Warren E. Burger: We’ll resume arguments. Mr. Smith, you may proceed whenever you're ready.
Stuart A. Smith: Mr. Chief Justice and may it please the Court. When the Court adjourned yesterday, I have set forth the facts of this case which are essentially that Internal Revenue Service summons was served upon respondent an officer of the bank in order to determine the identity of the depositor or transferor of some 400 $100 bills that were in seriously deteriorated condition. Summons was drawn in the matter of the tax liability of “John Doe” because the identity of the depositor was what the Internal Revenue Service wanted to ascertain. Now, respondent refused to comply and after a hearing held in the United States District Court brought by the Government .The District Court narrowed the summons to require production of all cash deposit tickets equaling $20,000 during a one month period, October 16, 1970 to November 16, 1970 since the Federal Reserve Bank in Cleve -- in Cincinnati had received this cash on November 6 by ticket and 10 or 15 days later and also --
William H. Rehnquist: You said deposit tickets equaling $20,000. Do you mean deposit the tickets in which the single amount of $20,000 would have been indicated as having been deposited?
Stuart A. Smith: Yes, that was one part of the order. The second part of the order involved the production of the deposit tickets of cash equal to an excessive $5,000. The District Court felt that in that way by narrowing the summons in that regard the identity of the depositor could be ascertained with the minimum of disruption to the bank. Now, respondent appealed to the Court of Appeals for the Sixth Circuit which reversed and it’s the correctness of that statutory ruling which is involved in this case. The Court of Appeals held that the Internal Revenue Service has no statutory authority. The issue of summons before it has discovered the identity of the particular person it wishes to investigate. I think before I discussed the statutes in some detail, I think it’s important to state at the outset what this case does not involve. This case does not involve any application of a constitutional protection to the production of records by the bank. I think that the Court’s decision last term in California Bankers Association has made clear that there is no claim of privilege against self-incrimination which would be applicable by the bank. Its officers or in behalf of these unknown taxpayers who may be incriminated by the records sought by the summons. These are third party records which are not protected. So the case therefore presents a statutory question, the narrow focus of which is upon two provisions of the Internal Revenue Code which are presently set forth at Section 7601 and Section 7602 of the Code. There set forth on pages 2 and 3 --
Warren E. Burger: 7601 or 7801?
Stuart A. Smith: 7601 of the Code. There set forth in pages 2 and 3 of our brief under the caption statutes involved. Now, these statutes, we submit our cast in the broadest possible terms. Section 7601 admonishes the Secretary of the Treasury has delegate here the Commission of Internal Revenue to proceed from time to time through each Internal Revenue District and inquire after and concerning all persons therein who be may be liable to pay any Internal Revenue tax. Section 7602, which affords the service to summons power designed to implement this canvass power in Section 7601 also is cast in broad terms. And that these two statutes which the Court recognized in the Donaldson case to be both closely related and rooted in statutes enacted more than a century ago which we believe provide the statutory power for the Internal Revenue Service. The issue was summons like this, --
Potter Stewart: Mr. Smith, it’s clear to say that while you say that these two -- these are the two statutes that are involved. That's really an issue in this case, isn’t it? Your brother says that 7601 is not involved in this case that we --
Stuart A. Smith: Yes Mr. Justice Stewart, I'm aware that there is dispute about 7601 but in our view the statute -- that the power of the Internal Revenue Service which we believe Congress has accorded. It can be viewed by looking at these statutes in Danville.
Potter Stewart: And indeed the Court of Appeals limited its consideration to the language of 7602, did it not?
Stuart A. Smith: I believe so.
Potter Stewart: Right.
Stuart A. Smith: If I may, I would like to consider in detail the terminology of these statutes which I think are critical to a resolution of this case. As I said, Section 7601 talks about a canvass power of the Internal Revenue Service to proceed from time to time and it talks about inquiring after and concerning all persons in our view a broad phrase. Now, when you get the answer of Section 7602, the statute talks about four purposes for which a summons like this can be issued. It talks about the purpose of ascertaining the correctness of any return for making a return where none has been made for determining the liability of any person for any Internal Revenue tax or collecting any such liability. Now, we think that the summons in this case plainly falls within the statutory purposes.
Warren E. Burger: You may have answered Mr. Justice Stewart on this and if so I missed it. If you didn’t have 7601 would 7602 be enough to take care of your case?
Stuart A. Smith: We believe it would because we think that the summons that was issued in this case falls within the statutory purpose of Section 7602 alone. When we’re talking about the purpose of ascertaining the correctness of any return making a return where none has been made etcetera, etcetera, we think that if the Internal Revenue Service -- the proper way to view do this case is as the initiation of a process and which these statutory purposes are fully applicable. In this particular case, the Internal Revenue Service does not know the identity of this depositor whose transactions are indeed suspicious. I think it’s undisputed that these transactions are suspicious and presumably once the identity is ascertained via the summons power. Then this Internal Revenue Service will go on to ascertain the correctness of the depositor’s return, make a return if none had been made, determine his liability under the third purpose and so forth and so on. In fact, the third purpose of the statute determining the liability of any person for any Internal Revenue tax, we think it’s sufficiently broad enough to cover this case because what we’re talking about here is the statute does not confine itself in the way that the Court of Appeals confined it to a determination of the tax liability of unidentified person rather it talks about the liability of any person for any Internal Revenue tax. And we think that what Congress has done here is to accord the Internal Revenue Service, the power to answer what we think is the basic fundamental question in the enforcement of any law. That is who is responsible, who has breached his responsibility under the law in the context of the revenue statutes it simply a question of who has not fulfilled his civil tax liability. That’s what's involved here and we think the statute covers it. Now, what the Court said that is the Court of Appeals is that there is no particular taxpayer under investigation. Now, in our view that is not correct in any sense that is meaningful when one considers the services statutory responsibility to ascertain and to go through the internal revenue districts and to determine the liability of any person. It is only correct in the sense which we think is a trivial sense that the identity of the person has not been ascertained this yet. But there is no doubt in this case that there is a particularized person under investigation here.
Potter Stewart: His doubt as to whether or not there’s any tax liability that’s just a suspicion, isn’t there?
Stuart A. Smith: Well, it is a suspicion but --
Potter Stewart: Tax liability by anybody, any person or any other entity or any kind of tax?
Stuart A. Smith: Indeed, but we think that there has -- an event has occurred here which has properly raised the suspicion in the Internal Revenue Service that there is a tax liability involved here. Cash dealings of this magnitude are unusual and in this context --
Potter Stewart: Could there but for all anybody knows that cash deal -- cash dealings of this magnitude there maybe unusual, I suppose they are. It doesn’t mean that person didn’t pay taxes?
Stuart A. Smith: Indeed, it doesn’t but our point simply is that Congress has given the Internal Revenue Service the power to ascertain the identity of such a person and then to determine whether he has in fact that it is quite possible --
Potter Stewart: Well, that means anybody, doesn’t it?
Stuart A. Smith: It does, it indeed --
Potter Stewart: I mean -- it means anybody on suspicion or even on --
Stuart A. Smith: I think that’s right, I think that Mr. Justice Harlan in setting forth the criteria in the Powell case under which an Internal Revenue Service summons could be issued said, that one of the purposes and there were four was that the investigation must be conducted pursuant to a legitimate purpose and the second test that he used was whether inquiry was relevant to that purpose. I think under these circumstances, the Internal Revenue Service’s desire to ascertain the identity of the depositor in this case under these circumstances is a legitimate inquiry and that is a legitimate investigation and that the inquiry to ascertain his identity is a relevant to that purpose.
