Warren E. Burger: We will hear arguments next in 76-398, Citizens & Southern National Bank against Bougas. Mr. Humphreys you may proceed whenever you are ready.
William C. Humphreys, Jr.: Mr. Chief Justiceand may it please the Court. My name is William Humphreys and I represent the petitioner in this case, the Citizens & Southern National Bank. The case arises out of Title 12, Section 94 of the United States code which is known as the National Bank Venue Act and the case involves the application and interpretation of that bank venue provision. The interpretation of that statute requires this court to decide whether the statute requires that a National bank only be sued in its home county, that is, the county which is specified in its certificate of organization. A second issue that must be decided by the court in order for any decision on the merits as to the interpretation of the statute to be rendered meaningful is whether a National Bank may waive the provisions of Section 94 by the establishment of a branch bank in a county other than a county where it is chartered. Those are the two issues presented by this petition to the court.
Speaker: As a matter of fact, in how many Georgia counties does the CNS still have banks?
William C. Humphreys, Jr.: Your Honor, that fact is not in the record but I will frankly concede that CNS has branches in many counties --
Speaker: In many counties?
William C. Humphreys, Jr.: Yes sir and that is not disputed and in fact, in the instant case the record shows that we did have a branch in the DeKalb county where this suit was brought, that is not our home office. Our home office specified in the certificate of organization is in Chatham county, Georgia.
Speaker: So you are taking the position that even though you have a branch in the DeKalb County that suit may be not be brought there if it is not on a transaction arising out of, well may not be brought there. It has to go to Savannah.
William C. Humphreys, Jr.: That is correct Your Honor.
Speaker: And even though the volumes -- so suppose if someone brought suit against you in Fulton county at Atlanta, and the volume of business done by CNS in Fulton county was 20 times what it was in Savannah, you would still say they had to go to Savannah to sue you.
William C. Humphreys, Jr.: That is correct Your Honor. If the venue was waived by the bank in that particular case raised, then it would be required to be sued in Savannah, its home county.
Speaker: You say a home office, is that --
William C. Humphreys, Jr.: Yes, it is the county specified in its charter, is the word we --
Speaker: Is that synonymous with registered office. In my state, a corporation has to reside in its certificate of incorporation, if its registered there.
William C. Humphreys, Jr.: Yes it is a little bit different with regard to National Banks, they are obviously federally chartered and there is not the registration that goes over state corporations rather there is a certificate of organization and in that certificate of organization there is a place specified and it is that place that we contend is the home county, that is, the place specified in the certificate of organization.
William H. Rehnquist: Is that wholly within the discretion of the bank to select any county within the state that it has a bank at to be that certified place?
William C. Humphreys, Jr.: Well, at the time the bank is initially chartered then the answer to your question is yes, when they are chartered they will select a place that is to be their home office and then there are really strict provisions that that home office, for example, cannot be moved during the lifetime of the bank over fifty miles. So that even if, as I understand it, if you select county A, then you cannot move that county, your principal office over fifty miles. You can move it fifty miles with the permission of the controller of the currency but as I read, I believe it is 12 of United States code section 30, you may not move it over fifty miles.
William H. Rehnquist: Are there any substantive requirements in connection with the principal office, do you have to hold your Director's meetings there or is it just purely a venue?
William C. Humphreys, Jr.: No Your Honor, there are approximately, when I went through and counted, at least seven or eight statutes that talk about activities and duties that must be conducted where you are located.
Warren E. Burger: But what about maintenance of records, is there not any requirements, that certain records be maintained at the principal or chartered place of business?
William C. Humphreys, Jr.: Your Honor, I am not aware that there is any specific statute in existence now that requires that the records be maintained only at that one office.
Warren E. Burger: How about regulations over the control in general?
William C. Humphreys, Jr.: Your Honor there may be I am -- there may be a regulation such as that, I am sorry I do not know of any, I do not find any specific statutory authority, there may be certain records but generally the bank can of course, now conduct business not only in its main office but --
Speaker: Do you say that there are some statues that require at the home office the conduct of some kinds of business, is that right?
William C. Humphreys, Jr.: Yes, Your Honor.
Speaker: Of what kinds?
William C. Humphreys, Jr.: Well, for example, one very important statute, I believe governs the amount of reserves that must be maintained with Federal Reserve Bank and this statute requires that if you are located in a federal reserve city that you will maintain so many percentage of reserves, if you are not located in a reserve city, the reserve requirements are less, this we found in 12 United States, code 142.
Speaker: Is that why you are in Savannah and not Atlanta?
William C. Humphreys, Jr.: No Your Honor, the reason we are in Savannah is because years ago, we in fact were started in Savannah.
Speaker: Has this bank, has the CNS everywhere itself used by courts of DeKalb county?
William C. Humphreys, Jr.: Again that is not in the record but I am certain that we have.
Speaker: I am sure it must be. Mr. Humphreys may I ask you two questions in this reserve calculation, I take it reserves throughout the bank, all of the bank branches are counted in calculating reserves.
William C. Humphreys, Jr.: I would presume so as long as they were part of the same bank.
Speaker: Is there anything in statute and my second question is that would preclude you from closing your banking activities in Savannah but retaining your office for Director's meeting and the like there. Say you decide all your banking in Atlanta but keep your home office in Savannah, could you do that?
William C. Humphreys, Jr.: I am reluctant, I do not know the answer to that question, I will add that with regard to the requirement that it be moved fifty mile that it only be moved fifty miles. And even then only with the controller's permission, I am told as an anecdote that at one point in time there was thought of trying to move the office from Chatham county to Atlanta and someone suggested they could only do it at about 50 miles a week, so that they would move fifty miles one week and fifty miles the next, but clearly I --
Speaker: Because that only relates to moving the home office, that isn't relevant to the question whether you could discontinue banking?
William C. Humphreys, Jr.: No sir, I do not know whether if they could discontinue banking activities, I believe this will probably depend to some extent on the answer to Mr. Chief Justice's argument which I am not able to answer and that is must there be some records, must there be a physical place that continues to be maintained in the home county and that there may be some regulations regarding that.
Speaker: What limitations -- who was doing branching under Georgia law?
William C. Humphreys, Jr.: Your Honor, we have opened up branching somewhat and I believe it is now a grandfather situation, we can pretty much go, we can merge with and I believe this court considered the effects of that, what used to be 5% banks and I believe now we have state wide branch banking in Georgia, it is not grandfather situation.
Speaker: Did Georgia ever have a situation that I understand prevails in some states in which no branch as well had whatever, perhaps no branch at the Atlantic county in which the home office is located.
William C. Humphreys, Jr.: Oh! Yes Your Honor. We did have that large such at one time and it has got the Georgia banking law has gone through several phases and I am confident that that law did exist at one pint because that is why the we used to have grandfather or 5% banks where the bank would go and could only own 5% of banks in other county. So we did have that at one point in time.
Speaker: But now as so far as a law is concerned, your bank could have a branch in every county of Georgia?
William C. Humphreys, Jr.: That is correct.
Speaker: And it is a hundred and some -- how many counties in Georgia --
William C. Humphreys, Jr.: I do not know how many counties, I am sorry, that Georgia has but it is a large number of counties and the bank will undoubtedly have branches in those counties where it is profitable to open up an office or have a branch.
Speaker: You are going to tell us what your justification for opposing this venue is?
William C. Humphreys, Jr.: Yes, Your Honor, it involves basically the meaning of two words in 12 U.S.C Section 94.
Speaker: Is that all just the statute if there isn't any policy justification?
William C. Humphreys, Jr.: No Your Honor , this statute was being presented to be written by Congress today. There was probably no policy argument for not writing a statute that will allow a branch of bank to be sued at any place, it had a branch, for calls of action arising out of the business activities conducted in that branch. I do not believe there would probably be a very good policy argument for not giving the bank the same wide venue that a corporation has. 12 U.S.C. 94 contains two basic provisions, one is a federal provision and a one is a state provision. The federal provision says simply that a bank may be sued in any county or in any federal court, in any district in which the bank is established; and the state court provision provides that a bank in for state court purposes may be sued in any state municipal county court in the county in which it is located and these two provisions were enacted, one in 1863, the federal court provision, and one in 1864, the state court provision. Now, the Georgia Court of Appeals decided that since Congress had used a different word 'located' in describing the venue for national banks then it did when it described the venue for national banks which was connected to the word established and that therefore a Congress must have intended for located to have different meaning, a broader meaning than the word 'established' and therefore Congress must have intended for banks to be sued in every county in which they were located.
