Warren E. Burger: We will hear arguments first this morning in Crown, Cork & Seal against Parker. Mr. Solter, I think you may proceed whenever you are ready.
George D. Solter: Mr. Chief Justice and may it please the Court: The real issue in this case is whether a blanket application of equitable tolling by the application of a blanket equitable tolling the defendant should be subjected to a second wave of separate, individual lawsuits by putative members of the class after the denial of class certification. The Fourth Circuit's decision not only permits this, but also makes it possible for such individuals to file their complaints as class actions, thus beginning the tolling cycle once again. We respectfully submit that the Fourth Circuit rule announced in this case is not supported by case law, is an intrusion upon legislative prerogative and is inconsistent with legislative purpose in establishing time requirements for filing. It violates the integrity of Rule 23, expands rather than limits litigation arising out of class actions, and overlooks the jurisdictional aspect of the 90-day period prescribed in Title VII. We further submit that there are no facts in this case which warrant equitable tolling for the individual respondent and there is no basis in fact in this case or in law for the adoption of the broad rule extending the tolling of American Pipe versus Utah to individual private actions after class certification has been denied. Now, on the surface, it might appear that there is little difference between intervention as prescribed by American Pipe and a separate, individual lawsuit after class certification has been denied. In order to examine the difference and illustrate the differences, it is necessary to see just what the Fourth Circuit tolling rule does by extending it to the private individual action. By the mere filing of a complaint in the District Court, entitled a VII. Secondly, and perhaps the most frightening part of it is that it really has the effect of placing the tolling power in the hands of lawyers and plaintiffs and not in the hands of the courts and this is done by the use of a broad class definition in the initial complaint, because in American Pipe, the filing of a complaint is what tolls the statute. It is illustrated by this case in the complaint filed by the two alleged class members which the respondent seeks to... seek the benefit from, define the class as this: Black persons who have been, continue to be, or may in the future will be denied equal employment opportunities by the defendant. That is from the first such person that was ever hired to infinity. There is no limitation in that definition as to time, as to the location. It wasn't restricted to the Baltimore plant and this company has plants in 26 states of the United States. There is nothing to limit it by definition as to the nature of the discrimination or any other circumstance. It simply refers to this gigantic class of persons in a very general sense. Now, this danger was recognized in the concurring opinion in American Pipe where it was warned that it should not be interpreted as an encouragement to lawyers to frame overly broad issues... I mean, overly broad definitions to attract members. We also feel finally that it is totally inconsistent with the purpose of the 90-day notice in Title VII. In that notice, under the law, actual service of the notice upon the complainant after EEOC waives its jurisdiction is mandated. The time does not begin to run until he actually has possession of that notice and that notice, as is shown in the Appendix, is extremely explicit. It is not something that he is supposed to know about in the sense of when statutes start to run or filing times start to run. He must know about it immediately by reading that notice or having someone read it to him. There are no exceptions carved out in the statute for any other different period or any changing of that period and it seems extremely explicit even though this is a remedial statute and we all recognize the rule of liberal construction when we are referring to remedial statutes. The important relevant facts in this case to remember are simply these: That the respondent, after having timely filed his complaint with the EEOC, sat back as he had to to await the result. While that was being investigated, two other gentlemen from Crown, who were black employees who had been terminated, filed a class action known as Pendleton and Allen, and they used the broad definition which is have just referred to. That occurred on September 15, 1978. Approximately two months later the EEOC issued its no reasonable cause to believe that discrimination had occurred and the 90-day notice to sue. Mr. Parker did nothing. In the meantime, two years went by and finally the District Court, after hearing and after a period of holding the matter sub curia, decided that class certification should be denied. That occurred on September 4, 1980, within two months. Which was timely in the sense of the 90 days if there is, in fact, a tolling, Mr. Parker filed his own private individual suit. Time went on. Of course, he was met with a motion for summary judgment by Crown which brings the case ultimately here today. Also, when he was met with the summary judgment motion, three days later, he filed a motion to intervene in the Parker-Pendleton class action which had been... in which certification had been denied many, many months before. He filed it under the concept of United Airlines versus McDonald in order to appeal the denial of the class action. He did not intervene in a timely fashion under American Pipe to become a party in the remaining litigation. Now, with those facts as the background, it is particularly significant to us and we submit should be to the Court that here the respondent had actual notice of the filing time when he received his notice from the EEOC. There is nothing to indicate that he relied on the existence of the Pendleton-Allen class action, even though that is alleged in the brief, because he went back to EEOC in 1980 and tried to get another fresh 90-day notice of right to sue in order to give substance to his new filing. Of course--
William H. Rehnquist: Mr. Solter, do you think American Pipe requires reliance at least to the putative intervenors?
George D. Solter: --No, I don't. I think that is one of the things that is considered in the discussion; that the people who do know about it are entitled to rely on it for the purposes outlined in American Pipe, namely, to intervene. In other words, if they decide to stay out and they are aware of it, then obviously they are relying on it and they come in to intervene.
William H. Rehnquist: You say the very fact of their later intervention shows they probably relied on the existence prior to the refusal to certify?
George D. Solter: If they knew of it, but, of course, American Pipe extended to those inactive and unknown members as well who might subsequently learn of the class action and the fact that it was not certified and file in time. It covered all of the members, potential members, of the putative class whether they had knowledge and relied or whether they gained knowledge at a later time. The respondent in this case did take advantage of his right to intervene for purposes of appeal under United Airlines versus McDonald and then, for one reason or another, after having been given that right to intervene and file the appeal, the appeal was not timely filed and that was the end of that. We submit that the Fourth Circuit has provided a fifth alternative to a situation where the respondent, under the scheme of Title VII, had already four alternatives. He could have filed timely if he wanted to go his own individual way. He had the notice, he could have filed timely. He admitted having received it and having taken it to an attorney. He also admitted having gone back to EEOC after receiving it for further explanation. He could have moved to intervene in the Pendleton-Allen case while class status was pending. He could have moved to intervene in a timely fashion after class certification was denied, but he did not. And, he could have moved to appeal the denial of class certification, which he did, but, of course, then lost that by failing to file in the Fourth Circuit a timely appeal.
William H. Rehnquist: There would be no point to your third alternative, would there, to intervene in the class action after denial of class certification?
George D. Solter: Oh, yes, I think that is the whole point. The reason for intervention that was prescribed in the American Pipe case was to keep control over the litigation in the same court, in the same district, rather than to allow the individuals, as they can now under this rule if it is adopted, to go out and file their own private actions.
William H. Rehnquist: Well, as I understood your fourth alternative was to intervene in an appeal, appeal the denial. Your third was simply to intervene after refusal to certify. And, I am wondering, what is the point to that if you don't plan to appeal?
George D. Solter: Well, I got my numbers mixed up. I thought you were referring to the actual intervention in the case before the appeal stage, while it was still viable to--
William H. Rehnquist: No, I meant after denial of certification.
George D. Solter: --What he did in this case you mean?
William H. Rehnquist: Yes. Except I thought you were posing as two separate alternatives intervention after refusal to certify for purposes of appealing and simply intervention after refusal to certify, apparently wanting to be in an uncertified class.
George D. Solter: Well, I did mean to make that distinction, because after denial of certification, he can... the statute starts to run again under American Pipe and he is provided the opportunity to then intervene provided he does it within the time left to him on whatever statute it is. So, that is one alternative.
William H. Rehnquist: Then when he does that he is simply submitting his individual claim on the merits really?