Warren E. Burger: And after you found his identity then you might check his tax return and see whether he had been returning.
Stuart A. Smith: Indeed, I think we would do so and that essentially all of those acts would fall quite well within the statutory purposes here. I think that it would unduly cripple the Internal Revenue Service’s power to ascertain the tax liability in determent of any person if the rule in this case promulgated by Court of Appeals that first the identity of the person had to be ascertained. Well, with the law here, I think that the Internal Revenue Service has a broader power to under these statutes to ascertain the identity of the person under investigation. Indeed, the depositor here is a particularized person or persons. Now, what the respondent has said here essentially is in support of the Court of Appeals’ test that no particular taxpayer is under investigation. Now, in an amicus brief filed by the American Bankers Association, they, in facing these broad statutory purposes of Section 7601 and 7602 say simply that with respect to the statutory phrase determining the liability of any person for any Internal Revenue tax, they would impose a gloss on that provision. They would say that the Internal Revenue Service either had to have the name of the person or some evidence of liability. Now, we say with respect to their first test, we think that's answered by the fact that we have a particularize depositor here. With respect to whether the Internal Revenue Service had some evidence of liability, we would submit that that would resurrect the very probable cause requirement which the Court firmly rejected in Powell. The Internal Revenue Service is not bound by any probable cause requirement in issuing the summons or that it need have is an official suspicion. And indeed under these circumstances, the suspicions are amply justified by the transactions that occurred in this case and not only the magnitude of the money involved but the fact that the money was found in rather unusual condition which suggested a long period of storage. People do not usually keep money in an airless place unless they are hiding if for some reason and we think under these circumstances, the Internal Revenue Service had ample justification to seek the identity of the depositor here.
Warren E. Burger: Is the bank required to keep the number of bills over certain denominations from they're deposited under any provision of the Code?
Stuart A. Smith: To keep the currency itself or the serial number?
Warren E. Burger: The serial number.
Stuart A. Smith: No, I'm not aware of any provision in the Code that requires that, but there are of course reporting requirements -- Federal Reserve reporting requirements that were involved here which is how the Internal Revenue Service picked those transaction off.
Warren E. Burger: Does include reporting the serial numbers?
Stuart A. Smith: I don’t think so because Mr. Chief Justice if you look at page 16 of the record appendix, you can see the copy of the report of the currency transaction that was filed by the Federal Reserve Bank in this case. It’s simply talks about amount to denominations of $100 or higher and you can see in the third column of that in the middle of the page. Here, these two instances within 10 days of a deposited $20,000 in hundreds and there's a notation to hundreds in deteriorated condition apparently from long period of storage. And there is a bank in -- and the name of the bank the Federal Reserve Bank is at the bottom and the name of the depositor bank is at the top. Now, we think it’s absolutely clear on the basis of power that there is no probable cause requirement that binds the service. Indeed, the court analogized the power of Internal Revenue Service in this case, the power to the inquisitorial power of a grand jury and surely the grand jury can sit in and investigate the entire industry for a particular period of time and look in and call people before it to offer testimony with respect to the subject matter to investigation. Now, we set forth in our brief what we think is rather strong legislative history in supported of this statutory argument that the Internal Revenue Service has this power. In 1954, at the time of the codification of the present tax law, the summons power and the canvass power represented an amalgamation of three different provisions which were in the 1939 Code and which in turn date back to statutes going back as far as 1864. Now, the particular statute which we think is relevant to Section 3654 (a) of the 1939 Code which similarly talks about the Internal Revenue Service’s power to look into and to insure that the tax laws are being faithfully obeyed and that the collector had this power. And we think it is not without significance that in 1878 when Congress was debating the very sort of procedural question is to whether to transfer or to a court the summons powers that were held by collectors to another agents in the Internal Revenue Service. The debates made a reference to an incident where the Internal Revenue Service served as summons upon a railroad in order to ascertain the identity of a shipper of liquor which was believed to have been shipped on tax and the railroad complied with that provision -- with that summons and offered up its books of account in connection with that inquiry. Of course there was no income tax in 1878, but there were excise taxes on liquor and we think that Congress was well aware of the fact that if it accorded this power to the Internal Revenue Service to ascertain the identities of persons. Now, we think further that this legislative understanding which is -- was almost 100 years ago -- occurred almost 100 years ago is also reflected in the decisions of the lower courts. Indeed, apart from this case and the Humble Oil case which is presently pending on the Government’s petition for writ of certiorari and which I would imagine the Court is holding in connection with the disposition of this case. The Circuits have pretty well uniformly given the Internal Revenue Service the power to ascertain the identities of unknown persons. One of the prime examples of this power is in connection with tax-return preparers. Four Circuits have held that tax-return preparers must under compulsion of an Internal Revenue summons issue give over to the Internal Revenue Service the names and social security numbers of their clients when the Internal Revenue Service has reason to believe that the preparer has filed returns which may not be completely accurate. I think if the Court has no further questions, I would like to save the remaining time for rebuttal.
Warren E. Burger: Very well, Mr. Smith. Mr. Watson.
William A. Watson: Mr. Chief Justice and may it please the Court. I would like to expand briefly to some of the remarks made by counsel. He uses repeatedly in his argument the term “depositor” and this depositor he mentions the person who may be a liable for unpaid taxes and there is nothing in this record that says in the first place that this money came to this bank from a depositor. We don’t know where it came from. I made such a distinction in my brief between customers who may bring in cash exchange and a depositor.
William O. Douglas: Do you mean the bank doesn’t know where the money came from?
William A. Watson: ot in my knowledge, but I'm making a distinction here as to the possibility that it came in off the street as a cash exchange and which instance the record reflects that there is no way of identifying the source.
William O. Douglas: Well, Mr. Watson looking at this page 16 the report to the Federal Reserve at the right, it seems to be column where is suppose to be indicated whether a deposit, withdrawal, exchange of currency, cashing or purchasing a check, is that right?
William A. Watson: You're referring now to --
William O. Douglas: I'm looking at page 16 -- the report for the Federal Reserve.
William A. Watson: TCR-1?
William O. Douglas: Yes, that’s right.
William A. Watson: That form was not utilized in this instance as the record shows when this money went to the Federal Reserve in November.
William O. Douglas: Is it not you? I thought Mr. Smith told us this was the report by which the Internal Revenue came upon this transaction?
William A. Watson: No, the way the Internal Revenue Service came upon it was simply that an employee and the Federal Reserve Bank in Cincinnati noticed the condition. And based upon an earlier experience where some old money had come through which they in some way had determined have been buried in concrete, his suspicions were again arose on this transaction and the IRS was verbally notified.
William O. Douglas: Was this ever used?
William A. Watson: The TCR-1 was never filed by the bank concerning this transaction that is just the form.
Warren E. Burger: Who made up the details here showing November 6, 1970 $54,600, $20,000 in $100 bill?
William A. Watson: Oh no, that is the report compiled by the Federal Reserve people I presume Your Honor which describes the entire shipment if I'm correct about that.
Potter Stewart: It’s a report from the bank to the Federal Reserve and that doesn’t indicate at all that it was the depositor of the bank, that’s your point?
William A. Watson: Yes.
Thurgood Marshall: Mr. Watson if you can -- if you don’t know where the money came from or anything, what are you worried about?
William A. Watson: Well, sir we have of course the basic question of whether the IRS can use the summons under these facts. Did they have the summons with an authority?
Thurgood Marshall: Well, how are you hurt by that?
