Earl Warren: Number 26, Sullivan, Chief Judge of the United States District Court for the Northern District of Illinois, Petitioner, versus Otto Behimer. Mr. Butler, you may proceed with you argument.
John C. Butler: Mr. Chief Justice and the Associate Justices, may it please this Honorable Court. This certiorari review presents the question whether a district judge is authorized by virtue of Section 1404 (a) of the Judicial Code, to transfer on motion of the defendants, a diversity action pending before him to a forum where the convenience of the parties and witnesses in the interest of justice would best be served, but, wherein the venue of the transferee forum and the reach of its process was supplied by the assurances of the defendants to wave their venue privilege and to enter their personal appearances. However, the transferee forum was run which was competent to hear the issues in the suit, such forum independently possessed jurisdiction of the subject matter of the case by virtue of the diversity of citizenship of the parties. More generally, this case presents for determination the question whether Federal District Courts are authorized to transfer actions either on motion of plaintiff or of defendant to another forum which has become available since the commencement of the action by reason of such post-suit circumstances as, one, a change in the residence of the parties, or two, a plaintiff for a defendant corporation's qualification or doing of business in such other forum, or three, a defendant's consent to an acceptance of the venue in process of the transferee forum. In all such instances, I presuppose that such a transfer would be for the convenience of the parties and witnesses and in the interest of justice were that not so the question of the authority of the district judge would be academic. The facts, out of which the present question arose in this case are these. Respondents, one, a citizen of Illinois and the other a citizen of New York filed suit in the Northern District of Illinois charging the two defendants, Standard Oil Company and Indiana Corporation and Standard Oil Foundation, Inc and Indiana Charitable Corporation with acquiring the assets of a Utah Corporation at less than the fair value of such assets. Plaintiffs, who are respondents here on respectively 900 and 1000 shares of stock in the Utah company, the two defendants owned approximately 76% of the outstanding stock of the Utah company. And the defendants had organized to wholly on subsidiary which offered to buy all of the assets of such -- of such company. This offer was considered at the special meeting of the shareholders of the company and was accepted. The charge against the defendants is that they, together with 52 so called controlled stockholders in the Utah Corporation, permitted the sale of these assets at a price less than fair value. The plaintiffs sued not in the right of the Utah company but on behalf of themselves and all other stockholders who are or were similarly situated. Those stockholders are called minority stockholders in the complaint. Jurisdiction of the action was bottomed upon diversity of citizenship. The residence of the defendants was not alleged nor did the complaint occur that the venue of the United States District Court for the Northern District of Illinois was proper. Defendants however, did not raise this question and so they have waived it. The day following the answers of the defendants in which they denied the crucial substantive allegations of the complaint, they filed a motion to transfer the action to the District of Utah, Central Division which is at Salt Lake City. Petitioner granted the motion to transfer saying that, and I quote “If I have the power to do so, I would be guilty of an abuse of the discretion vested in me by Section 1404 (a) of the Judicial Code if I refuse to transfer this action to Salt Lake City.” In some, there were eight reasons which moved the petitioner to this conclusion. These are set forth at pages 88 and 89 of the record and they're summarized at page 5 of the petitioner's brief. An important reason among those eight is found in the fact that the class on whose behalf of the two respondents have volunteered to act, consists of 920 shareholders. 575 of them reside in Utah and 134 more in California, Washington and Idaho. However, petitioner's order of transfer was stayed by the issuance of the writ of mandamus by the Court of Appeals for the Seventh Circuit. That Court stated that petitioner did not have the power to transfer, since the transfer reform must be a district were a plaintiff has a right to sue independently of the wishes of defendant. If the plaintiff does not have this right, independently of the wishes of the defendant, it is not a district where it might have been brought. Now, since venue and personal jurisdiction in this instance where available to the plaintiffs in Utah, only by reason of the post of assurances of the defendants, under the standards adopted by the Court of Appeals. Such assurances were unavailing and transfer was unauthorized. So holding, the Court of Appeals did not reach the question which respondents had also raised before them as to the exercise of the petitioner's discretion. The Court of Appeals said whether or not he and his Judge Sullivan properly exercised his discretion in the mistaken and the belief that he did have such power, it will be unnecessary for us to decide. It is petitioner's contention not the phrase “where it might have been brought,” as such appears in Section 1404 (a). And incidentally, in my view, a most deceptively simple phrase is at least an ambiguus phrase and that it does not establish the time of determination as to the where. As Mr. Merriam has pointed out yesterday, the courts which have dealt with this matter have spoken of such time in terms of commenced or could now be brought or maybe prosecuted and so forth. That you will find rehearsed in the Paramount Pictures versus Rodney case and in the opinion of Chief Judge Magruder in the Josephson case. It is petitioner's contention that this phrase been at the least ambiguous because of its silence about the matter of when one is to determine where an action might have been brought. Should be interpreted so as to confer upon the District Courts the power to transfer if at the time the power is exercised, the transferee forum is, one, where the action might have been brought. Such an interpretation will in the petitioner's view and here I quote from Chief Judge Magruder, “Enhance the usefulness of this important provision for transfer of cases in the interest of convenience and justice.” The transfer provision so construed will then be available to both plaintiff and defendant. An instance was mentioned yesterday by Mr. Merriam, which I should like briefly to repeat here today. “Let us suppose a case of a plaintiff being a New York resident, being involved in an accident in New Jersey, occasioned by the negligence of a defendant, who is a California citizen. And the defendant being merely momentarily in the State is not available for the process and then it would be improper because it would be either New York or California.” After suit is filed and this is a hypothetical case, but after suit is filed, let us assume that the defendant moves to New Jersey. Plaintiff in order to have sued the defendant had to proceed to California. May he not move to transfer his case to New Jersey where on my supposition, the cause of action arose, the witnesses reside and where all of the convenience of the witnesses in the interest of justice will best be served by having the Court there hear the case. If the contention -- if the position of the Court of Appeals in my circuit is correct, that would be denied to the plaintiff in my hypothetical case.
Charles E. Whittaker: But why?
John C. Butler: The plaintiff in my hypothetical case, Mr. Justice Whittaker, could sue in New Jersey and drop a suit in California, but he couldn't transfer it because at the time he filed his suit in California which was the only place he could then reach the defendant, this -- the forum of New Jersey was unavailable to him.
Charles E. Whittaker: (Inaudible)
John C. Butler: That is correct. Except in the Court of Appeals' interpretation, that is true. If you then say by brought, you mean not only commenced but service of process acquired. There are some cases, District Court cases earlier which have gone off on the thought that commenced is equivalent to brought and have transferred on that basis.
Earl Warren: Suppose the defendant have moved to Montana instead of New Jersey, would the -- would the Court have transferred to Montana in the interest of justice?
John C. Butler: Assuming as I always do that the interest of justice would there be served. The plaintiff, I should think would have his option to ask the Court to transfer the case to Montana.
Earl Warren: No. I'm talking about the defendant.
John C. Butler: And --
Earl Warren: But they --
John C. Butler: The defendant as well, either side.
Earl Warren: Then --
John C. Butler: Under the circumstances of my case, I would fail to see where the convenience of the parties and witnesses would -- would be served by a transfer. But passing that and speaking in terms only of the authority, I would assume that being then a forum available at the time, either the plaintiff or the defendant could move and the case be transferred there.
Earl Warren: Suppose the question arose in this way, suppose it arose before the -- the suit was filed and the defendant moved to Montana and agreed with the plaintiff that the suit could be filed in Montana. Could the plaintiff have maintained an action in Montana?
John C. Butler: The -- the change of residence on the part of the defendant having been prior to the suit?
Earl Warren: Yes.
John C. Butler: Yes, I believe so.
Earl Warren: Even though the -- even though the statute specified the forums, the only forums in which the action could be brought in Montana didn't -- was not one of them?
John C. Butler: Well, I'm talking of the general diversity cases.
Earl Warren: Yes.
John C. Butler: So that, Montana would presumably be a correct forum. Not being a district of the residence of the defendant.
Earl Warren: Well, do you differentiate this case then from the one that preceded you in that regard? There, there were two places --
John C. Butler: Yes.
Earl Warren: -- two forums in which the -- the action could be brought, one was Texas, one was Illinois. Suppose we had your hypothetical case or a case -- the kind of case that they had. And -- and the defendant had consented to be -- be sued in Montana, lets say, instead of Illinois or -- or Texas where -- where the law have said, it could only be sued. Could they then maintain the suit in Montana?
John C. Butler: Mr. Chief Justice, the questions in the case preceding and in this case are approximately the same. I would say this, that if there be a reversal in the preceding case, I believe that our for certiorari, there should be a reversal here because there is involved in the patent case a particularized venue provision whereas I am speaking in terms on the framework of the diversity action.
Earl Warren: Well, but to get back to my question. Do you think that could be done?
John C. Butler: That if a defendant in the diversity case moves, or in a patent case, where it could have moved --
Earl Warren: (Voice Overlap)
John C. Butler: -- to Montana prior to the infringement suit against him. Yes, then it would be a proper forum, as I understand Section 1401 (b).
Potter Stewart: If there had been a -- an infringement in Montana?