George D. Solter: Precisely. And, that is why I am arguing that that is the route that should be followed and not to go out with his private action and institute another case outside of the framework of the class action which is really the whole basis on which the American Pipe case was placed as I read it. And, that was to effectuate the purposes of Rule 23, to protect the class as a whole, inactive and uninformed as well as those who relied, and to control the individual claims through Rule 24, the intervention route, rather than to have the independent actions going on. And, here is where the reason for intervention is so necessary. When someone tries to intervene in a case of this kind after the denial, in order to intervene and get the benefit of the tolling, they have to show that first there really was a class of some kind and, secondly, that they were a member of it in order to get the benefit of the tolling. And that is where I think the District Court should have the power to control rather than if an individual action is filed and a motion for summary judgment filed on the basis of limitations, to then hold another, almost a de novo hearing to determine whether there was a potential class and whether this man or woman was a member of that class. The whole idea of American Pipe was to use Rule 23 to keep the litigation in some orderly fashion controlled so that the matter could be managed in a proper way and a practical way. And, after all, the decisions that are rendered are for the district courts to follow and to help them in implementing their court calendar. And, it seems to me that that is why this point was made so firmly in American Pipe where it said it was limited for the purposes of intervention. Also, there is another question that is raised by the language of American Pipe where tolling was limited at least where the denial of class certification was solely for the lack of numerosity. The reason for that was that in that case there was a class clearly established but there weren't enough members to satisfy Rule 23 and, therefore, there was a clear finding that joinder was practical and, therefore, the next logical thing that follows is if joinder is practical, then intervention is the next step. Now, if certification was denied for lack of typicality or commonality, there is a good chance there is no class there at all underlying the action or at best it is a very narrow class and, therefore, intervention, as opposed to a private suit, provides the mechanism for screening out non-meritorious claims. It keeps the litigation in the same court in a fairly timely fashion, because members would have to act promptly because their statute is running out, so that everything is fresh, it is all in one place, and not scattered in many districts perhaps where a defendant may have a different plant so there would be venue there.
John Paul Stevens: Mr. Solter, may I ask you--
George D. Solter: Yes, Your Honor.
John Paul Stevens: --what do you do with the plaintiff, prospective plaintiff who seeks to intervene not as a right but intervention in the discretion of the trial judge and the trial judge decides he won't allow intervention, not because of time bar but just because he doesn't think it is an appropriate case to... He doesn't want to complicate his own lawsuit with this group of intervenors? Would you say they are also barred?
George D. Solter: Well, I would say that if the judge granted it on the grounds that you suggest, it might be an abuse of discretion under the rule, but if he granted--
John Paul Stevens: I am asking if he denied it.
George D. Solter: --If he denied it?
John Paul Stevens: Yes.
George D. Solter: If he denied intervention because he felt that the individual had failed to establish that he was a member of a class or that there was such a class--
John Paul Stevens: Well, assume he was literally within the class described by the plaintiff, but when it came around to certifying the class, the judge decided the commonality or typicality reason for not certifying a class and then he also decided not to allow intervention because he thought it would delay the proceeding, allow too many people to come in. What do you do... How does your rule deal with that kind of a case?
George D. Solter: --Well, the result, I think, would be that, first of all, the person would be time barred because he wouldn't be able to then claim the benefit of tolling. But, I think he has... That would constitute a final order as far as he is concerned and he would have a right of appeal.
John Paul Stevens: But that is his only right?
George D. Solter: Sir?
John Paul Stevens: The Fourth Circuit Rule would protect him though as I understand it.
George D. Solter: I don't think any more so necessarily than the intervention rule would, because a defendant is going to raise the limitations issue in one way or another, even in the private action that the Fourt Circuit advocates. In other words, you would still have to come in and file a motion for summary judgment based on limitations and then there would have to be, it seems to me, a hearing on this whole question of class status for his to reach back and get the benefit of the tolling. This isn't something that is handed to him. He gets the benefit of the tolling only if (a) there is a class, and (b) he is a potential member of it. And, somewhere down the road there has got to be proof of that. So, I think you still end up with that same--
John Paul Stevens: Well, I should think we would always have a case in which the plaintiff would be within the description of the class representative, within the class described in the complaint, but not within the class the trial judge was willing to certify. You have got kind of concentric circles almost and he is within the outer ring.
George D. Solter: --Well, that is true, of course, but the purpose of the motion and hearing on certification is to narrow it and try to determine what the real class--
John Paul Stevens: And, if he doesn't get within the class that is actually certified, then he does not get the benefit of the tolling rule?
George D. Solter: --I would say that is correct, yes.
Sandra Day O'Connor: Mr. Solter, in the category that you are talking to Justice Stevens about, doesn't your position encourage perhaps the unnecessary filing of a bunch of complaints in anticipation that this problem might arise and isn't that as burdensome or moreso than the protective motions to intervene that the court was concerned about in American Pipe?
George D. Solter: Well, obviously there is the risk of that being involved. The question is whether it really amounts to anything greater by going the intervention route. After all, if a potential member of the class thinks he is has got a claim and he belongs in this class and he wants to intervene, he has to make these showings. And, it just strikes me that it comes back to the question of control and management at the trial level that really dictates the answer to the problem. Now, the Second Circuit has ruled in the fashion that tolling does not affect... That the member of the class does not get the benefit of tolling to file a private action, he only can intervene. Also, the Ninth Circuit, where the American Pipe case came from originally, has taken that view. The Fourth Circuit takes the other view and that, of course, is why we are here. Now, under Rule 23, which this Court placed a great deal of emphasis upon in the American Pipe case, it recognized that back before the 1966 amendment, there were the spurious type class actions which where unfair advantage could be obtained by persons who wanted to sit on the sidelines and see what happened and not be bound by any judgment. And, to cure this effect, Rule 23 was amended and it provided for process, among other things, if there is certification, to identify the members. And, American Pipe recognized--
Thurgood Marshall: Mr. Solter--
George D. Solter: --Yes, sir.
Thurgood Marshall: --Is that the reason that Hansberry and Lee doesn't apply here?
George D. Solter: I am sorry, sir, I didn't understand.
Thurgood Marshall: The case of Hansberry against Lee. It is an old 1940 case.
George D. Solter: I can't recall it, sir.
Thurgood Marshall: Chief Judge Stone said that where there is a class action case it does not bind a future class action case on the same properties.
George D. Solter: I think that... I don't... I have to be frank. I don't recall the case, but from what you say, it seems that that was one of maybe--
Thurgood Marshall: The reason for this.
George D. Solter: --The problems that brought about amendments to Rule 23 in 1966. I would like to reserve my last five minutes for rebuttal, Your Honor.
Warren E. Burger: Very well. Mr. Ramsey?
Norris C. Ramsey: Mr. Chief Justice and members of the Court: It is the respondent's position that the Fourth Circuit's ruling is consistent with the purpose for the tolling rule as announced in American Pipe. First, I shall discuss the policy considerations. The effect on Rule 23 if the Court were to limit the putative class member to intervention into the cause action. Second would be the practical effect of limiting it to intervention. Third would be the effects of the broad interpretation of the tolling rule on Rule 23. Fourth, the effect on the case at bar, and fifth, the fact that the interpretation given to the tolling rule by the Fourth Circuit is consistent with this Court's dictum in Eisen and the fact that a broad interpretation of the limitations rule on the statute, for purpose of statute of limitations is also consistent with the tolling rule. And, finally, that the 90-day notice of right to sue is a statute of limitations as opposed to a jurisdictional prerequisite. The policy reasons for the American Pipe tolling rule is to prevent premature filings of motions to intervene into the class action before the class certification issue has been decided. If the Court were to limit the putative class member to intervening into the existing cause of action, then that would undermine the policy considerations of judicial economy and efficiency. It might make the purported class action unmanageable by the filing of numerous separate lawsuits in different jurisdictions and numerous and multiple motions to intervene into the class before the class certification issue has been decided. Moreover, the Court should pay close attention to Federal Rule of Civil Procedure 24A and Rule 24B in this case. Federal Rule of Civil Procedure 24A gives the intervenor a right to intervene, whereas, Rule 24B allows the court to exercise its discretion as to whether or not the putative class member would be able to intervene into the cause of action. Knowing this, any smart lawyer or smart putative class member would move to intervene on a timely basis prior to the motion for class certification being denied and again thus undermining the purpose of the tolling rule. The practical considerations for requiring intervention only would have... A decision to require intervention only would have as a practical matter an adverse impact on the putative class member. That is the putative class member would step into the shoes of the party plaintiff. When he steps into the shoes of the party plaintiffs, he inherits all of the procedural errors, discovery errors, and other problems inherent in intervening into a cause of action where litigation has already taken place. Thus, again, this would serve to encourage the intervenor to intervene pursuant to Rule 24A prior to the motion for class certification being decided.
William H. Rehnquist: Mr. Ramsey, as a practical matter, can you say, based on your experience, how much discovery usually takes place in a typical class action case before the class certification motion is ruled upon?
