Warren E. Burger: We will hear arguments first this morning in 73-1424, Serfass against the United States. Mr. Dower.
Harry A. Dower: Mr. Chief Justice and may it please the Court. At the outset, I would like to reserve if I may five minutes of my time for rebuttal. If I may sir, I'd like to reserve five minutes of my time for rebuttal.
Warren E. Burger: Very well, Mr. Dower.
Harry A. Dower: Please Your Honors, this matter appeared before the Court having granted a petition for writ of certiorari on the petition of David Serfass to review the record of the Third Circuit which had reversed a decision of the United States District Court for the middle district of Pennsylvania. Chief Judge Michael Sheridan had granted and ordered dismissing the indictment on motion having been filed on behalf of Mr. Serfass. He had been indicted for refusing to submit to induction under the Selective Service Act. David Serfass was in the Peace Corp in Pohnpei, a remote island in the pacific and he had completed his two years of duty there and was requested by the Panape Transportation Authority to serve several months longer to complete the training of a native as a maintenance superintendent. There was some mix up in his notifying his draft board that his term in the Peace Corps had been concluded. He did receive a notice to report for induction -- there was again another mix-up but he did make it to Allentown his residence, 2 a.m on the day that he was to report for transportation at 5 a. m. He went to the induction center in Wilks-Barre and was found to be suffering from amoebic dysentery and was returned to report at a later date. It was at that interval for the first time that he spoke to the pastor of this church and learned and in his discussions with his pastor, he began to have very serious reservations about serving in a military service. He then upon advice applied for form 150 from the Selective Service Administration which is the form to be used for an application for classification of the conscientious objector. The draft board perfunctorily denied his application and just stated to him that there was no change in classification over which he had no control and again ordered him to report for induction. This time, he again went to the induction center and the usual procedure in case of this kind at the last minute, refused to take oath and to submit to induction. About 20 months later, he was indicted and arrested and a trial date was set for speedy trial. At that time, we filed two motions, one, a motion to dismiss the indictment and also a concurrent or simultaneous motion to postpone the trial. Judge Sheridan did grant -- ordered the postponement of the trial, set a date for oral argument of the motion to dismiss. And at that argument, the United States attorney did stipulate that the application for conscientious objector classification, which David Serfass had made did meet the prima facie requirements. Following this and with a short time after the oral argument, Judge Sheridan requested and this was agreed by both parties by David Serfass and by the United States that his entire Selective Service file be submitted to Judge Sheridan and this was done. Some months later, Judge Sheridan pursuant to a line of cases in the Third Circuit did grant the motion, did order that dismissal of indictment. The Government appealed and we moved to dismiss in the Third Circuit on the ground of lack of jurisdiction and that matter as well as the argument on the merits were briefed simultaneously. The Third Circuit at that time had adopted a procedure whereby on its own order would dispense with oral argument and that was done in this case. It of course has oral arguments within this case, there was an oral argument. Now, the time interval here was interesting, this Court in its decision in Elhert had indicated that there is a no mans land between the draft board having considered a request on the merits for conscientious objector classification after notice of induction had been received, and the same kind of rather and a consideration of this issue within the military service, that the Court may very well consider that to be as a situation different from Elhert. The Musser case which was decided last summer in a per curiam opinion, I think only one dissent, Justice Douglas dissented, in a sense clarified at least for the Third Circuit, the holding in Elhert and under Musser, it was held that the draft boards had no power to consider a request for conscientious objector classification after a notice of induction had been sent. As a consequence, the Third Circuit reversed on the merits and also denied the motion to dismiss for lack of jurisdiction.
Warren E. Burger: Help me back up a little bit if I may Mr. Dower. In the hearing on your motion before Judge Sheridan, could he have made a finding or determination of the guilt?
Harry A. Dower: Yes sir, I'm sorry, not a finding of guilt, he could have made determination.
Warren E. Burger: Determination.
Harry A. Dower: He could have terminated the case which is what he did.
Warren E. Burger: Well, now, but could he have made a determination that the man was guilty?
Harry A. Dower: No sir.
Warren E. Burger: And that there was no necessity of going on with the trial?
Harry A. Dower: No sir, he could not have made a finding of guilty. The motion to dismiss and it was accompanied by an affidavit relating to several pages from the Selective Service file, but no jury trial has ever been waived. There was no formal motion for acquittal, it's quite correct sir that we do not argue for a moment, that he could’ve been found guilty on the motion to dismiss the indictment, not having been tried. After the denial -- after the reversal of the District Court order by the Third Circuit, we then petition for a writ of certiorari and I'm quite aware that there are several other cases that we argued this morning all of which have come up at the same time. And generally deal with the 1971 Criminal Appeals Act which was an Amendment to the Act following this Court’s decision in Sisson. I think perhaps for me at least the only thing it's clear about the 1971 Amendment is that it was a response for this Court's decision in Sisson. Now, this Act is different, and so far as I know, these are the first cases to come up under this Act, now raising that question as to what the Act means at least in particularly in reference to the Double Jeopardy provision. Now, the Act I would note and I think this is quite important. Is not the bill that was introduced into the senate. The Act now provides that in a criminal case and appeal by the United States shall lie to a Court of Appeals from an order dismissing an indictment and the important words at least as far as were concerned is except that no appeal should rely with the Double Jeopardy Clause if the constitution prohibits it. Now, there were back at the point where perhaps we were in 1907 when the Senate considering the original Criminal Appeals Act had decided or had rather debated, that they're going to depend upon this Court to tell the Senate and tell us what Double Jeopardy meant, because of all the cases that have been decided particularly in the recent years and many of them under the Selective Service Act, there really is no firm guide for anyone so far as I can see to know just what Double Jeopardy means in terms of pre-trial. In some cases post-trial dismissals of an indictment or of a charge whatever it maybe called. Sisson of course was a post-trial dismissal. Serfass is a pre-trial dismissal, the second case you have today, the Jenkins case is one of which is again a post-trial dismissal -- oh, I'm sorry, it was an acquittal in the trial by a judge and the third case that you have this morning, the Wilson case, is one in which there was a dismissal of a charge after a trial. Now, in Serfass, we argue that this Act, the 1971 Criminal Appeals Act must have some meaning in order not to be a truism. I would dispose off the latter part first by saying that I cannot conceive how Congress could enact the Criminal Appeals Act which would authorize the United States to appeal in violation of the Double Jeopardy provision. Congress does have the power to regulate the jurisdiction of the courts but I cannot understand and I'm very happy that we don't have to argue or don’t have that case that an appeal would lie, which is contrary to the Double Jeopardy provision. So, if this exception is to have any meaning, then this is what I assume what these cases are about, just what is Double Jeopardy. Now, I would also point out that as I understand the real burden, the real thrust of the Government's brief in the Serfass case and to some extent in the others too. What the government is attempting to do is to have decisions of this Court which in effect would reinstate the bill as introduced into the Senate. Under which an appeal would have been possible from any pre-trial disposition of a case, short of an acquittal or a conviction of course, everyone would be appealing a conviction.
William H. Rehnquist: Well, is there difference in the language in the bills make much difference Mr. Dower, isn't it clear from the bill that was enacted that Congress meant to authorize appeals in all cases unless appeal would violate the Double Jeopardy Clause?
Harry A. Dower: I don't think so Sir. When Congress said that an appeal in the criminal case lies from an order dismissing an indictment, surely it must contemplate that there are situations in which a dismissal would have a reason or would have brought about -- I'm sorry, that prior to dismissal, jeopardy would have attached. Now, I think except for the Jenkins case, which is to be argued next, everybody has always talked that an acquittal was an end to a proceeding. This was far back in 1896 in the Ball case and 1904 in the Kepner case, acquittals ended. So, that what we are really talking about is at least in Serfass is a pre-trial disposition of the case in some fashion other than an acquittal. Now, what is the -- what does this Act mean? If it's not a truism, does it not address itself to a situation where an indictment has been dismissed short of a trial. And if jeopardy has attached in that proceeding, then Double Jeopardy Clause of the constitution would prohibit this. I am quite aware sir, Mr. Justice White that your distinction in your dissent in the Sisson case of the distinction made between technical and constitutional jeopardy and I'm quite willing to admit that the manner and which we used the word technical jeopardy in our brief is different from the way you used it and I -- further reflection I think that perhaps your distinction if I understand that would be more appropriate. But when does jeopardy attach is to a large extent the question that is involved in this case. And in fact, what is jeopardy? The Government argues that there is no jeopardy until there has been a trial, either by a jury or trial by a judge alone.
Warren E. Burger: They don't quite go that far, do they?
Harry A. Dower: Repeatedly, in their brief, they do.
Warren E. Burger: Well, Jeopardy would attach as soon as the jury was in panel too.
Harry A. Dower: Well, this would be included within from that trial.
Warren E. Burger: That's not a complete trial.
Harry A. Dower: No, sir, they quite --
Warren E. Burger: When did jeopardy in the sense of exposure to a judgment of guilt begin under this motion?
Harry A. Dower: I'm not so sure sir that that is the import of all the cases. I don't believe that this Court in Sisson for example, went so far to say that exposure to guilt was necessary. And this is -- really what I would argue is that we ought to determine what is involved in a trial and whether it's by jury or by judge alone, and I submit sir that this is a fact-finding process -- generally as to the merits or as to some issue which would permanently would dispose off the case. Now, I don't see any mystical value and in a trial or such or impaneling a jury to commence a trial because what --
Thurgood Marshall: Except that you can't go to jail without it?