John C. Butler: Well, I believe there is a choice of a residence or where he has a -- a place of business and has committed acts of infringement. So, by definition, Montana would be a proper forum.
Felix Frankfurter: Mr. Butler, did I understand you to say, that if there is a change of residence after the suit has been commenced on the part of the defendant to another venue jurisdiction that the plaintiff could move, to have a case transferred to the venue district of the defendant if that is the venue district in which suit could have been brought originally?
John C. Butler: Yes, sir.
Felix Frankfurter: Now, so I understood you. If that is sought, as any case -- is there any decision in which the 1404 (a) was invoked by a plaintiff when an appropriate occasion in your point of view had arisen?
John C. Butler: Not under those precise circumstances. But, there have been many cases, Mr. Justice Frankfurter, where plaintiffs have invoked Section 1404 (a).
Felix Frankfurter: Decided --
John C. Butler: Where --
Felix Frankfurter: -- a case, reported opinion?
John C. Butler: Yes.
Felix Frankfurter: Are these -- are they in your brief?
John C. Butler: Yes.
Felix Frankfurter: Where are they, Mr. Butler?
John C. Butler: Let me mention particularly one --
Felix Frankfurter: Well, that raises one of the -- one of the naturally fittest questions whether they -- whether this is only a one way street as it was.
John C. Butler: Yes. Well now, involved in the Torres versus Walsh case was the companion case which is not too much discussed by the Court of Appeals but was involved in the court below.
Felix Frankfurter: I'll be grateful to you if you --
John C. Butler: The decision there --
Felix Frankfurter: Just give me a (Voice Overlap) --
John C. Butler: Torres which is in our brief.
Felix Frankfurter: Does the reference of the cases in your brief?
John C. Butler: Yes. Its 221 F.2d 319 but the District Court decision was not mentioned as such in our brief.
Hugo L. Black: Did you say 319 or 219?
John C. Butler: 29 -- 319. The case below, the companion case to the admiralty action in Torres is Thompson Products versus Pennsylvania Railroad Company and its citation is 127 F.Supp. 449. That came up under the name, I believe, Pennsylvania Railroad Company versus Dawson, Judge Dawson of the Southern District of New York.
Felix Frankfurter: Did you say that was an admiralty case?
John C. Butler: No.
Felix Frankfurter: Oh.
John C. Butler: This was a case where the plaintiff sued the defendant railroad company in the Southern District of New York in an action for damages to a shipment over the defendant railroad, consigned to the plaintiff. After filling a suit, the plaintiff found that the damage might have been caused by improper loading by the consignor, Landis Tool Company of Waynesboro, Pennsylvania. So, the plaintiff then moved to transfer his action which he had filed in New York City to the Middle District of Pennsylvania where both the railroad and the consignor could be sued. He was particularly interested in doing that because where he to file a new suit in Pennsylvania, the statute of limitations against the railroad on, I believe, a bill of lading was about to expire and he would have been out, as to the railroad, and the Court granted the motion.
Felix Frankfurter: Well, 1404 itself is of course silent regarding the moving party?
John C. Butler: Yes. And it is silent insofar as to the when.
Felix Frankfurter: Well, that raises the question that we've been buried back and forth.
John C. Butler: Yes. Now, petitioner would suggest that these following considerations which would support his -- his contention. First, that when a motion to transfer is presented to the District Judge, he of course, would look to see if the present circumstances are such that the interest of justice would best be served by such transfer in the convenience of parties and witnesses. He would not, in other words, look to some preceding point in the past time to determine whether the interest of justice would then be served. But rather, is it now, to be served by such a transfer. And the petitioner suggests this, that if that be the case, if the exercise of his discretion should be presently made should not contemporaneously also, his power to transfer be determined.
Charles E. Whittaker: (Inaudible)
John C. Butler: I would suggest that that would be very logical. The question is now assuming that you do not know when -- the where it might have been brought is to be fixed. That a -- the parallel determination of whether it is not in the interest of justice to transfer should be a contemporaneous factor.
Hugo L. Black: What's the controlling guide in there? Suppose a man sues a company that's doing business in a certain state. And that's the only place he can sue it, but all the witnesses or somewhere -- no doubt to what convenience and fairness requires of the case be tried somewhere else. Why could he not sue him there in that place where, under you argument -- where he's doing business and then go into the Court and say, “I had to sue you here,” but in all fairness, injustice, this can be tried only at this other state and ask for it to be moved there under the federal court, could he do that?
John C. Butler: Well, sir, Chief Judge Magruder has suggested that he might do just that very thing.
Hugo L. Black: But I think that's been intimidated several times because I'm -- I'm just wondering what's your position was on.
John C. Butler: I believe, that assuming, that we're talking on framework of a diversity action and that venue would be proper, as I presume it would be.
Hugo L. Black: Provided they could get service?
John C. Butler: Yes. So that the question would be the availability to service, but by definition, that has been accomplished when the suit is first filed in the transfer or a forum. So that presumably, the transfer would then be proper.
Hugo L. Black: To such Court, District Court, anywhere -- then you wouldn't be guided at all by whether it could have been brought in the beginning or could be brought there now.
John C. Butler: And I should think --
Hugo L. Black: But you would -- you would let be the controlling thing, the fairness and justice of the trial?
John C. Butler: Well, that and the availability of the transferee forum at the time the -- a motion to transfer is passed upon.
Hugo L. Black: Oh, do you -- you do give it that much effect?
John C. Butler: Well --
Hugo L. Black: If you give it that much effect, why don't you not have to give it to the other effect if --
John C. Butler: Well, because I -- well, I'm saying is the same thing, Mr. Justice Black and that is this, that by definition, venue always obtained in the diversity case. Service of process has been accomplished before the motion to transfer is made, in the transfer or forum. And Chief Judge Magruder has suggested that the service of process, once accomplished, need not be repeated in the transferee forum.
Felix Frankfurter: You added a minute ago to -- in answer to Justice Black's question. Assuming the availability of the transferee forum, is it correct?
John C. Butler: Well --
Felix Frankfurter: What do you mean by that?
John C. Butler: -- the --
Felix Frankfurter: What do you mean by that?
John C. Butler: That the venue would be proper. Chief Justice Magruder did not, and say that you could transfer it in the improper venue.
Felix Frankfurter: Well, what --
Hugo L. Black: What would be in the improper venue? The fairness and justice of the trial.
Felix Frankfurter: I understood Justice Black's question. I may have misapprehended it, to say that if the suit -- if a suit is properly instituted in the transferor's forum, is there no unquestionably as if satisfying all the venue provisions. But then, there arises the only additional fact that it would be more just to bring this suit in another district in which suit could not be brought under the venue provision.
John C. Butler: Then I -- I --
Felix Frankfurter: Merely, justice can mean as the party.
John C. Butler: That then would not be sufficient --
Hugo L. Black: Why?
John C. Butler: -- in my view.
Felix Frankfurter: Alright.
Hugo L. Black: Why?
John C. Butler: Because there --
Hugo L. Black: Why? If you are right in saying, if the question is decisive as whether the case can be tried. There is no fairness and most justice if that's the controlling thing.
John C. Butler: Because it would be going beyond the wording of the statute and --
Hugo L. Black: Well, but that depends --
John C. Butler: Well, the statute --
Hugo L. Black: Well, I don't think you see something could go beyond the wording of the statute. You say where the suit could have been brought.
John C. Butler: Yes, that's where it might have been brought.
Hugo L. Black: But you're saying that they can -- they don't have to accept that and that means, where it could be brought at the time the motion is made?
John C. Butler: That is where it might have been brought if at that time, it might have been brought there. Then the wording of the statute will satisfy it.
Charles E. Whittaker: Isn't that the -- another (Inaudible)
John C. Butler: I don't believe so, with all deference. I -- I see that I am running out of time, but I'd like to mention one perfect point. And that is this, that Section 1404 (a) is the remedial statute, it was -- it adopted the doctrine of forum non conveniens. The doctrine forum non conveniens as it -- that a court may dismiss conditions being satisfied if there is an available forum as an alternate which is the more convenient forum. Well, I'd like to make this point clear, that nowhere have I found a non conveniens -- forum non conveniens case which requires the availability of the alternate more convenient forum to exist at the time the suit was filed. And I should like to call particularly to the Court's attention, the case of Vargas versus A. H. Bull Steamship Company. A very well reasoned decision by a court in New Jersey, the Law Division of the Superior Court, who's opinion was adopted by the Supreme Court of New Jersey involving a Jones Act case, a federally created right of action. Certiorari was sought and because the Court there did conditionally dismiss the case and certiorari was refused by this Court. I should like to point this out, that if the present case had been filed some five moths after it was. It could not have been filed in the Northern District of Illinois. Although no charges made in the complaint, counsel for the respondents in an affidavit have suggested that the principal office, the place of business of Standard Oil Company is in Chicago. And under the amendment of Section 1332 which was enacted July 25th, 1958, that then would make Standard a resident of Illinois for purposes of diversity and there would be an Illinois plaintiff and Illinois defendant. Diversity would be destroyed and presumably, the plaintiff would then have recourse only to the state courts of Illinois. In which event, Illinois having the doctrine of forum non conveniens, it is reasonable to suppose that they would do as, it was done in the Rogers case in New Jersey conditionally dismissed the case on the insurances there. They have been given to the District Court in this case, namely that they would accept the venue in the process of the alternate forum which is the much more convenient forum. It would be in other words, I should think, rather strange to construe Section 1404 (a) in a fashion which would be somewhat retrogressive denying it the authority, the power, or the scope which as antecedent doctrine possesses. Particularly, in view of the fact that section 1404 (a) has been well regarded as a remedial statute and its provision should be given hospitable scope. I might add that to give the construction that the petitioner contends for here, does not make mere surplusage of the phrase “where it might have been brought” because we have three factors to consider, venue, personal jurisdiction and subject matter jurisdiction. Venue is a mere privilege. Personal jurisdiction can be accepted by the parties but if it's beyond the scope of the litigants to confer subject matter jurisdiction on the court, therefore, there is content, substance of vital nature in the phrase “where it might have been brought”. Because you cannot -- even though you have venue and personal jurisdiction transfer an action to another forum which does not posses subject matter jurisdiction.