Norris C. Ramsey: Yes, Your Honor. A significant amount of discovery generally occurs in that in cases of this nature, such as Title VII class actions, the motion is generally decided on statistical evidence as to whether or not there is a pattern and/or practice of discrimination that has been practiced against a class. In addition, the class plaintiff may have also attempted to discover evidence concerning disparate treatment of class members. And, in fact, in the case at bar, after the class certification issue had been decided, there was a dispute as to whether or not the main plaintiffs in the class action would be allowed to go into the employer's personnel files for purposes of discovering evidence concerning disparate treatment. If the District Court had made an adverse decision to the class plaintiffs and denied them the right to seek that evidence, then the Respondent Parker, having intervened at that state in the litigation, he would have been deprived of evidence to carry his burden of proof on the merits.
John Paul Stevens: Mr. Ramsey, that also would have been true if they had certified the class, isn't it? They would have been stuck with the developments in that lawsuit.
Norris C. Ramsey: Well, if the Court had certified a class, the--
John Paul Stevens: And then denied discovery.
Norris C. Ramsey: --And then denied discovery, then they would have been faced with that problem, although we believe the District Court would have been wrong in that Eisen versus Carlisle & Jacquelin teaches that the court should not go into the merits when determining whether or not a case should be certified as a class action.
John Paul Stevens: No, but it seems to me you are arguing it is unfair to make the non-party accept the bad features of the litigation, but unless he files his own lawsuit, he is going to do that if the class is eventually certified. He, in effect, seems to be content with the class until the certification ruling is adverse.
Norris C. Ramsey: Well, at that point, he may be able to move to intervene pursuant to Federal Rule of Civil Procedure 24A on the grounds of inadequacy of representation in that the main plaintiffs would not have sought sufficient discovery to have the case determined on its merits.
John Paul Stevens: It just seems to me there is a little inconsistency in your position. I may not get it entirely.
Norris C. Ramsey: Well, further, the other practical effects on the case would be that requiring a putative class member to intervene into an existing cause of action may not be financially feasible in that should the court have before it a nationwide class action individuals located in jurisdictions far from the original jurisdiction may not be able to financially afford to hire attorneys and litigate in a foreign jurisdiction. Moreover, if there was a nationwide class action, then the individuals, by being required to file to intervene, may be required to litigate in a jurisdiction in which witnesses, documents, and other factors related to this litigation would not be present in a foreign jurisdiction. For example, an employer, as counsel stated, may have plants in separate jurisdictions throughout the country. That is where those personnel files would be located. That is where the supervisors would be located. And, thus--
William H. Rehnquist: Mr. Ramsey, is it customary where motions to intervene in a class action have been filed and intervention has been granted that each of the intervenors keeps their own attorney who made the motion to intervene on their behalf?
Norris C. Ramsey: --I believe that is discretionary with the court. The court may appoint lead counsel where there are several intervenors or it may allow the intervenor to keep his own counsel. In all instances, the court would probably allow the intervenor to keep his own counsel, although there would be lead counsel for purposes of carrying out the major phases of the litigation. Now, after the class certification issue has been denied, then, of course, there is no longer any interest in protecting judicial economy and efficiency, because the purpose of that rule in the first place was to disencourage premature motions to intervene into the class action and the filing of separate lawsuits. Of course, once the court decides adversely to the class; that is that there should not be a class certification, then Federal Rule of Civil Procedure 24B comes into place. That rule allows discretionary intervention. And, should this Court limit the putative class members to intervening into the existing cause of action, then it is possible that the putative class member could lose his lawsuit on the grounds unrelated to the merits of his cause of action. That is the Court could decide that the motion pursuant to Federal Rule of Civil Procedure 24B was untimely, that it may cause undue delay in the original cause of action, and, thus, deny the putative class member the right to intervene, and, thus, his day in court. As a practical matter, deciding that the American Pipe tolling rule should be given a broad interpretation and allow separate lawsuits or intervention would not undermine the purpose of Rule 23. Should separate lawsuits be filed, then the court, pursuant to Federal Rule of Civil Procedure 42A could consolidate all like and related causes of action for purposes of pre-trial litigation, for purposes of trial, or he may pass... the court may pass any other orders it deems necessary to effect judicial economy and efficiency. Should there be several lawsuits filed in separate jurisdictions, then the court on motion by any party, the employer as well as the intervenors, may coordinate the litigation through the multi-district litigation panel, and, thus, conduct all pre-trial proceedings so that there will not be unnecessary burdens and expenses on the employers, the court, or the litigants. And, once the pre-trial phases of the litigation has been completed, the panel of multi-district litigation then can remand the case back to the particular jurisdiction in which the lawsuit was originally filed for trial. In the case at bar, the petitioner was not prejudiced at all. This is said because the respondent here filed a charge of discrimination with EEOC which then put the petitioner on notice as to the claim of the respondent, that he was complaining that there was discrimination against him on the basis of his race. And, indeed, as counsel pointed out, there was an investigation conducted by the Maryland Commission on Human Relations and EEOC finding no probable cause in which the employer participated. Second, as the District Court opinion points out, the respondent here was a member of the putative class and the petitioner had been placed on notice as to the type of claims that the respondent had. In fact, the class had been shaped by discovery and members of the putative class had been named in the record so they actually knew the identity of each putative class member. Moreover, once the respondent had filed his own lawsuit, he moved to consolidate his lawsuit with the case that had been filed as a class action. To say that the difference between intervention and consolidation is to... It would be to exalt form over substance by saying that consolidation and intervention would be different.
William H. Rehnquist: Was there any particular reason that you chose on behalf of your client to file separately and then move to consolidate rather than to intervene?
Norris C. Ramsey: The reasons were because being experienced with that litigation and being counsel in both cases, I was aware of the pre-trial discovery and difficulties that had gone on in that particular case and not wanting my client to be bound by those difficulties, then I opted to file a separate lawsuit and then move to consolidate those lawsuits based on my experience in other cases where class actions had been filed and separate lawsuits had been filed and the District Court allowed the separate lawsuit to engage in his own discovery, to complete his own discovery for purposes of trial. So, there was a practical reason for doing that. The respondent submits that the Fourth Circuit's interpretation of American Pipe to allow the filing of a separate lawsuit is consistent with this Court's dictum in Eisen versus Carlisle & Jacquelin. There the Court rejected the argument that class members would not opt out of a class action because the limitations period would have run, citing American Pipe. We believe that the only fair reading of that dictum is that a class member would opt out for purposes of filing a separate lawsuit since a putative class member would not opt out of a class only to move to intervene into that same lawsuit again. Furthermore, we believe that the tolling of the statute of limitations for purposes of separate lawsuits or intervention is consistent with the purposes of the statute of limitations. The purpose of a statute of limitation is to promote justice by preventing unfair surprise through the recovery of stale claims that have been allowed to slumber until evidence has been lost, memories faded, or witnesses disappeared. Here, where a case has been filed as a class action, it is incumbent upon the defendant or employer to retain its records and documents. It is incumbent upon the employer or defendant to prepare its case for trial and retain the necessary evidence. Therefore, the purpose of a statute of limitations would not be undermined by such a tolling rule. Finally, the defendants... the petitioner argues that the 90-day period for bringing a lawsuit is a jurisdictional prerequisite as opposed to the statute of limitations. The respondent submits that this Court in Zipes versus Trans World Airlines has addressed that issue to a large extent. It pointed out in that decision that the limitation periods under Title VII have always been referred to by this Court as statutes of limitations subject to waiver, estoppel, and tolling. Moreover, a reading of 42 USC Section 2000e-5(f)(3), the Jurisdictional Section of Title VII, does not mention the 90-day limitations period. It would seem that the defendant or the petitioner concedes that this case involves a statute of limitations as opposed to a jurisdictional prerequisite in that it admits that American Pipe applies and if American Pipe applies, then there was a tolling of the statute of limitations during the pendency of the class action. In conclusion, the respondent submits that a broad interpretation of the American Pipe rule to allow separate lawsuits or intervention is consistent with Rule 23; that is to promote judicial economy and efficiency. We submit that it would undermine the purpose of the tolling rule and encourage the filing of pre-certification motions to intervene and separate lawsuits should this Court decide otherwise. Thank you.
Warren E. Burger: Do you have anything further, Mr. Solter?