Harry A. Dower: Well, again Sir you are -- as I understand your question or comment, unless a man has been exposed to being held guilty, he is not been in jeopardy and this I submit Sir is not in the holding of this Court as recently as Sisson. That one could although the facts of the Sisson case Sir are different. Nonetheless, this Court did cite with approval of a large number of cases in which jeopardy was held to attach prior to exposure to finding of guilty. I am not quite clear with this.
Thurgood Marshall: Like what?
Harry A. Dower: All the cases sir reached so hard as did the majority in this Court to find that the determination made by court was an acquittal. And I suggest Sir that you don't need to constrict yourselves by the label of an acquittal that once fact-finding has commenced in reference to an issue that would dispose off the case that this is when jeopardy attaches. Now, the reason I say this and argue in this fashion is that, all of the old cases which talked in terms of jeopardy arising upon a trial or an impaneling of the jury, are cases when our pleading and practice procedure was such this was nearly the only way to dispose off an issue. We did not have Rule of Criminal Procedure 12 (b) (1) or really Rule 12 and all its parts. The Common Law aside from the motion on arrest of judgment which gave everybody so much trouble in the Sisson case, the motion in bar -- aside from that, nearly the only way that I know of to dispose off a case was by a trial. Now, in the last 70 years, we have developed new and modern methods of pleading and practice. Now that started with the court pleading as adopted in the states in the late 1930's where there are rules of Civil Procedure, Federal rules and in 1946, I think it's the date the adoption of the Federal Rules of Criminal Procedure. And we have done away with the old common law terms of demurrer. Speaking demurrers yet when I am speaking demur, common law was prohibited, yet this is precisely -- I'm sorry, this is what it's not really precisely. This is what Rule 12 (b) (1) provides for. Some method of disposing of issues prior to a full trial where if you like the Court must go outside of the indictment, the bare-bones indictment in order to make the determination. Rule 12 (b) (4) provides for the holding of a hearing to make these determinations. Another rule 47 I believe it is which permits the filing of an affidavit in connection with these things. Now, this is different from the 1907 Act. The way these issues can be brought before our court today are entirely different. We now -- and this is what was done in the Serfass case. Now, there was no dispute as to any of the facts in the motion to dismiss the indictment. All of the Government's evidence incidentally was in, was before the judge, although I quite agree there was no possibility finding him guilty at that time, but the court did consider the entire bit of evidence that the government had. Excuse me, this is also noted not in precisely to those terms in the Government's brief in the letter in the last several pages of their brief. They also acknowledged. Now, what happens in the prosecution of a Selective Service case is that the Government gets the entire Selective Service file and evidence as a business record. Occasionally, there will be an officer from the induction center to testify but whatever evidence the Government has is in the Selective Service file. Now, that was a situation in the Serfass case, unlike Brewster for example, where this Court held that an appeal would lie from an order dismissing the indictment where one did not have to go outside the indictment for the disposition of the case. But here, this was necessary. Now, I propose or submit to Your Honors that in this part of the 20th century, what Double Jeopardy means or should mean is that jeopardy attaches when the fact-finding process begins, as to an issue which would dispose off the case. Now, no case that I ever heard have read speaks in those terms precisely in those terms, but there are a number of cases in Circuit Courts, they have held to this effect.
William J. Brennan, Jr.: Well, Mr. Dower, I gather that your basic submission is that what happened here since the disposition of motion was made on the basis of the file and other evidence that as you say it represents what would have been the Government's entire case that the jury being convened in the case trial.
Harry A. Dower: Yes sir.
William J. Brennan, Jr.: That this should be treated as a functional equivalent of an acquittal even though you concede that could not have been any judgment of guilt.
Harry A. Dower: We argue that but -- (Voice Overlap)
William J. Brennan, Jr.: Well, it's that right? Is that what you --
Harry A. Dower: Yes, in our brief we are arguing in that fashion.
William J. Brennan, Jr.: But aren't you still arguing?
Harry A. Dower: No, I'm going to be on that Sir and I'm saying that let's not confine ourselves to labels of acquittal in order to find that jeopardy has existed because this is what has caused so much trouble at least to my analysis. All that we need to say is that jeopardy attaches when a fact-finding process begins. And that you don't have to reach with sympathy at least in part with the dissenters in Sisson that there was a tremendous reaching to find acquittal in order to bring the case within the ambit of the old common law cases. And I submit Sir that this isn't necessary anymore given particularly Rule 12 (b) (1). If I would come back Mr. Justice Brennan to one other observation, the real functional equivalent of the Serfass case is one in which -- again it's a motion which is no longer used, it's the common law motion as a demurrer to the evidence at the conclusion of the government's case, this is in effect what we were doing. We now call it a motion for acquittal.
William J. Brennan, Jr.: Demurrer of the evidence.
Harry A. Dower: I beg your pardon?
William J. Brennan, Jr.: A demurrer of the evidence that succeeded and had the effect on the acquittal?
Harry A. Dower: Yes, sir it would have.
William J. Brennan, Jr.: In the old practice?
Harry A. Dower: Right sir and also Chief Justice and Mr. Justice Marshall, a demurer to the evidence if sustained, would not run the risk -- well, a demurrer to the evidence with common law would not have run the risk of finding of guilty. This has been our custom for centuries.
Warren E. Burger: The consequence of what you're arguing though is that in these circumstances, this motion in itself becomes the trial of the case. If it has the outcome that it had --
Harry A. Dower: Insofar as the discharge of the defendant is concerned, yes.
Warren E. Burger: If the defendant is successful it has the effect of being in trial of the case?
Harry A. Dower: Yes sir.
Warren E. Burger: Now, is it not true that under the federal statutes in order to have the jury waived trial in the criminal case, you must have the consent of the prosecution, the defense and the court?
Harry A. Dower: Yes sir.
Warren E. Burger: Now, do you think that statute is any barrier here or the party is just slipped sideways into a trial on the merits without having consented to submit the issue on the merits to the court?
Harry A. Dower: No sir, the whole import of Rule 12 (b) (1) is to take a look at these things at the very beginning of the proceeding. And if there is a thorough and valid defense, no issue of fact involved you see. There is a thorough and a valid defense available. It ought to be considered at the outset and if this results in the discharge of the defendant, fine. Let's dispose off the matter in that fashion. If it does not, Rule 12 (b) (5) says, “His plea stands and you proceed if necessary for the trial.”
William H. Rehnquist: But you said the moment ago that your hypothesis is that double jeopardy was when the fact-finding process begins. Now, you say that in this Rule 12 motion there's no issue of fact involved.
Harry A. Dower: No Sir, under Rule 12 (b) (1) if it's -- and 12 (b) (4), it's necessary to support the motions to dismiss, you can file an affidavit or the court can hold a hearing.
William H. Rehnquist: But on a motion like that can the judge who hears the motion find facts rather than simply decide whether as a matter of law, there's anything to support the Government’s case?
Harry A. Dower: Yes sir, as occurred in this case, Judge Sheridan found the facts in the Selective Service file. He didn't make a formal finding effect. You know, he didn't delineate a portion of his opinion in this fashion.
William H. Rehnquist: But then it isn't just a question of law?
Harry A. Dower: Oh no sir. If it's purely a question of law such was a situation in the Brewster case. Then, I would say that the 1971 version of the Criminal Appeals Act would permit an appeal because there has been no fact-finding process commenced. And all of this -- all that is involved is a question of law.
Lewis F. Powell, Jr.: I confess to some confusions Mr. Dower. I thought you said to me earlier that what this came down to us is that Judge Sheridan had before him all of the evidence that would’ve constituted the Government’s case, had it gone to a jury?
Harry A. Dower: Yes sir.
Lewis F. Powell, Jr.: And that he appraised that for sufficiency to get to the jury?
Harry A. Dower: Alright sir?
Lewis F. Powell, Jr.: And he concluded that it was insufficient?
Harry A. Dower: Yes sir.
Lewis F. Powell, Jr.: And therefore, he dismissed the indictment?
Harry A. Dower: Yes sir.
Lewis F. Powell, Jr.: And now you say there's some fact-finding involved to that?
Harry A. Dower: In his consideration of the Selective Service file which is the entire Government’s case.
Thurgood Marshall: Is that really a conclusion that those facts do not amount to a sufficient evidence to convict? If it's a more conclusion of law then it is a finding of fact?
Harry A. Dower: Would have to have the facts before him Sir before the district judge --
Thurgood Marshall: Well, if he has got the facts that -- what does he find that that is the file?
Harry A. Dower: No Sir, these facts are not on the docket. The Selective Service file comes in the evidence at the trial or in this case by stipulation --.
Thurgood Marshall: I understood this order it said that I conclude that the motion to dismiss is legally correct. Did nobody say it?
Harry A. Dower: Yes sir, but this was in consideration of the entire Selective Service file which came into him by stipulation rather than impaneling a jury and then having stipulation or having the Government offered.
Thurgood Marshall: And he made a finding of fact?
Harry A. Dower: His decision is based on the facts which he found from the Selective Service file.
Thurgood Marshall: And his finding was a conclusion. I don’t want to get all involved in facts in law or idea. Your point is that he made a conclusion of law that these facts would not be sufficient to convict this man.