Speaker: But were there any branch banks in 1864?
William C. Humphreys, Jr.: No Your Honor, there were not any branch banks in 1864.
Speaker: Then how do you derive that intention of Congress?
William C. Humphreys, Jr.: I do not -- I am not arguing for that. I believe the Georgia Court of Appeals as in other courts, state courts are trying to find ways to expand their venue. That has always been the case and they looked at the dictionary not the Georgia Court of Appeals but the Security Mills vs. Wachovia case in North Carolina took a run through the dictionary to look at the various words and definitions of 'locate' and 'establish'. This is not a very fruitful task because one of the synonymous meanings or synonyms for locate is to establish. So having done that to still give them opposite meanings does not make a lot of sense and that's particularly true in light of the conditions that existed in 1863, as we have said there were not branch banks in 1863, a bank could only do business in one place, the county in which its Certificate of Organization was issued. But more importantly the jurisdiction of the state in federal courts in 1863 and 1864 was concurrent with regard to national banks and this to me is very important in deciding whether located and established mean the same thing, because until 1882, any suit against the national bank could be brought in the first instance in federal court without regard to diversity and without regard to amount involved. Similarly, any suit brought in state court could also be removed to a federal court since the federal courts had concurrent and original jurisdiction and therefore it seems to me that the argument becomes even more untenable that a federal court, that Congress intended for state courts to have a broader venue and to permit suits in more state courts than in federal courts with this concurrent jurisdiction and the same really holds true today, because if a diversity suit were brought in Georgia in a branch, in a place other than where the bank was established, the bank could remove that case to federal court, and the federal courts are clearly unanimous in holding that the word established refers only to the place specified in the bank's certificate of organization.
Speaker: Why can not the bank remove in a situation like that?
William C. Humphreys, Jr.: Well, it would have to be a diversity case, Your Honor, it would have to be a New York citizens suing a bank in Georgia and, for example, bringing suit in Atlanta. That would not work with two Georgia citizens such as we have here.
Speaker: Since 1882
William C. Humphreys, Jr.: Since 1882, now prior to 1882, you have the same result, you would remove and then you could end up back in the county where you started or rather have the case dismissed, if you are moving from state court to federal court. So I submit that the first argument or consideration that should not control in this case is any consideration that the word located and established had different meanings as used by Congress in 1863 and 1864. Whatever, interpretation is given to the word located in this case and this is clearly a state court case. It is not, does not arise in the federal court, but whatever interpretation this court gives to the word 'located' it also must give to the word 'established' and it is clear, as we have, I think mentioned briefly before that located and established when used in 1863 and 1864 referred only to one place. There was only one place in existence at 1863 and 1864 and that was the place that the bank was chartered. Now further more, if you read the language of section 94 carefully it is very apparent that although Congress might have mingled the words located and established, it was very particular as to when it intended to note a potential plurality and when it intended to mean the singular and thus the statute provides that the suit may be brought in any district or territorial court of the United States, and it further provides that the suit may be maintained in any state, county or municipal court. There is a potential plurality of courts that I believe could be found from that language. On the other hand, Congress was quite explicit that it should only be maintained in the district, the one district, I would suggest in which the bank was established and in the one city or county in which the bank was located.
Speaker: How does the Langdeau case helped you much or it hurts?
William C. Humphreys, Jr.: Both the Langdeau case helps more than it hurts but is not determinant of the issue. In Langdeau, the court was concerned with whether 12 USC 94 was permissive or mandatory that was the only issue --
Speaker: Whether it prevailed over the state.
William C. Humphreys, Jr.: That is right, whether it could be in that way or whether it had to be applied or whether it just was something that could be applied.
Speaker: It held that it had to be.
William C. Humphreys, Jr.: And it held that it had to be applied.
Speaker: But there was no question there about where the bank was --
William C. Humphreys, Jr.: There was no question there about where the bank was although the court did say that to hold that the statute was merely permissive rather mandatory, would render meaningless a Congressional enactment permitting suits in the bank's home county. Now that is an exact quote from Mercantile, they coined the phrase home county, the court in Mercantile. This court really for a hundred and three years beginning back in 1871 with Bank of Bethel in going really down through 1976 in Reds and Harvard case has never intimated and it has many opportunities that located and established are not referred to any place other the one place that is the place in the Certificate of Organization. For 40 years the federal court, ever since the Leonardi case which was decided by the Second Circuit in 1936, for 40 years the federal courts have been unanimous in holding that established is determined by the place specified in the bank's Certificate of Organization and that once that decision is made, there is no need to go further to determine where venue properly lies in a suit against the bank. Most courts, most even state courts in this day have recognized that located and established do in fact, mean not only the same thing but that they refer only to the county specified in the Certificate of Incorporation or rather the Certificate of Organization.
Speaker: Do you have any idea when this statute was passed, how many states had more than one federal district?
William C. Humphreys, Jr.: Your Honor, I have made diligent search to try to find out this potential plurality question on district and territorial as the statute was initially enacted that it provided that it could be brought in any circuit district or territorial courts, clearly, I believe in 1863 there still were circuit courts that had primary or trial court jurisdiction. I have not been able to -- the court system was very complicated in 1863, I am unable to say that there was a state that had a district or a territory. I do know that back in 1863 when you stick, when you write in the alternative of circuit district or territorial court, I feel that there must have been some overlapping and even if we can't, I can't --
Speaker: Now, was there a state that had one on one circuit courts, for example.
William C. Humphreys, Jr.: Your Honor, I have --
Speaker: Or having more than one district court.
Speaker: There were states with one on one district courts.
William C. Humphreys, Jr.: I know that there was a district court, I know there were district courts that would encompass two states, I know that and over the district might cover two states --
Speaker: How about more than one on one state?
William C. Humphreys, Jr.: I do not know I have -- the treatise on the court system at 1863, I have tried to go through and it is a very tedious task, the system was very complicated back then and I am extremely sorry, Your Honor, I simply cannot respond to that.
Speaker: I suspect, you could find it in the front pages of 35 federal.
William C. Humphreys, Jr.: Your Honor, I think not. It is very complicated, I will go back and undertake that but we have tried diligently so that I could definitely say that state Acts had a district and the circuit court in it and therefore there was a reason for that potential plurality but i would suggest that that my ignorance is not damming to my argument because my point is that even if there was a potential plurality, just the chance of more than one Congress used the word 'any', really whether there were more than one or not I do not know but if there was a chance that there was more than one court in which this case could be brought, then they used the word any. In other words, any circuit district or territorial court on the chance that there was a plurality.
Thurgood Marshall: I just remembered, there must have been plenty of states with just one district court, because I remember correctly, Maryland has still got one.
William C. Humphreys, Jr.: That there are still states today that have only one district court.
Speaker: Mr. Humphreys, what significance if any do you attach to the McFadden Act of 1927 authorizing national banks to branch and using the word establish with respect to branches.
William C. Humphreys, Jr.: The Act probably could be used to make a distinction between the location and establishment of a bank versus the location and establishment of the various branches of that bank but that statute has no effect on 12 USC 94, it has only not been amended by Congress, the federal case of it considered that the McFadden Act had placed no importance on it to the extent that it somehow changes or effects 12 USC 94, but that statute was written at the time still in terms of the basis, and we believe of the county specified in the charter, and if for some reason located and established are now supposed to mean every place where the bank has a branch then we have numerous other statutes, for example, the publication of controller's report shall be in the city or county where you are located. These reserve requirements, all of these topple like house of cards and instead of having one central county where all of these reports are published the reserve requirements suits against the controller of the currency, all of a sudden these also take on a plurality rather than what we contend would be the single place, where Congress originally intended for these activities to take place.
Warren E. Burger: Well, is a branch or a bank in and of itself, does it have all of the attributes of the bank?
William C. Humphreys, Jr.: It many have all of the attributes of the bank or it may not, it may have the instant tailor and it may not be able to make loans but it is permitted to have all of the attributes of a bank. I mean, the general business of the bank may --
Warren E. Burger: Does it have its own President and Board of Directors?
William C. Humphreys, Jr.: A branch would not, no sir.
Warren E. Burger: Well that is one of the important attributes of the bank as well.
William C. Humphreys, Jr.: Yeah, sir I was directing myself to what the business that they could conduct.