George D. Solter: Mr. Chief Justice, and may it please the Court: Very briefly, it seems that the respondent argues that equitable tolling should be looked upon as some sort of a right. This Court and all courts look upon equitable tolling as something that is given only sparingly, almost on a case-by-case basis, and it wasn't until, I believe, the American Pipe case that a blanket exercise of judicial or equitable tolling was granted so that it covered many, many people. I think that what we have to look at here is that the equitable tolling of American Pipe came about because the Court was anxious to maintain the integrity of Rule 23 and that it saw that if tolling was not given in that situation many people would be harmed and would not have an opportunity to even move to intervene to determine whether they were class members who were entitled to assert a private action after the denial of class certification. We say that if a putative member of the class wants the benefit of that tolling, he must bear the burden of that tolling by showing through intervention in an orderly, manageable fashion before the same court that he is a member of that class and that the class existed. Otherwise, it seems to me that if you adopt the Fourth Circuit rule, you simply open the door for an entire new round or wave of litigation in courts today that are already overly swamped. At the same time, the intervenor is adequately protected by the technique that is available to him under Rule 24 where he can come before this Court, the District Court, and assert his right to intervene in that action. We simply feel that this... The whole purpose of the American Pipe tolling rule through intervention was to keep the power to control and direct class litigation in the courts and not in the hands of opportunistic lawyers and litigants where abuses could occur. We respectfully submit that the judgment of the Fourth Circuit should be reversed.
Warren E. Burger: Thank you, gentlemen. The case is submitted. We will hear arguments next in Bell against New Jersey and Pennsylvania.


Warren E. Burger: We’ll hear arguments next in 75-342, Federal Power Commission against Conway. Mr. Tuttle, you may proceed I think whenever you’re ready as soon as the attendance is --
Allan Abbot Tuttle: Thank you. Mr. Chief Justice and may it please the Court. The issue in this case is whether the Federal Power Commission has the statutory authority to reduce a public utility’s otherwise just and reasonable electric wholesale rate because the utility allegedly maintains artificially depressed and anticompetitive retail rates.
John Paul Stevens: Mr. Tuttle, you didn’t in your petition I know raised the question of the finality of the Commission’s ruling that was reviewed by the Court of Appeals. From your own knowledge, is it a common practice in the agency proceedings where petition for intervention has been partially granted and partially denied by the Commission for the party that is partially denied to run to the Court of Appeals at that stage and seek together reviewed?
Allan Abbot Tuttle: It is not a common practice and of course when it occurs, the Commission’s position would ordinarily be and indeed was in the Court of Appeals that the issue was premature. As you know, the Court of Appeals, in this case, disagreed with that argument which we made indicated that the Commission had obviously reached a final conclusion as to this issue and that the interest of justice required the court to reach the issue at that juncture because the Commission had made that ruling in a number of other cases and the court felt that there was no indication that any further elaboration of that issue would help resolve the question of the Commission’s power at that juncture. The Court of Appeals, having made that ruling and having reached the merits of the case, we, of course, proceeded that this court addressing the merits of the Commission statutory power. This litigation arose in June of 1973, when Arkansas Power and Light filed with the Commission a wholesale rate increase request under Section 205 of the Federal Power Act. Conway Corporation, the respondent here is a wholesale customer of Arkansas Power and intervened in the proceedings alleging that the filing was made for anticompetitive purposes. Conway asserted that it competed with Arkansas Power, its supplier, for direct sales of electricity to industry. And Conway alleged that by raising the wholesale rate to it while keeping the retail rate to industry low, Arkansas Power was effectively squeezing Conway out of competition for direct industrial sales.
John Paul Stevens: But what is Conway’s business?
Allan Abbot Tuttle: Conway is a -- there is a municipal electric system in Conway and Conway Corporation manages it.
John Paul Stevens: In the municipality of Conway?
Allan Abbot Tuttle: Yes, Your Honor. Conway urged that the increase be rejected or reduced in order to eliminate this price squeeze. Federal Power Commission rejected this suggestion concluding that the relief sought, the rejection or reduction of the wholesale rate increase was not within its power to grant. Under Section 205 of the Federal Power Act, the Commission is charged with assuring the justness and reasonableness of wholesale electric rates in interstate commerce. It has, however, no authority to set retail rates. The Federal Power Commission concluded that it could not as Conway was suggesting based the wholesale rate on the non-jurisdictional retail rates. The Commission said and this occurs at page 53 of the record, “Wholesale rates must recover allocated wholesale costs. Conway suggested relief as a rate not related to wholesale costs but rather related to Arkansas Power’s industrial rate.” “However, that industrial rate,” the Commission said, “is subject to the sole jurisdiction of the State Commission and not the Federal Power Commission.” The Court of Appeals reversed holding that the Federal Power Commission had a responsibility under Sections 205 and 206 of the Federal Power Act to remedy an alleged discrimination between a jurisdictional wholesale rate and a non-jurisdictional retail rate cause by, and these are the court’s words, “the utility’s own decision to depress certain retail revenues in order to curb retail competition from its wholesale customers.” The operative statute here in Section 205 (b) of the Federal Power Act which provides, “No public utility shall with respect to any transmission or sale subject to the jurisdiction of the Commission maintain any unreasonable differences in rates, charges, services, facilities or in any other respect either as between localities or classes of service.” The scope of this provision and most significantly the significance of the limiting language with respect to any transmission or sale subject to the jurisdiction of the Commission can only be understood with reference to the legislative history of the 1935 Power Act, and perhaps more important, the impact of this Court’s 1914 decision in the Shreveport Case upon that legislative history. Briefly, Shreveport involved the question of the power of the Interstate Commerce Commission under the Interstate Commerce Act to remedy a discrimination between jurisdictional wholesale railroad rates and non-jurisdictional intrastate railroad rates set by the Texas Railroad Commission. Based on this Court’s view of the broad and unexceptional language of the antidiscrimination provisions in the Interstate Commerce Act, this Court in 1914 concluded that the Commerce Commission could require an increase of a non-jurisdictional intrastate rate which discriminated against interstate commerce. The Shreveport Case figured prominently in the 1935 debates or hearings, I should say, on the Wheeler-Raybum Bill which with modification became the Federal Power Act of 1935. Section 202 of the original bill, the forerunner of Section 205, provided in part, “no public utility should establish or maintain any unreasonable difference as to rates, charges, service, facilities, or in any other respect either as between localities or as between classes of service.” At the hearings on the Bill, the solicitor of the Federal Power Commission who was a draftsman of the Bill was asked if the Shreveport case would apply if the retail rates were so low that for a company to exist, it became necessary to charge exorbitant rates for its wholesale interstate business. He argued that it would not apply to the Bill as drafted and maintained and this is a quote. “The intrastate rate should be determined upon its reasonable,” excuse me I misspoke. “The interstate rate, the jurisdictional rate, should be determined upon its reasonableness. Its reasonableness alone without regard to what the intrastate rate is.” Despite these and other assurances as the scope of the Wheeler-Raybum Bill, the concern remained that owing to the broad and unexceptional language of Section 202 that I’ve read to you, that the Shreveport Case might nonetheless govern the law if enacted in those terms. Accordingly, the Act was amended -- the Bill was amended and the words added which became the words of Section 205. Section 205 as enacted provided, no public utility shall and these are the added words to which I want to call your attention. No public utility shall with respect to any transmission or sale subject to the jurisdiction of the Commission maintain any unreasonable differences in rates, etcetera. Following these amendments, Representative Cole, who was a sponsor of the Bill, stated, “We have tried, I think, successfully to avoid the interjection of federal control into intrastate activities in a way in which the Shreveport Case might permit.” This wording of the Act has led Justice Jackson concurring in Colorado interstate to make the only statement that a member of this Court has made on precisely the issue involved in this state -- in this case. And he said at 324 U.S. at 615, the Act forbids discrimination only as between regulated rates and does not forbid discrimination between regulated and unregulated ones. Despite this legislative history, the Court of Appeals concluded that Section 205, as enacted, did not require that both rates involved in the pattern of discrimination fall within the jurisdiction of the Commission. The court argued that if Congress had intended to limit Section 205 to competitions merely between jurisdictional rates, it would’ve added to the end of the section the following words, classes of service subject to the jurisdiction of the Commission, rather than as the act reads merely the words classes of service. Thus, according to the Court of Appeals, if the Congress had wished to limit Section 205 to discriminations between jurisdictional sales, this is what it would have had to have said, no public utility shall with respect to any transmission or sale subject to the jurisdiction of the Commission maintain any unreasonable differences in rates between classes of service subject to the jurisdiction of the Commission. However, the repetition of the phrase subject to the jurisdiction of the Commission at the end of Section 205 is obviously redundant because by its terms the statute is already limited to quote “any transmission or sale subject to the jurisdiction of the Commission”. Based on Congress’ failure to repeat this obviously redundant phrase, the Court of Appeal said that the Commission was required to address the question or the issue of discriminations between jurisdictional and non-jurisdictional rates. Its only concession was to say that any sanction imposed by the FPC to remedy in any competitive practice is to be addressed to the jurisdictional rate.