Harry A. Dower: Yes Sir, but he had to find the facts first which were not a part of the judgment rule in the common law sense were not a part of the indictment and these were the things that were necessary for him to determine before he could reach his conclusion that this evidence that which the Government had would not be sufficient to convict. Now that the white is on -- I would just offer one other suggestion. Well, I will just repeat that I think that are too often courts, lawyers have been struggling to attach a label of acquittal on a pre-trial disposition or on some disposition of a case in order to bring into the common law rule. This is no longer necessary given a particularly rule 12 (a), 12 (b).
Warren E. Burger: Well, Mr. Korman.
Edward R. Korman: Mr. Chief Justice and may it please the Court. This case is here on a writ of certiorari to the United States Court of Appeals for the Third Circuit to review a judgment of that Court which sustained it’s jurisdiction to hear an appeal by the United States from a pre-trial order of the District Court dismissing an indictment on the merits. The Court of Appeals also reversed the order of the District Court and remanded the case for a new trial or other proceedings not inconsistent with its opinion. The petition for certiorari which was filed here did not in anyway challenge the determination of the Court of Appeals on the merits. It challenged only the determination of the Court of Appeals that it could consistent with the Double Jeopardy Clause entertain the appeal by the United States. Before getting into the merits, I would like to address myself to one question that occurred to us and which we have looked into and that is the availability of the President’s pardon and Clemency Program that these defendants -- should the Court delay its decision beyond the 31st of January of 1975. And we have been told and counsel for both Mr. Jenkins and Mr. Serfass have been advised that if they wrote to the respective Untied States Attorney’s Offices and indicated their intention to unveil themselves or their desire to avail themselves of the alternative service program, should there be a judgment in this Court adverse to them. They could preserve their rights to participate in the alternative service program even if they ultimately applied for it after January 31st because of the delayed decision of this Court which might be adverse to them. To turn to the merits of the appeal in this case, there are really two issues presented. First, the issue whether the Congress intended to authorize the appeal from this order. The Criminal Appeals Act provides that the United States can appeal to the Court of Appeals from a decision order or judgment dismissing an indictment in a criminal case, unless the Double Jeopardy Clause would bar further prosecution. Moreover, in order to overcome the restrictive interpretation that had been placed on similarly worded earlier Criminal Appeals Act which had limited the Government’s right to appeal from dismissals only where the dismissals were permitted appeals rather only where the dismissals were based on the four corners of the indictment. Congress deliberately wrote in to section 3731, a rule of a liberal construction and mandated that the statute be liberally construed to effectuate its purposes. Not only from this language but from the legislative history of the Criminal Appeals Act that it’s plain beyond any doubt that Congress intended to authorize the appeal in question here. Indeed, at the Senate Judiciary Committee in an excerpt quoted at page 16 of our brief observed that the problems of appealability have become especially serious in Selective Service cases where judges have reviewed defendant’s Selective Service files before trial and dismissed the indictments after finding that there have been errors by the draft boards. These are issues to be determined by a judge, not a jury and there is no reason why they should not be subject to appellate review. Congress not only was concerned about all pre-trial dismissals but particularly those in Selective Service cases and it’s quite plain and indeed from reading petitioner's brief, we had assumed that he had conceded the issue that the statute quite plainly intended to authorize the appeal from the pre- trial order dismissing the indictment in this case. This brings us then to the second question that’s presented and that is whether an appeal from this order is barred by the Double Jeopardy Clause. And in this connection it's worth again recalling the words of the constitutional provision that nor shall any person be subject for the same offense to be twice put in jeopardy of life or limb. Now, while that term has a certain degree of vagueness and it's never been given a completely clear and fixed definition, one thing is certain from every case that is ever construed the Double Jeopardy Clause of the constitution and that is a person is not placed in jeopardy until a trial has begun at which he is in danger of having a judgment of conviction entered against him. And until that time has come, he has not been placed in jeopardy and that the Double Jeopardy Clause protects a defendant against being tried that is being placed in jeopardy of conviction for a second time and at that is case is such as Illinois v. Somerville made clear, the guarantee is not even absolute.
Potter Stewart: Well, that's not quite true when you come to the twice being put in jeopardy, is it? Or is it -- let's assume that clearly he was put in jeopardy once. And then could he be indicted again for the same offense?
Edward R. Korman: That perhaps would depend, I would assume on how the trial ended.
Potter Stewart: Well.
Edward R. Korman: For example, there was in this trial because the jury was unable --
Potter Stewart: By hypothesis in my question he has been put in jeopardy once, he's gone through all through a trial, a fair due process trial, the jury has deliberated and they have returned of verdict of not guilty upon which judgment was entered. Now, could he be indicted again for the same offense?
Edward R. Korman: No, he could not.
Potter Stewart: So, being put in jeopardy doesn't really mean that at least when you're talking about the second being put in jeopardy, doesn’t really mean which is (Voice Overlap), does it?
Edward R. Korman: Well, I would think -- perhaps I answered too quickly. I would think that he could be indicted again but he could never be tried on the indictment and therefore --
Potter Stewart: He could be indicted again and --
Edward R. Korman: Yes, I would --
Potter Stewart: At the expense of having to hire a lawyer to defend the same?
Edward R. Korman: Well, I would think it shouldn’t be done and probably would be done but I think (Voice Overlap) --
Potter Stewart: Do you think that constitutionally it can be done?
Edward R. Korman: I think it could but I don't think it's the burden and expense of going to trial against which he is protected and the bar of the --
Potter Stewart: Could even be arraigned?
Edward R. Korman: Well, I would assume that he would have an arraignment, a valid defense the indictment on which he could move to dismiss.
Potter Stewart: Well, doesn't the double jeopardy provision stand for the proposition that if a person is once been put in jeopardy and that’s the hypothesis of my question that he can't ever be charged again? He can't be bothered by the state with defending the same trial.
Edward R. Korman: It's not that broad if he's been put in jeopardy and the trial was ended in a conviction or an acquittal. He can't be put to the trouble and expense of another trial. Now, obviously if he can't be tried, it would be irresponsible and improper to indict him for that offense and he would have --
Potter Stewart: Then it would be perfectly constitutional to so?
Edward R. Korman: Well, I don't -- it gets after a while, it would not be proper for him to be tried and therefore I assume from that that it would not be proper for him to be indicted and therefore you would have a valid defense to the indictment.
Potter Stewart: That's quite clear. What you told us originally suggested that if all of these things could happen to him a second time right after the impaneling of a jury and that really is not true, is it?
Edward R. Korman: I don't follow that part of Your Honor's question, all of the things that happened to the defendant in this case.
Potter Stewart: Now, after a person has once been put in jeopardy and that led to a clear-cut verdict of conviction or acquittal?
Edward R. Korman: No, what I meant to imply by the latter part of my talk that protection of the Double Jeopardy Clause is not absolute, is that a person can be tried on an indictment. The trial can go completely to the end and both sides rest, the Government have the most complete opportunity and a fairest opportunity to prevent this case. The jury can split 11:1 for an acquittal and yet the Government can retry him again and place him through the entire burden and expense of the trial and that's all I meant to refer to by that the latter part of the comment.
Thurgood Marshall: What you really mean is that for the two jeopardy, is one is different from the other?
Edward R. Korman: I don't --
Potter Stewart: Yes. That's what does follow.
Thurgood Marshall: The same word means two different things.
Edward R. Korman: I don't know that it means two different things, I think it means the same thing, it means trial and in one instance where the jury has been unable to reach a verdict after a full and the Governments had a full and fair crack of the appellee, I am confused with the words Your Honor quoted in (Inaudible) case. The Government can still have a second crack at the appellee because it has where the jury has been unable to reach a verdict. On the other hand, where he's been acquitted or convicted, that guarantee becomes absolute but in both instances, the determination as to whether a new trial may ensue is essentially based on questions of policy and questions that go to the history of the Double Jeopardy Clause.
Warren E. Burger: I take it that what you're saying if it were transposed into a civil context instead of criminal is that if a suit were had on a civil case and it results favorable to one of the parties, there is nothing to prevent the losing party from bringing a suit again on the same issues that he has to assert the defense of res judicata in order to stop it.
Edward R. Korman: That's correct.
Warren E. Burger: And the same thing as through an indictment. He maybe indicted by ill-informed or irresponsible grand jury with the aid of a irresponsible or ill-informed prosecutor and the only way he can assert his right is to go in and assert his first jeopardy isn't that right?
Edward R. Korman: That's correct.
Warren E. Burger: Now, you're not suggesting that or are you suggesting that the constitutionality of the second indictment can't be determined in any other way and by a judicial proceeding in which Double Jeopardy is asserted and decided?