Speaker: Well, the main office would not have its own President and Board of Directors, the President and Board of Directors would be over the main office in all the branches?
William C. Humphreys, Jr.: That's correct, yeah sir. The bank itself has the President and a Board of Directors, each branch will have a branch manager, just like a division of a corporation, it is not a separate entity.
Speaker: Mr. Humphreys, would you help? You mentioned the fact that there are requirements that such as publishing the amount of reserves or something like that, what is the purpose of requirement like that, to inform people who do business with the bank, what it sizes in the like? What are the requirements you are talking about apply all over? May be they should apply every place at the bank. I did not quite get the argument.
William C. Humphreys, Jr.: Alright. There are numerous other statutes. In some of them, it might in fact be desirable to apply every place, the bank has a branch. Publications of, as I say directors meetings and that sort of thing and it might be that it is desirable for the bank to publish them not only in the place where it is located as specified in the statute but also all over the state, every place it has a branch. I would suggest though that it is that sort of argument that ought to be directed to the Congress and not directed to this court and whether it is desirable policy for a bank to be sued everywhere or whether it is desirable policy to have controller's reports published everywhere. It's something we cannot answer
Speaker: May be Congress has already answered that.
William C. Humphreys, Jr.: Well, I do not think so particularly with regard to the reserve requirement Your Honor because there it would seem like Congress certainly would not intend to create a confusion by using the word 'located' to define the specific reserve requirements for a bank depending on the county whether that it was located in, that is, whether it be a central reserve county or whether it be another county. By the saying that the bank is located everywhere then that provision becomes almost unmanageable that would seem to me.
Speaker: I thought that the requirement only related to the place where publication had to be made rather than the content of the publication.
William C. Humphreys, Jr.: No, Your Honor. As I say I tried to summarize too quickly and they are not cited in the brief but there are about 8 more statutes that were enacted in 1864. One of the statutes concerns the requirements for maintaining reserves, I mean this is not a publication statute and I do not want to suggest that that statute was necessarily passed in 1864 but the statute provides that if you are located in a reserve city, you will have a reserve requirement of 'x', if you are not located in a reserve city, you have another reserve that is not a publication that actually directs you as to how much reserve you may have.
Thurgood Marshall: And in the state of Texas, the bank that is chartered in Galveston and a branch in El Paso had to turn out that since it were taking about three days to get there, would it not?
William C. Humphreys, Jr.: At least.
Thurgood Marshall: And it would apply, your statute would apply.
William C. Humphreys, Jr.: That is correct Your Honor.
Thurgood Marshall: And as of today that bank had published whatever they want in the Galveston daily paper is noticed in El Paso.
William C. Humphreys, Jr.: Under all of the statutes that would be correct, yes sir. In the few minutes that I have remaining, I would like to ask the courts in diligence to consider the waiver argument because many state courts having concluded that located and established refer to only one county then turned right around and say however this venue requirement is waved by the erection and maintenance of a branch in another county. That argument is not found on judicial precedent and if the court would think about it as I know it will, it occurs to me that never before in American Jurisprudence have we decided that venue can be waved presumptively by pre-litigation conduct, the only case that even suggests that, if that sort of rule was adopted every case that comes before a trial court, the judge is now going to be faced with an argument of he presumptively waved venue by some conduct inconsistent with it, in advance of trial.
Speaker: What do you do about the Neirbo case?
William C. Humphreys, Jr.: Neirbo trade very lightly on this matter and was a very narrow holding and it involved the corporation who specifically appointed a registered agent for service of process.
Speaker: Which is pre-litigation conduct --
William C. Humphreys, Jr.: But that was very narrow, they found to express consent to be sued by the appointment of agent for service of process and I would suggest that Neirbo can never be cited or used without considering Olberding which was decided in 1953, by Justice Frankfurt because Neirbo be read too expansively or can be used too expansively without reading Olberding because in Olberding the argument was made that a non resident motorist passing through the state, and this was not a jurisdiction question this was on venue, they had decided constitutionality of the non resident motorist statute. But this non resident motorist was passing through a state and for some reason venue requirements were not met because neither the plaintiff nor defendant were residents of that state and the defendant assorted his venue right and the court said, now you waived venue because we have got our non resident statute that says when you are passing through the state you waive a venue, if you have an automobile wreck and you appoint the Secretary of State to receive process although there no specific appointment was made. And justice Frankfurt has said that but to conclude that a motorist who never consented to be sued has agreed to be sued and therefore waived federal court venue as to move in the world of Alice in Wonderland. In other words, that non resident motorist had not consented expressly to be sued. There is no case that this court has considered other than Neirbo in which a pre-litigation waiver has been allowed and in Neirbo the court was very specific to say that it was because they had expressly appointed an agent for service of process and therefore had expressly consented to be sued. Now what the proponents of the waiver argument would seek now is to say that any Act inconsistent with assorting venue that you do prior to trial will result in waiver of venue such as erecting a branch bank. Well I submit that individuals do things all the time in consistent with the normal state venue right of to be sued in your home county. But no court has ever said that because if you are an individual, you go to another county and commit a tort that you have waived venue, you have a waived venue if the statute says you have a right to be sued where you live, you do not waive that statute prior to litigation, and that is what we would contend this statute says that the bank has a right to be sued where it maintains its home offices. Thank you.
Warren E. Burger: Very well,Mr. Humphreys. Mr Kovacich you may proceed.
Michael J. Kovacich: Mr. Chief Justice Burger and may it please the Court, I am Mike Kovacich. I think Mr. Humphreys has outlined to you the crunch of the matter and it basically boils down to a statutory interpretation and there have been decisions which were cited in the briefs from various lower federal courts and state appellate courts dealing with this question in recent years. This case is revolved basically around two theories of interpretation, as far as holding for the position which I contend is proper. The first theory, and this was the one predominantly followed by the Georgia court is the dichotomy in language between the words established and located. The ruling was basically and because of this dichotomy in language, once the bank set up a branch, county other than its chartered county, if you want to use that term, that it was located there, and could be sued there, and therefore in compliance with the statute. The second theory is that of waiver. That is that act of establishing a branch bank in and of itself constituted waiver. This is what Mr. Humphreys discussed when he said pre-litigation waiver. That is the basis of the decisions in some of the lower federal courts which are cited in my brief and in some of the state court decisions which are also cited. But as I said it revolves around this question of interpreting the statute as to litigation in federal court which is not really what we have got here but it has been brought in for a consideration and looking at the entire picture, I would agree with Mr. Humphreys, that the established does mean that particular county. I do not know whether that is quite a case for state litigation and I would not go so far as to concede that, but I think as some of these federal decisions have held the establishment or the conduct of business. There were one or two decisions and there is also a recent Florida appellate decision which dealt with the question of doing business and this gets us in part as to what is required. Some of these cases have contained a recitation of like the Reeves (ph) case, the 66 branches in the Southern District of California and all of that, the Wyle (ph) and this brings upon the question that Justice Rehnquist posed before in Wyle (ph). You may not be aware that DeKalb and Fulton counties are bordered next to each other and part of the city of Atlanta is located in DeKalb. I think that as Mr. Humphrey's response to Mr. Justice Rehnquist indicates a considerable portion of CNS's business by volume as in DeKalb and Fulton counties. I am sure the business in DeKalb is several times what it is in Chatham county. And as to the question raised by Mr. Justice Blackmun about their using the courts in DeKalb, as pointed out in my brief, there was earlier litigation dealing with one of the loans that led to the unlawful redemption as we have alleged in our petition. It was litigation in regard to that, filed by the bank in the exact court that this litigation --
Warren E. Burger: Are you suggesting that the person goes to another state of another jurisdiction from his own and uses their courts that that in and of itself draws him into the jurisdiction of that court for all other purposes.
Michael J. Kovacich: No I would not Your Honor. Mr. Chief Justice, but what I am raising here is the fact that besides using the court, the bank has established branches and is conducting active business and uses the courts as a part of conducting that business and has become a part and parcel of that county and this leads into somewhat the point that Mr. Humphreys raised about, does going to another county and committing a tort waive an individual's venue, and he said no it would not. I believe, that is a correct statement of the law. But many states Georgia included, provide a corporation can be sued in any county in which it commits a tort. You can sue a corporation in a county where the tort is committed or in a contract matter where the contract is entered. So I think courts have recognized different jurisdictional and venue requirements as to corporations.
Warren E. Burger: Nothing ambiguous about that statute, is it not?