William A. Watson: Well, we of course are involved with confidential relationship of banks with its customers, that’s the underlying concern of the bank.
Thurgood Marshall: But you said it might to coming all to street and somebody change to some like that.
William A. Watson: Theoretically, yes and --
Thurgood Marshall: So if that had happened how would that -- the bank be responsible for anything there?
William A. Watson: Well, it means the bank can disclose all of these records. However, many depositors or records maybe involved.
Thurgood Marshall: Do you keep a record when you change money?
William A. Watson: No, sir.
Thurgood Marshall: Well, so you’d say this came in and change money we don’t know who did it?
William A. Watson: That’s right.
Thurgood Marshall: And you had no problem at all.
William A. Watson: But we don’t want the IRS to rummage through records of people who are not involved.
Thurgood Marshall: You don’t want to ask any question?
William A. Watson: Sir?
Thurgood Marshall: You don’t want to ask any question?
William A. Watson: Well, not so much asking questions of the bank but taking the records let's say of a half of dozen or a dozen or however many depositors may fit in the category of the summons as narrowed by the Court and subject innocent depositors to the invasion of their privacy.
William O. Douglas: Mr. Watson could -- does a record here show I don’t recall how many customers did any into this category you described here?
William A. Watson: No, sir.
William O. Douglas: One month?
William A. Watson: No, sir.
William O. Douglas: It does not show that?
Lewis F. Powell, Jr.: Mr. Watson, may I get back to this page 16 petitioners’ file exhibit one. I'm confused about this report is. Who prepared it, that your client or the Federal Reserve Bank?
William A. Watson: My understanding of that sir is that that is the -- prepared by the bank, the Federal Reserve Bank. It just shows how much money came in and those two shipments in cash.
Lewis F. Powell, Jr.: But the --
William A. Watson: They're actually --
Lewis F. Powell, Jr.: But who’s suppose to fill in under nature of transactions whether it’s a deposit or withdrawal, exchange of currency, cashing or purchasing check, who is suppose to fill out it?
William A. Watson: Well, the bank -- it was the commercial bank. Local bank was to be supposed to provide that information. It was not done in this instance, I don’t know that the record reflects but it’s my understanding it was routinely not done. And all --
Warren E. Burger: What's the form, what's the purpose of having the form done?
William A. Watson: Well the purpose was very obvious to comply with the existing regulation which required the reporting of these currency transactions.
William O. Douglas: Reporting by whom?
William A. Watson: Those are not enforced--
William O. Douglas: Reporting by your client.
William A. Watson: Yes, sir.
William O. Douglas: Well then, then is this a report by your client? You’ve been telling us it was something prepared by the Federal Reserve?
William A. Watson: It’s the petitioner’s trial exhibit number 1 and as I understand that that was prepared by the Federal Reserve Bank in Cincinnati.
William O. Douglas: Well, what is your claim? Prepare in the way we report?
William A. Watson: They have the TCR-1 form which was suppose to be prepared by them but which was not prepared by them.
William O. Douglas: Where is that? Is that form here?
William A. Watson: I'm sure it’s set forth in the record somewhere Your Honor but I could not put my finger right on it.
Warren E. Burger: Well, if they didn’t prepare it as they are required to prepare it, what explanation are you preparing to offer or what hypothesis would you suggest?
William A. Watson: Well, I would only say as in my information that it was routinely not observed and likewise by the Federal Reserve, they did not routinely require it to be observed.
Warren E. Burger: But then the Internal Revenue comes in and indicates that they would like to have that requirement complied with.
William A. Watson: Well, --
William O. Douglas: And that is your case?
William A. Watson: Sir?
William O. Douglas: And that is your case?
William A. Watson: I'm not sure I understand in what context you asked the question judge, when you say that is our case.
William O. Douglas: Well, you're not -- you don’t want to supply it because of the reasons that’s stated in your argument?
William A. Watson: Yes and I presumably that maybe why the bank did not provide the information on the form. The record does not reflect precisely the reasons is why it was not supplied in the first place. This apparently was not in --
Warren E. Burger: Well, is this form called for by some statute or regulation of the Federal Reserve or --
William A. Watson: There was a Treasury Regulation in a effect which is mentioned in the footnote in the Sixth Circuit’s opinion.
Potter Stewart: It’s the 31 Code of Federal Code Regulations 102.
William A. Watson: 102.1
Potter Stewart: 102.
William A. Watson: That have been in effect apparently, since around 1959 according to that footnote, but there were no sanctions involved as I understand it. There are sanctions under the present domestic currency reporting requirements of the Bank Secrecy with this Court took up last term.
Potter Stewart: How large the bank is this? Do you know what is put in there?
William A. Watson: Terms of total assets around 18 million as (Inaudible).
Byron R. White: Seven tellers, I think the record tells us something like this.
William A. Watson: At the main branch, you have about 3, 2 at the other branch. I have say 6 or 7 be correct, yes sir.
Byron R. White: If these bills came in of the street, I take that the record indicates it was a most unusual street day or period because this is the only time apparently they have this kind of deposit?
William A. Watson: Yes.
Byron R. White: It surely wouldn’t be usual for the -- somebody to bring in $40,000 in $100 within a two-week period and want to change, would it?
William A. Watson: Presuming that a single individual brought it in and a single amount, yes, I think Your Honor would be correct and I think the record shows that perhaps Mr. Bisceglia answered that affirmatively.
Byron R. White: But suppose you don’t have to make that presumption --
William A. Watson: I don’t know of any presumption along those lines sir and in fact I don’t know of any presumption that old money is tainted money. This is the basis of the Government’s suspicion, but people do keep money -- they keep it long time in odd places. It doesn’t mean that when they finally bring it in that it necessarily represents a fraud on the IRS or any other --
Warren E. Burger: Well, doesn’t have to be -- does the Government have to meet a burden of showing that it’s tainted in order to make an inquiry under 7602?
William A. Watson: I would think that they must have some strong reason for indulging the authority and I think they must act within the authority of the statute. They say that this is enough to justify their actions here.
Warren E. Burger: Or aren’t there a lot of IRS activities, that are practiced and sustained which don’t involve any taint that is to give one as illustration if the taxpayer was consistently reporting taking deductions for $40,000 of interest payments out each year on an income of $50,000?
William A. Watson: Yes, sir.
Warren E. Burger: Wouldn’t you think that would reasonably arouse some inquiry?
William A. Watson: More than inquiry I would think so, yes sir.
Warren E. Burger: It doesn’t have to be any taint, does it? True? He might be just overloaded with debts?
William A. Watson: [Laughter] Or some like that, but again in that instance, you have a taxpayer. You know that there is a taxpayer. You are not asking to someone whereas perhaps we could use the example of a man who sells new automobile. He sells a Cadillac car. Can an IRS walk-in to his office and say you must sell to a lot of people with a lot of money. I want to see all your records. I'm not investigating anybody I'm just curious. Now, what's the limit on official curiosity?
Byron R. White: Mr. Watson, does the record show whether this that the old-fashioned big bills or not?
William A. Watson: It does not to my knowledge sir. It’s just they were all deteriorated $100 bills.
Potter Stewart: It must have been hard for the tellers to count, if it was hard for the Federal Reserve people to count?
William A. Watson: Presumably so. Of course the district judge, as you know from the record, suggested that the agent was making a mountain out of a mole here that there was an easier way procedurally anyway to get to this and that was to summons the head teller who was Mrs. Dorothy Sulfrage (ph) and in fact the record shows that agent Bruecher talked to her and she could not recollect at the time and suggested perhaps the records might refresh her recollection. She was never summons either by summons or by subpoena. Of course we get into another can of worms if she had been and what might have happen then but it was the District Court’s thinking that in any bank he had ever been in and the teller would remember without the necessity of invading all these records.