Hugo L. Black: Is it your argument that wherever the Court has subject matter, jurisdiction of the subject matter of the lawsuits therefore, that it can be moved to that court?
John C. Butler: Venue and personal service, the --
Hugo L. Black: Well --
John C. Butler: Yes, sir.
Hugo L. Black: But that would seem to me, let you close it. If you're going to put it that way, close to the saying that the suit is brought at the place where the person is doing business and that the statute authorize it to be transferred to a place where he is not doing business, if fairness and justice required it. Now, why do you not have to take those words at the end of that Section as a whole or reject them as a whole?
John C. Butler: Because where it might have been brought are words of limitation. But the stat -- the statute does not tell us when the “where it might have been brought” is to be determined.
Hugo L. Black: Well, but -- but the “where it might have been brought” depends on when, doesn't it?
John C. Butler: No.
Hugo L. Black: Frequently -- frequently.
John C. Butler: Not in this sense, so we contend.
Speaker: Who do you think Congress is trying to protect by the phrase “might have been brought,” plaintiff or the defendant? So, limitation on somebody, the statute doesn't say that wherever -- whenever the interest of justice require it or it requires it, the District Court may order the transfer to a district which would have subject matter and venue jurisdiction, subject matter jurisdiction and venue. Who is it? It's -- Congress is trying to protect somebody.
John C. Butler: I think, they where trying to conform with venue and personal jurisdiction requirements, but at the same time, within that limitation to expand the availability of forums to hear and determine cases in the interest of justice.
Felix Frankfurter: Well, Mr. Butler, it isn't either plaintiff or defendant to ask whether it was to protect either plaintiff or defendant, doesn't exhaust the alternative. This is a statute relating to the functioning of the federal courts, not merely the -- the the interest advantages or disadvantages of litigants.
John C. Butler: That's right. That is right. I think that -- I see my times up. I'll make this comment. I think, Congress had in mind to promote the interest of justice to make transfers --
Speaker: That's a lot of words --
John C. Butler: (Voice Overlap) dismissals or to make transfers much more available.
Charles E. Whittaker: Well, that's precisely what it said -- what it said that -- that this transfer might and should be made to some other venue where the action might have been brought. So, it's not a full package to say, we treat only this, the convenience of the parties or the witnesses to the interest of justice because there is a further limitation.
John C. Butler: That is true. And it's inherent in the subject matter jurisdiction which must be preserved. In other words, you cannot transfer a case and thereby destroy the jurisdiction of the Court to hear and determine. Thank you very much for you kind attention.
Earl Warren: Mr. King.
Warren E. King: Mr. Chief Justice and Associate Judges. The question was just asked as to the intention of the Congress in enacting Section 1404 (a) and an examination of the status of litigation in the period when Section -- Section 1404 (a) was enacted, might shed a little bit of light on that question. In 1947 and 1946, the House Judiciary Subcommittee was holding hearings on -- with reference to the bringing of suits against railroads. Some of the facts that were brought up before the Subcommittee were these. For example, in Minnesota at one time, there were over 1000 personal injury cases brought in the state courts of Minnesota by nonresidents -- nonresident plaintiff against railroads. And some of the railroads didn't even have lines in Minnesota. One lawyer in Chicago filed 100 suits within a period of one year against the Southern Pacific Railroad and the Santa Fe with Diamond in excess of $6 billion. And an analysis of the distance from Chicago to the site of the accident on the average was some 1930 miles. The average accident occurred 1930 miles from Chicago. Between 1941 and 1946, there were 2500 suits filed in the District Court other than the district in which the accident occurred or in which the plaintiff resided. What was occurring in those -- in that period of time was, in personal injury cases, primarily in suits under the Federal Employers Liability Act, lawyers would get these cases and file them as far from site of the accident is possible. An action happened in New Mexico, they filed in Minnesota or in Chicago. The doctrine of forum non conveniens was not a universally accepted doctrine in 1946 and 1947. In an article in the California Law Review by Edward Barrett, Professor of Law at the University of California, he states that the doctrine had not been examined and just passed upon by most of the states, that 14 states had rejected it and only six states had accepted the doctrine of forum non conveniens. One of those states was New York, in which it was a statutory right given to the court to transfer if the court felt it was a tort action brought for purpose of harassment of the defendant. The earliest case, recognizing the doctrine in the federal courts where the companion cases of the Gulf Oil Company and the Lumberman's Mutual case.
Felix Frankfurter: Oh, but there was an earlier opinion by Justice Brandeis in 280 of -- referring -- giving the whole history of the business. The doctrine one really arose in connection with commercial litigation and not collision cases.
Warren E. King: The doctrine originally arose in Scotland, I understand, in the suits between nonresidents and it was first adopted in this country where there were nonresident litigants and the cause of action had arose outside of the country. And in that case -- those cases, they were sent back to their respective countries. But the decisions in the Gulf Oil Company case and the Lumberman's case indicated, after a split decision of five to four that they should be -- the doctrine should be applied only in exceptional circumstances or the use of the word “those rare cases” where the doctrine should be applied and it was not generally recognized that the federal courts would have the right to transfer these cases. If there were an accident case that happened in New Mexico, filed in Minnesota, then Santa Fe would have the right to remove the case to the federal court in Minnesota. But it still could not transfer that case to the -- to the state where the accident occurred, where the witnesses were located. And some writers have indicated that the purpose of the enactment of Section 1404 was to exact the remedy of this situation where in personal injury cases, the suits were brought far from the State where the accident occurred. And the venue statutes of the various states and under the Employer's Liability Act permits, the suits to be brought where the defendant resides. And because of that are -- that there will always be more than one forum in these railroad cases. These railroad lines go through a dozen or more states. And if the suit is brought in Minnesota in an accident happened in Montana, then proper venue would have been in Montana, coexist and with the venue in Minnesota. And Section 1404 gave the federal court in Minnesota the power to transfer it to a -- the forum where it could have been originally brought. And I believe the purpose of 1404 was to actually broaden, thus, the doctrine as it had been enunciated in the two cases decided by this Court where they used the word, “the exceptional case, exceptional circumstances, the rare instance”. It was and it's so that the Court has a bigger leeway in transferring cases to a forum where the suit could have been bought in -- in the beginning. It is their position of course that -- of the respondents here that there is no ambiguity in the words “where it might have been brought”. Section 1391, the general venue section, Section 1400, serving venue of patents, all used the word “may bring”. Brought is the past tense of bring.
Felix Frankfurter: And all those --
Warren E. King: May have --
Felix Frankfurter: -- and all those sections allow suits to be started in those jurist -- in those venue districts in which it couldn't be brought by virtue of the statute. But in which it maybe brought if the defendant waive that limitation, isn't that true?
Warren E. King: I respectfully submit, it is not.
Felix Frankfurter: You surprise me.
Warren E. King: This -- the statute doesn't say that you can't --
Felix Frankfurter: I'm not talking about 1404. I mean all the other provisions.
Warren E. King: 1391?
Felix Frankfurter: 13 -- all of the other -- all the other venue provisions which makes specific limitations upon the Court to entertain a suit unless the provision of the statute is satisfied. That limitation is lifted if the defendants -- because I have no objections.
Warren E. King: That is correct. But it does not make it a proper venue in the first place. It is not a suit -- a state as none --
Felix Frankfurter: But it doesn't -- I don't know what that means, a proper venue. And certainly, it isn't a proper venue in the sense that you could have brought suit there if there had been no waiver. But it -- it -- by the consent of the party in part if you will by that kind of phrasing, imparts jurisdiction in a court which by statutes, hasn't got it.
Warren E. King: Section 1406 merely states that failure to waive. The failure to raise the question of improper venue waives improper venue.
Felix Frankfurter: Well, therefore, although -- although the statute which the limitation, it says, maybe brought here, must be brought here. All those subjective -- subjunctive limitations are wiped out if the defendant affirmatively says, "I have no objection.” If he doesn't raise it, which means it's a protection for the defendant and not something that circumscribes the Court as a matter of -- as part of the federal judicial system.