Michael J. Kovacich: No, Your Honor, I think that statute is fairly clear and I think that that situation -- .
Warren E. Burger: No, but when you are talking about that situation, you are simply saying Georgia legislature has as a matter of policy declared that to be so, but we do not have that quite clear kind of expression here, do we?
Michael J. Kovacich: No, we do not Your Honor and because of this courts decision in the Mercantile case that is holding that 12 USC Section 94 was mandatory. That therefore pre-empts the Georgia statute for the determination of where CNS can be sued and the determination has to be made under this statute.
Speaker: Mr. Kovacich, I want to be sure about your procedure. Do you feel that you could sue this bank in any county, in state court of any county in Georgia where it has a branch, whether this particular transaction arose out of business from that branch.
Michael J. Kovacich: NO I would not go that far Your Honor. I would say that there has to be some connection to that county.
Speaker: Why do you draw that distinction?
Michael J. Kovacich: Well, I think maybe because in the back of my mind, I think of the Georgia venue statute as to corporations that is if you are going to sue a corporation over a tort or a contract, you have to have some connection to the county other than just finding him there.
Speaker: Do you feel you could sue in Savannah, or Chatham counties of Georgia?
Michael J. Kovacich: Yeah. Well of course the bank is contending that the Chatham is the only place that --
Speaker: Right, but do you think you can sue there? So at least on your theory you have two counties which you could sue, the Chatham and DeKalb. Regardless of where the defense actually--
Michael J. Kovacich: Well, under my theory if there were no ties, no transactions, no part of these transactions in Chatham county, then the only way that I could sue there is on the fact that the statute provides a special additional venue.
Speaker: Well, let me ask it again. On the facts of this case, on your theory then you can sue only in Chatham county or DeKalb county not in Fulton?
Michael J. Kovacich: That is correct, Your Honor because I am not aware of any transactions or any part of this entire matter which were conducted in Fulton county.
Speaker: So you do not go all the away and say because there was a full service branch in the county whatever that means, speaking terminology, that you can sue the bank in that county?
Michael J. Kovacich: No I do not, now I think some of the decisions referred to in my brief imply that possibly that is the case. The waiver or the establishment of the branch that knowing business decision to open the branch and all the ramifications that imposes, includes the right to be sued there. Now, some of these decisions though do contain the qualifying language or the limitation that there must be transactions that arose out of that, otherwise I would think the original purpose of the statute that being to protect the banks, national banks and their infancy at that time from cumbersome litigation would be thwarted and I think I do not know whether or not that is a legitimate purpose today, but assuming that it is. I think that the same purpose is accomplished by limiting the litigations to counties, which have some connection. I will not say here we are dealing with the series of four, five different actions including two separate notes and you know the record does not show and the way this case was involved.
Speaker: You confused me a little bit, I suppose I am not tracking but I thought you were are approaching this initially on a basis of statutory interpretation and then I hence I am wondering why you include the county of the branch or the transaction but exclude a county, where there is another branch and no transaction.
Michael J. Kovacich: Well as I say, or I think some of the decisions do not --.
Speaker: I am not asking about you, and not those decisions.
Michael J. Kovacich: Well I guess from the stand point of the the fairness aspect, I do that in my mind that this could possibly be burdensome to the bank and I think really fairness is one aspect that we have to consider in this.
Speaker: Well on that approach, do you not to lose your construction argument and are you not forced go on into a waiver theory?
Michael J. Kovacich: Well, I think to a certain degree and to me, it is thinking from the fact that to resolve this question which is gone through extensive litigation and many courts recently, that this courts decision or it might be desirable that this court's decision also address itself to the federal and the only way to do that is on the waiver theory because the dichotomy of language definitely does not exist and apply to the federal situation.
Speaker: What would you say, okay if it does not mean established?
Michael J. Kovacich: Well, this I think that is one theory of application and I think that is a theory --.
Speaker: What you would say about national bank that exists in a state, that has two districts and it has branches in two districts and have one as its home office and another as a branch in another district. Where may it be sued? Let us assume that a suit is brought in the district, federal district court, in the district where it has a branch but that is not its own house office, can it be sued there?
Michael J. Kovacich: If you follow my contention that the establishment of the branch constitutes a waiver at least for transactions arising out of this.
Speaker: Except on the waiver you would have to say that it could brought in only one district, except for the waiver.
Michael J. Kovacich: As far as the federal is concerned yes, your Honor and this is why I think we get into the fairness question and this touches upon the matter that Mr Justice Marshall raised before in regard to the Galveston, El Paso situations.
Speaker: Your suggestion, we just rewrite the statue in a fair way?
Michael J. Kovacich: No I am not your Honor, I am not suggesting that you rewrite the statue. I am suggesting that you interpret the statue and you decide what constitutes a waiver of the prerogatives that the bank has under the statue and I would contend to you that the establishment of the branch should be a sufficient act to a constitute waiver, at least as to transactions arising out of the conduct of business in that branch.
Thurgood Marshall: Where is the notice, the bank did not get that notice. When was the bank told that if it established a branch, they would be subject to suit in that county? Waiver is annoying waiver.
Michael J. Kovacich: I do not think, in that sense may be that there was notice Your Honor, but I think also on the same bank if an individual say in a Fulton county Georgia, goes into see and ask to transact business with them, do they tell him look if this does not go the way you want it and you decide you have to sue us that you have go to Savannah, I am sure they do not and so --.
Thurgood Marshall: So if he goes into an ordinary corporations, it still is the same thing there, is it not? It has extended the law but you termed that a waiver. Well, I say waiver has been knowingly made. When bank had to know that, when they established a branch bank that they will waive then, the statue.
Michael J. Kovacich: Well, I would think that it could be, I mean you could argue and I am sure that would be the bank's position that they must make a annoying waiver and they must be put on some kind of a notice but I really do not know any way to put bank on any type of notice as to what are the ramifications of establishing a branch bank.
Thurgood Marshall: How otherwise can you waive a statue?
Michael J. Kovacich: Well, I think that going into that county assumes some ramifications of it. It is a knowing business decision and I am sure when they go in there they do not know what the tax, they may not know what the tax structure or the tax rate is going to be, but they presume and know that they have to pay, they are going to have to pay some type of taxes and as far as this you know this point it is --
Thurgood Marshall: How did the bank know that it is the statue tells them, that they can only sued in Savannah, that they know and the statute says that.
Michael J. Kovacich: Well, that is the interpretation that the bank has been operating under.
Thurgood Marshall: But now this is what the statue says.
Michael J. Kovacich: Well this is a question of statutory interpretation. Your Honor, some courts including state appellate courts and federal courts had held. That this is not what the statue means because by the establishment of the branch, the bank waives venue. There are decisions on both sides of that and in the fairness question, I think probably the most classic is the Halco case, where a New York bank had established a branch in the Virgin Islands and the transaction and everything arose out of the activities of the branch in the Virgin Islands. Now, there the Third Circuit's holding was that the individual had to go to New York, to sue the bank. But there are other federal decisions including one that crosses state lines that hold that the establishment of the branch is a waiver. One were, the bank was established in Camden, New Jersey and the branch in Philadelphia, and the District Court in Philadelphia held that the establishment there was sufficient action to constitute a waiver. Now some of the decisions have looked at other business, are the extensive business of the branches but I think that it would be hard to write any definitive standards there.
Thurgood Marshall: What do you do, where the banks has its office in Fulton County and a branch in DeKalb county, that all in couple of feats, how would your fairness work there? You are suing either one, I guess?
Michael J. Kovacich: I think probably is, if that had been the situation as a matter of convenience, since our office had been handling the litigation in prior action, we might have gone down to Fulton.
Thurgood Marshall: But as a matter of fact your office has a branch in Fulton County?
Michael J. Kovacich: No. No mine, mine is a small suburban firm. But I think one other point that this deals with is, each of the branches has a branch manager who is generally also a Vice President, who can be an agent for service, and the fact and that is how service was perfected in this case and how it has been in other cases, but besides the fairness is as an argument is difficult to make, but I think the statue is subject to interpretation on either, the basis of a waiver theory and for this court to defensively say what actions constitute a waiver. I would contend that the establishment of a branch in and of itself is sufficient. The other as I said and this was the basis on which the George Court Of Appeals rendered its decision, is that by establishing a branch bank, the bank located itself in that respective county, for suit under that court's interpretation of this act without getting in to any waiver but I think that on either application that the motion of the bank, the original motion of the bank to be dismissed was properly denied and I would respectfully request that this court affirm, the decision of the Georgia Court of Appeal.