Byron R. White: May I ask Mr. Watson? I'm looking at Judge McCree’s opinion footnote 1 at page 9-a of the Government’s petition in which this sentence appeared. It does appear however that this regulation, that’s regulation 102, required the commercial bank in this case to file a form TCR-1 in which of course the information sought by the IRS in this proceeding would have been disclosed. Does that mean that had commercial complied with the regulation the name of the depositor would have appeared in a TCR-1?
William A. Watson: I think so if it was a deposit and they had furnished that information, it would have been there.
William O. Douglas: And I gather what you're telling is that the commercial bank did not comply with the regulation.
William A. Watson: That’s correct.
William O. Douglas: Because there was no compulsion upon the?
William A. Watson: As I understand it, now again that is not precisely stated in the record, but that’s the information that I have.
William O. Douglas: But may that have been changed by the Currency Act of 1970?
William A. Watson: Well, I think so because under the Currency Act, you're not only have the requirement of reporting domestic transactions of $10,000 but you also have sanctions to whereby the Secretary (Voice Overlap) is not reported.
William O. Douglas: So where this case to arise after the -- that as 1970 law we wouldn’t be here, would we? You would’ve reported it.
William A. Watson: I would think so yes.
Byron R. White: Unless, you said the regulation was invalid on the same basis --
William A. Watson: Unless we challenge.
Byron R. White: As we take the subpoena, yes.
William A. Watson: Yes sir, unless it were challenged on some appropriate ground. Of course, the Currency Reporting Act talks in terms of $10,000 currency transactions again. We don’t know (Voice Overlap).
Byron R. White: Incidentally, the answer the question I first, put you prepared this petitioner’s trial exhibit 1 according to Judge McCree it was as you suggested prepared by the Cincinnati Branch of the Federal Reserve.
William A. Watson: Yes, sir. Of course the Sixth Circuit decided in this case as you know was simply on the basis that those four requirements set forth in 7602 did not apply. They did not reach the constitutional or the philosophical issue if you will. They simply said did you had to have a taxpayer at least identifiable, if not by name as an existing taxpayer or in the case of the tax preparer cases upon which the United States relies there was known to be taxpayers whose returns have been prepared by those people and the Government wanted to check them. Now, every Circuit Court and District Court which has talked about the Bisceglia since its rendition has distinguished Bisceglia on the facts from all of these other cases and I don’t know the same authority for the Government’s position here.
Warren E. Burger: Only the second phrase of 7602, have a rather broad sweep for the purpose of making a return where none has been made. Now, it doesn’t have to suggest that it’s a rather wide ranging authority in IRS.
William A. Watson: I don’t give that broad in interpretation Mr. Chief Justice. I think it is implicit in that phrase as in the others that you know a taxpayer exists, you know or have reasonably he hasn’t made a return and you're going to make one for him which of course the IRS has the authority to do.
Warren E. Burger: Aren’t there some reasonable presumptions that could be indulged in that people making deposits of this amount may conceivably have some tax liability?
William A. Watson: I don’t think so. I really don’t think so even its old money I don’t think that presumption arises.
Byron R. White: (Voice Overlap) as I understand vis-à-vis the Internal Revenue Service under the statute and the regulation have no authority whatsoever that it may anything unless without it knows the name of the taxpayer and the breadth of the subpoena has something to do with it.
William A. Watson: Not unless it knows the name of a taxpayer, but certainly they must know that there is a taxpayer. I don’t think the IRS has the authority just to browse.
Byron R. White: Well, what do you mean browse? Let's assume there could only talk within that subpoena there's only be one person.
William A. Watson: We can’t assume that, Your Honor.
Byron R. White: Just assume it for the moment
William A. Watson: Alright.
Byron R. White: Wouldn’t you still be taking the same position?
William A. Watson: I would be, yes.
Byron R. White: Yes, so it isn’t a browsing process at all. Just as if you’re search is done but unless Internal Revenue Service either knows the name of the taxpayer or knows the tax liability, it has no business.
William A. Watson: It has no business in the record.
Thurgood Marshall: Suppose IRS asked the question of the bank we like the name and address of the man who deposited $102,000 in your bank at 3:30 yesterday afternoon. Would you think that’s --
William A. Watson: I don’t think that’s any of their business.
Thurgood Marshall: You don’t?
William A. Watson: No, sir. That’s invading a private transaction for no lawful purpose absent --
Thurgood Marshall: Well, it is the auditing of the income tax return invading the privacy?
William A. Watson: Not under the statute I don’t believe, sir.
Thurgood Marshall: Well, they do it everyday.
William A. Watson: They do it every and they would certainly do it to every --
Thurgood Marshall: (Voice Overlap) different.
William A. Watson: -- every single customer of this bank has that fits this category if they were disclosed.
Thurgood Marshall: Well, if they came to you and said that we are investigating the tax returns of Joe Black, and we like to see the returns, would you give it to them?
William A. Watson: If I am to prepare of his return?
Thurgood Marshall: No, sir. You're the bank. We are investigating Joe Black and we want his bank statement.
William A. Watson: Oh, I think they're entitled to have it. They --
Thurgood Marshall: Well, is that an invasion of privacy?
William A. Watson: Well, sir it may go farther than I would go if I wrote the statute, but they have the statutory authority and I think that this Court has held in Donaldson and some other cases that they can see the records of third parties and that there is no abuse into the self-incrimination or unreasonable search and seizure per se on that basis.
Lewis F. Powell, Jr.: Does that suggest Mr. Watson, if we disagree with the Court of Appeals on the interpretation of the statutes, what we would do about the constitutional question that you raised and that the Sixth Circuit didn’t (Voice Overlap). Because as I understand that the only question you raised was the Fourth Amendment for this, wasn’t it?
William A. Watson: Yes, then that question must be face if this Court feels --
Lewis F. Powell, Jr.: You don’t think you’ve already decided that in some of these other cases?
William A. Watson: Not on these facts.
Lewis F. Powell, Jr.: So what would you have us do? Decide the Fourth Amendment question here or send it back for the Sixth Circuit to decide it first?
William A. Watson: I would just as happy if the Court affirms the Sixth Circuit on the basis the opinion was written.
Lewis F. Powell, Jr.: I know but suppose we don’t, suppose we disagree with the Sixth Circuit on the interpretation of the statute?
William A. Watson: Well, the Court of course could remand for that purpose but and I think that will be just a satisfactory with me but I believe our ground is solid on that issue. I think that this does --
Byron R. White: What will you do?
William A. Watson: This does go far, far beyond any reasonable seeking of corporate records and of course this Court has suggested in the California Bankers case, a corporate identity does not have an absolute right and an unqualified right to conduct its affairs in secrecy or privacy but that it does have some privileges in that regard and perhaps if the Court gets into constitutional question it will have to decide what those limits are.
Warren E. Burger: If your client has no state here except an obligation you feel that take the privacy of your own customer’s transaction?
William A. Watson: Yes confidentiality of the records.
Lewis F. Powell, Jr.: Was the decision below pre or post are this Court’s think cases last year.
William A. Watson: It was before I believe.
Lewis F. Powell, Jr.: Before and was there a petition for rehearing that came after or not?
William A. Watson: Yes, a petition for a rehearing I think came also before the California Bankers case.