Warren E. King: But the act or failure to act of the defendant to object to venue, under Section 1406 does not in light to the scope of 1391 or 1400. There is a correct and an incorrect venue under 1391. Suit maybe brought in this jurisdiction or that jurisdiction. 1406 merely says, if you bring it in the long jurisdiction and the defendant does not object, then the Court did acquire it.
Felix Frankfurter: Well, that's merely using your formal words instead of some other formal words and say, although the statute defines the limitations under which a court may entertain a suit if the defendant objects. If he doesn't object, the Court may answer the plaintiff.
Warren E. King: That maybe the result. But the --
Charles E. Whittaker: Well, Isn't it just the other way? [Laughs] As far as 1404 which concern venue. A statute does not say that the cause maybe transferred to some other forum if the defendant will consent, but limits the power of the Court to make the transfer to a venue where the action might have been bought. That doesn't involve any additions or if the defendant will waive something, does it?
Warren E. King: Definitely not, sir.
Felix Frankfurter: But 1391 says it maybe brought. It doesn't say if the defendant waives it. It says, maybe brought here and that is right into to it because of the nature of venue in protecting the defendant. I'm not saying that the outcome has to be one way or the other and saying that these entomological and dramatical or syntactical arguments do not control the decision in this case.
Warren E. King: The chance of the Section 1404 is the past (Inaudible) that indicates a point of view of time that has already passed. If the action is -- if the motion to transfer is under the present, it maybe transferred. But the conditions or the -- the conditions covering the jurisdiction to which it maybe transferred are those -- are referred to in the plural perfect tense. Something that has occurred in the past and it is now no longer true. May or -- may or may not be true any longer. But it must have occurred at the time -- it must have been true at the time the suit was brought. The report of the House Judiciary Committee in adoption of the Section, 1404 refers to the -- the B & O versus Kepner. There was the case were an action have occurred in Ohio, the defendants line, Mansfield, Ohio and yet the plaintiff file suit in New York. And the House Committee report says that the 1404 was intended to remedy situations just of that nature. And the meaning of the Kepner case will disclose that at the time suit was filed in the New York District, it could have been filed in one or more districts in Ohio. But in the absence of 1404, the cause could not have been transferred and 1404 was enacted to permit that -- suits of that nature to be transferred to a forum were it could have been brought at the time the suit was originally instituted. The position of course of the respondent is that there no ambiguity, the wording is clear and that the District Judge -- petitioner did not have authority, power to transfer this case to Utah where the suit could not have originally been brought in the first instance.
Potter Stewart: Mr. King, you pointed out that a railroad, typically does business in many, many states and that the basic purpose perhaps was to enable a transfer of -- of a lawsuit against the railroad to a district closer or to the district, where the personal injury has occurred and where the witness is presumably are available. But there are great many other diversity of citizenship cases, and many of them are negligence cases involving automobile accidents. And as I -- I'm right, am I not, in thinking that under the diversity venue statute, the plaintiff is limited to his residence or that of the defendant under general diversity under the enactment. Now, it said certainly, not a rare or very hypothetical case to have an automobile accident happen fairly far from the residence of either the plaintiff or the defendant. And Massachusetts can be involved in a collision with a man from New York, both -- and they're both on their summer vacation in Wyoming. And yet, under your interpretation of this -- this statute, the Court would be powerless, would it not to -- to transfer an -- an action even though both -- both of the parties were willing to the district where the actual -- called the locus of the actual cause of action.
Warren E. King: I believe that that would be true if suit could be started there and if objection were not made to venue, then, the Court would have jurisdiction. But I doubt if a Court would have the power to transfer a -- this particular action to Montana or Wyoming.
Potter Stewart: It's where -- where, under my hypothetical case, all the witnesses, all the eyewitnesses were. And where those parties would like to see it transferred. Of course, as you point out, if -- if a suit where brought there, and there were no objection that be given.
Warren E. King: But this Section 1404 was enacted after long hearings by the House -- Judiciary Committee where the statute concerning the personal injury case against railroad was brought into. And there of course, venue did lay in many, many States. Thank you, Your Honor.


Warren E. Burger: 70-5064 Jefferson against Hackney. Mr. Cole you may proceed whenever you’re ready.
Steven J. Cole: Thank you. Mr. Chief Justice Burger and may it please the Court. With the Court’s permission I would like to save five minutes of my time for rebuttal.
Warren E. Burger: Very well.
Steven J. Cole: The State of Texas provides public assistance to four groups of its needy residence and receives over 350 million dollars a year from United States for this purpose. The four groups are the children deprived of parental care and support because of the absence, death, or incapacity of the parent. Persons over age 65, the disabled and the blind, these are the persons both Congress and the State of Texas have identified as needing financial assistance because they do not have a breadwinner in the household. Texas has established the welfare program covering all four groups in its Public Welfare Act of 1941 pursuant to a single provision of the Texas Constitution. There are two separate issues presented by this appeal. The first is whether the Equal Protection Clause and Title VI of the 1964 Civil Rights Act permits Texas to pay AFDC recipients eight-ninths of whom are black and Mexican-American, 50% of the amount Texas has determined to be their minimum required needs while it pays all other welfare recipients, those receiving aid under the old age, aid to the blind and aid to the disabled programs, three-fifths of whom are white 95% or a 100% of the same minimum needs. The statutory issue presented today is whether Texas may consistent with the Social Security Act as construed by this Court in Rosado versus Wyman determine eligibility for AFDC and the amount of AFDC payments by subtracting outside income from 50% of the standard of need rather than from the standard of need itself. Both issues must be decided by the Court since a victory on either one to the appellants will still leave the other in dispute. The starting point for understanding both issues is the standard of need. This has been referred to by the Court in Rosado with the yardstick to determining who is eligible for public assistance. The standard is a dollar amount which represents the state’s judgment as to what is necessary to provide a subsistence level living in that particular state. In Texas, the items included in the standard or personal needs which include food, clothing, and personal incidentals shelter cause and a few special need items. Texas uses a single standard for all welfare recipients in the state regardless of the category under which the recipient receives as assistance.
Speaker: In other words, children under the AFDC have the same standard of need as blind adults or disabled adults or people over 65?
Steven J. Cole: No, that’s not exactly right, Your Honor. What happens is Texas has a standard budgetary allowance. So for example shelter needs are budgeted according to the household size and not according to the category. Similarly, personal needs are budgeted according to age. Adults in the ADC Program, the caretaker, the mother caring for children receive the same budget and needs not receive but are budgeted for the same needs as adults in the Aid to the Blind Program or Old Age Assistance program. Children, the dependents of an old age recipient or dependents of an ADC mother are budgeted for the same amount in each program. Texas has made a judgment and we do not challenge it in this case. The children require less per month than an adult to supply the same minimum needs. But we have not challenged that in this lawsuit. An example of how this work is at page 41 and 42 of our brief that might be helpful if I refer to that. In table one, we have set forth an age couple both receiving old age assistance, that’s at page 41, and the state has determined that for each month that couple needs a $172.00 per month for a personal and shelter needs. On page 42 at table two, is a mother and three children who received AFDC from the State of Texas. Their monthly needs have been defined by the State of Texas now to be $182.00 a month or just slightly more than the two-person family receiving OAA. Now, these amounts for both families are approximately $2,100.00 a year and ask the Court to bear in mind that this standard is far from generous. The United States defined the official poverty levels about $3,900.00 a year for a family or poor and the Bureau of Labor Statistics, level of living budget is over $6,500.00 a year. In any case, we are not challenging in this lawsuit, the fact that Texas defines the needs of a family of four with three children to be only slightly greater than the needs of the family of two. We accept that judgment. Texas has made it. We are not questioning it. We also are not questioning the fact that that standard for both of those families is defined so inadequately. That’s not an issue in this lawsuit. We again accept that judgment. Our position is that having determined the subsistence needs of both families. Texas may not discriminate in the percentage of those needs that chooses to meet for the various groups of recipients. In practical term, what has happened is that Texas has called the family in table one that since they are needy and since they are dependent because they are old, the state will guarantee them whatever they need to purchase a subsistence diet and adequate shelter according to Texas’ judgment in any case. While at the same time, the state has hold the children in table two that since they are equal need and their dependence is cause by the death or absence or incapacity of their father. The state will only have them purchase 50% of what the state says they need to survive. At the outset, we wish to make clear for the Court that the discrimination in the percent of needs pay is not related to any differences in the requirements of the various recipients. As we have mentioned, the percentage reduction is applied after the standard of need is a computed. Therefore if there are any differences in need in these particular families for instance, economies of scale because there a lot more members of the household, or maybe a blind recipient needs to seeing live again and of course an AFDC family normally would not. Those will be reflected in the standard of need before the percentages are thought. We’re dealing with families that Texas has said after it computes the standard or equally needy. As the Department of Health Education and Welfare pointed out a brief in the District Court of Alabama which I submitted to this Court in Whitfield versus King. The percentage reduction as applied is essentially a physical measure. It is unrelated to the needs of the various recipients. We also ask the Court to bear in mind that the percentage reduction in this case has nothing to do with the availability or none availability of other sources of income. When income is actually available to a particular recipient whether it be an OAA recipient or an AFDC recipient, for example, child support to the ADC mother, social security benefits for the OAA family, that income is subtracted from the grant. There aren’t any double benefits we are contending with here. So the percentage reduction has nothing to do with that. In fact, the way Texas applies to percentage reduction to do the AFDC family actually operates as a work disincentive. Unlike no in the Dandridge versus Williams case involving family maximums that this Court decided. Texas does not encourage an AFDC recipient to seek nonwelfare sources of income. Since it’s impossible for the Texas AFDC family to use that income to get closer and closer to the standard of need because the way Texas applies the percentage reduction is it applies it for the standard first and then it subtracts outside income. No AFDC family in Texas could ever end up with more than 50% of its needs. So it has, it does not have that work incentive feature the Maryland Family maximum and indeed the Supreme Court of California unanimously decided in case Villa versus Hall which we’ve also supplied to this Court. The Court noted that this too was a work disincentive feature and specifically referred to the Texas budgetary method which is similar to California. It is this aspect that the percentage reduction is used by Texas which gives rise to a Social Security Act claim. And with the Court’s indulgence, I’d like to finish the statement of the case with the facts they gave rise to a statutory claim and then returned to the argument. Prior to May 1969, the family described in table two receiving AFDC was determined by Texas to need approximately $165.00 per month under the Texas standard of need. Since at that time, Texas used that standard to determine the amount of payment and eligibility for payments or all person families with income less than this amount receive some benefits. The precise amount depends on whether or not there are budget deficits. The standard of need minus their available income exceeded the maximum grant level then in effect in Texas. If it did, they only receive the maximum. Effective May 1, 1969, consistent with one of the mandates of Section 402 (a) 23 which is the subject of the Court in Rosado decision, Texas adjusted its standard of need by 11%. The cost of living increased since that standard was last priced in 1965. We are not challenging the adequacy of that adjustment in this case. As a result, the family in table two now is determined by Texas to need $17.00 per month more or now $182.00 per month. Additional families therefore, those with income below this new standard of a $182.00 but above the pre May 1969 Standard of a $165.00 have now been determined by the State of Texas to be in need of public assistance. But on that day, Texas stopped using its standard of need as the AFDC yardstick against which income would be compared and that --
Speaker: Are you saying that before 1965 when the standard of need was al $165.00, a family before received a $165.00?