Edward R. Korman: Well, I would think that if the event happened that is the second indictment were brought the defense would be to dismiss that indictment on the grounds of Double Jeopardy. Now, whether you say that it's how -- I think it becomes after a point that material was to how you characterize or whether you say the indictment should be dismissed because it can’t be retried and it's pointless to have that indictment or to say that after the acquittal even the indictment itself has barred us, is I think it just turns on a language he used. I don't think it's significant, the significant part is and as this Court has repeatedly said that it's the Double Jeopardy Clause which protects against a second trial for the same offense. Now, my adversary is suggested that there are no firm guides in which to instruct the Court and how to proceed in this case which involved a pre-trial dismissal and we would suggest that there are at least a hundred years of precedent to this Court to guide it in designing this case. The most extinct summary of the law in this area was stated by Mr. Justice Brandeis in his opinion in Collins versus Loisel where he said, the constitutional provision against Double Jeopardy can have no application unless a prisoner has there to for been placed on trial. The preliminary examination of one arrested on suspension of crime is not a trial and his discharge by the magistrate upon an examination is not an acquittal. Even the finding of an indictment followed by arraignment pleading there to repeated continuances and eventually dismissal at the instance of the prosecuting officer on the ground that there was not sufficient evidence to hold the accused, was held not to constitute jeopardy and this principle has been illustrated in numerous cases decided by this Court under the old Criminal Appeals Act which permitted the United States to appeal to this Court directly from a order of a District Court characterized as a motion in bar entered before jeopardy has attached. And this Court consistently held in construing that statute that where the defendant has not been put to trial, he has not been put in jeopardy and I think that a particular significance to the issue here are the cases which involved appeals to this Court for motions in bar which sustained the defense of the statute of limitations. That defense goes to the general issue in the case and as a matter of fact in two opinions of this Court, a pre-trial ordered dismissing an indictment on statute of limitations grounds was characterized as an acquittal. Nevertheless, this Court has repeatedly entertained appeals from such orders because the defendant had not been placed in jeopardy. The most recent of that was in United States v. Goldman in which the issue -- the same arguments that were made here were made there, that was an appeal from the dismissal on statute of limitations grounds which goes to the general issue in the case. There was a pre-trial dismissal and this Court rejecting a challenge to its jurisdiction stated that since the District Court had not commenced it sitting for trial, the defendants in error had not been in placed in jeopardy. Now, the defendant of course concedes that in fact the jeopardy had not attached. Instead, he argues that because of the fact that the dismissal of the indictment was the functional equivalent of an acquittal on the merits that constructively jeopardy has attached. And this argument which really takes us to the first of the Court of Appeals’ decisions which have denied the Government the right to appeal from pre-trial orders is based on what we believe to be a serious misconception of the meaning and purpose of the Double Jeopardy Clause. We don’t have to equival all the terms, we can concede that if an acquittal is a termination or a ruling in favor of the defendant after the trial on the issue of guilt or innocence that maybe characterized as an acquittal and that a pre-trial dismissal on the merits maybe viewed as an analog of an acquittal. But the reason that a defendant cannot be tried again after he has been tried once and acquitted, is not necessarily because he has been acquitted but because he has been placed on trial and been put in jeopardy of conviction once and so the Double Jeopardy Clause of force and protection not only from an acquittal but a conviction and even protection against a second trial where the jury did not reach a verdict, if the case was terminated improperly prior to verdict. And so that it makes little sense to say that the argument that this is somehow an acquittal doesn’t really answer any question at all. The question is whether he has been placed once in jeopardy and whether if the Government is successful on its appeal, he would be placed in jeopardy the second time and it was this critical distinction which we believe was overlooked for example by the Court of Appeals for the Seventh Circuit in United States against Ponto which has become the leading Court of Appeals decision on this issue. There in excerpt quoted at page 34 of our brief, the Court of Appeals in a case not different from the instant case said that, “Since the dismissal order was based on the determination on the merits, it was an acquittal to which jeopardy had attached. Now, it's interesting to note in the Green case which is one of the cases that's cited by the Court, Mr. Justice Black wrote for this Court that it is the acquittal which ends the jeopardy that has attached at the commencement of trial. It's not an acquittal, it's not jeopardy which attaches to an acquittal. Moreover, the Courts of Appeals continued thus Government appeal from this ruling would violate the Double Jeopardy Clause of the Fifth Amendment since a re-trial on the charge would be prohibited. But when was he tried initially on the charge? The Court of Appeals never address itself to that issue, and it's not surprising that of the five judges of the Seventh Circuit who composed in majority, two of the five did not even join in this reasoning and they adopted yet another analysis which the Ninth Circuit has also subscribed to. And they said that since this was a dismissal with prejudice, and since therefore the Government could not bring a second prosecution. Therefore, it was barred from appealing. And in making this argument, the Court relied on the opinion of this Court “United States against Oppenheimer. That case was a case in which the Government had indicted someone for violating the Bankruptcy Act conspiracy that committed fraud under the Bankruptcy Act. The defendant made a motion to dismiss on statute of limitations grounds, the motion was granted, the United States never appealed. Subsequently, this Court in a decision had redefined and clarified the law in the area and it was plain that the initial determination of the District Court dismissing the indictment was an error. The United States then brought a second indictment against the defendant and he then alleged that that second indictment was barred either under the doctrine of res judicata or the Double Jeopardy Clause. And this Court held that the second indictment was barred because the failure of the Government to appeal from the first indictment left standing on the record a final order on the merits, and that the civil law of doctrine of res judicata applied to a criminal case even to a pre-trial dismissal, on the merits where the Government had not appealed but sought to bring a new indictment the defendant could in effect invoke the doctrine of res judicata. But of course that does not follow from that that the Government could not appeal from the initial dismissal of the order and of course in United States versus Goldman to which I referred to afterwards which was decided after United States against Oppenheimer. This Court entertained an appeal, a direct appeal from the dismissal of and indictment on statute of limitations.
Thurgood Marshall: Mr. Korman, as Mr. Dower corrected there's no dispute, that that’s all the evidence would have been produced at the trial?
Edward R. Korman: That's correct in all Selective Service cases as Your Honor may be aware of --
Thurgood Marshall: Which means this case?
Edward R. Korman: Yes. The --
Thurgood Marshall: So, what good is a trial in this case?
Edward R. Korman: Well, I would think for example from the -- and may not be any good, as long as the judge adheres to his position, and would dismiss that there were a trial --
Thurgood Marshall: Well, is he wrong in his position?
Edward R. Korman: He was found to be wrong by the Court of Appeals and that determination is not even challenged here. I agree that had they gone be to trial -- would have been foolish to go to trial with the judge entertaining the erroneous view of the law that he had, but that doesn’t necessarily follow from that that the defendant was placed in jeopardy of a conviction by the pre-trial disposition that took place here.
Thurgood Marshall: And if the -- Mr. Serfass or what his name is – he decided that he would go to trial and he would put on the evidence everything that he is in good shape as long as he is before that judge.
Edward R. Korman: That's correct. Now, of course --
Thurgood Marshall: So, why didn't that end the case?
Edward R. Korman: Well, it's the end of --
Thurgood Marshall: He would have been acquitted, wouldn't he?
Edward R. Korman: Well, I assume that the judge would have done the same thing and that's what's problem in Mr. Price' case. So, where that's exactly what happened. I would note however, that judge -- even Judge Friendly in his opinion in Jenkins suggested that if a defendant had available to him a defense which he could have raised before a trial that involved no disputed issue of fact and deliberately permitted himself to be placed in jeopardy and then delayed his motion in order to gain this tactical advantage but that was a question he was leaving open and was not deciding and indeed we would argue if we were faced with that where a defendant did that knowing that he had a defense available to himself and let himself be placed in jeopardy that the protection of the Double Jeopardy Clause should not be accorded to him but that need not be reached in this case. So, that the second and what we think to be misguided ground upon which the Court of Appeals of (Inaudible) is this misunderstanding of the doctrine of res judicata that is because the doctrine would bar a second indictment where the first indictment was dismissed and not appealed from. Therefore for some reason the Government could not appeal from the initial pre-trial dismissal. Yet a third ground which was suggested by the Courts of Appeals is one similar to that suggested by Mr. Justice Marshall that is if you will say that the Government can appeal from the pre-trial dismissal, that will only discourage defendants from making their motion prior to trial and they will only delay it until jeopardy has attached. Well, of course that whatever merit may be that that consideration of policy however doesn't answer the question here since Congress has authorized the appeal and has made the determination of policy itself. And has determined to permit that appeal here and of course second, if it does become a problem, this Court either through its rule making powers of Congress through a legislative action can provide and mandate that these motions be made prior to trial otherwise they’ll be deemed waived as is true now with motions directed to the defect in the institution of the prosecution. So that essentially the Finley case, the United States against Finley involved policy considerations that are no longer open to this Court to consider since Congress has decided itself that it wants the United States to have the right to appeal from these pre-trial dismissals. Moreover, there really isn't any reason to depart from this long line of precedent to overrule any number of decisions of this Court. None of the considerations which are reflected by the Double Jeopardy Clause are really applicable here. The defendant was not put through any burden and expense and trauma of trial. He was not put through a hearing or determination of fact which could have resulted in a conviction. All that occurred here was little more than the argument of a legal question. As a matter of fact, there was a good deal less here than that which occurs at a suppression hearing where the judges actually hear evidence where they make the determinations of credibility and where their decision on whether to admit or not to admit a particular piece of evidence could very well be decisive of the case. Here, all that took place was an argument on a motion. The Selective Service file of course is contained undisputed facts which is true in every Selective Service case, the defendant rarely ever disputes that he failed to report his order and his only defense can be based on something that maybe in the Selective Service file. So, that the facts were never in dispute here. There was no trial of any issue of fact and the defendant had not been placed in jeopardy. And for these reasons, we believe there is no reason to deny and to defeat the intent of Congress to authorize the appeal here or to overrule a long line of decisions of this Court and we therefore ask that the judgment of the Court of Appeals be affirmed.
Warren E. Burger: Thank you Mr. Korman. You have about three minutes left Mr. Dower.
Harry A. Dower: I will be brief Sir. I respond to the Government's position in reference to what is involved in jeopardy by saying that a person has got to go through the burden and expense and emotional strain of a trial. I think this is reading these statements in the cases far too narrowly. Certainly, many people are terrified upon receiving a traffic ticket. The emotional strain can start as soon as that. Certainly, when a person is indicted, he's going to go through a lot of burden and expense and emotional strain too.