Michael J. Kovacich: Mr. Kovacich, may I ask you question? I think throughout the argument both parties seem to assume that when a federal venue is sought to be established, the bank can be established only in one place and that the branch would not be established within the meaning of the statue. Has this court ever so held? I do not think so your Honor, I think the reason that both parties have taken that position is one we have not gone into that aspect of it and as great of depth as we are dealing with the state court issue and secondly the statue uses the word 'established' in regard to the federal district and as I understand that the federal laws which set up the procedure for a bank a national bank being chartered also used that exact term 'established' and so from that you draw possibly, an intention to mean the same thing and therefore you do get this home county aspect but to my knowledge as far as --
Speaker: There is no holding by this court that a federal, that the branch of a national bank is not established in the county and in which the branch is located. There is no holding by this court.
Michael J. Kovacich: Not that I am aware of.
Warren E. Burger: Thank you, gentleman. The case is submitted.


Earl Warren: Number 430, Sam Achilli, Petitioner, versus United States of America and Number 834, Sam Achilli versus United States of America. Mr. Atwood.
Peter B. Atwood: Yes, sir. Mr. Chief Justice, may it please the Court. The petitioner in this case was indicted and convicted of willfully and knowingly attempting to evade a large part of his income tax with violation of section 145 (b) of the Internal Revenue Code for the years 1946, 1947 and 1948. The trial court imposed a sentence of two years on each count, which would run concurrently and a $2000 fine on each count or a total of $6000. On appeal to the Seventh Circuit, the Court of Appeals reversed this to the first count for insufficient evidence and sustained as to the remaining two counts for the years 1947 and 1948. A petition for rehearing was filed which was denied wherein in that petition for the first there was raised the question of the overlap of Sections 145 (b) and Section 3616(a) of the Internal Revenue Code. A petition for certiorari was denied on November 19, 1956 and later withdrawn. Subsequent to the denial of petition for certiorari, the case was brought back to the District Court for resentencing under the mandate of the Court of Appeals. At that time, a further motion was filed for correction and reduction of sentence. The substantial -- filed the motion. It was based upon the overlap of section 3616 (a) and 145 (b). The Court denied the motion with respect to the overlap but reduced the sentence to one year on each of the remaining counts to run concurrently and fixed the fine of $1000 on each count to be accumulated or a total of $2000. The matter was brought before the Court of Appeals of the Seventh Circuit and while there, the Court -- this Court was dually -- one on the denial of certiorari and both cases are now before this Court. The contention which we make in this case is that an attempt to evade taxes within the meaning of Section 145 (b) is the same and identical thence provide in Section 3616 (a) to file a false and fraudulent return with intent to defeat and evade the tax. The indictment which was filed against the petitioner in this case alleged that he willfully and knowingly attempted to defeat and he attempted to avoid the -- and evade the payment tax by the filing of a false and fraudulent return. I think the Government admits the identity of the offenses when it states at page 33 of its brief, the following, "In the instant case as in Berra versus United States 351 U.S.131 and indeed almost every case prosecuted under section 145 (b), the proof that the defendant willfully attempted to evade taxes by filing a false return is identical without that required to prove that he filed a false return with intent to evade tax in violation of section 3616 (a). The consequences of that assumption, I've set forth in the -- the main brief, which we filed in this clause to the effect that there is an identity of the offenses and there cannot be a dual offense or double conviction for a misdemeanor and for the penalty. The Government, approximately one week before we are about to file our brief in this case, the time fixed by this Court, made a completely, new position, took a completely new position with respect to section 3616 (a) to the effect that section – that that section did not apply to income taxes. That change of position, I'd like to devote a few minutes to because it seems to me to be quite important with respect to the history of this litigation and of the statutes involved. When this Costello case was before this Court and which it is at this term, the Government admitted that Section 3616 (a) applied to income taxes and stated as a matter fact that it put clearly and therefore it applied to income taxes. The Government in the Dillon case in the Eighth Circuit had argued that 3616 (a) did not applied to income taxes and was successful in securing a ruling by the Eighth Circuit to the effect that 3616 (a) did not apply to income taxes. The Government in its -- our -- our position to -- position for certiorari in that case disavowed holding of the Eighth Circuit and said that 3616 (a) did apply to income taxes. As a matter of fact, it prepared an appendix to a brief in the later cases, one of which was (Inaudible) case which is also pending before this Court, in which it prepared an appendix to that brief and which was send around to the various District Attorneys throughout the United States to be used in what we call boilerplate in cases, the -- involving the same subject. In other words, urging the Court's --
Earl Warren: What did they -- what did they say to their -- their District Attorneys in that regard?
Peter B. Atwood: In this appendix, Your Honors, that -- Mr. Chief Justice, is to the effect that the --
Earl Warren: I always read the amount of it. I don't ask you to read a lot of it --
Peter B. Atwood: No.
Earl Warren: -- but did they -- did they in effect urge them to -- to act upon 3616 as though it was applicable to the income tax laws?
Peter B. Atwood: That is true Your Honor. And furthermore, they cited the same historical material in which they -- they call materials that they cite here, in this case.
Felix Frankfurter: You don't suggest that -- you don't suggest that in the estoppel, do you?
Peter B. Atwood: No, I do not, Your Honor. Not at all, not at all.
Felix Frankfurter: You just say it's very persuasive.
Peter B. Atwood: I say it goes to part of the history, which I like to bring out as we go along with respect to that subject. As a matter of fact the -- the Eighth Circuit in the Dillon case also stated that Section 7207 of the 1954 Code which is the counterpart of Section 3616 (a) of the 1939 Code applied to income taxes. The Court -- or failed in that case to take Congress into the fact that two reports that Congress, the Senate and The House with respect to the 1954 Code specifically stated that the Section 7207 was not intended to make any change in existing law. The -- the Government also as far back as 1952 admits that they have been prosecuting these cases under Section 3616 (a). They say that prior to that time there was no judicial holding that 3616 (a) did not apply to income taxes or any innovation to that effect. However, they do not disclose in their brief --
Felix Frankfurter: By prosecuting -- I take it that you mean that sentences were imposed were in 3616.
Peter B. Atwood: Or an information file (Voice Overlap) --
Felix Frankfurter: Or in the Commission.
Peter B. Atwood: Yes. There were -- they say that up prior -- prior to 1952 there were no cases holding that 3616 did not apply to income taxes and rely solely on the Dillon case as indicating that as the first holding in which the Court -- they are determined that 3616 (a) did not apply.
Felix Frankfurter: I don't understand correctly. When you say it didn't apply, a prosecution or the conflict that is in -- in question here, your contention is it falls both within section 145 and 3616, is that right?
Peter B. Atwood: That is true, Mr. Justice Frankfurter.
Felix Frankfurter: Therefore, to say it was -- it was -- it could be -- if it was prosecuted under 3616, merely means to me legal significance of that statement is that the sentence that was imposed, the limits of -- of sentence provided for by 3616 was given by the judges, the various -- in those prosecutions. Does it mean anything else?
Peter B. Atwood: It means this that the District Attorneys in filing an information against the taxpayer relied on section 3616 (a).
Felix Frankfurter: You see it as the indictment of the information endorsed.
Peter B. Atwood: Information there -- that's correct, Mr. Justice Frankfurter. There were -- there would be no indictment involving 3616 (a) because of its being a misdemeanor.
Felix Frankfurter: You mean it has to belie information?
Peter B. Atwood: I think so, Your Honor. The -- prior to -- well, then the Government proceeds in its brief to disclose a considerable amount manner of statistics showing that since 1952, a 177 cases have been prosecuted under section 3616 (a).
Felix Frankfurter: Now, I must trouble you again. Does that mean that in none of those of cases there were grand jury proceedings – preceding the trial on the merits?
Peter B. Atwood: The information disclosed in their --
Felix Frankfurter: I can hardly believe that.
Peter B. Atwood: Their brief in the case they were by information.
Felix Frankfurter: Well, my question is a little different.
Earl Warren: How many cases did you say Mr. --
Peter B. Atwood: 177, Your Honor. Mr. Chief Justice.
Earl Warren: Unless -- unless prosecutors differ greatly when I knew at first hand time something about them its not uncommon for prosecutors to be wrong in the selection of the statute.