Steven J. Cole: No, I am not Your Honor. The family before May 1969 received when they changed the new policy and adjust the standard received the full difference between the standard of need and their available income limited --
Speaker: As one earns $100.00 a month and the standard of need with $165.00, they got $65.00?
Steven J. Cole: They got $65. Right! The only limitation was there was a family maximum on grants which in Texas at that time was a $123.00. So if there budget deficit was greater than $123.00, they only receive the $123.00. That was the system that was upheld in Dandridge versus Williams.
Speaker: What’s the difference where you said that it gets $65.00 difference between $100.00 and $165.00? What’s the situation today where one still earns a hundred?
Steven J. Cole: Okay. Now, the standard has been raised. The standard now is $182.00.
Speaker: Yes.
Steven J. Cole: But at time the suit was brought the percentage factor was 50%, so let’s use that figure. The 50% is multiplied against the $182.00 which results it in an item which Texas called recognizable needs even though the standard of need is a $182.00 and that recognizable need is $91.00. The family with income of $100.00 now, receives no benefits. Not only does it receive no benefits but the family since it’s not receiving a cash welfare grant loses complete Medicaid coverage. There was Medicaid in the State of Texas and in half the States is condition on the receipt of public assistance.
Speaker: And this change you say was made May 1969?
Steven J. Cole: It was made May 1, 1969 and it was the policy that’s now being challenged by amended complaint in this lawsuit. By the way, the Medicaid consequences which I refer to are not minimum. The Solicitor General has told the Court that for the average of AFDC family it amounts to about $50.00 to $60.00 per month.
Speaker: And why is it that you say they lose those benefits?
Steven J. Cole: Congress has mandated in Title 19 of the Social Security Act that Medicaid assistance be provided only to those persons receiving aid under one of the Cash Welfare Programs. Since that person is now still needy, they’re not receiving a dollar grant and they lose Medicaid eligibility.
Speaker: That is the one who earns a hundred entitled only to 91 gets nothing?
Steven J. Cole: That’s right.
Speaker: And therefore he also gets no Medicaid?
Steven J. Cole: That’s exactly right.
Speaker: Where as back in where they have the $165.00 or they get $65.00 and also get Medicaid?
Steven J. Cole: Yes. Your Honor, we are not maintaining in this lawsuit that Texas must pay full needs. I’d like to make that clear. Texas could establish any presented reduction it wishes under the Rosado decision as long as it pays some benefits to those families with a need. That is if it wants to pay only 10% of benefits but it applies that to the budget deficit after it subtracts the income then the Medicaid consequences would not attach because the family will get some dollar benefits. What happen in Texas beginning May 1969 is that 2500 family who were previous families who were previously receiving AFDC became ineligible by the operation of the new system that was stipulated by the state and of course the new families who were rendered needy by the adjustment to the standard of need, those marginal income families were kept off the rolls. It is this that gives rise to a statutory claim since Texas managed to cancel out the one practical effect.
Speaker: Well, in my hypothetical of family earning a hundred is now entitled to nothing. It would be better for them, I gather simply the quick work then get the 91 plus Medicaid, is that it?
Steven J. Cole: Yes, sir. Absolutely or at least only earn 90 if they could manage that or only receive 90. There are other factors other than work. The father is deciding whether they support their families. Every dollar of support goes to the State Treasury as opposed to helping that family reach the standard of need. And let’s remember the standard of need is what Texas defines as that basic requirement to subsistence living. So families below that standard --
Speaker: Does Medicaid for your family enable to -- you said it runs about $50.00 to $60.00 a month?
Steven J. Cole: The Solicitor General has told the Court that the average AFDC family receives $50.00 to $60.00 a month Medicaid. I don’t think I have to belabor the point that medical care could mean like itself and if we are dealing after all what families who don’t even have enough to supply under Texas’ own terms enough food, clothing and shelter to their families.
William H. Rehnquist: Mr. Cole, I believe that the respondent in his brief makes a point that all of the parties’ appellant presently in the case have not lost their eligibility as a result of what you claim to be Texas’ violation of the statute, Mrs. Davilla having been dismissed as an appellant in October 1969. What is your answer to that contention?
Steven J. Cole: Mr. Justice Rehnquist, first of all, this is a class action and there’s stipulation, there are 2500 families in Texas eligibility was effective by this, that’s number one and Mrs. Davilla was a plaintiff in a consolidated case. The reason she did not appeal is not available to me. I don’t know the reasons. It’s perhaps because the Jefferson point this appeal and she thought she was protected but more important than that, one of the appellants that is before the Court Mr. Vasquez is presently earning income. He was not when the complaint was filed. He is now receiving some disability benefits. Now, but they weren’t enough to defeat his eligibility. The manner of computing the payment affects him seriously because if the percentage were applied after his income is subtracted, he would receive the much higher grant. It’s our contention that Mr. Vasquez even if you don’t want to consider the unnamed members of the class who were not before the Court now that Mr. Vasquez has an interest in the computation method and he is raising the eligibility consequences since if the Court agrees with this on that point, we’ll have to strike the Texas method and he will get an increase grant as a result.
William H. Rehnquist: Do you say his interest is sufficient to enable you to raise the point?
Steven J. Cole: Yes, sir. I’d like to conclude on this factual statement by pointing out that this effect of making these additional needy families eligible was precisely what Mr. Justice Harlan referred to in the Rosado opinion is the one practical effect in his statute under which we’re litigating to make this largely needy families eligible for the care and training provisions of the act. With respect to our equal protection claim, our position is that the District Court incorrectly measured the discrimination against AFDC recipients according to the traditionally lenient equal protection test. Frankly, we believe that the treatment of AFDC recipient has a racial purpose to it. In light of the enormous racial imbalance in the various welfare categories, the law of history of restrictive measures against AFDC recipient in Texas which are borne most heavily on blacks in the program, the States decision to allocate funds as it has with this little room for any other inference, this is particularly so when appellees almost frivolous explanation to add it to the picture. I’d like to discuss them in a moment. Our case however, does not depend in this Court’s finding a racial purpose to the discrimination. In Dandridge, the Court said that even if the State Welfare Regulation is not drawn on its face in racial terms but if shown to have a racially discriminatory effect it will be inherently suspect and subject to restrict judicial review by the Court. This is just such a case, I first like to set out a very briefly to Court the racial impact of what Texas has done and then review the explanations put forth to the huge disparities. Of a total of 389,000 welfare recipients in the state, 46% of them are white, 54% of them are black or Mexican-American. In comparison, the racial and ethnic distribution within each category strike an AFDC, it’s not 54% black or Mexican-American; it’s 87% black and Mexican-American. The old age program is --
Speaker: Divided how?