Lewis F. Powell, Jr.: Before and it was disposed of before?
William A. Watson: I believe I'm correct on that maybe, yes sir. This Sixth Circuit decision was decided October 18, 1973.
Byron R. White: The record indicates the petitioner of rehearing was denied November 16, 1973?
William A. Watson: Yes sir, I think that’s correct.
Byron R. White: So that would be before bank cases too?
William A. Watson: Yes, sir.
Byron R. White: So there was no further petition for rehearing.
William A. Watson: If this Court has no further question, I will close.
Warren E. Burger: Thank you Mr. Watson. Mr. Smith.
Stuart A. Smith: I just want -- I think the Court is clear on this point and that is this form TCR-1. I just want to clarify it.
Lewis F. Powell, Jr.: Well, I misunderstood you I thought (Voice Overlap).
Stuart A. Smith: Yes, this was -- in other words, the Commercial Bank of Middlesboro did not comply with the requirements of the then existing code -- provisions in the code of federal regulation so that when the moldy money hit the Federal Reserve Bank, the Federal Reserve Bank in effect can filled the to form that the bank should have to comply.
Potter Stewart: (Voice Overlap) IRS, did it?
Stuart A. Smith: Exactly. Now, of course under the Bank Secrecy Act, there are criminal sanctions for failure to report, so presumably --
William O. Douglas: Well, what do you think if we disagree with the Sixth Circuit on the statutory construction? What should we do about the Constitution?
Stuart A. Smith: Well, we have made reference to the fact that we think the Fourth Amendment claim is insubstantial here because of the District Court’s narrowing of the summons which we think removes any claim that it’s unreasonable or overbroad of course --
William O. Douglas: But it was decided by the Sixth Circuit, was it?
Stuart A. Smith: Right, it was never decided of course the Court has discretion to consider it as an alternative basis to affirm but we think that if the Court does consider it that there is no basis for it, but the discretion is broad enough --
William O. Douglas: What about the extending to let the --
Stuart A. Smith: We think that would be a perfectly a reasonable disposition of the case since it is a factual matter and while the District Court considered the facts of the case to Court of Appeals did not have an opportunity to face the issue in the way it disposed to the case.
Warren E. Burger: You began to say something about sanctions on the bank for not filing this form.
Stuart A. Smith: I think that under the Bank Secrecy Act, there are criminal fines now but not --
Warren E. Burger: That’s under the new Act?
Stuart A. Smith: Under the new Act, right.
Warren E. Burger: But at the time of this (Voice Overlap)?
Stuart A. Smith: No under the -- at the time there were no sanctions whatsoever, it was theoretically a voluntarily thing that the Federal Reserve Bank expected member banks and banks that dealt with that used the Federal Reserve facilitates to make these submissions. Indeed, it’s because of the kind of failure in this case that Congress finally addressed the problem and put some teeth in the law with respect to the reporting requirements. I have no further.
Warren E. Burger: Very well, thank you gentlemen. The case is submitted.


Charles P. Scully: -- even a question by (Inaudible). No, Justice Harlan, I'm sorry.[Laughter] I'm sorry, Justice Harlan. And -- and as I understand the question, it is directed at the brief with the Board in the portion I assumed that attempts to distinguish between alleged, procedural and substantive rights, am I correct in that assumption?
Speaker: (Inaudible)
Charles P. Scully: Well, I think if I may then --
Speaker: (Inaudible)
Charles P. Scully: -- if -- if I say if I may then, I -- I perhaps should go back to the argument that I thought we had concluded with respect to the no man's land and attempt to point out that with respect, for example, with the State of California where we have no statutory provisions. We have a court coming in to apply a federal statute without any administrative procedures of any kind and with a very serious question existing as to whether or not the federal law could compel the State as part of this judicial operation in that field to apply administrative procedures. And then they would apply in that field a law which is consistent neither with the state law nor with the federal law. And so we submit that instead of their being a no man's land because of a declination and a refusal of the States to enter sure of a -- session agreement that it will create just the opposite result and we think the Garmon case is classic for that. Namely, that the considered judgment of Congress in enacting the Taft-Hartley law and its predecessor was to have a national uniform policy in which public rights would be enforced and in which the entrée by means of private suits for injunctions would be eliminated. To ensure that, they established the mean for an expert Board with extensive procedures to handle administratively what a court would neither have the -- the time nor the staff to do. And in order to have a uniform national standard, it is our argument under 10 (a) that they said to the state agencies, “We will cover the field of industrial relations. We invite you to participate, but we invite you to participate on conditions which will ensure that the application at the state level will be substantially identical with that at the national level.” And if you do not adopt that construction of 10 (a), then as this Court has previously indicated instead of having a no man's land when the Board declines jurisdiction but at least not having a multiplicity of applications in 48 different states, you will have the exact result which occurred in the Garmon case. In the Garmon case, as I stressed in the statement of facts, there was no time when the Board had presented to it, the alleged conduct going to the question of secondary boycott, but at that very same time, that conduct was presented to a trial court in San Diego. Now, it's our contention that if that information had been submitted to the Board initially rather than through the Superior Court and only a representation petition having been filed with the National Board, that on the record in this case when the Board had investigated that case, they would have found that there was jurisdiction under their yardsticks based upon the secondary boycott aspect. And we submit they would have found that the picketing which was peaceful in all respects was for organizational purposes and occurred only after the union representatives while at the invitation of the employer spoke to the man. The man said we want to join the union. The union representative then went into the employer's place of business and asked him to sign a contract. There was no question of representation. The question according to the union's contention on the record was his ability to pay the wage demanded. And yet, in spite of the fact that the employer will not follow up on that procedure and the union then strikes, we submit that we have the intervention at the state level of injunctive relief which is aimed at conduct which is guaranteed to the union under Section 7 of the Act, namely, a pure organizational picket line. But on the contrary, you have a determination by an initial trial court followed by an appellate court which specifically finds the item that there is an unfair labor practice under 8 (b) (2) of the Act. The very thing that Congress thought at the national level was so complex and -- and complicated that you needed an expert Board. And it's our argument accordingly that on the point which you have posed the question, that instead of the contention that there is a no man's land, that there is an area where the Board's can come in but the area has to -- the state boards can come in but they have to come in so that it will be operated in a mannequin system with the National Board.
Speaker: As I understand your argument that you within the state courts and courts enforced (Inaudible) system or authority that they had. Would that petition in other words to say the board -- the state board governed by state law and they -- or they do apply it, they can only apply it, is consistent with the federal law.
Charles P. Scully: Well, that's why I think that --
Speaker: And therefore, it takes that set of assumption and you have no (Inaudible) in the Garmon case?
Charles P. Scully: No, that's why I think the Garmon case is an excellent example because to -- to create, it must be consistent with the National Act whereby just (Inaudible) pleading as they did in our case, they alleged their -- the industry affecting interstate commerce, they alleged an unfair labor practice. The Board never had that information to determine it with respect to the unfair labor practice. You can allege facts sufficient in the State such as ours so that you can remove yourself from the application of the local law which renders the conduct legal. You can fail to apply to the Board which you've been exercising. The administrative remedies would have protected the conduct and by going down the middle with respect to the area where the Board declines and where the State does not have and under its basic local jurisdiction. You will have the third remedy device whereby you can obtain private injunctive relief in direct violation of the underlying theory of the Labor Management Relations Act solely by failing to disclose fully to the Board, the information that it can review. And so, the Board will never be in a position and contrary to the statement by this Court in the Garner case. This Court in the first instance will have the primary power and duty to review and decide that determination rather than the Board.