John Paul Stevens: What if the Court of Appeals had just said the Commission could consider it and not that it was required to consider it, would you regard that holding as wrong?
Allan Abbot Tuttle: I would Mr. Justice. I think that the -- our principal analysis of the statute is that we are limited in the matters that we are to concern ourselves with, with matters which may not be the subject of state regulation. And our view of our statute is that the only discrimination which we may address within the ambit of Section 205 and 206 is the discrimination between jurisdictional rates. And that is our fundamental submission in this case.
John Paul Stevens: Mr. Tuttle, is it not true that in making the determination of reasonableness on the wholesale rate, you do have to make some preliminary judgment as to whether costs are probably allocated, do you not?
Allan Abbot Tuttle: Absolutely.
John Paul Stevens: Does that not involve some inquiry under the rate base for the retail rates?
Allan Abbot Tuttle: Well, it involves an allocation, as you say, of costs. And there’s no question that we may look to the retail business to the extent of determining that the wholesale rate and the wholesale rate payers are not being loaded with more costs than would justify according to the amount of the investment, which is put to that service.
John Paul Stevens: But you say the statute makes it impermissible for you to look and see -- assume hypothetically that the retail rates were much lower than the wholesale rates and the jurisdiction rate. You couldn’t even consider that fact in deciding whether the wholesale rates are reasonable, that’s your position as I understand it?
Allan Abbot Tuttle: My position is that the wholesale rate has to look at properly allocated wholesale costs.
John Paul Stevens: But my example might suggest to suspicion that there’s something wrong with the costs. Couldn’t you even look at it for that purpose?
Allan Abbot Tuttle: We can always look at the entire company’s business --
John Paul Stevens: Including rates?
Allan Abbot Tuttle: -- in order to determine that the costs are correctly allocated.
John Paul Stevens: Including the retail rates?
Allan Abbot Tuttle: I don’t think the retail rate would be relevant. I think the relevant issue would be the allocation of the costs.
John Paul Stevens: What percentage of this company’s business is retail and what percent wholesale?
Allan Abbot Tuttle: It’s a hard thing to be absolutely specific about because it’s hard to classify some of the business but between 80 and 90% retail, the revenue is 80 to 90% retail.
John Paul Stevens: And you may not look at those rates at all in your -- performing your function, is it?
Allan Abbot Tuttle: We may look at the rate based in the allocation of costs but we may not look at that rate. Our job is to determine first what is properly allocated to, in terms of cost to the wholesale business. And then determine whether or what is the appropriate rate of return on that investment. And that’s what Congress’ charged as we’re doing here as we (Voice Overlap).
John Paul Stevens: Mr. Tuttle, if the facts are as alleged by the intervenor -- intervenors here. Do they have any remedy at all for the situation?
Allan Abbot Tuttle: They have several remedies in my view, Mr. Justice. They have -- of course if this is an artificially depressed retail rate, which in my view it has to be assuming the allegation --
John Paul Stevens: Did they artificially depress their rates for 90% of their business in order to do this?
Allan Abbot Tuttle: I said, well, I didn’t see -- I'm not saying for a moment Mr. Justice that a price squeeze really exists here. We are dealing with the face of a pleading that alleges a price squeeze. So I assume --
John Paul Stevens: So the price squeeze can arise in two ways, either by having extravagantly high rates in the wholesale field in normal rates in retail or vice versa. And here, I assume, with 90% of the business in retail, they probably didn’t depress those rates, anything the wholesale rates will (Voice Overlap).
Allan Abbot Tuttle: Well, they probably didn’t depress any rates. My point is that it’s like I'm dealing with this thing on the face of a pleading. And those I have to accept the allegation that there is a price squeeze and an unlawful price squeeze because the respondents says so and we refuse to hear their argument.
John Paul Stevens: On accepting that what is their remedy?
Allan Abbot Tuttle: Well, first of all, I’d like to address the question of the fact that if you say could occur from artificially inflated wholesale rate. And I’ll come to that in a moment but the point I’d like to make just initially is that our ordinary rate making standards with respect to the wholesale rate would forbid inflated wholesale rates and inflated wholesale costs without looking to the issue of discrimination. So it’s not going to rise under our own standards. It’s not going to rise on the wholesale side.
John Paul Stevens: Assuming you’ve done an adequate job of investigating the company and the total cost?
Allan Abbot Tuttle: But we accept our responsibility and it hasn’t been questioned in this case that we have.
John Paul Stevens: But now a good answer to my question, what is their remedy?
Allan Abbot Tuttle: Well, their remedy, assuming that I am right, that the rate is cost by a depressed retail rate. Of course, that is a matter subject to the jurisdiction of the State Commission. And they could intervene in rate proceedings in the State Commission and alleged that it’s an improper remedy.
John Paul Stevens: Do they have standing because they’re not -- they have no interest in that rate anymore than -- don’t they have the same problem there?
Allan Abbot Tuttle: No, because that would be a rate that if our other assumptions are correct is a rate that’s artificially low in any competitive. And although the retail -- the State Commission might say, “Well, we have to look at our rate and our rate by itself.” And I would say they would be right saying that.
John Paul Stevens: Let me just back up, to be sure I understand you. Assume there’s no pending state proceeding before the Arkansas State Commission, what do they do? Do they go in and --
Allan Abbot Tuttle: Well, they could make a complaint.
John Paul Stevens: They file a complaint with the State Commission and say that you should cause the utility to charge higher prices?
Allan Abbot Tuttle: That’s one remedy. Of course another remedy --
John Paul Stevens: Has that ever been successful? I never heard of such a case.
Allan Abbot Tuttle: I don’t know, I know there had been interventions in --
John Paul Stevens: Yes, but that’s not our example because our problem is they don’t have such a pending proceeding under our hypothesis.
Allan Abbot Tuttle: Conway now has such a pending proceeding?
John Paul Stevens: No.
Allan Abbot Tuttle: No.
John Paul Stevens: What does Conway do about the problem that it alleges exists if there’s no pending Arkansas State Proceeding?
Allan Abbot Tuttle: It could file a complaint alleging that the rate is improper. And that’s only one remedy, Mr. Justice. It would seem that under the ordinary standards of the antitrust law that if an artificially -- if there is a price squeeze caused by a manufacturer artificially raising the rate to his wholesaler in order to squeeze wholesaler out of business retail business that would be a violation to antitrust clause.
John Paul Stevens: But would not the utility have a complete defense because both of those rates are compelled by regulatory agencies and then wouldn’t Parker against Brown apply?
Allan Abbot Tuttle: That’s a very interesting question. And my suggestion is that probably Parker against Brown would not govern. Parker against Brown, of course, you -- this Court knows and is currently considering the Detroit Edison case which will address the question of just exactly what the impact of a state-ordered rate would be. But my analysis would be that this case falls between -- somewhere between the Act of Sovereignty which is immune from the antitrust laws under Parker v. Brown. And the State allowed anticompetitive conduct which was held not to be a defense of the antitrust laws under the Goldfarb case because there’s no indication that there is any state policy here favoring an anticompetitive -- an artificially low and anticompetitive rate. And I think proof of that would be that the Arkansas Power has in fact filed rate increases since the beginning of these proceedings in Arkansas. And they have been processed and they have been granted. So, my judgment would be that there is no state policy here requiring this rate.
John Paul Stevens: Did you assume a situation in which the rate -- the state rate has been approved by the state agency? Isn’t that a sufficient expression of state policy?
Allan Abbot Tuttle: Well that -- if the state looks at the rate, you see, the way Arkansas works is more or less likely --
John Paul Stevens: I assume they don’t approve it without looking at it?