Steven J. Cole: I’ll have to refer to the record Your Honor. Our record at page --
Speaker: [Voice overlap] for about half and half or --
Steven J. Cole: Well, I have a right here at page 72 of the record. The AFDC program is – yes, it’s about 44.6% black, 40% Mexican of the 85% or 86%. Yes, so the black and Mexicans are evenly divided, yes, sir.
Speaker: Thank you.
Steven J. Cole: The OAA program is not a majority black or Mexican as we might have expected but its 63% white. In setting its payment levels, Texas has selected a one classification that enables the most whites to be benefited by the States allocation while at the same time the greatest number of blacks and Mexicans are disadvantaged.
Speaker: Are there other States who have followed this types of problems?
Steven J. Cole: Yes sir, in the appendix to our brief, we have set forth two trials. One, as of October 1970 which was the latest published information we had from the Department Health, Education, and Welfare, we list about 20 States that have a percentage of disparity. In appendix B, we have selected those States disparities as great as Texas was 25% as of today.
Speaker: What page is it?
Steven J. Cole: At 1 (b) of our brief, it’s the very last page of the brief and if you’ll notice those seven States whose percentage disparity as great as Texas is, five of those States present a racial disparity very similar to Texas. With this racial impact in mind, we asked the Court to consider Texas’ justification for selecting the AFDC recipients to bear the sole grant of the state physical limitations. We think their justification is so rational that the Court to decide this case in our favor using the traditional test. There are three sets of explanations, there’s a practical one in the record, there’s a lawyer’s justification and there’s the one that District Court use. The practical justification is this, the three-judge court below asked counsel whether there was anything in the record that would support this discrimination. The Attorney General’s response was and I quote, it’s at page 71 of the oral argument. “We’ve got just so much money in each of this program to spend.” Well, this is undoubtedly true. But what we are challenging here is the legislature’s allocation of the money. Now, that takes the question before the Court. Now, we remind the Court that since 1965, the Texas Constitution has given the legislature complete flexibility and appropriations. It has only a total sealing.
Speaker: Well, are you suggesting that if they wanted to spend no more than they now spend, they can level out the percentage for all four categories say at 60%?
Steven J. Cole: Yes sir and I don’t think it would have to be at 60%. [Voice Overlap] The reason I say that Your Honor is because there are twice as many old age recipients as AFDC recipients. So very -- but yes, sir.
Speaker: I gather your premise is, it would not be a 100% across the board?
Steven J. Cole: No, unless the Texas Constitution was amended, it would not be a 100% across the board but they do have flexibility before 65 they didn’t. The Texas constitution said a certain limited amount for ADC and a certain limited amount for Old Age Assistance. That is no longer the case.
William H. Rehnquist: Mr. Cole, you’re not challenging on Federal Constitutional ground the overall Texas sealing?
Steven J. Cole: No, sir.
William H. Rehnquist: Then if you prevail basically the AFDC people will get more out of common fund and the other categorical grants would get less, is that right?
Steven J. Cole: If the Texas Constitution state as it is, that would be the result, yes.
William H. Rehnquist: And you’re not challenging the Texas constitution?
Steven J. Cole: No, but frankly Your Honor, we do believe and this is not a legal judgment to be made either by us or the Court that if that question is put to the Texas people, the constitutional sealing will be raise. But it’s true that if we win, we’re not requiring the state to spend more money and it would be a reallocation.
William H. Rehnquist: I take it from the stipulations on file that this would result in a lowering of the benefits received from the categorical -- in the other categorical grant, the Old Age Assistance, and blind assistance.
Steven J. Cole: Right, the stipulations make clear that Texas is fully spending its appropriation on the other categories and then you have to come from somewhere.
William H. Rehnquist: No effort was made either by the respondent or by you to join any representative members of this other classes who would suffer if your contention prevails?
Steven J. Cole: We do not know.
William H. Rehnquist: Do you have any position as to whether under Rule 19 may or should have enjoined?
Steven J. Cole: Your Honor, my position would be that they stand in the same position as the favorite class in almost every equal protection case that’s before the Court. I think the thing that’s troubling you is, we’re dealing here with a pot of money not eligibility for public housing or a regulation of business but it’s always true that the favorite class stand to lose its favorite treatment if the disfavored class wins the lawsuit. And under Rule 19, I don’t think this Court has ever required that disfavored class to be brought before the Court.
Speaker: However, in this case you have all the aspects of a common fund that seems to me a limited amount of money that you haven’t had and some of those other cases.
Steven J. Cole: I suppose that’s right to the extent that the Texas Constitution limits the present Texas Constitution limits the total expenditure. I would say this, Your Honor, that the suit obviously had widespread precedent State of Texas was well known in the State of Texas and I think it would be wrong to say that the suit would come as a surprise if the appellants before this Court should win and will become a surprise to the old age recipients in the state.
William H. Rehnquist: But how can you say that? This is a group scattered widely over Texas not represented by anyone so far as we are informed on this record?
Steven J. Cole: Your Honor, that is really one of the points that goes to the heart of why Texas has done what they’ve done. 25% of all the people over 65 in the State Texas receive Old Age Assistance that’s an astounding figure. The appellees have testified quite candidly that it was their political clout that is basically encouraged the legislature to appropriate as it has. Mr. Bond (ph) who is the Chairman of Public Welfare testified that OAA touches nearly every home. AFDC doesn’t touch as many people and the OAA people have the votes. Now, I would think the legislatures have been responsive to them and they must have some input in to the process. I point that that the AFDC children represent less than 3% of the state’s population of children under 18 compared to the OAA percentage. I really have no other response to the fact that they have not been formally brought before the Court. I will point that the State of Texas is never made any motions to bring them before the Court either for whatever that’s worth. I’d like to point out that the record shows that the Welfare officials would equalize if the legislature appropriated at a lump sum. Mr. Bond’s deposition again indicated that. So, there is no welfare related reason for this. The welfare expert says, if you give me a lump sum that’s what I would do. I’d have a percentage across the board but they haven’t given him a lump sum even though the constitution permits it. The lawyer’s justification was that the discrimination is justified because AFDC children and mothers well, today employable are more likely to be come employable in the future and also because they’re more likely to get support from relatives. Well, future employability potential obviously has no bearing on the rationality of current payment disparities. The welfare programs are designed to meet current needs and maybe that would justify in the running training programs by AFDC recipients but it certainly won’t justify current AFDC grants. And surely, Texas won’t suggest that paying 50% of needs in OAA would be fair in light of the fact that a majority of OAA recipients receives social security, it just has nothing to do with the question before Court. The District Court viewed the program as completely separate programs. Whatever you do in OAA, you don’t have to do an ADC because they’re separate because we see an ADC the purpose is to strengthen family life and the purpose of the other program is self-care. The fact is that Texas Constitution and the Texas Statutes makes no such distinction. The purposes are single-minded, financial aid and rehabilitative services. Now, I would suppose that a blind person may need a different kind of social service that an ADC mother who’s husband just pasted away but I would suggest that those differences don’t justify a difference in the financial assistance you give to the family. With respect to the statutory claim, Section 402 (a) 23 required each state by July 1969 to adjust the amounts used in that state to determine a family’s needs for AFDC and also to proportionally adjust any maximums that the state may have. Before this Court Rosado vs. Wyman, the petitioners argued that that section contemplate an increase in all AFDC payments by July 1969. They urged that any other construction would it render the statute of meaningless bookkeeping exercise.
Warren E. Burger: Mr. Cole, let me interrupt you. You said you wanted to reserve five minutes but you’ve used up three minutes of your five that you were reserving already. If you want to reserve any you have –-
Steven J. Cole: Okay. I’ll finish the statutory claim, and if I have the time after to rebuttal, thank you.
Warren E. Burger: Mr. Bailey.
Pat Bailey: Mr. Chief Justice and may it please the Court. I think counsel has stated that there are initially to questions presented in this case. Your first a constitutional question involving the Equal Protection Clause of the Fourteenth Amendment. This is based upon the manner and which the Texas legislature has allocated the money available between the various categories of welfare assistance in Texas, the aged, the blind and totally disabled and the dependent children. The statutory claim deals with whether the allocation of the money between these categories by the legislature violates the Civil Rights Act of 1964. Also, the Federal statutory issue of whether the Texas method of determining eligibility violates the Social Security Act and in particular 42 U.S.C. Section 602 (a) 23. Also, I think we have in this case an additional issue of an old age by the appellants and that is whether there is any just issue controversy appellant and appellees as to the statutory grounds allege. I think that it would help the Court somewhat if we look a little in the background of these welfare programs in Texas. The Texas Constitution prohibits gifts to individuals. This welfare program that Texas has had been authorized by amendments to the constitution which allows these grants to be made to needy individual. These amendments have all ways which authorized these grants have always put a limit upon how much money that legislature of Texas been appropriate to pay these grants and packed up until 1965. They even put a limit on how much they could appropriate for various wants of the program. However, in 1965 this was gone away with before the legislature could appropriate different varying sums, as they solved it, between the various categories were in operation.
Speaker: Do you say there’s a constitutional limitation on the total amount?
Pat Bailey: Yes, sir. At the time this suit began it was $60 million during the course of the litigation and in fact, shortly after the initial judgment was entered, the people of the state raised its ceiling to $80 million. The bulk of which went to the AFDC program.