Felix Frankfurter: I'd be grateful to you, Mr. Scully, if you would tell me under what answer to this problem you wouldn't have a moment of injustice.
Charles P. Scully: I doubt that you could give answer to that, Your Honor.
Felix Frankfurter: All right. So that the problem of no man's land was very unreal to answer --
Charles P. Scully: That's right.
Felix Frankfurter: -- the question.
Charles P. Scully: That's right. With respect to the second portion of your question if I understood it correctly, Mr. Justice, it appears to go to the question that the Board argues that by the mere declination of power, there is a revitalization of a reserve power in the State to take jurisdiction over the area that Congress has originally vested in the Board. Our position on that contention is that when Congress exercised its legislative authority, it went to the full scope of its authority as indicated in the (Inaudible) decision that discretion with respect to permitting the occupancy by the States of the area which Congress gave to the Board, the discretion that was to be exercised was the discretion of the Board, but that it was hand hemmed in with the conditional requirements set forth in Section 10 (a) of the Act. And that accordingly, the mere declination would not be sufficient.
Earl Warren: Mr. Archer.
James W. Archer: If the Court please. The outset I'd like to state briefly, the issue as I view it in our case and that is simply this that may a state court enjoin concerted union activity tortious under our state law and likewise, violative of the federal laws where the Regional Director of the NLRB has conducted an investigation and declined to take jurisdiction. I want to emphasize that I said that the active days of the union here were tortious under our California state law contrary to Mr. Scully's contention that they were lawful activities and I will come to that in a moment. I also want to emphasize the fact that I indicated that the matter was investigated by the National Labor Relations Board by a field examiner and it is so recorded in the records in this case. Perhaps, the inadvertent misstatements of Mr. Scully in respect to the activities of the unions rises out of the fact that neither he nor any person appearing on the union's brief in this Court participated in the trial of this case in the lower court or appeared in the appellate courts of California. A study of the record however will indicate conclusively that the nature of the activities were unlawful under California law. The plaintiff employers here are engaged in the retail lumber business at the little town of Escondido. They employed eight men. The representatives of the two unions and this Building Trades Council called upon them and asked them to sign a contract. They were afforded an opportunity to discuss their proposals with the eight employees on two separate occasions. The men did not indicate at any time a desire to join the union or any interest in it contrary to what Mr. Scully stated here a few moments ago. The examination of the findings and of the opinion of the Court, the majority opinion indicate that without any uncertainty that --
Earl Warren: Mr. Archer, how did the -- how did the opinion of the Court treat that question of -- of whether it was a violation of -- of California law? The reason I asked that is because the dissenting opinion on page 54 says, "Before discussing those points, it should be observed that under our law, defendant's activity is lawful and hence neither damages nor injunctive relief is proper. The majority does not question this proposition. The rule was stated the citation of many supporting authorities."
James W. Archer: Well, I think with due deference to Justice Carter, he is in error, Your Honor. I do not believe that the majority opinion holds that this conduct is lawful wherein they cite on page 52 of the record containing the majority opinion of the Supreme Court, the end of the second paragraph commencing on that page concerted labor activities for such a purpose, thus were unlawful under the federal statute.
Earl Warren: Just a moment, what page did you say?
James W. Archer: I beg your pardon, sir. 52 of the record, which is the opinion of the majority of the Court.
Earl Warren: Oh, yes, yes, I found it. Thank you.
James W. Archer: In middle of the second paragraph commencing on that page, continue in reading, and for that reason, we're not privileged under California law. They cite Park & Tilford and the Lillefloren versus Superior Court cases. Now, in the Park-Tilford case --
Hugo L. Black: But they say there, I don't quite understand your --
James W. Archer: I beg your pardon, sir?
Hugo L. Black: I don't quite understand your citing that sentence of settling your problem.
James W. Archer: Well, I --
Hugo L. Black: They did because they say that they were -- it was unlawful in California because it's unlawful under -- under federal law.
James W. Archer: With that privilege. Now, what I have come to, sir, is this that in those two cases, Park-Tilford and that Lillefloren case, California recognized for the first time, although I must confess it was not too great clarity, the difference between recognition or picketing and organizational picketing. In the Park-Tilford case, they dissolved a portion of an existing injunction on the ground that -- that portion of it would prohibit organizational picketing. They upheld that portion of the injunction, excuse me, that supported a demand for the immediate signature of a contract holding that that was unlawful under California law long prior to it being unlawful under the Taft-Hartley amendment. So California as of Park-Tilford case recognized that recognitional picketing, a demand that an employer places men in the union prior to there being any indication that the employees as such have designated the union to be their bargaining agent or a majority was unlawful and contrary to the policy of the State of California. Now by strange coincidence, the Lillefloren case cited there, subsequently, the 31 California case was an opinion written by Mr. Justice Carter who wrote the dissent in this case. And in that case, he dissolved then in or that he on behalf of the five other justices of our Supreme Court comprised of seven, pointed out that a demand for a closed shop would be unlawful citing at Park & Tilford case. And he restates that the order should have restrained only the unlawful demand for the close shot. On this question of the California law on recognitional picketing as distinguished from organizational picketing, I would like to direct Your Honor's attention to a very authoritative article that has appeared in the December issue of the Stanford University Laws Journal, law review. Stanford Law Review, December 1956, it was published subsequently to the printing of these briefs with its very authoritative and it draws this distinction which I am endearing to draw for you that California now recognizes a difference at least at times it recognizes a difference between recognitional picketing and organizational picketing. And the Court here found that it's -- this fell in the former category as being an unlawful demand for a closed shop violative of both the federal and the state law.
Earl Warren: Is there any other language in the opinion other than that that you read bearing upon whether it is unlawful under state law?
James W. Archer: No, Your Honor, there is not. Unfortunately, it was not stated with more precision but it believed to be the intention of the author of the opinion and the majority that they were making that distinction but did not state it with precision. The findings in this case that I started to mention when Judge Warren asked me a question to indicate contrary to Mr. Scully that the -- the fourth finding found on page 14 that said employees have indicated they do not desire to join or be represented by any of the defendants. And then at the top of page 15, the Court found that the unions did not intend to induce the employees or plaintiff to join the said union or to educate them as to the advantages of benefits of unionization, so that it was strictly a recognitional picket line that confronted us. Now, we sought aid of NLRB on May 7th as Mr. Scully indicated. And on May 21, the field examiner advised us in writing, "On the basis of the information submitted in your letter of May 20th, it is impossible for this office to process further your petition. The amount of business done by Valley Lumber Company, the name of the co-partnership of the Garmon, is insufficient for the Board to assert jurisdiction on the basis of previous Board decisions." Then on May 29, after the field examiner had made his report to the Regional Director, the Regional Director, Mr. Howard F. Laverne wrote to the Valley Lumber Company at Escondido and the -- and the second paragraph of his letter reads as follow, "As a result of the investigation, it appears that in the view of the scope of the business operation involved, it would not effectuate the purposes of the National Labor Relations Act to institute further proceedings at this time. And I am therefore dismissing the petition in this matter." Now, I have read that to Your Honor because in the opinion of the majority at page 49, excerpts from those two letters are quoted in the opinion. Unfortunately in the second quote, they omitted the language where there are some asterisks there before the close of the quote. They left this language out, "And I am therefore dismissing the petition in this matter." I think it is of importance in view of some of the questions that have been asked to counsel today regarding these budgetary and other considerations, administrative considerations that in our declination here, they used the language, it would not effectuate the purposes of the National Labor Relations Act to institute further proceeding. So at that point, we appeal to the Court and obtain our -- our injunction. Now, the -- some question was raised in the briefs as to the fact that we had -- did not ask for an unfair labor practice charge or sought that relief. There is a discussion of that in the record in this case and the testimony of Mr. Waddell that he discussed that with Mr. Laverne's office on the telephone. And as a result of that, he concluded not to endeavor to file one. We did not take the position that the union's activities constituted an unfair labor practice. Our position and our theory of the case which is spelled out in just those words, our theory is in page 199, top of that page of the record, Mr. Waddell under cross-examination by Mr. Weiland of San Diego stated the design of the complaint in the case that if we acceded to the demand of the unions, we would then be compelled to violate the Act and not that the demand itself was a violation. But if we acceded to it, we were then being put in the position of -- of being in violation of law, and therefore, the demand was unlawful. Now, I would like to --
Harold Burton: Is it page 199?