Allan Abbot Tuttle: Well, they do in this sense. That Arkansas is like the federal government. In that one files a rate and it can become effective under suspension with a posting of a bond before a ruling is made upon its justice and reasonableness. If it turns out that after a complete analysis of the state rate filing, the state determines that this is indeed a compensatory rate and one that they wish to impose and there remains a price squeeze, where the federal side has been through its process and determined that the wholesale rate is just and reasonable under federal standards. And the process has been completed on the state side and there is a state finding of justice and reasonableness on the state side. And they’re nonetheless remains a differential. That’s simply a fact of life. I don’t -- if it’s by hypothesis, there’s no violation of law.
John Paul Stevens: And it has no remedy then? And the answer is the plaintiff has no remedy -- or the intervenor has no remedy because I suppose they cannot look at the wholesale rate anymore than you can look at the retail rate.
Allan Abbot Tuttle: I would agree but only if the process has gone through the point of the state determining that this is indeed the rate that they think ought to be applied.
John Paul Stevens: Is the rate filed in investigation, they didn’t -- they let it go into effect. It’s the normal procedure.
Allan Abbot Tuttle: If the allegation were that it would simply went into effect without an investigation, it would seem to me that under the antitrust laws, that doctrine in Parker v. Brown would not create an immunity and one could perhaps achieve a remedy in federal court. Of course not all problems have remedies and not all problems with respect to this situation necessarily have remedies in the federal system. We have a responsibility to assure that the wholesale rate is just and reasonable. And the remedy for this discrimination if -- and the only thing it could be in my judgment is an artificially depressed retail rate lies with the state. That’s allowing that circumstance to obtain. And if the state doesn’t do it, it’s because they’re not doing their job, not because we’re not doing ours. We think that beyond the jurisdictional limitations that I've mentioned that the remedy suggested by the Court of Appeals is addressed to the wrong rate and in any event is an inadequate remedy. We’ve already discussed in my discussions with Justice Stevens the fact that a squeeze might arise in three ways, either from an inflated wholesale rate or depressed retail rate or something that was an end-product of analysis of both rates. And I have assumed that as the Court of Appeals did that the discrimination alleged here is caused or alleged to be caused by an artificially depressed retail rate. I make that assumption because as I’ve indicated, our ordinary standards of rate making would require us in the first instance to determine that the wholesale costs are not artificially inflated. And thus that knows price squeeze caused by artificially inflated wholesale rates could ever arise. So, the price squeeze if it exist at all, exist by a virtue of an artificially depressed retail rate; it’s our view that that of course is a rate of which we have no jurisdiction. That’s my first point that I wish to make with the court. But in any event, it seems to me that the ordinary federal standards of rate making would forbid us to remedy this discrimination by lowering the wholesale rate which is what the remedy that the Court of Appeals suggested and the remedy that Conway had suggested. Because the wholesale rate has to recover allocated wholesale costs and the relief that Conway suggests the reduction of the wholesale rate is not related to wholesale costs but it’s related to retail rates. This Court in the Shreveport case, in discussing circumstances where the court found the power to address the discrimination between the jurisdictional and a non-jurisdictional rate held that that situation cannot be remedied by sacrificing federal standards of ratemaking. And the court said and this is at 234 U.S. 355. “It is clear that in removing the injurious discrimination against interstate traffic arising from the relationship of the intrastate to the interstate rate, Congress is not bound to reduce the latter below what it may deem to be the proper standard. Thus our obligations are to assure a just and reasonable jurisdictional rate. And we’re not in the position and we’re not allowed under our ratemaking responsibilities to sacrifice that rate in order to remedy a discrimination caused by an anticompetitive non-jurisdictional rate.” The Court of Appeals suggested that this whole problem could -- of not being able to lower the wholesale rate might be avoided by reference to its concept of a zone of reasonable wholesale rates and suggested that we might reduce the wholesale rate to the lower range of the zone of reasonableness. And therefore, have some effect on the price squeeze situation. We don’t think that the -- that there is an adequate zone or a zone in a wholesale ratemaking which allows us to effectuate this kind of remedy. In setting rates, the Commission is required to set a rate which will assure adequate and reliable electric power at that least cost while maintaining the financial integrity of the utility. In setting that rate, the Commission does not locate a zone of reasonable rates and then select a rate within the zone. Rather, it attempts to find the just and reasonable rate. It evaluates items of cause such as plant investment, fuel cost, labor and management expenses, capital cost, depreciation and taxes. These are knowable, measurable figures. They can and should be precisely quantified. And their evaluation does not create a zone of reasonableness. The only zone of reasonableness that might be found in utility ratemaking is the range of potentially appropriate rates of return on that investment rate base, specifically, rate of return on common equity. But we don’t think that here is an appropriate place to make an adjustment because of allegations of anticompetitive conduct. The Commission must select a rate of return which is commensurate with the risk associated with investment which will maintain the existing investment which will attract new investment at a reasonable cost. And we think that it doesn’t make sense to select that rate on any other grounds than those criteria stated because of allegations of anticompetitive conduct. But our fundamental contention is that Justice Jackson was right when he said in the Colorado Interstate case, “The Act forbids discrimination only as between regulated rates and does not forbid discrimination between the regulated and unregulated ones.” And we don’t think that this conclusion creates a regulatory gap requiring the court to expand on the plain words of Section 205. I’ve already addressed the possibilities of remedy. But I also think it’s worth noting that price squeeze in an unlikely event in the nature of things. As I’ve indicated, the Commission’s ordinary rate making standards with respect to wholesale rates assure that there would be no artificially inflated wholesale rates. So that no price squeeze caused by such rates could arise. Moreover, in an industry where 80 to 90% of the business comes from retail revenues, it seems unlikely that a truly anticompetitive rate would be created or maintained on the retail side. Of course if it does, if this does happen, there is another remedy Mr. Justice Stevens I didn’t mentioned, Congress can expand upon the powers of the Commission. And in fact there are currently pending four separate bills addressed to Congress’ responsibility with respect to unfair methods of competition. Alternatively, of course as I’ve suggested, there may be remedies before the State Commission or remedies under the antitrust clause. Accordingly, I submit that the judgment of the Court of Appeals should be reversed.
Byron R. White: Mr. Tuttle, could I ask you? I note that Mr. Bork approved the filing of a petition by the Power Commission. Was this approval required by law?
Allan Abbot Tuttle: It is always been our custom to allow the Solicitor in the Justice Department to determine whether petitions would be filed with this Court. Our statute allows us to represent ourselves in any case in court. It makes no specific reference to the Supreme Court. Now, what happened here of course --
Byron R. White: Are you suggesting that the Solicitor General isn’t the authorized representative of Federal Power Commission in this Court?
Allan Abbot Tuttle: I'm saying that we have always construed our statute --
Byron R. White: (Voice overlap) that’s why I’m asking you.
Allan Abbot Tuttle: In essence, I'm saying yes he is the authorized representative.
Byron R. White: Well then I take it that it necessarily follows that the views in this brief are his views too?
Allan Abbot Tuttle: I think I have to say what happened in order to answer that question.
Byron R. White: Well, you can answer it yes or no?
Allan Abbot Tuttle: I can say that of course he has expressed no dissent to the views expressed in this brief.
Byron R. White: So, your answer is you don’t know?
Allan Abbot Tuttle: My answer is that I don’t know. I know that he knows --
Byron R. White: In any event, if he is required to represent the Federal Power Commission before this Court, we do not know whether we have his views or not?
Allan Abbot Tuttle: You have his authorized filing.
Byron R. White: Do we have his view? Do we know whether we have his views or not?
Allan Abbot Tuttle: I think that these are the views of the United States as authorized to be expressed by the Solicitor General. That’s the best answer I can give you.
Byron R. White: Well then the answer is I think we do not know whether we have his views or not. Now, does the organizational plan of the Department of Justice assign some responsibility within the department with respect to the Federal Power Commission petitions?
Allan Abbot Tuttle: It does. But a problem can arise.
Byron R. White: I understand that. Now, just let me ask you. Is there any evidence in these papers that you have filed here as to what the views of the Antitrust Division are?
Allan Abbot Tuttle: The evidence is that the Antitrust Division has not dissented and has made no filling of its own.
Byron R. White: Thank you.