Speaker: And that is in the state constitution, that $80 million?
Pat Bailey: Yes sir. Now, --
Speaker: As a figure, it is not a pointer --
Pat Bailey: No sir, it’s an actual figure. It has been gradually going up somewhat stop the time, I believe the last attempt before the one it was passed was defeated. So, at least if not always passed the vote of people.
Speaker: This is done by referendum?
Pat Bailey: Its own general election [Voice overlap] the legislature’s constitutional amendments to the people and they vote on them either passing them or reject it.
Speaker: A majority vote?
Pat Bailey: Yes, sir. Now, the legislature in Texas meets only ever two years except on special session and normally the money is appropriated on a two-year basis or two-year period. Now, the constitutional amendments can only be submitted pursuant to a regular session which means if we get in a process financial wise we can’t call a special session and submit a constitutional amendment and get more money. We’re on sort of a two-year basis. Now, Texas in the late 60’s and starting really about 1968 like many other States had various regulations dealing with add-ons like a man-in-the-house, maximum grants, and certain rest of performance. The Court decisions that began to come about in this period of time resulted in a dramatic increase in welfare rolls but mainly in AFDC, the category that this litigation is directed at. Now, the result or consequence of this was that we had it constitutionally fixed the amount of money to spend. We had two-year appropriation to work with. There was no way to rapidly it meant the state constitution or any assurance it’s a voters would to make more money available. There was no way or there is no way to transfer appropriations between these categories unless the legislature does it. The only thing that could happen was it grants and some of the categories have to be lowered, the ones that arose or raising it rapidly in. We have the added problem that this time is it the cost of living increase required by the Social Security Act became effective July 1, 1969. Texas faced with its problem went to the solution at some States were using in one that the Department of HEW was authorizing that up going to a ratable reduction method where we recognized this standard of living inquiries but we can only pay a percentage of this. Texas had to reduce some of the grants as a result of using this rightful reduction system and it was because of this the either reduction of some of the individual’s grants or the fact that they did not increase that actually triggered this lawsuit. Now, let’s initially look at the constitutional claim. They are complaining that the allocation of the legislature of Texas that made between this various categories of assistance is in violation the Fourteenth Amendment. It’s really a two-fold crust, I think in here. One is that, we are not saying the same percentage of need between the various categories and they say there should be no various. Now, in the aged program, we paid a 100% as to the blind and disabled 95%. At the time of this lawsuit, 50% in AFDC. This is about --
Speaker: But who fixed those percentages?
Pat Bailey: The Welfare Department, Your Honor, on the basis that they have to figure how much money they had and how much they were going to pay at?
Speaker: But did the legislature say that AFDC shall have “X” dollars out of 80 million.
Pat Bailey: Yes, sir.
Speaker: Old checks dollars out of 80 million, is that the way it was done?
Pat Bailey: The legislature did this and the welfare department of course then has to take the money that’s in the program and say, we’ve got so many people, 24 months --
Speaker: Does the legislature said out of the 80 million, 40 million shall go to the AFDC? What you’re telling is I gather that they could not pay more than 50% of need and stay within 40 million.
Pat Bailey: Within the budget, yes, Your Honor. Now, this because of the constitutional amendment, it was pass raising the 60 million and 80 million. We have since been able to increase the percentages from 50% to 75% prior to time and will shortly after this suit commenced.
Speaker: And the others stated a 100%, do they?
Pat Bailey: No, sir. They stated the blind and disabled were stayed at 95% and the Old Age Assistance remained at 100%.
Speaker: (Inaudible)
Pat Bailey: The appellants have also raised the allegation that this allocation found between the category has some form of racial motivation or effect. Now, as to the contentions, the court below has twice rejected it. I think that as to this initial argument that King v. Smith and Dandridge v. William have already decided this initial issue adversely to the appellants. The Court is recognized in these cases that the state have considerable latitude in allocating their AFDC resources. I think this Court has said that each state is free to set its own standard of need and to determine the level of benefits by the amount affirms it devotes to the program. I don’t believe that the Court could make it much clear that the States can use their discretion as to what particular problem in the welfare area that the state wants to concentrate upon and use their limited funds to do the best job they can. I think the court below recognized this when they saw that Texas only had a limited amount of money and they felt that it was the duty of the legislature of the state to use its judgment in the manner in the amount the available money should be divided. I think that the court below possibly look to this Court’s warning in Dandridge v. Williams where the Court stated that the constitution does not empower the Court to second guess state officials charged with the difficult responsibility of allocating limited public welfare funds among the merit of potential recipients. We feel that to do otherwise really would put the Court down in the position of exercising a legislative rather than a judicial function. Now, I think that without commenting at length upon them, there are numerous reasons which are constitutionally sufficient for spending less in one program unless you just look at the AFDC program as opposed to other programs. The Courts have long recognized that these are different programs with different objectives. Secondly, the aged, the blind and the disabled are not luckily going to improve their condition, in many cases, will only worsen. These people are also quite frequently the recipients of larger amounts of drugs or medical needs. I think that this is one that the legislature could have considered as wanting to devote more of their energy, more of the available funds in this area as opposed to another and not necessarily feeling that the child or the blind or someone else should suffer but realizing that they couldn’t create a utopia either with the money that they had.
Speaker: You’re talk about more of the public funds for the aged or for the blind or for the disabled. In fact, is that true? How much of the $80 million goes to AFDC now?
Pat Bailey: About $23 million, a little over $23 million. So it would be a somewhere around close to 30% in our record --
Speaker: That $23 million goes to AFDC --
Pat Bailey: Out of the $80 million, I believe in the last appropriation.
Speaker: And about how much goes to each of the others? About I --
Pat Bailey: I would have to look Your Honor. I believe there is around $50 million goes to the Old Age Assistance program. The blind program is rather small --
Speaker: They’re not many people who are blind?
Pat Bailey: Yes, sir and in APTD is also risen some but not too much although this is rapidly growing one. But the remainder of the money about the $7 million about approximately remaining is divided between the blind and the disabled.
Speaker: So that $50 million out of the $80 million goes to Old Age Assistance?
Pat Bailey: Yes, sir.
Speaker: And the fact is, as your brother said I guess it’s at 25% of everybody over 65 in Texas gets Old Age Assistance?
Pat Bailey: I think it’s probably correct, I have --
Speaker: One of every four people over 65 in the state?
Pat Bailey: Now, the --
Speaker: Mr. Bailey you’ve been making -- I gather these are constitutional?
Pat Bailey: Yes, sir.
Speaker: It’s so constitutional, are you going to get to the statutory?
Pat Bailey: Yes, sir.
Speaker: Because I gather if this system conflicts with any requirement of the Federal Statute then it can’t stand, is that right?
Pat Bailey: This is correct sir either one is a correct. Now, the appellants in this case have also questioned the use of the traditionally equal protection test by the court below rather than a compelling interest test. I think that Dandridge v. Williams decides the question that unless there are some showing or in the rule of a regulation and there’s a racial motivation or fact that the compelling interest statute should not come in to play unless this is shown. This I think brings us both to this question into the civil rights question. The appellants have contended that this allocation is because of some racial intent. I think the undisputed facts in the record before this Court show that this allegation is with out merit in the court below has on two in occasions so held. I think we have to look at it a little bit of the facts since here. They’ve never been a reduction in AFDC (Inaudible). The amount of increase is over the last 28 years have almost been equal from the standpoint of every time some of the adult categories were raised in money, so with the AFDC program.
Speaker: And you say there’s never been a reduction in AFDC; you’re talking about total money appropriated?
Pat Bailey: Yes sir, in total.
Speaker: But there has, has it not or am I mistaken been a reduction in the percentage given to --
Pat Bailey: The AFDC?
Speaker: To units based on percentage of standard of need, there has been a reduction on that, hasn’t it?
Pat Bailey: Yes, Your Honor, there have been over the history of these programs reductions and practically every one of them at one time or another either by the legislature not appropriating money and the programs growing there have to be some reductions from time to time but never in the total amount of money spent for the programs.
Speaker: Total money spent.
Pat Bailey: Since 1943, the AFDC program has been growing about twice as fast as the adult programs. The majority of the families receiving actually an increase under this ratable reduction theory that Texas went to in 69 were actually large families which were predominantly they grow in Mexican-American. Under this proposed amendment which passed increase the money available sum $20 million of the amount that was appropriated by the legislature. The AFDC got almost $12 million out of the $15 million available. Also, the Court looking at the depositions of the welfare department officials said that these people didn’t even know what the racial make ups of the various category was until after this suit commenced and they were required to do certain studies and come up with certain statistics. Another thing that we get in to here if we talk about leveling this out, if we took and these are stipulations in this case, if we took this money and leveled it out, it would not have a racial effect as the appellants seem to contend. It would mean that practically and equal amount of racial groups in the adult program, the aged, the blind, and the disabled would have their grants lowered to in turn it raised about the same amount of individuals in this ethnic groups in the AFDC program. Now, if this was not the case, they might be some merit to appellant’s contention but leveling this out has no racial connotation because they’re going to be as many people in the Mexican-American and the negroes that will have their grants lower than this other programs as well have them raised in AFDC and I think this itself shows the lack of merit in appellants’ contention.