Peter B. Atwood: However, prior to 1952, the Government itself urged in many cases which it cites at page 39 of its brief. I believe its 39, to the effect that Section 3616 (a) is applicable to income taxes. As a matter of fact, it cites a case dated back in 1945 in which it was urged the Koppelman case. In which it was heard that the 3616 (a) applied to income tax proceedings where the petitioner there was seeking probation. And the District Attorney opposed probation on the ground that he had filed a false and fraudulent return in violation of Section 3616 (a). The position we take with respect to that is that it seems to me that the Government at this late stage, approximately a week prior to the filing of our return, with this change of position feels and must feel that unless they are successful with respect to that contention, they have lost this case. I'd like to advert now directly to the history of Section 3616 (a). But I think it's -- the crux of this whole case and I think the Government has pitched its own case on that argument. Certainly, that Congress itself in our brief history of the matter is set forth at page 3 of our brief. The Congress it's -- of our reply brief, that Congress itself as stated in the 1954 Code that the derivation of Section 3616 (a) or -- or Section 7207 of the 1954 Code is Section 3616 (a). In the 1939 Code, that Congress has stated that the derivation of Section 3616 (a) is Section 3179 of Revised Statutes. The two reports of the House and the Senate, which I adverted to you before, both specifically state that the 1954 Code with respect to Section 7207 did not change the existing law. Now, the question is then I think to back and see the antecedence of Section 3616. 3616 had its derivation in Revised Statutes of Section 3179 which first appeared in Revised Statutes of 1874. The predecessor of that section was the Act of 1798 as shown by the materials which were submitted by the Government and which applied -- there was, of course, no income tax at that time. In 1861 and 1862, there was an income tax. And the Government admits that section -- that the predecessor of Section 3179 applied to the income tax provisions of the Act of 1861 and 1864. In 1864, Congress passed a supplement to the revenue laws, which contained certain administrative provisions, one of which was Section 15. Section 15 later became Section 3179 of Revised Statutes. It reads as follows, "Whenever any person delivers or discloses to the collector or deputy any false and fraudulent list, return account or statement with intent to defeat or evade evaluation, enumeration or assessment intended to be made or being dully summoned to appear to testify or to appear and produce such books as aforesaid, neglects and so forth shall be fined not exceeding $1000 or imprisoned -- or imprisoned not exceeding one year.” The Government urges that that provision was superseded by later legislation with respect to income taxes and relies upon the Act of 1898 as it started. It states that the Act of 1898 marked the resumption of a congressional policy, which was in -- though not in effect in 1874 had been followed ever since of incorporating, under each Revenue Act, specific criminal penalties. Now, it relies on the Act of 1898, which provided that if any manufacturer shall make any false or untrue declaration, such person shall be deemed guilty of a misdemeanor. Now, it seems to me quite obvious that that provision could not apply to the exclusion of Section 3179 because it did not require a proof of an intent to evade tax which was one of the requirements of Section 3179. The -- there is therefore, a different case -- a different proof required under the 1898 Act as compared with Section 3179.
William J. Brennan, Jr.: Well, Mr. Atwood, do I correctly understand the Government's position is not that 3616 in terms would not apply to this offense. But rather that later legislation has indicated a congressional intention to supercede the purposes of prosecution of this offense? That statute with the felony statute. I -- I don't -- do you understand the Government to argue that in terms 3616 would not apply at this time?
William J. Brennan, Jr.: Yes, sir. I think that's the position of their --
William J. Brennan, Jr.: You do?
Peter B. Atwood: I think that's their whole case, Your Honor. That there was a repeal, pro tanto as they say of section 31 --
William J. Brennan, Jr.: So that --
Peter B. Atwood: So, it means that it would have applied only three other different taxes.
William J. Brennan, Jr.: That's what they pay.
Peter B. Atwood: As a matter of fact, the official (Inaudible) tax that they refer to is covered by specific legislation, which is referred to in the reply brief of the Government.
William J. Brennan, Jr.: Well, perhaps, I should have ask the Government the question but I -- I followed your argument. I thought it different -- that your impression is different from mine of what the Government is saying.
Peter B. Atwood: I do feel that they -- they have the -- they've taken the position of 3616 does not applied to income taxes at all. Even --
William J. Brennan, Jr.: That we have nothing else in the way of legislation or history or anything else but on the face of it, it would not apply.
Peter B. Atwood: Well, no. They did apply to income tax cases when there were income tax laws in effect but they had taken the position that when Congress was about the specific criminal penalties and later legislation, they did so to the exclusion of Section 3179. And they start with this 1898 Act as indicating that. And as I just pointed out the 1898 Act was a much narrower Act. It provided a smaller penalty. It didn't have the qualification of intent to evade which was in the -- in the 3179 provision. Nor did it have the later -- the other requirement in the section 3179 which was that any person summoned to testify or to produce books shall be guilty of a misdemeanor. That was not in the 1898 Act. So, obviously in my opinion the both were -- were supplementary to each. They complimented each other. Then the Government proceeds to say that the 1909 Act set a pattern with respect to the subject. The 1909 Act was, of course, not an income tax but a tax, an excise tax on the corporations by measured by income. And that tax also was very limited, that specific criminal provisioning -- provision which was contained in paragraph 8 of the Act of 1909 provided that any person authorized by law to make, render, sign or verify any return who makes any false and fraudulent return or statement with intent to evade or defeat the tax imposed shall be guilty of a misdemeanor. Well there again, there was very limited scope to section -- paragraph 8 of the Act of 1909 in that it applied only to persons who were required to render, sign or verify the return. Whereas that Section 3179 applied to anyone who was required -- who -- who -- disclosed or delivered a return to the collector. It also applied as I've just mentioned, to anyone who supplied -- who were refused to produce books or to testify. That issue was not covered by the Act of 1909. And therefore again, both Acts could exist together and apply to the income tax proceeding. The Government says then that there were no specific legislation thereafter which indicated that the -- the Section 3179 applied to income tax proceedings because thereafter, commerce legislated specifically on the subject. However, that is not the case. Actually, there were only two Revenue Acts between 1909 and 1928, which specifically dealt with income taxes. That was -- the very first one was the Revenue Act of 1913. Now, that Act too is very limited in scope. I like to refer the language of that which appears at page 17 of our main brief, which begins that if any person liable to make the return or pay the tax shall neglect to refuse and any person required by law to make, render and sign which is the same language which was contained in the 1909 Act. And again, was limited to persons who were required to file a return and didn't apply, for instance, to an accountant who would deliver a list or a statement to the collector or the director which would prove to be fraudulent or false. So that again, Section 3179 would equally apply to a criminal undertaking on the part of a taxpayer or a representative of the taxpayer under the 1913 Act. Then to the 1913 Act, it didn't contain the language, which was contained in Section 3179 relating to the production of books or the testifying before an internal revenue agent or representative. The Government then says that the Revenue Act of 1918 is an evidence of Congress intending that its specific criminal provisions shall be applied exclusively to income tax proceedings. There again, we have a very limited provision in the -- in the criminal provisions of the Revenue Act of 1918. The Revenue Act of 1918 provided that anyone who attempts to evade or defeat the tax imposed by that chapter shall be guilty of a misdemeanor. They added the words "in any manner." In other words, anyone who attempts in any manner to defeat or evade the tax shall be guilty for a misdemeanor. But there again, the use of the words "in any manner," would not enlarge the meaning of the Act because the Congress is not required to set forth the details of -- of the manner in which an evasion shall take place. So that the Revenue Act of 1917 which dealt with the same subject but which left out the words in any manner would have the same scope with the 1918 Act. The Congress it seems to me decided in 1918 to punish attempts as such which are to distinguished from the merely -- from the mere filing of a false and fraudulent return which was still a misdemeanor under Section 3179 which provided however, only $1000 fine. In other words, in the Revenue Act 1918, Congress decided to make the penalty for attempts a more serious offense and made the punishment $10,000 but still provided it would be a misdemeanor. I think the distinction between an attempt to evade tax is to be -- is -- is -- is to -- it's very important in this case because in the -- those cases in which the Government has relied upon the attempts provision of Section 145 (b) and possibly this section in 1918 Act, it has always delineated the attempts which the taxpayer has -- is carrying out for the purpose of evading his tax. For instance, he has concealed assets.He has made false entries in his books. He has given false testimony to a revenue agent or he has withheld transactions from his records or in any of the variety of ways depending upon the genius of a taxpayer to attempt to evade the tax as distinguished from filing a return. In those cases, in 1918, the Congress said, “Where you attempt to do these things, commit this affirmative acts, we will make the punishment $10,000 and still keep so to speak, Section 3179 and apply to the filing of a false and fraudulent return”, would intend to evade the tax. Congress apparently believing that the two sections did coexist, if the Section 3179 were applied to what the Government later called “minor cases” because the Government has admitted in this case, that they have prosecuted for over five years individuals under Section 3616 for "minor" cases. Now, this would still even attack the Revenue Act of -- even attack Section 3179. I also want to point out that in all of these cases where the Congress was enacting legislation, it was also amending the Revised Statutes. And that it was amending Revised Statutes, which were right alongside of Section 3179 but never at anytime amended Section 3179 or indicated that it was refilling Section 3179. Then comes along the 1924 Act which reverted it to the language of the 1917 Act and apply to attempts to evade tax and referred it to two or three accounts and made it a felony. However, that Act did not apply to income taxes alone. It applied to all forms of taxes. And I'd like to call the Court's attention to the language which appeared in the Government's brief at page 26 on what -- where it makes reference to the 1924 Act. And states in the income tax field, the provision first appearing in the 1924 Act, that "Any person who willfully attempts in any manner to evade or defeat any tax imposed by this chapter or the payment, thereof, shall be guilty of a felony." Now, the word "chapter" does not appear in the Act. The word actually is "Act". So that should read any tax imposed by this Act. Then counsel went on in its brief to quote, from the late Justice Jackson concerning that section being the capstone of our system of sanctions. I think the reference there is -- is erroneous because in the 1924 Act -- the 1924 or the penal provisions did not relate only to income tax but to all forms of tax. If the Court please, I like to reserve partly 10 minutes for rebuttal.