James W. Archer: 199, sir, the top of the page commencing that the line, "Our theory was that it charges the violation of the law of the State of California and that the ultimate object was to compel the plaintiff to sign a contract which would, if enforced, result in violation of paragraph (a) of Section 158."
Hugo L. Black: Is that the closed shop provision?
James W. Archer: Yes, sir.
Hugo L. Black: Is that the basis on which the Supreme Court of the State affirmed the issuance of the injunction?
James W. Archer: Yes, sir.
Hugo L. Black: In the ground that it was -- was unlawful because of the violation of the Federal Act.
James W. Archer: Well, they don't say -- say that, Your Honor. They --
Hugo L. Black: They say -- I gather that one argument is that since the ultimate objective is considered, the economic pressure was to obtain a closed shop which is at proper labor objective under the law of California. The purpose of picketing was not unlawful and then they go ahead over the next page and say that, "However, it is unlawful under the Federal Act."
James W. Archer: Yes and then in support of that, they cite the two cases in California.
Hugo L. Black: Those were the cases which as I read them had held that it was lawful to have a closed shop in California.
James W. Archer: Are you referring now, sir to --
Hugo L. Black: Park & Tilford.
James W. Archer: Park & Tilford?
Hugo L. Black: Yes.
James W. Archer: It's -- it's lawful to have an organizational picket line for that purpose.
Hugo L. Black: Yes.
James W. Archer: But it is not lawful to couple that with a demand that it be signed prior to their being any showing of representation. That's the holding of the Park & Tilford.
Hugo L. Black: May I ask you this question? The Government takes the position as I understand it. Maybe I'm wrong about that brief. They take the position, the state as the power to enforce the Taft-Hartley Act that it can go ahead just as you would on the FELA case and try these issues where the Board has declined to act but in trying and the State must follow the Taft-Hartley Act. Did the State here follow the Taft-Hartley Act or was there a relief granted which is inconsistent with the Taft-Hartley Act?
James W. Archer: No, sir. The relief grant was consistent with Taft-Hartley and consistent with California law on this subject.
Hugo L. Black: If you -- you take the position that the state law, that is here enforced, has enforced substantive state law the same which -- is that which is in the Taft-Hartley Act and that the procedural relief granted is the same that would have been granted in the Taft-Hartley Act.
James W. Archer: Well, the same end result.
Hugo L. Black: What?
James W. Archer: If you have to go, you have to go --
Hugo L. Black: Is it -- is it consistent with the policy of the Taft-Hartley Act to issue an injunction such as they did here of peaceful picketing?
James W. Archer: Well, yes, Your Honor, if -- because of the secondary boycott aspect of the picketing, an activity of the union here, that face of it would have been stopped under the Act.
Hugo L. Black: Was it a limited injunction or was it -- did it have any limitation?
James W. Archer: It had only the limitation that they would have to seize picketing until they represented the employees. In other words, they could have had an organizational picketing -- picket line inviting or inducing the man to join the union.
Hugo L. Black: If they can get a majority?
James W. Archer: Right.
Hugo L. Black: Well, suppose under the fifth Taft-Hartley Act, do they have to have a majority?
James W. Archer: Yes.
Hugo L. Black: Have to have majority in order to be able to picket?
James W. Archer: No, no. I beg your pardon, sir.
Hugo L. Black: Well, do --
James W. Archer: You have to have -- I didn't know what -- I -- I missed what you said.
Hugo L. Black: Well in -- the State has held that they cannot picket if they have a minority, isn't it? The minority cannot picket.
James W. Archer: No. The State has not so held, sir. The State has held that they can picket to get a membership to invite them or induce them but they cannot picket for a demand that the contract be signed forthwith --
Hugo L. Black: Is that --
James W. Archer: -- correctly would be employed.
Hugo L. Black: (Voice Overlap) limited to them?
James W. Archer: Yes, sir.
Hugo L. Black: Where is the order?
James W. Archer: It's -- well, it's quoted in the opinion of the court or during -- near the beginning.
Hugo L. Black: Is the order -- is the order in -- in the record?
James W. Archer: Page 45, Your Honor, right under the -- in the last paragraph, they are right under those figure $1000 damages, then there is the quote of the entire injunctive order.
Hugo L. Black: That's all of it?
James W. Archer: Yes, sir.
Hugo L. Black: That enjoins him from picketing.
James W. Archer: Yes, sir.
Hugo L. Black: Can't picket at all?
James W. Archer: Well, when the last clause -- until defendants or anyone or more of them have been properly designated as the collective bargaining representative, the plaintiff's employee or an appropriate unit thereof.
Hugo L. Black: In other words, it says that no -- no -- none of them can picket. It can't picket under the law they have adopted here just peacefully unless they represent a union that has already been accepted as the bargaining agent of the company.
James W. Archer: Oh, no, you have to read --
Hugo L. Black: I thought you said that.
James W. Archer: No, I beg pardon, sir. You have to read that to get the purport of it of it -- that the picketing was to -- in order to, in the middle of the paragraph, to compel plaintiffs to execute a contract. Now, there's where the -- the difference lies between a prohibition against peaceful picketing to induce the employees to join and that prohibition against in order to compel the plaintiffs to execute any contract with the defendants requiring the plaintiffs to discriminate with respect to conditions of employment. The -- the recognitional type of demand ignoring the -- or avoiding the effort to invite the employees to join the union. They just take the shortcut of coming in and say, “Here, we have a contract, you sign it, put your men in the union.” And an employer says, “Well, may I ask my men or will you ask my men if they want to be in a union.” The men are asked by the representatives of the union and they say, “We don't care to join your union.” And the union says, “Well, you're going to sign for the employer. You're going to sign the contract anyway or you have pickets.” And you have -- men are following the tracks in this case and calling on costumers and asking them not to trade with the Valley Lumber Company and stopping incoming shippers.
William J. Brennan, Jr.: Mr. Archer --
James W. Archer: Yes sir.
William J. Brennan, Jr.: -- in further of your point that if the Board had taken this case and had applied to a Federal District Court for a injunctive relief, this is the kind of injunction that the Board would have it obtained?
James W. Archer: I think it would, Your Honor, with respect to the unlawful secondary boycott activities.
William J. Brennan, Jr.: Well, what about with respect to the recognition of picketing?
James W. Archer: That I do not know of whether or not they would draw that distinction between this recognitional picketing and organizational picketing. That's a rather a -- a --
William J. Brennan, Jr.: Indications are rather the other way, aren't they?
James W. Archer: I beg your pardon?
William J. Brennan, Jr.: I said the indications are rather the other way, aren't they?