Speaker: Mr. Bailey, you’re speaking in terms know of absolute numbers, are you not rather than the percentages? I take it that the appellants’ response would be that although the absolute numbers might be the same the percentages are a good deal different?
Pat Bailey: I have and not a word in the record nor I have really looked to see what the percentage difference it would be but when we’re talking about people. You’re having about as many heart as you’re having held among the latitudes. I think that King and Dandridge show us that the States have a lot of latitude in the way they allocate this money. We submit also that there was no racial motivation or effect in what has been done in the allocation. There are some four other cases the Lampton out of Louisiana, the Ward case in Mississippi, the Goodwin case out of New York, the Stanley case out of Virginia which all got percentages about the sign are very strikingly similar. And to date, I am not aware of the Court saying that this show racial effect or motivation. Now, as to the statutory question, the initial attack in this case was at the ratable reduction of paying only a percentage of this recognize need was paid. However, before this case rates this Court, the issue was resolved by Rosado. Now, there was no pleadings or proof or allegations in the trial on the first appeal about anything that Texas was doing wrong in its method of determining eligibility. It was only after the Court, this Court sent the case back for the entry of a new judgment and after the Court had entered the judgment denying both the constitutional and statutory relives of by the appellants that they raised for the first time this question of whether or not Texas was properly determining eligibility. There were no amended pleadings efforts to amend their pleadings. None of the appellants before this Court were affected by the way eligibility was determined. The only party which could’ve been affected was the party Davilla but she didn’t even appeal from the first judgment entered by the Court and was no longer a party to the case when it was sent back for the entry for a new judgment or when this issue as to determining eligibility was first raised in a motion to amend the judgment entered by the Court.
Speaker: What’s the respective which you suggest that an eligibility has not been determined that is required by the Federal statute?
Pat Bailey: Well, Your Honor we feel that none of these people in this case.
Speaker: I know. What do you understand these appellants to say? Is the effect in determination of eligibility in light of the Federal requirement?
Pat Bailey: All that I can understand by what they have said here Your Honor, is that the possibility that some day in the future this person might become ineligible. This shows no controversy. The only thing that I believe counsel said is that if the Court could let this issue get in here, this person might have a --
Speaker: Does that possibly relate to the ineligibility for Medicaid for at least for the operation of new computation?
Pat Bailey: None of these particular appellants, Your Honor are ineligible for any of the medical assistance programs in Texas. And this is the issue that we raise here is that we feel that none of these people have been in anyway affected.
Speaker: Well, how about the class? I gather the --
Pat Bailey: None of the class Your Honor that they represent has been affected and I think that counsel and the appellants are in most unusual position here. They are arguing for a position which if granted by this Court will actually lower their benefits. Now, this is a most strange position I think for the appellants to be in because if a great many more people were put only welfare rolls in Texas, these particular appellants would have to have their benefits reduced and I think this is a somewhat unique situation for the appellants to come in the Court arguing.
Speaker: You mean the absolute dollar amount would be --
Pat Bailey: Yes sir, AFDC will result in the --
Speaker: [Voice overlap] the dollar amount?
Pat Bailey: Their dollar amounts would have to go down because if we have more people on the rose, we’re going to have the same amount of money is going to have to go further, so everyone that’s an appellant before this case. It would have their grants.
Speaker: But still I gather they’d be getting percentage wise if they prevail, the same percentage as the other categories of need?
Pat Bailey: This might be true Your Honor but I think we came back again of the fact if there’s really no controversy as to this issue between the parties before this Court. What they’re really doing is this. They’ve lost –- the Rosado caused them to lose their statutory issue on this ratable reduction and the only thing they got left now, that they try to jump in at the lightest as many here, is the fact that this -- the way we’re determining eligibility, that something that would never in the case until the second judgment was entered. They got an issue --
Speaker: Do you understand the appellants’ statutory requirement to be limited to a claim that eligibility determinations contravene the eligibility of the determination requirements under Federal Law?
Pat Bailey: Yes sir, what they’re saying in here is that what Texas does? They apply this ratable reduction factor to the standard of need. Let’s just say it is $75.00 and there’s a $100.00 worth of need. It would be $75.00 for a particular individual. If they have income of more than $75.00 then they are ineligible. What the appellants would like to have happen here would be for their eligibility to be determined on the four recognized need. This would in turn put them showing a small amount of unmet need. This would then put them in the welfare rolls at a small grant opening up some certain benefits.
Speaker: Opening up Medicaid to sick?
Pat Bailey: Yes, Your Honor. Now, I think that one of the problems that we run into here when did this is that we are letting or putting on the welfare rolls certain people who are very marginally eligible to get certain benefits. But the result is, is that we’re having to penalize the people who need the help the most because it’s the people that have no outside income who have larger in needs that are going ultimately have to have their grant reduced to put this marginally needy people on the rolls. Now, I did not think that it was the intent of Congress in this Act to penalize the most needy.
Speaker: Mr. Bailey, on the case or controversy point, I understood Mr. Cole to say that appellant Vasquez was sufficiently effective by the eligibility determinations so as to enable them to properly raise that would be actual parties they have before this Court.
Pat Bailey: I don’t see how, Your Honor because he is receiving a welfare grant and he is receiving medical benefits. Now, if he was not, if he had been terminated and no longer could get a grant, could no longer get the medical assistance, then I think Your Honor they would have a proper party before this Court but they don’t have one yet. They wanted to change horses here but they haven’t got anybody who will fit the saddle of this new horse that they’ve got. I think that really that they have tried -- the appellants have tried to read in to this portion of the Social Security Act, that portion requiring this cost of living adjustment. A whole lot more than Congress ever intended to put there. The Court in Rosado recognized that the purpose of this was to make the States recognized that cost of living increases had occurred, that the state should adjust to them, that in turn it might prove the States to spend more money in this area. But I think that really what they’re asking here is that something new be read into this step that the eligibility requirements be change, the way that the States determine eligibility and I think that if Congress have intended this to be the purpose, they would have written in the end a whole lot clearer than this and not let to adopt a hope that some litigant might discover this hidden among this statute that this was the purpose of it. I think that in conclusion that the question of whether to help the more at a cost of the many really, and this is the argument that they’re making in this case, is the business of the legislative branch not the judicial. I think that the arguments and hopes of the appellants in this case are ones that should be pursued in the legislative and congressional halls rather than in the Courts. I think that really what they would like to do is when you strip all the argument in the rhetoric and the clichés that are used is that they would really like this Court to judge the wisdom and the propriety of the way the legislature of Texas has decided it would spend the money had available in the welfare area and turn these appellants this satisfaction with this plan and possibly, if they can get the Court to agree with them in to some form of constitutional or statutory prohibition. I think that the path of this Court is clear and that is to sustain the judgment of the court below. Thank you.
Warren E. Burger: Thank you Mr. Bailey. Mr. Cole, you have one minute left.
Steven J. Cole: Your Honor, first of all, I would like to remind the Court that there are 2500 families that Texas has stipulated as eligibilities been terminated as a result of the method used here. Secondly, Mr. Vasquez whose eligibility has not been terminated has lost approximately $40.00 a month by the method of computation which streaked him because of its eligibility consequences he would gain $40.00 per month. In recital, the Court said at page 413 that 402 (a) 23 has the effect of requiring the States to recognize and accept the responsibility for those additional individuals whose income fall short of the standard need is computed in light of economic realities and to place them amongst those eligible for the care and training provisions of the Act. The Court said this because HEW came to the Court and told the Court, that’s 402 (a) 23 meant and if you’ll look at the amicus brief for this Solicitor General in recital, you will find those words. The Solicitor General in this case says that yes the Court said it but that was dictum and he didn’t really mean to say it and I think if the Court looks at the basis for the decision in the New York case in light throughout New York’s program, you will realize it wasn’t dictum at all. Thank you.
Speaker: Mr. Cole.
Steven J. Cole: Yes, Your Honor.
William H. Rehnquist: Can I ask you one hopefully final question about something Mr. Bailey raised. At least, a couple of your client here, Mrs. Jefferson, Mrs. Gibson are and are presently eligible under the Texas standard and as I understand his contention, you’re arguing that these eligibilities standard should be broadened in such a way that more people would become eligible for what a fixed amount of money and that therefore this particular clients of yours would not gain but lose financially if your contention is sustained. What’s your response to that?
Steven J. Cole: They are all competing interests amongst the class which was when the suit was brought to find these all AFDC recipients in the state. The original contentions in the suit were indeed that payments had to increase for everybody. That was rejected in recital. Of course when payments had to increase, so did eligibility that flowed with it. On remand, when the payments increased question which no longer a viable question because of recital there was diverging claims I supposed and --
Speaker: No thought was given to getting separate counsel?
Steven J. Cole: Your Honor, I can’t, I personally can’t respond to that because I was not a District Court level in this case.
Warren E. Burger: Thank you, Mr. Cole. Thank you, Mr. Bailey. The case is submitted.