Earl Warren: You have five minutes. That's according to length --
Peter B. Atwood: Five more.
Earl Warren: -- but you may reserve that.
Peter B. Atwood: Thank you.
Earl Warren: Mr. Rice.
Charles K. Rice: Please the Court. The number of briefs of amicus curiae which have been filed in this case, there are some evidence of the importance of the case and as far as the revenue collection system is concerned, of course, the downgrading of the criminal sanctions from the status of a felony to that of a misdemeanor is a matter of extreme importance.
William J. Brennan, Jr.: Before you start, Mr. Rice, would you tell me whether we have nothing but 3616 to look at? Would it or would it not on its face cover the offense charge?
Charles K. Rice: If the Section 145 (b) did not exist?
William J. Brennan, Jr.: Just looking at 3616 without anything else. That's all we have. Would it on its face cover the offense charge here?
Charles K. Rice: Well, our position is that section --
William J. Brennan, Jr.: I know what your position is.
Charles K. Rice: There has been --
William J. Brennan, Jr.: I want to know whether it would or wouldn't on its face.
Charles K. Rice: It appears on its face to cover the offense charge and that I think is the reason why over a period extending back to 19 --
William J. Brennan, Jr.: All right. Now, your position -- your position is that the legislative history will establish that return as used there did not include income tax return, is that it?
Charles K. Rice: That is right, Your Honor.
William J. Brennan, Jr.: All right.
Charles K. Rice: If there is anything that has distinguished the tax collection system in the United States from that in foreign, in any foreign countries is the seriousness of which the criminal sanctions imposed in the United States have been viewed. This Court in the Spies case has referred to the felony sanctions as the capstone of a system designed to meet every offense against the revenue laws. And we think that the system was deliberately intended to impose felony sanctions as evidenced by the eight successive Acts of Congress culminating in the Internal Revenue Code of 1939. Now, I would like to say a few words, at the outset as to the practice within the Department of Justice with respect to the application of Section 3616. That section as far as income tax is concerned, of laying -- laid in a disregarded form for many years and had not been applied as a matter of policy with respect to income tax prosecutions. There had been an occasional reference to what does in the Koppelman case in 1945 in connection with whether or not a man had violated the terms of his probation. But as far as prosecution policy is concerned, the department had not authorized prosecutions under Section 3616 at anytime prior to the middle part of 1952. And the reason for it -- that it did that at that time was this, in the post war period with the great increase in tax rates and the great number of great increase in the number of taxpayers, it was obvious that the great bulk of the income was coming and had to come from those who were in the middle-income brackets and the small-income brackets. And the Internal Revenue service felt that a strict enforcement policy with respect to both the middle-income and low-income brackets was necessary in order to ensure the proper collection of the revenue. So, the result was that beginning in the late 1940's and early 1950's, the Department of Justice began to receive, in very substantial numbers, a large number of cases in which against taxpayers, recommending felony prosecutions. In some of these cases, the amount of tax involved was no more than a hundred dollars and the amounts in -- in very substantial of the cases was very small. At that time, the Department was proceeding on a -- on the basis of felony prosecutions in all cases and the cases continue to be send out for criminal prosecution although some of them are amounted in tax, no more than a $100. As you could well imagine, the -- the these cases met with considerable resistance on the part of the United States District Courts and on the part of the United States Attorneys in the various districts. There were complaints that the District Courts were being turned into police courts, that we were getting back into the prohibition days and that something had to be done about the flow of these small cases, which was reaching the courts. So, casting about in an effort to meet this situation and in an effort to make the punishment fit the offense, recourse was had to Section 3616 (a) of the Code which I said a moment appeared on its face and in general terms to apply to all tax offenses including the income tax. So, beginning at that time about 7% of the cases each year was sent out for prosecution under 3616 (a) instead of 145 (b) of the felony provisions.
Hugo L. Black: It's been sent out from where?
Charles K. Rice: From the Department of -- here in Washington to the United States Attorneys.
Hugo L. Black: What could they talk to him whether to proceed there for a felony or misdemeanor?
Charles K. Rice: Instructing them to proceed under Section 3616 (a) --
Hugo L. Black: As a misdemeanor from (Voice Overlap) --
Charles K. Rice: As a misdemeanor -- yes.
Hugo L. Black: In what percentage did you say?
Charles K. Rice: It's about 7%.
Felix Frankfurter: 70?
Charles K. Rice: Seven.
Felix Frankfurter: Seven --
Charles K. Rice: -- of the entire number of cases. Now, in the majority of these cases, the proceedings were by information but in a fairly substantial number, then the proceedings were also by -- or were by indictment rather than by information.
William J. Brennan, Jr.: I take it there were number of convictions then under it or (Voice Overlap) --
Charles K. Rice: Yes, Your Honor. The figures are set forth in our brief at page 14 and 15 --
Earl Warren: We'll recess -- we'll recess now, Mr. --


Warren E. Burger: We'll hear arguments in Number 7, Gunn against the University Committee. Mr. Louisell.