James W. Archer: I don't think that this matter of the distinction between the two types of activity has been properly presented frankly.
William J. Brennan, Jr.: Well --
James W. Archer: I -- I think that it's -- it's --
William J. Brennan, Jr.: Of course, in the evidence that the Board will draw that distinction yet, is it?
James W. Archer: No, sir. But I feel that the courts are beginning to recognize the difference between the two. And that if we can continue to point out that there is a legitimate real difference between just going to an employer and demanding that he sign the contract and make his employees member of the union whether they wish to be or no and in picketing to invite them or to educate them. Maybe we can get these things straightened out.
Hugo L. Black: Well, even if the Board's contention is correct that 10 (a) does not mean what the other side is this.
James W. Archer: Yes, sir.
Hugo L. Black: And that the States can issue injunction such as they have, I don't mean with the language there --
James W. Archer: Yes, sir.
Hugo L. Black: -- under circumstances of this nature and -- but that the State must act consistently with the federal advocacy. I assume that it would be your burden to show not merely that the Board might or the law might sometimes hereafter to be consistent on what the State does, but it'd be necessary to hold that it's consistent with the federal law, wouldn't it?
James W. Archer: I think so.
Hugo L. Black: And that would have to be done in order to sustain what you have here even if the Board's position should be accepted.
James W. Archer: Yes, sir.
Hugo L. Black: And you have to take your position and do take the position that it is consistent.
James W. Archer: Yes, sir, we do.
Earl Warren: Mr. -- Mr. Archer, I'm not quite clear yet on your theory as to whether this is a state law or federal law that has been violated. You -- you called our attention to the top paragraph on page 199 --
James W. Archer: Yes, sir.
Earl Warren: -- as your theory where it says, our theory was that it charges the violation of the law of the State of California. In that, the ultimate object was to compel the plaintiffs to sign the contract which would have enforced result in the violation of paragraph (a) of Section 158. Now, I notice in your petition, on page 3, paragraph 6, that you make your recital of the misconduct and then say that because such conduct would be an interference with the collective bargaining rights secured to said employees by the National Labor Relations Act and would require the plaintiff to discharge in violation of the said National Labor Relations Act, new employees who refused or violated to join one of the said defendant unions within 30 days after their employment. Now, doesn't that allege a -- a violation of federal law as distinguished from state law and is that consistent with this paragraph on 199?
James W. Archer: I think it is, Your Honor.
Earl Warren: That's the thing that bothers me.
James W. Archer: I -- I think it is consistently --
Earl Warren: Yes.
James W. Archer: -- the idea of being that if the ultimate objective of the picketing is unlawful for any reason, state or federal, it's enjoinable under our law under the Park-Tilford and the other cases. Now (Voice Overlap) --
William J. Brennan, Jr.: (Voice Overlap) --
James W. Archer: -- there's one other case that -- I beg your pardon?
William J. Brennan, Jr.: Was there any suggestion that rather than -- as I understand it, this was a restraint against picketing period, to stop all picketing business.
James W. Archer: Yes, sir.
William J. Brennan, Jr.: Any suggestion at all that rather than that that the restraint, as I understand you to say, was the case of Park & Tilford merely against pursuit of the unlawful objective leaving -- allowing picketing if limited to organizational picketing?
James W. Archer: Yes, all right and in this case, sir, they could have picketed for organizational picketing.
William J. Brennan, Jr.: I know. Was there any suggestion that the restraint be limited to a picketing in pursuit of the unlawful objective allowing them to continue picketing for unlawful objective?
James W. Archer: They didn't -- they didn't request permission to picket lawfully. That subject was never raised in the lower court at any time that they were trying to go in and picket to invite the employees to join the union or induced them by organizational procedures to join. They stood pat on their demand that they can have a contract with the employer regardless of whether the employee they had signed up a single employee, so that was not an issue in the case.
Felix Frankfurter: I suppose you -- that you would not -- that you would not agree that the direct statement of your California law was just part of it on page 54 namely, and of our law, defendant's activity is lawful and to me the damages of injunctive relief is proper. The majority does not touch on this proposition.
James W. Archer: I -- I think that Judge Carter is wrong. And -- and he says in his -- his opinion in this Lillefloren case which is cited by the majority opinion in the Lillefloren case, 31 Cal.2d cited on page 52 after that statement, that it was not privilege under the California law. And Judge Carter there draws the very distinction in a very brief opinion when he draws the distinction between a recognitional and an organizational picket line. Apparently, he just doesn't forgot at this time, but he --
Hugo L. Black: Well, you suppose the majority read what he said?
James W. Archer: I don't know, sir.
Felix Frankfurter: (Inaudible)
James W. Archer: I would assume they all read it. I think that's fair to assume they all read both opinions, but --
Felix Frankfurter: Even the majority of questions, one that does assume that, of course, that would (Inaudible)
James W. Archer: Certainly. Yes, sir.
Felix Frankfurter: Well, moving on from there (Voice Overlap) --
James W. Archer: But to answer to -- to answer your question, it comes back to the same thing that I have said before that our courts have -- have recognized the difference and -- and yet, they just -- at times, they don't apply it to the -- to the factual situation.
Felix Frankfurter: To produce that distinction that (Voice Overlap) --
James W. Archer: Yes, they -- they --
Felix Frankfurter: (Inaudible) judge to go over to another point? What do you do with the discussion by the minority of the difficulty of California applying federal law? I'm referring to the discussion beginning at the bottom page 59 and over into 60.
James W. Archer: Well, I don't -- I don't see any problem there, Your Honor, any -- in -- in the labor of field anymore you have it in the other field. I was mentioning this morning --
Felix Frankfurter: That is a very great difference, being in the labor field and most other fields of the law or at least in those fields of law where the law hasn't determined by courts in issue and where the law gets its life to a very considerable extent from the prior determination of the administrative agents, references that may have been (Inaudible)
James W. Archer: It's a problem but --
Felix Frankfurter: -- about the Commission and it's the same as true of the National Labor Relations Board.
James W. Archer: It's -- it's --
Felix Frankfurter: -- and -- and behind that requirement as a legislation, a series of great view consideration of authority that these are so over such bearing, such elusive, multicolor, appropriate circumstances that you want some central body. Let's say, this is it and not leave it to the occasion of episodic determination of a court.
James W. Archer: Well, I -- I agree in part with that, Your Honor, but the -- the fallacy of -- of federal jurisdiction will say over this whole field is pointed up right here classically.
Felix Frankfurter: But that's what you -- you're enforcing that in this case.
James W. Archer: I am not here of my own volition.
Felix Frankfurter: I don't [Laughter] --
James W. Archer: I represent three little businessmen who had eight employees.
Felix Frankfurter: But you're trying to sustain the judgment.
James W. Archer: Yes, sir --
Felix Frankfurter: (Voice Overlap) --
James W. Archer: -- because I feel that they were then entitled to and I feel today they're just as entitled to and I know no law which says to the contrary.
Felix Frankfurter: I think we're -- I think you and the members of the Court are here on the same coercive process when you said with your own volition (Inaudible) because of our function.
James W. Archer: But I -- I mean to say, Your Honor, that the -- it's tragically almost ludicrous that you have to come to Washington D.C. to protect the rights of a business of that magnitude.
Felix Frankfurter: I couldn't sympathize anymore.
James W. Archer: And time is up. Thank you, sir. I -- may I take to just to call your attention to the fact that in our brief, we discussed at pages 28, 29 at set at some considerable length, the 10 (a) features -- interests you all.