Warren E. Burger: Mr. Tuttle, the supplement Mr. Justice White’s mentioned is -- does the law make the Solicitor General the exclusive representative of the Power Commission in this Court? Not authorize, the exclusive?
Byron R. White: I think that it does -- I think that it does, Mr. Chief Justice. I think that in circumstances where the Solicitor General wishes to, he may authorize an independent regulatory agency with litigating power such as our own to file our own petition which is what he did in this case.
Hugo L. Black: What is this supplemental memorandum for the United States?
Allan Abbot Tuttle: Supplemental memorandum?
Hugo L. Black: For the United States. The Solicitor General says this, speaking for the United States.
Allan Abbot Tuttle: I’m not sure what document you’re talking about. What case do we have?
Hugo L. Black: Which one have I got here? I must have the wrong case.
Allan Abbot Tuttle: There’s no filing in this case by the Solicitor General that I know of.
Hugo L. Black: I got the wrong one. [Laughter]
Warren E. Burger: Mr. McDiarmid.
Robert C. McDiarmid: Mr. Chief Justice, and if it please the Court. There is a serious question in this proceeding and it’s a good deal broader I think than the question as stated by the FPC. Looked at most broadly, I think it’s the question here is one of how the Federal Power Commission fixed into the picture of the societal control of basic economic structure of the society. It’s very plain that sales of electricity have been since the inception thereof regulated in one form or another either at common law as common carriers of public utilities at common law or by agencies set up by either states or federal government. The FPC’s position here is one of what I would characterized as being selective myopia. They’re looking at a particular portion of a particular section of a statute. I think misreading it. Without attempting to see how it fits into the structure at large or into this whole set of their statute. I have here and I hope I may be forbidden -- forgiving for saying so a sense of déjà vu. Three years ago, I stood here while the FPC was saying similar things in the Gulf States case. There it said that it didn’t have to worry about anticompetitive problems under Section 204 of the Federal Power Act because it could deal with such problems by treating the actual problems when they occur, the acts of the company rather than the financing. And that court -- that case is, well review was being had of a decision of the courts below here at the same court, also unanimous. In that case, the majority of this Court agreed that the FPC did have the responsibility to look at what had then claimed was non-jurisdictional problems, anticompetitive problems and to deal with it within the context of Section 204. The minority of this Court and a decision written by Mr. Justice Powell agreed that the Commission had the responsibility to deal with anticompetitive problems when the problem was presented to it in the course of a case where the conduct was being challenged such as ratemaking. We thought the FPC’s position at that time was something of a shell game and trying to find jurisdiction somewhere else without quite saying where it was and we think it’s similar here. The Conway Corporation is a corporation which was set up during the 1930’s in order to raise some money that couldn’t be raised under Arkansas law to bailout two colleges, Your Honor. It’s a city-owned corporation. It and the other eight customers here are all publicly-owned. Mr. Tuttle asserts that the problem here must somehow be one of discriminatorily low retail rates. We’ve stated at some length the problems that we see with the Federal Power Commission’s regulations and why that isn’t so. Perhaps, it stated best however by a amicus brief which we received I believe yesterday filed by Commonwealth Edison to which we’re happy to consent incidentally. As they pointed out there are at least a dozen methods, accepted methods of ratemaking, differential allocation, differential assumptions of rates. The FPC for example sets rates on the basis of estimates of cost, not actual cost but estimates of cost made by the company in advance -- a year in advance. Most State Commissions do not. Arkansas does not. The FPC may or may not be allowing various kinds of tax normalizations. That’s not too clear. There are lots of the things like this. They’re spelled out in some detail in our brief. But the fact of the matter is that it’s very easy for a power company to file a higher rate at the FPC. The FPC does not typically do anything with it in the near term future. And this rate was filed in 1973. Hearings are not completed. We’ve had three judges. One is retired. One has moved on to better things. And that’s not uncommon. Recently, the FPC decided a rate case which was filed in January in 1970 and they decided that in August of last year.
William H. Rehnquist: Well, of course your tactic here of appealing to the Court of Appeals on an interlocutory motion isn’t really designed to expedite the final decision of this sort of case, is it?
Robert C. McDiarmid: Oh, I think not, Your Honor. They find out that the case has been processed in this expeditious manner as we could. At the same time, as this was going ahead. I assure you we would like very much to get some money back. We’ve been paying all this time. What we contended originally was that there is a historic responsibility and a statutory responsibility the FPC to avoid discrimination. We said this was a discrimination case. As a discrimination case, there is a fast procedure for dealing with these matters. Not one where we are now paying the second pancake rate increase without any judgment as the first. The Arkansas Commission has had two findings on the two cases which have been filed there. They’ve cut them both down. What we said, this is a discrimination case. In a discrimination case you can go ahead very quickly. You can decide if there appears to be discrimination as it plainly does here. You can require the company to show cause. Why the discrimination should not be ended and ended there. Then you go on to have the rest of the hearing. Eliminate the discrimination if there is still a rate increase pending. Go ahead and hold the rest of the hearing on that. That we can survive. What we can't survive and this is not an uncommon problem. This problem has been raised at the FPC and probably a dozen cases since 1973. We cannot survive the situation where the company charges a much lower retail rate than its wholesale rate. Then I’ve taken into account the assumption that the cause of justification for the difference is taken into account.
Speaker: But that’s made the merits of your case?
Robert C. McDiarmid: Yes it is. But in this case, Your Honor, the Commission had decided that this was not a discrimination case. They would not deal with it. They would not allow us to collect information on it. They would not allow us to put on a case on it. They wouldn’t deal with it. And if the Commission is going -- if we are going to wait until after the Commission spends five years hearing the case, then go to court then spend the three years that this has taken, for example, to get that issue decided. Then go back. Nobody is going to be alive who’ll pay that and these clients of mine are going to be out of business. And there is a very real and very present problem, a serious one. Now, we pleaded here a discrimination in historic terms. We also pleaded the discrimination in price squeeze terms under the Sherman Act under the Alcoa, Southern Photo line of cases. The FPC concedes for this purpose -- the purpose of this case that that must be the basis upon which this decision is made. And I think in fact that’s -- we will have no problem proving it. But the Commission urges that it has no jurisdiction. I find it very difficult to follow its reading of the statute. One way in which the statute could easily have been written by Congress if it meant what the FPC said it meant. It’s if it had written at the same way as the FPC quoted it in its application for certiorari in this case, misquoted, just adding an S. The Commission isn’t claiming that anymore. But this is an element of a very historic kind of control. Originally, monopolies of this type were controlled by common law. The most common problem that arose at common law was when there was discrimination. And the courts found no problem in those cases in saying it is very simple, just end the discrimination. We don’t have to have worry about what the costs are and the discrimination raise both rates or lower them both. The Sherman Act provides for a remedy under the antitrust laws, trouble damage not simple damage. The Robinson-Patman Act, if it applies, would provide for a trouble damage remedy. Under Part I of the Federal Power Act or the Original Water Power Act of 1920 is very clear that the Federal Power Commission would have had jurisdiction to deal with this discrimination and this discrimination precisely if there were no State Commission. Arkansas Power and Light is a licensee of the nation’s water resources. Part I plainly makes the -- a licensee subject to the jurisdiction of the Federal Power Commission to avoid discrimination. And that jurisdiction terminates as to those matters for which a state provides a regulatory agency to deal but only as to those matters. The Commission and Arkansas say that there is no state agency to deal with this discrimination. And they say the Federal Power Commission can’t either. We think that’s wrong. Prior to 1927, when this Court decided the Attleboro case, it seemed clear that a State Commission could resolve this discrimination problem. In Attleboro, this Court decided that the so-called Attleboro gap existed that the States could not control sales at wholesale for resale. The Federal Power Commission was in 1935, it is part of the Public Utilities Act of 1935 given the responsibility to deal with the matters which had been left open by this court at Attleboro are opened. This Court has said in numerous occasions, most frequently FPC against Florida Power and Light, also in FPC against Southern California Edison that Congress intended fully to plug the so called Attleboro gap to fill that responsibility. But the FPC here says, no, they don’t. Mr. Tuttle’s