Warren E. Burger: Well, is there any power you know of even in a true Double Jeopardy case as to which no one would disagree that is a verdict of acquittal if an irresponsible jury as I suggested before a grand jury re-indicted. It creates all of this stress, does it not that you're speaking of?
Harry A. Dower: Yes sir --
Warren E. Burger: Is there any other way to deal with that indictment except to go in and assert the claim of Double Jeopardy and have it?
Harry A. Dower: First time it would occur sir, I know of no other way than to go and to move to dismiss the indictment. Well, I should think that thereafter and I'm not prepared to argue the case but thereafter, civil suit for damages against the prosecutor --
Warren E. Burger: Suit against the prosecutor or any other suit -- he might have a suit whether it’s a good one or not, he might conceivably have a suit against members of the grand jury and again you would have a question of whether it was any good but there’s nothing automatic that stops a second indictment, does that?
Harry A. Dower: No sir, except the integrity of prosecutor's office.
Warren E. Burger: The integrity of the people on (Voice Overlaps)?
Harry A. Dower: Yes sir, I must concede that. Unfortunately, so far as (Voice Overlap) --
Warren E. Burger: Or for their Intelligence if they were ill informed?
Harry A. Dower: I would rather relay on their integrity Sir.
Warren E. Burger: But they might simply make a mistake.
Harry A. Dower: Alright, it's inconceivable that a person could get to that position being so ill informed but sure within the ambit of what is conceivable --.
Warren E. Burger: That is the grand jury might not be informed by the prosecutor that the man had been previously tried and acquitted and then you’d have perhaps various kinds of proceedings against the prosecutor?
Harry A. Dower: I should hope so. I would just say that once again I sensed that the Government, so many of us have to know, you just but too much emphasis on labels and that we really ought to look at the function of these things. What is a trial in terms of the burden and expense and emotional strain? It doesn't have really to be -- I'm suggesting that jeopardy in that sense arises well before a jury is impaneled. And with the modern methods of disposing off issues before a Court prior to the impaneling of the jury, we don't need to read these things so narrowly. I would also just respond to the closing statement made by Mr. Korman, in reference to the sophisticated and I will be kind -- the sophisticated defense counsel who waits until a jury has been impaneled to bring his motion to dismiss. He says that this Court by its rule making could probably require these motions be made prior to trial. I would not be so hasty to conclude that, I would assume that a rule of that kind would require a great amount of public discussion before it could be even considered for adoption. I Thank all of you Your Honor.
Warren E. Burger: Thank you Mr. Dower. Thank you Mr. Korman. The case is submitted.


William H. Rehnquist: We'll hear argument first this morning number oh one four sixty-three, United States versus Fior D'Italia. Ms. O'Connor.
Eileen J. O'Connor: Mr. Chief Justice, and may it please the Court. This case is about the authority of the Commissioner of Internal Revenue to assess FICA taxes that Congress has imposed on employers. It also involves the well established principle of tax litigation. It involves two key sections of the Internal Revenue Code and how they relate to each other, and it involves the evidentiary value of assessments in tax litigation. The first of the key sections is section sixty-two oh one. It appears at page sixty-two A of the appendix to our petition. It authorizes and requires the Secretary of the Treasury to make inquiries, determinations, and assessments of all taxes imposed by the Internal Revenue Code. The second key section is thirty-one eleven. It appears at page fifty-five A of the appendix to our petition. This section imposes a tax on employers. The tax is measured by the wages they pay or are deemed to have paid their employees.
William H. Rehnquist: Wh- which section is this, Ms. O'Connor? I...
Eileen J. O'Connor: Section thirty-one eleven at pa- page fifty-five A of our appendix to the petition...
William H. Rehnquist: Thank you.
Eileen J. O'Connor: This is the tax that imposes this is the provision that imposes a tax on the wages employers pay or are deemed to have paid their employees. The question this case presents is how the commissioner carries out his obligation under sixty-two oh one to assess the tax that is imposed by section thirty-one eleven. [Inaudible]
Eileen J. O'Connor: The tax in... Ms. O'Connor...
Sandra Day O'Connor: let me tell you what troubles me a little about the Government's position in the case, and I hope you will address it.
Eileen J. O'Connor: Exactly, Your Honor.
David H. Souter: Well, would that error ever be anything more than a disparity between what the employee reported and what the employer reported?
Eileen J. O'Connor: Would what, Your Honor?
David H. Souter: How am I mean the the error that that section con- I'm wondering what the error is that that section contemplates, and I can I can see it's application, let's say, if the employer simply added up the employee's reports wrong and got the wrong figure.
Eileen J. O'Connor: It could also apply just an- and sixty-two oh five is not specific to restaurants or food or beverage establishments or or tips at all, because another common error that employers can sometimes make is mis-characterizing a worker as an independent contractor, for example, and upon determining later that the person is actually an employee and they should be withholding...
Speaker: FICA...
David H. Souter: the question in another way.
Speaker: In thi- -- how come...
David H. Souter: as I understand it I mean, this is th- the I didn't didn't mean to side-track you from Justice O'Connor's question, but I'll I'll raise the thing that bothers me.
Eileen J. O'Connor: That's right, Your Honor.
David H. Souter: and I'll assume for the sake of the question that a given employer has done that.
Eileen J. O'Connor: Mhm.
David H. Souter: I also assume that if you are correct, that employer has this possibility hanging over it that that that the IRS is is going to make this kind of an assessment.
Speaker: That's that...
David H. Souter: M- my question is, is there any way that the employer can anticipate this kind of an assessment in order at least to to avoid the interest running under under this section?
Eileen J. O'Connor: Absolutely.
David H. Souter: And they were all correct, I take it.
Eileen J. O'Connor: Right, those forms arrived absolutely correct.
Speaker: January. You start setting aside for it.
David H. Souter: He may set up a res- the employer may set up a reserve,
Eileen J. O'Connor: Mhm.
David H. Souter: but as I understand it the employer is not obligated, in in effect, to to withhold upon himself, is not obligated to pay the tax on it until the assessment comes, because under under the IRS's instructions the employer pays the tax on the amounts reported to the employer even if he knows they're wrong.
Eileen J. O'Connor: That's exactly right, and that's another indication of the fact that Congress realized that this was going to be a difficult provision for employers to enact.
David H. Souter: Well, what would...
Speaker: he do -- What...
David H. Souter: would he do to anticipate it? Would he would he say I'm I'm paying you another ten thousand dollars, I don't happen to owe you that in tax now, I've paid what the law requires me to pay, and you haven't assessed anything else.
Eileen J. O'Connor: Absolutely not, Your Honor.
David H. Souter: All right, then how does the taxpayer take advantage of the provision that allows him to make a correction and avoid the interest in this case?
Eileen J. O'Connor: Well, one of the things that is somewhat troublesome about some of the briefs in front of you from the other side is that the other side is looking at this as though it were a penalty.
Speaker: something...
David H. Souter: No, I will assume it's it's no penalty.
Eileen J. O'Connor: Uh-huh.
David H. Souter: I just want to know how it works in this situation.
Eileen J. O'Connor: Right.
David H. Souter: based on what he has to report to you.
Eileen J. O'Connor: Right.
David H. Souter: You haven't assessed anything yet.
Speaker: take advantage of it?
Eileen J. O'Connor: let me point out a couple of things from your question, Justice Souter.
Speaker: Wh- where is twenty-one thirty-one...
Eileen J. O'Connor: is in our joint appendix Your -- oh, no, no, it's in the petition.
Speaker: It's at page fif-
Ruth Bader Ginsburg: help if you answered specifically whether interest does run on the period between the employer paying what the employee's reports call for and the assessment at a higher amount.
Eileen J. O'Connor: Thank you, Justice Ginsburg.
Speaker: twenty-one Q in particular.
David H. Souter: Then then how does this section have an application here? You say, well, this mitigates it,
Speaker: No, I'm sorry. If if...
David H. Souter: the employer can do is pay immediately at the moment of your assessment and therefore no interest...
Speaker: will run...
Eileen J. O'Connor: No, I did not mean to suggest that sixty-two oh five applied to this assessment, and in fact it doesn't.
Speaker: opportunity.
David H. Souter: wouldn't apply in these circumstances.
Eileen J. O'Connor: It doesn't need to, because under thirty-one twenty-one Q it's a very interesting provision.
Speaker: penalty.
Antonin Scalia: that point there is, and if you would come back to Justice O'Connor's question, which was, how could the employer ever know that there was a mistake in the assessment? And and you said, well, as soon as he knows it, he can come forward with the additional amount and there won't be any penalty, but how does he know it?
Speaker: That's the problem.
Eileen J. O'Connor: reporting on a monthly basis, and in this case there was clearly you know, we have a hundred and twenty thousand dollars of unreported credit card tips in each of the two years involved here.
Speaker: The restaurant has clear notice...
Antonin Scalia: Your a- your assessment assumed a certain unreported amount of of cash tips as well.
Speaker: Yes, it did, Your Honor.
Antonin Scalia: how is the reporter how is the employer going to know whether that's erroneous or not?
Eileen J. O'Connor: The same method that he would use to make any other determination.
Speaker: On that s- wait...
Antonin Scalia: But the burden is on him.