David W. Louisell : Mr. Chief Justice, may it please the Court. In some ways, this is the most unusual of all three-judge cases because as I think I can show, the one issue that was, at least arguably involved here, the three-judge court insisted explicitly on ignoring it. And an issue that really wasn't at all involved, they insisted on rendering an advisory opinion of it. After I argued this case in January of 1969 in reflecting immediately afterwards on some of the questions from the bench, I realized that I hadn't probably early enough in my argument made it very clear just who the parties are and that the State of Texas as such is not a party to this case. This was a three-judge suit brought by the committee and by three individuals apparently purporting to represent classes of people and the suit was brought under the Dombrowski theory basically. The defendants, the county attorney of the county involved here and the other two defendants, the sheriff and the justice of the peace are the appellants in this Court. The Attorney General of Texas as the senior law enforcement officer of Texas took over the defense of three-judge case but the state itself is not a party to the suit. Now, Your Honors after the last argument because of some questions addressed from the bench primarily, we filed a supplemental brief and the only briefs before the Court on the merits here are our opening brief, the brief for appellees that was not replied to as such and our supplemental brief. It seems to me that it's very important, as always of course, but perhaps particularly here because of the nature of what the three judges did below to be very observant of the facts. On December 12, 1967, President Johnson, and the press of course announced it a little bit ahead of time so that excitement, interest was aroused, went to make an address and to inspect Fort Hood in Central Texas. The speech was to be a dedicatory speech at Central Texas College. The Secret Service summoned all the local law enforcement people to help prepare for this event. The Sheriff of Bell County and Coryell, the adjacent county, the local police chiefs were all summoned and urged to lend of course their aid in the protection of the President and in appraisal of the facts here, the Court of course will be aware that this was within about just a little more than four years of the shadow of Dallas, Texas of November 1963. Seven, at least seven members from the University of Texas and presumably a number of them members of this committee organized a protest the war in Vietnam, came to the premises shortly after the President had begun to speak and they had their protest signs. I perhaps should, again, remind Your Honors that Fort Hood, I think is the largest armored fort in the United States, at least 25,000 or 35,000 people on duty there and at least 25,000 gathered to hear the President's address. Many of the people stationed at Fort Hood are veterans who have returned from Vietnam or are on their way to Vietnam, personnel on their way to Vietnam. When the protesters, including the three individual plaintiffs here arrived at the premises, they started to approach with their signs and there's no claim that there was any impropriety about the signs. Of course, there's no claim that they weren't perfectly within their right in a peaceful protest. But immediately or almost immediately, perhaps not quite, and unfortunately one of these cases tried only on affidavits like our equity practice before in 1912, I can't really say that to the extent there is a dispute in the facts that there's any real resolution of the facts in the opinion of the three-judge court, but most of the facts, most of the significant facts are not really undisputed. Very soon, violence started. One of the protesting young men was attacked. A burly sergeant is reported as having said they have never seen blood. Terrible commotion commenced and it is important I think Your Honors to note that the first intervention was not by the Texas Sheriff or the Texas Police or any other Texas official. The first attempt to prevent the serious potential violence was by the Military Police there. The Military Police took control, took custody of these men and then turned them over to the sheriff. Apparently, there was some momentary dispute, that is turn them over to the deputy sheriff, actually, the sheriff himself was at a distant point near to the presidential stand and when he saw the commotion, he came over to see what should be done about it. These three plaintiffs were turned over to one of the deputy sheriffs. There was some momentary confusion as to whether the exact locus was in Bell County or Coryell County but they ended up in Bell County and when it was decided that it had been within the territorial limits of Bell County, the sheriff authorized a disturbing of the peace charge against these three people who had been taken in custody. It's very important at least I think it's an interest to note that this disturbing of the peace statute as it then existed in Texas and as it is reported, printed on page 12 of our brief -- excuse me, page 12 of the joint appendix and it also appears in our brief, provides a penalty in the maximum amount of $200.00 but there is no provision for a jail sentence. More lenient for example than some of our other similar statutes, my own California statute for example, has a 90-day jail provision in it too. There were some things that took place and here of course, you have some conflict in the affidavits. The affidavit of the sheriff of Bell County denies any brutality, denies anything approaching brutality. In fact, shows relatively I would say courteous treatment, they were allowed to continue to watch for example the television of the President's speech but they are some things that are unfortunate things from the view point of a precise correct administration of the law. Of course, this is a rural community between Austin and Waco, Texas, a lay justice of the peace and so forth and the justice of the peace according to one of the affidavits of one of the young men, fixed the bail of $500.00 where the maximum penalty was $200.00. The bail was immediately made or maybe I shouldn't say immediately but very promptly made. The lawyer came very informally and quickly provided the bail requirement and they were released.
Warren E. Burger: Are you suggesting possibly Mr. Louisell that the atmosphere at the moment was affected by the fact that the safety and security of the President of the United States was thought to be involved and that it wasn't just an ordinary disturbance at the county fair, is that what you're suggesting?
David W. Louisell : Precisely that, and of course with what had taken place just four years earlier, one can understand the state of even not only concerned but of extreme anxiety but I'm also suggesting as the sheriff makes clear in his affidavit that there wasn't any intention upon the part of Texas officials to organize against a reasonable protest. They weren't the ones to seize these people and as the sheriff pointed out in his affidavit, the one very happy thing about the event was that these people who dared to go into that environment under those circumstances escaped substantially uninjured. One did have, I believe some bleeding from the mouth for awhile. Now, this all took place on December 12, 1967 and incidentally the bleeding of the mouth, from the mouth was from the assault of one of the soldiers, it had nothing to do with any action of the Texas sheriff or police officials. On December 21, the three-judge suit was started invoking the usual sections of the Judicial Code 1983, the Declaratory Judgment Act and asking for a declaration and an injunction against enforcement of the section of the Texas Penal Code, I have already referred to, the so-called disturbing of the peace section, Article 474. A temporary restraining order was granted. This was extended from time to time until the hearing but before the hearing which occurred on February 23, 1968, before the hearing, all these charges of disturbing the peace against these three plaintiffs and they are reproduced in the joint appendix and you will note of course, that they were printed forms and merely filled in. Of course, this doesn't show up in the printing of them, that is in the printing of the record but they simply filled in in this layman language, “dist. the peace.” On February 13, all three of these charges were dismissed by the county attorney because he was advised that the actual incidence had taken place on a federal enclave, a part of the territory pertinent to Fort Hood and that the state had ceded jurisdiction and there was no state jurisdiction at all so they were dismissed. In all candor, I think I said at the last argument and I believe it is firmly now as then, that if they hadn't been dismissed for this reason, they would've been dismissed because of the facts. There had been no disturbing of the peace, at least as far as we can tell from this cold record. Maybe it might have been appropriate to charge them with an affray under the Texas Code, but certainly if the justice of the peace hadn't been forced by the reason of the thing to dismiss these charges, the County Court on appeal where you have a de novo trial, from a conviction by a justice of the peace, they would've been found before it -- and to throw them out.
Speaker: Mr. Louisell, now what happened to the temporary restraining order?
David W. Louisell : The temporary restraining order was continued from time to time in all the entrances, the entries I should say of continuing are in the docket orders. It was continued right up until the time of the hearing on February 23 and --
Speaker: Was it dissolved?
David W. Louisell : There was no explicit dissolution of it that I can find indicated in the record.
William J. Brennan, Jr.: [Inaudible] do we have a judgment?
David W. Louisell : Well, this is another unusual thing, yes, you do have a judgment or if not a judgment, something equally as appealable, but let me point out to you that we hovered this in our supplemental brief.
William J. Brennan, Jr.: For example only recently, we dismissed that view they contained from three judges, [Inaudible] because while there was an opinion and the opinion --conclusion submitted in the opinion is not embodied in the judgment [Voice Overlap] --
David W. Louisell : I believe that is correct but a very important distinction is apparent, it was at the Goldstein case, a very recent --
William J. Brennan, Jr.: [Voice Overlap] the Richardson case.
David W. Louisell : Pardon?
William J. Brennan, Jr.: It's the Richardson case, not the Goldstein case, that involved a different question?
David W. Louisell : That involved a declaratory judgment --
William J. Brennan, Jr.: But the point was, it was no -- the case in which we dismissed recently, there was an opinion about the -- that holding in the opinion was not embodied in the judgment. And we held it was a direct appeal, we held it not -- it was not an appealable judgment, and dismissed it.
David W. Louisell : Here is the situation on that as I see it Your Honor. First of all, as we show in the supplemental brief, the appeal from a final judgment here is governed or from an interlocutory order.
William J. Brennan, Jr.: I agree it is but where is it, I can't find that out of the order or --
David W. Louisell : Well, it's in the last paragraph --
William J. Brennan, Jr.: Of the opinion?
David W. Louisell : -- of the Court's opinion. The Court did not comply with Rule 58 that requires the entry of a separate document as a judgment, one of the recent amendments to federal Rule 58. It did not do that but it did specify of course, the entitlement to the injunction and to the declaratory judgment and --
William J. Brennan, Jr.: But then didn't it suspend it pending something in the Texas Legislature [Voice Overlap] --
David W. Louisell : They suspended it pending a meeting of the legislature of Texas. That legislative session did meet and did nothing about this Act.
William J. Brennan, Jr.: And after that nothing was done about the suspension?
David W. Louisell : And nothing was done about the suspension.
William J. Brennan, Jr.: Well --
David W. Louisell : But of course that suspension expired of its own weight by the very terms of what the judge -- the Court had written.
William J. Brennan, Jr.: And you suggest that then converts the last paragraph into a judgment for purposes of a [Voice Overlap] --
David W. Louisell : The last -- certainly he intended as a judgment Your Honor because the very docket entry shows, the docket entry of April 10, 1926, judgment filed and entered. Secondly, even if it isn't a judgment, it is currently an interlocutory order that is explicitly appealable under 28 U.S. Code 1253 and in studying that section, may I suggest you also study 2101 which makes even more clear the appealability of this particular order.
Warren E. Burger: I think we'll suspend for 10 'o clock, Professor Louisell.
David W. Louisell : Thank you.