Speaker: [Inaudible]
Eileen J. O'Connor: Justice Scalia, the burden is on the taxpayer, and in this case the taxpayer conceded the ent- the entire amount of the adjustment...
Speaker: Page thirty-five of the joint appendix --
Anthony M. Kennedy: is on the taxpayer to give information as to which the taxpayer is not in the best p- p- pos- position to know.
Speaker: That's true, Justice Kennedy. The -- uh-huh.
Anthony M. Kennedy: how is the employer supposed to know, and you say, well, if he doesn't know he can amend later.
Eileen J. O'Connor: Actually, n- not all of that is true is Justice Kennedy.
Speaker: say, does...
Anthony M. Kennedy: how does he do that, s- s- s- sue the em-
Speaker: employee or something?
Eileen J. O'Connor: Oh, if in i- in yes, if if there were a dispute between the two over any matter the employer certainly could.
Speaker: Well you're...
William H. Rehnquist: You're talking about a tax court or...
Speaker: district court or...
Eileen J. O'Connor: Just in just as a general proposition.
William H. Rehnquist: general proposition I don't think the employer can s- s- s- subpoena the employee.
Speaker: Don't you.
Eileen J. O'Connor: That's what I meant, Your Honor.
Speaker: If if there were some other legal proceeding.
Anthony M. Kennedy: he ought to fire the employee and then be subjected to a wrongful discharge suit and then subpoena the information so that he can give it to you.
Eileen J. O'Connor: Well, actually, there is no evidence in the record on whether the individual employees were audited or not.
Speaker: on that point.
Anthony M. Kennedy: have the capacity to do it and the employer doesn't.
Eileen J. O'Connor: That's that's true, Justice Kennedy.
Stephen G. Breyer: And that's just luck, because I thought Justice O'Connor's original question was, look, we can all do this, it's so simple.
Eileen J. O'Connor: I'm sorry I I didn't...
Speaker: And now is there anything else...
Stephen G. Breyer: is there anything else that i- di- that this restaurant owner has it in his power to do? Other than write the check.
Eileen J. O'Connor: A- absolutely Your Honor, and...
Speaker: What is that?
Eileen J. O'Connor: question.
Speaker: worker...
Stephen G. Breyer: eight percent.
Speaker: Right. Per month. Right.
Stephen G. Breyer: It is about people who satisfy all these other minimums it is not about people they can even get a tax credit for this...
Speaker: Right.
Stephen G. Breyer: I'll save that question.
Speaker: I'm...
Stephen G. Breyer: interested in the answer to Justice O'Connor's question, in what I'd call the mind run, mainstream, basic, typical situation, and that is, what is that answer? So far I'm concluding he can...
Speaker: do nothing. Oh  tell me the answer. Yeah.
Eileen J. O'Connor: restaurant can do is show evidence that would tend to determine, or help determine the amount of the tips, how many wha- what kind of a restaurant you have, how upscale it is, where it's located, the kind of meals you serve in fact, the IRS has a procedure where restaurants can show all that information, a sample menu to get below the eight percent.
Speaker: To to justify in court. Right.
Stephen G. Breyer: I think in typical cases like this one, the restaurant will have paid more they will have assumed that it is more than eight percent.
Eileen J. O'Connor: Right.
Stephen G. Breyer: All right.
Speaker: Now, we're only...
Stephen G. Breyer: talking...
Speaker: about...
Stephen G. Breyer: an area that's well above that, and in respect to the area well above that.
Eileen J. O'Connor: The taxpayer here had the opportunity to do that.
Speaker: things that you...
Sandra Day O'Connor: acknowledge at least that it's virtually impossible for the taxpayer to get that information? I mean, the taxpayer has the reports from the employees,
Speaker: and that's all. And...
Sandra Day O'Connor: how as a practical matter, is the taxpayer going to establish there's something different? I mean, we we we know in terms of generoli- in generalities, we're told that there are l- less tips paid for bills paid in cash than by a credit card.
Eileen J. O'Connor: That has been an assertion that is unproven in the record.
Sandra Day O'Connor: So you don't...
Speaker: accept...
Sandra Day O'Connor: that as proof.
Speaker: So what's the tax   so what's the employer...
Sandra Day O'Connor: going to do?
Eileen J. O'Connor: It it may or may not be true.
Speaker: Let me ask you one other...
Sandra Day O'Connor: thing.
Stephen G. Breyer: Mhm.
Sandra Day O'Connor: system.
Speaker: Right?
Sandra Day O'Connor: that Congress passed to address this very problem?
Speaker: What...
Sandra Day O'Connor: percentage of restaurants e- have used TRAC? Do the does the record tell us that?
Eileen J. O'Connor: No, the record doesn't tell us.
Speaker: They never did that, they didn't do it in the...
Eileen J. O'Connor: district court, either.
David H. Souter: Where would the taxpayer get the information? The only thing the taxpayer has got are the employee's returns or to the taxpayer and your assessment.
Speaker: Well...
David H. Souter: the taxpayer going to get the information that would allow it to do what you say in theory it could do?
Speaker: [Inaudible]
Eileen J. O'Connor: magically, since its concession in the district court, at the appellate level and again in its briefs before this Court, the respondent has come up with all sorts of ideas that might challenge the amount of the assessment.
Speaker: Even if the...
Ruth Bader Ginsburg: in this case whatever may be in the next case, there is a stipulation in this case...
Speaker: Mhm.
Ruth Bader Ginsburg: not contesting the method.
Eileen J. O'Connor: We don't know whether the taxpayer here was paying the minimum wage, because none of that was in the record, because the assessment amount was conceded.
Speaker: in this case.   Yes.
Antonin Scalia: Go over that again.
Eileen J. O'Connor: The social security trust fund, so to speak.
Antonin Scalia: Is it So to speak, yes.
Eileen J. O'Connor: Well, it is a matter of Government accounting.
Speaker: As as a matter of Government accounting.
Antonin Scalia: a fantasy, isn't it? I mean, it's it all goes into one pot, doesn't it?
Eileen J. O'Connor: A- as as a matter of Government accounting, there are funds that that are...
Speaker: So purely as an accounting...
Antonin Scalia: matter it makes a difference,
Speaker: is that it?
Eileen J. O'Connor: As as a Government funding matter.
Speaker: As a Government funding matter.
William H. Rehnquist: the taxpayer It d- it makes no difference, I take it.
Eileen J. O'Connor: From the point of view of the taxpayer, it will make a difference if they use tips to satisfy their minimum wage requirement,
Speaker: and on this...
Eileen J. O'Connor: record we don't know.
William H. Rehnquist: And if if they don't, it it won't make that a d- a differen-
Eileen J. O'Connor: It will well, the- no, that's not entirely true, because it's an optional credit.
Speaker: which they might prefer to do.
Anthony M. Kennedy: what happens if the employer doesn't have enough gross or n- enough n- u- I guess, gross income to offs- to offset the credit? Then then he has to b- be stuck with the difference, right?
Eileen J. O'Connor: Well, it is a nonrefundable credit, and that means that you can either use the credit as an offset to your income tax, and what you're suggesting is they don't have any income tax.
Speaker: year.
Stephen G. Breyer: the qu- the question, and to be overstate the point, I'm not buying into this argument at the moment, I but I do want to hear your response.
Eileen J. O'Connor: Congress had the opportunity to s- say that no, the IRS does not have t- have the authority to do what has been referred to here as aggregate assessments.
William H. Rehnquist: Y- You said the assessment is presumptively correct, isn't it, under the statute?
Eileen J. O'Connor: Not under the statute, Justice Rehnqu- Chief Justice Rehnquist, but rather under the laws that this Court has observed.
Anthony M. Kennedy: Well, you take the position it is presumed to be correct, don't you?
Eileen J. O'Connor: It is u- U- United States versus Janis stands for the proposition that an assessment is valid unless it is without any foundation.
Speaker: [Inaudible]
Speaker: [Inaudible]
David H. Souter: No please go...
Speaker: ahead.
Antonin Scalia: it it has a foundation if three-quarters of it is true?
Eileen J. O'Connor: Pardon me?
Antonin Scalia: It has a foundation if three-quarters of it is...
Speaker: true? Is that what having a foundation means?
Eileen J. O'Connor: I think is much, much lower than that.
Speaker: So if...
Eileen J. O'Connor: this one has a foundation.
Antonin Scalia: One one penny on the dollar is accurate, that a- it has a foundation?
Speaker: Oh I I I think that would be...
Eileen J. O'Connor: pushing it a little far,
Speaker: Your Honor, and that's not what United States versus Janis would require.
Antonin Scalia: mean that there's some reason to believe that the full amount is accurate, not that three-quarters of it is accurate.
Eileen J. O'Connor: That's not what this Court has held, i- particularly in United States versus Janis, where in fact the assessment there was based on an estimate of wagering taxes.
Speaker: worth of wages.
David H. Souter: rule assume that the taxpayer is, in fact, in a position to prove the correct figure if the assessment is wrong?
Eileen J. O'Connor: Not necessarily, Your Honor, and it is incumbent upon any taxpayer upon whom a tax is imposed to maintain whatever books and records...
Speaker: they can.
David H. Souter: comes back to the question I've asked before.
Eileen J. O'Connor: Well, i- the taxpayer is in a business that requires a lot of things.
Speaker: can assume that if...
David H. Souter: short of the restaurant's hiring someone to bird dog every single waiter and waitress to see what, in fact, the tip was, I don't see how the employer here could collect the information.
Eileen J. O'Connor: The waiter...
Speaker: can also write...
Eileen J. O'Connor: down his tips in a little book, and there are...
Speaker: daily reports for it that the IRS provides.
David H. Souter: is in fact not telling the cold truth.
Eileen J. O'Connor: That is...
Speaker: why restaurants -- every employer should hire...
Eileen J. O'Connor: reliable people who they can trust to follow the rules.
William H. Rehnquist: Very well, Ms. O'Connor.
Tracy J. Power: Hm M- m- mes- may it please the Court, Your Honor.
Speaker: my neighbor had.
John Paul Stevens: one question that really is puzzles me in this case? I I can't follow the...
Speaker: cows and all that...
John Paul Stevens: But you did have records, written records that showed that the actual amount of the tips c- paid by credit card and so forth to the people in question here was substantially larger than you reported.
Tracy J. Power: We do not know to what extent, if any, those credit card tip amounts, or the amount on the credit card tip slot on a credit card, was in fact received by an employee, a tip received by an employee that is wages subject to the act.
Speaker: what...
John Paul Stevens: credit cards d- they go to the restaurant, u- doesn't the restaurant turn the cash over to the employee?
Tracy J. Power: The the res- restaurants handled it i- in a in a variety of different ways.
Speaker: We do...
John Paul Stevens: don't you know what the practice is in your own restaurants?
Tracy J. Power: Y- we would know what what each individual restaurant would know what is done i- in basic practice in their restaurant, but how much of if any, of that credit card amount was retained by any individual employee, we...
Speaker: do not know.
John Paul Stevens: the I understand the waiter may have split the tips with the busboy and so and so on, but the total amount of tip on the credit card slip was paid to some employee, was it...
Speaker: not?
Tracy J. Power: we don't even know whether it's a tip.
Speaker: be a tip. There...
William H. Rehnquist: restaurant.
Tracy J. Power: Would know whether that credit card amount was, in fact, a tip? No.
Speaker: circumstance where a cus-
Speaker: on the credit card...
Sandra Day O'Connor: As a tip? I I seem to recall seeing a...
Speaker: space on...
Speaker: restaurant charges...
Sandra Day O'Connor: that says tip, X amount, you fill it in.
Tracy J. Power: And that's correct, and if I went in and I didn't have any cash in my pocket and I said to the waiter, you know, I'm going to leave some extra tip on here, I need to pay for the valet when I leave, I'm going to put five bucks extra on here, can you give me the cash, yes, it's possible that there's...
Speaker: tips on there.
Stephen G. Breyer: The question is what's normal, and normal tip is tip, and I don't understand the chickens and the cows exactly becau- I- in may my copy of the code here it says it s- doesn't say, it says the employer, there is imposed on the employer an excise tax equal to six point two percent of wages, and it says, including tips, so I don't see how what your argument is that the tax isn't authorized.
Speaker: authorized.
Tracy J. Power: of an individual...
Speaker: employee. It's  and they have...
Tracy J. Power: what their assessment stands for is a is a tax on my gross tip payroll.
Speaker: that is not a tax...
Stephen G. Breyer: that basic point.
Tracy J. Power: My reply to that is, well we started out by saying it's wages, including the tips of the employee, and they did not give us a bill for wages which are the tips of the employee.
Speaker: tax.
Anthony M. Kennedy: th- that's that's a different argument from the one that we've been wrestling with, which is whether or not you have within your auth- authority and control an a an ability to calculate the basis for challenging the assessment.
Speaker: We do not.
Anthony M. Kennedy: began by saying, well, they they differ and, g- frankly, I I don't give much force to that argument.
Tracy J. Power: The employer does not know how the tips, the credit card tips are distributed.
Speaker: It's not as if...
Anthony M. Kennedy: get the credit card receipt?
Speaker: At the end of the...
Anthony M. Kennedy: the employer can set up any system the employer wants.
Tracy J. Power: At the end of the evening the employer would cash out all the employees and would turn over credit card tips to employees who might have received credit card receipts, and those employees would then decide among themselves to whom in what amount they are going to share those tips that they have received, along with any cash...
Speaker: tips that they may have...
Sandra Day O'Connor: has an aggregate at that point, some that appears from the credit cards to have been paid out in tips, no matter how it's...
Speaker: shared.
Anthony M. Kennedy: he has the ability.
Tracy J. Power: I don't really think he can make that a condition of employment.
Speaker: so forth. Those...
Anthony M. Kennedy: all the more all the more reason why the employer should have a strong interest in knowing how the division is being made.
Tracy J. Power: Well, I think that there are many employees who do not want the employer to have anything to do to know to do with the tip-sharing arrangements.
Speaker: Not only that, you have...
Ruth Bader Ginsburg: Power,
Tracy J. Power: Sorry.
Ruth Bader Ginsburg: has an obligation to pay FICA tax, and has an obligation to pay it on the total earnings, and it's it isn't your cow analogy didn't just pass me by, because the tax on the employer is independent of the tax on the employee.
Tracy J. Power: That's correct.
Ruth Bader Ginsburg: So it's the employer's cow.
Speaker: belongs to the employer.
Tracy J. Power: there is no question that the employer owes a FICA tax.
Speaker: long...
Ruth Bader Ginsburg: in fact, you stipulated, that you don't dispute the facts, the estimates, or determinations used by the IRS as a basis for its calculation of an amount of aggregate unreported tip income by all directly and indirectly tipped employees, this is yours, this on page thirty-five of the joint appendix.
Tracy J. Power: I do not dispu- we did not dispute the amount of the IRS' aggregate assessment, because of all employees collectively, because we simply do not have the information to dispute that.
Speaker: assessment in this case.
Ruth Bader Ginsburg: we know that there is a disparity between what's reported and what is actually paid in tips.
Tracy J. Power: There's plenty that the Government can do.
Speaker: Congress says should be done.
Ruth Bader Ginsburg: proposed, and tell me if I'm wrong about this, at that the Government go one by one after the employees, and am I correct in saying that the same method would be used by the Government if it went against an individual server, that it you are resisting the Government using against the restaurant.
Speaker: when the g-
Tracy J. Power: entirely different, because, and as the McQuatters case that's cited in the briefs by both parties illustrates, in that circumstance, the individual waiter has an opportunity to bring any defenses he has to the Government's assessment forward, and we are denied every possible...
Speaker: defense by that scenario.
Ruth Bader Ginsburg: specific, please.
Tracy J. Power: The employee disputes the estimate.
Speaker: the tips weren't as great as you think.
William H. Rehnquist: What is stiffing?
Tracy J. Power: No no tip...
Speaker: Oh.
Tracy J. Power: Sorry.
Speaker: Let's let's assume...
Speaker: the Government did...
John Paul Stevens: any of that can get you below the amount that shows up on the credit cards, because for example, say that one one employee got two thousand dollars in tips, and he could have a defense that I passed out six hundred dollars to the busboys, so maybe his liability is less, but it still seems to me the employer would have to at least pay the a- aggregate amount on the credit...
Speaker: cards. I just don't understand how you get around that.
Tracy J. Power: there is a there's a the situation where you could have many employees.
Speaker: percentage...
John Paul Stevens: explain why a- assessments might be wrong as to individual employees, but you still doesn't reduce the gross amount in the tip column on the credit card.
Tracy J. Power: It it does reduce the...
Speaker: gross amount...
Tracy J. Power: that the employer would have to owe, because if any of that credit card tips that you're assuming is in effect a tip...
Speaker: was...
Tracy J. Power: received by somebody who made less than twenty dollars a month, the employer doesn't owe any tax on...
Speaker: that. Or --
David H. Souter: that's a possibility.
Speaker: But wouldn't...
David H. Souter: it suffice on any rule of probability if the Government did just what Justice Stevens described? It's quite true, yes, there might have been an extraordinary turnover, if there is, the employer can come in and say so.
Tracy J. Power: No, because you go back to thirty-one eleven and Congress did not impose a tax on i- on the aggregate earnings of all employees collectively.
Speaker: Congress...
Stephen G. Breyer: there is...
Speaker: that even if...
Stephen G. Breyer: you had the perfect evidence, even if there was a memo beyond dispute, written by the accountant and and signed by all the employers that said, after the most thorough investigation of this restaurant I am telling you privately, and you agree, that the total tips earned that are eligible for social security are three hundred and fifty thousand, so it's signed by fifteen bishops, you know, absolute, dead right, you're saying that even if that's so, he still doesn't owe it because in the memo it doesn't say which employees.
Tracy J. Power: I think that it needs to say which employees earned which amount, and that's what the tax was imposed upon, and if on the other hand you had all of the employees say yes, I earned this, yes, I earned this, yes, I earned this, then you would have that individual...
Speaker: determination.
Stephen G. Breyer: been anything held, is there, that where an employer clearly owes a tax to the Government, based because of the earnings of the employee, and there can be different contexts where that comes up, the evidence that he owes that has to name or pick out which employee? I assume if there were a case that ever said that you would have cited it, and I doubt that there is.
Tracy J. Power: I don't think that...
Speaker: there is.
Stephen G. Breyer: there isn't, then that's my problem.
Tracy J. Power: I m- I think that it's in thirty-one eleven.
Speaker: I think that this Court has...
Tracy J. Power: already held that the tax is...
Speaker: imposed upon...
William H. Rehnquist: thirty-one eleven? It's just two sentences.
Tracy J. Power: Well, thirty-one eleven, it says wages well we- thirty-one eleven says wages I'm sorry, Your Honor, I don't have Equal to the following percentage of wages as defined in section thirty-one twenty-one A, the taxes posed on something called wages, that is defined in thirty-one twenty-one A.
Speaker: as anything but...
William H. Rehnquist: thirty-one twenty-one A in...
Speaker: your brief?
Tracy J. Power: on the next page, page fifty-six of the Government's appendix to the petition, and it says, the term wages means all remuneration for employment, and it goes on, they only have one of the the individual terms listed.
Speaker: specific...
William H. Rehnquist: you're y- but you're telling us this shows your point, and you point to the language that you think it does.
Tracy J. Power: Thirty-one eleven imposes a tax...
Speaker: on wages.
William H. Rehnquist: doesn't say individual wages paid to each individual.
Tracy J. Power: It says wages as defi- defined in...
Speaker: thirty-one twenty-one A. Thirty-one...
William H. Rehnquist: we turn to thirty-one twenty-one, and where is it in there that it makes your point?
Tracy J. Power: Be- but when you go through each one of the...
Speaker: twenty-one...
William H. Rehnquist: here for, to go through something.
Tracy J. Power: Okay, well, the foo- the twenty-one exceptions to thirty-one twenty-one A list individual things like whether an employee participates in a health insurance plan, whether an employee has a four oh one K plan, w- the exc- the extent to which an employee's wages go above or below the social...
Speaker: security wage base.
David H. Souter: accuracy of the figure, perhaps, which you said really is not your point.
Speaker: Well, this Court has already held...
Tracy J. Power: that that that's not the way the cu- the tax works.
Speaker: individual payment...
William H. Rehnquist: two Flora cases, neither of which is cited in your brief.
Speaker: are you re-
Tracy J. Power: versus United States, and I believe it's footnote thirty-seven in Flora versus...
Speaker: United States.
William H. Rehnquist: versus United States.
Tracy J. Power: Well, we re- referenced them in our complaint, Your Honor.
Speaker: paragraph fourteen of our complaint.
William H. Rehnquist: Does it give a citation there?
Tracy J. Power: Yes, Your Honor.
William H. Rehnquist: Well but that was just about whether or not the tax court had jurisdiction if there if if the assessment wasn't completely paid beforehand, wasn't it?
Tracy J. Power: Yes, but I believe that footnote thirty-seven in that belie- br- in that opinion said that the Court agreed that the excise tax, like a FICA tax, is a divisible tax.
Speaker: of...
Sandra Day O'Connor: passed something called the TRAC law in nineteen ninety-eight to deal with this very problem of tips and the FICA tax, did it not?
Tracy J. Power: Not technically, Your Honor.
Speaker: that was written between...
Sandra Day O'Connor: there was a section in nineteen ninety-eight passed by Congress, section thirty-four fourteen of the Internal Revenue Service Restructuring and Reform Act providing that im- IRS would not threaten a taxpayer audit to coerce the taxpayer into entering a tip-reporting alternative commitment agreement, so at least Congress acknowledged...
Speaker: Congress acknowledged that the a-
Tracy J. Power: I- it acknowledged that the agreement existed,
Speaker: but Congress...
Sandra Day O'Connor: was assuming there were assessments going on of employers for this...
Speaker: liability?
Tracy J. Power: that time, because there i- two documents at the very end of the joint appendix that a- are Government documents, and they indicate that the- that they were not doing the employer-only assessments at that time.
Sandra Day O'Connor: When did the IRS start doing these aggregate assessments?
Speaker: Do you know when that started?
Tracy J. Power: doing them about nineteen ninety-two, ninety-three and you had asked the question earlier, how many TRAC agreements are there that have been signed.
Speaker: two hundred thousand...
Sandra Day O'Connor: provision that I asked you about was made in nineteen ninety-eight, so that was well after the beginning of aggregate assessments.
Tracy J. Power: And long after the IRS had announced that they were not doing aggregate assessments.
Anthony M. Kennedy: The the gravamen of your of your brief is that as a principle an assessment shouldn't be imposed on the taxpayer unless the taxpayer has the information to contradict the assessment, which certainly makes a lot of common sense.
Tracy J. Power: Well, I think that...
Speaker: Or is it...
Anthony M. Kennedy: just kind of a due process fairness thing?
Speaker: Well...
Anthony M. Kennedy: specific principle you can point to to to show the correctness of that assumption?
Tracy J. Power: Well, I think that there's thirty years of congressional history that clearly shows that Congress did not intend for the employer to be put in this position, that Congress did not intend for the employer to be ha- to be required to police and monitor the reporting of employees, and effectively that's what the IRS's...
Speaker: interpretation does.
Anthony M. Kennedy: you have you have no s- specific authority or precedent for the proposition that an assessment should not be imposed on a taxpayer unless the taxpayer is in a good or perhaps best position to contradict the assessment?
Tracy J. Power: I think that we have plenty of authority for the proposition that the assessment in this case is unauthorized because it's on the collective wage-earnings...
Speaker: Well but no that but that wasn't...
Anthony M. Kennedy: what I asked you.
Tracy J. Power: That i- that a t- on- a tax cannot be imposed...
Speaker: upon...
Anthony M. Kennedy: cannot be imposed on the taxpayer unless the taxpayer has the capacity or the ability to contradict it.
Speaker: Mi- the best I can tell you...
Anthony M. Kennedy: everybody should know, but that doesn't usually work.
Tracy J. Power: I think that the burden of presumption and the burden of proof that they have put forth is premised upon the the u- understanding that the person with that burden has the records and is in the best position to respond, and that does not characterize this situation.
Speaker: existing here.
Ruth Bader Ginsburg: situations in the tax law where the Government knows that income has been underreported? Aren't estimates made in many different contexts where the taxpayer doesn't keep reliable records, and so the Government has to f- find some way of measuring what the sha- tax should be, so it does an estimate? Isn't that...
Speaker: common?
Tracy J. Power: one of those cases it's the the person responsible for keeping the records is the one taxed.
Speaker: and coming back and...
Ruth Bader Ginsburg: because when I asked you, are they making an estimate in that case, and you started to say no, because the the taxpayer, th- the individual servers have all these...
Tracy J. Power: Excuses or...
Speaker: defenses?
Ruth Bader Ginsburg: Yes.
Speaker: They can.
Ruth Bader Ginsburg: an estimate.
Tracy J. Power: They can.
Speaker: They can...
Ruth Bader Ginsburg: that you are resisting when it's applied to the employer.
Tracy J. Power: Because we are we don't have the same defenses that the waiter and the waitress does.
Speaker: a-
Ruth Bader Ginsburg: can the IRS are you suggesting they should go after the employees, and then when they know the amount based on the extra tax the employee will have to pay, then say, okay, employer, you paid the same amount, but practically can the IRS, does it have the facilities to go audit every waiter and busboy and...
Tracy J. Power: There's no requirement that they audit every waiter or busboy.
Speaker: do anything about it.
Ruth Bader Ginsburg: maybe it isn't cost-effective to go after the individual employees.
Tracy J. Power: Well, I don't think it's very cost-effective to do this one,
Speaker: when the employer is paying it out of one...
Ruth Bader Ginsburg: is owed independently, which is what I s- started to ask you about when you gave your cow example.
Tracy J. Power: Because that's what Congress said...
Speaker: Thank you, Ms. Power.
William H. Rehnquist: Ms. O'Connor, you have three minutes remaining.
Anthony M. Kennedy: M- Ms. O'Connor, at the very outset you said that three eleven imposed a tax on wages paid or deemed to have been paid.
Eileen J. O'Connor: Is the word deemed in the statute?
Anthony M. Kennedy: Yes.
Eileen J. O'Connor: I believe so.
Anthony M. Kennedy: Well, I'll f- I'll I'll find it, if you the...
Speaker: Yes.  I- page on page...
Eileen J. O'Connor: fifty-eight A thirty-one twenty is where thirty-one twenty-one Q appears, and remember that is a section that provides definitions.
Anthony M. Kennedy: Well, except I think the deeming refers to the time of payment, not to the fact of payment, but I'll I'll look at that.
Eileen J. O'Connor: I think you're right about that, Your Honor.
Speaker: It's at page fifty-eight A.
Sandra Day O'Connor: been m- making these assessments, please,
Speaker: Ms. O'Connor?
Eileen J. O'Connor: that it did start around nineteen ninety-two and nineteen ninety-three, and the information that the IRS is gathering on the forms eighty twenty-seven demonstrated the extent of the problem that Congress suspected did exist about substantial underreporting of tip income.
Ruth Bader Ginsburg: In view of all the questions about the proper computation, why has the Government resisted notice and comment rulemaking to come up with a fair formula, because the the contention is that the Government's formula exaggerates the income, exaggerates the tip income.
Eileen J. O'Connor: Th- that is certainly the contention, and there have been, however, no facts to show whether that's that's true or not, because in each of the cases, not only the Ninth Circuit below, but in each of the other three cases that we cite in our brief decided by the Seventh, Eleventh, and the Federal Circuits, no evidence was ever submitted to show that the tips were overstated...
Ruth Bader Ginsburg: in any...
Ruth Bader Ginsburg: why not em- employ that fair procedure of going through the notice and comment, and then I think that was what Judge Kozinski said would do.
Eileen J. O'Connor: Yes, he did.
Speaker: entirely excludes section...
William H. Rehnquist: Judge Kozinski did say that, so the case is submitted.