position is sort of strange. I am not quite sure that I follow it. I understand him to say that the FPC has exclusive jurisdiction over wholesale rates. And therefore, I presume that he will argue that we cannot attack the wholesale rates as being part of a price squeeze if we go into antitrust court or where this is to go. The State Commission would undoubtedly urge at Parker against Brown applied, certainly if it applies to light bulbs it applies to rates. This Court has before the question whether it applies to light bulbs and how far it goes in the Detroit Edison case. But suppose we were good to go to court under the antitrust laws, the court would presumably award us damages and continuing damages to the extent of the discrimination. In substance therefore, we would be going the court to get the damages which the FPC could have awarded us because of the differential in rates, the discrimination. That seems a rather roundabout way and unnecessary burden upon the courts to do something which the FPC has the expertise to do. If the suggestion is that we should go to court and we get an order directing the company or the State Commission to raise the rates, then we are doing by interaction precisely what the people who objected to the original draft of Part II in 1935 objected to Judge Hooker from the State Corporation Commission in Virginia in 1935. Objected that, and it’s in our brief that if that language was not changed, the FPC would have the authority that the ICC had had to come into Virginia or any state and force it to raise the retail rates. And that was why I think the reading of the legislative history makes it quite clear that that’s why the amendments that were made were made to prevent the FPC from directly going in and requiring retail rates to be raised. Mr. Tuttle’s solution would apparently have us do that indirectly by a court order. There are constitutional problems with that as well but I don’t think we need to get into those. Some of the amici say we should go to the state agencies and ask them to raise their rates. There is indeed a standing problem. We have tried this for a couple of our clients in other cases and we have been thrown out. Indeed in the Arkansas case, some of our clients here attempted to intervene for limited purposes. And we’re allowed to intervene for very limited purposes, much more limited than what would be allowed. But the problem is we don’t think that the state agencies are wrong in the way they set rates. The FPC is prepared to allow much higher rates. They’re prepared to do it on a different basis. And the State Commission said he’s believed that they have a responsibility to their citizens as well and to other citizens. And we don’t believe it’s our responsibility. We don’t believe it’s right to go to court and say, Arkansas Power and Light raise your retail rates. We have no problem with the way the Arkansas Public Service Commission is setting those rates. Our problem is with the FPC. The FPC suggests that there is a magic to the way it sets wholesale rates. But that’s easily answered. If there were as there are in some instances two wholesale rates, one by Arkansas Power and Light to an affiliate which then sold at retail and the area where it sells and one to us. The FPC would have no problem with saying lower the higher rate or raise them both and the discrimination and then set a just and reasonable rate. But end the discrimination first. In this case, they say, well, somehow or another, there is a magic to the way we set a just and reasonable rate. And we’ll get to it five or six years down the road and you’ll then be saved, maybe. But we won’t do anything about the discrimination. That’s not a satisfactory answer or we don’t find it a satisfactory answer. The FPC was set up to fill the Attleboro gap not to reopen it. Before the Attleboro decision, we wouldn’t have had the discrimination problem. Nowhere in the legislative history is there any suggestion that it was intended to reopen this kind of a gap to leave us hanging out there exposed to the worse kind of discrimination.
Speaker: The gap? I thought the gap was a power over wholesale rates?
Robert C. McDiarmid: Indeed, Your Honor. The gap is --
Speaker: And that gap was closed by Part II.
Robert C. McDiarmid: Was it? If it was closed, Your Honor, where is our protection against discrimination?
Speaker: Well, you got protection against unreasonable wholesale rates.
Robert C. McDiarmid: We have protection against what the FPC decides. Our unreasonable wholesale rate after the FPC finally decides it five years down the road.
Speaker: Well, --
Robert C. McDiarmid: If we’re still around.
Speaker: That’s their job.
Robert C. McDiarmid: It may be their job, Your Honor. But we say that before the gap was open, we had protection against discrimination in the interim while people were deciding what the reasonable wholesale or retail rate was. After that decision, we didn’t unless we go to court. The FPC seems to say -- plainly says, that they can't give us their protection.
Speaker: Well the lack of protection against discrimination you suggest was part of the so-called gap?
Robert C. McDiarmid: Yes, Your Honor. When the gap was opened, prior to the time the gap was opened all such sales were thought by most states to be regulated by them. I don’t know of any state agency that does not have a discrimination provision in its charter. And that’s the very element, the very basic element of regulation of utility rates or indeed or anything else in the kind of required monopoly service in this society.
Speaker: By the way, if you were going to try to seek an antitrust remedy, what antitrust law would you think might be relevant?
Robert C. McDiarmid: Sherman 2, I would think.
Speaker: Attempt to monopolize -- a monopolization attempt?
Robert C. McDiarmid: Yes, sir.
Speaker: And what’s your objection to attempting that route?
Robert C. McDiarmid: Our objection to attempting that route -- our only real objection to attempting that route, Your Honor is, are two.
Speaker: Parker against Brown would be one.
Robert C. McDiarmid: Parker against, well, the first question is can it be done. And there you have the Montana Dakota Utilities Case which this Court decided in 1947, I think. Seems to say that as to a FPC rate, the only place you can show unto that is at the FPC.
Speaker: Well, on reasonableness?
Robert C. McDiarmid: No, Your Honor. I don’t know possibly. I certainly don’t want to preclude that possibility in off shares that we lose. [Laughter] Obviously, we would have to try that. The other problem is Parker against Brown. But in substance, what you would be doing is you have to go back into the cost justification, exactly the same kinds of sticky problems that --
Speaker: Well, Parker against Brown isn’t going to embody of your attacking a wholesale rate.
Robert C. McDiarmid: That’s right, Your Honor.
Speaker: Well, don’t worry about it then.
Robert C. McDiarmid: Okay.
Speaker: And what about the especially if the FPC claims it has no authority whatsoever.
Robert C. McDiarmid: I don’t understand that to be saying that quite, Your Honor. They’ve said a very carefully phrased thing. They have said in a footnote to their main brief that they have exclusive authority over wholesale rates. But that we can go sue about the low retail rates which they hypothesized.
Speaker: But this aspect of a wholesale rate, whether it’s discriminatory or not, they say they have not authority.
Robert C. McDiarmid: They certainly say they have no authority over it.
Speaker: Well, they certainly have that. So the Parker against Brown which is only talking about state authority anyway doesn’t worry -- it wouldn’t bother you very much with the Sherman 2, would it?
Robert C. McDiarmid: No, not if the --
Speaker: That might bother a court though?
Robert C. McDiarmid: It might. Not if the primary question is the wholesale issue and this Court made clear that the wholesale problem is not precluded. Second problem, however, is one of costs. Now, I do not suggest for one minute that FPC proceedings are cheap.
Speaker: Or fast.
Robert C. McDiarmid: Or fast. Neither, however, are Sherman 2 cases. Now, Arkansas Power and Light in its current filing claims something like $80,000.00 in regulatory expenses for the year which they want us to pay of course for their wholesale case. Now we have to pay that and the FPC will charge it to us. There are other things probably in there too. In companies that break it out entirely as regulatory expense, I’ve seen it as high as 500,000 a year. Intervenors have to spend money too, not quite at that rate. Thank God! But they’re still expensive. But they aren’t as expensive as trouble damage cases. The other problem I think is really one of the proper functions for the courts. As I was beginning to say the States and the federal government found beginning with the actual rate to regulate commerce in the 1890’s that regulation by court are rather technical and detailed and long, problems with cost justification. We’re taking an awful lot of time or not something with which the courts had or wanted in any particular expertise. The Arkansas Power and Light Case on cost justification is now on 30 days, I guess, of hearing. Some of them had gone as long as 70 at the FPC and they -- not inappropriate questions. That’s not a kind of burden I would want to see imposed on the court system. At the rate that the problems are piling up at the FPC which does have the expertise whatever else it does or doesn’t have, I think it is plain that we would put in a tremendous burden upon the District Court System in one which I don’t think very many district judges would like to bear or should be asked to bear. Your Honor, it’s a very serious problem. I -- we think there’s an easy answer to it. It’s the answer that the Court of Appeals below gave, we don’t think in its entirety. I’m not -- in traditional discrimination terms, the range of reasonableness whatever it may be is not the whole answer. The FPC claims there is no range of reasonableness. My colleague just handed me a case where the FPC said there is a range of reasonableness, we’re picking the higher range, a higher into the range just after Conway came down. The FPC is the place that has the authority to deal with it. It’s a place set up to deal with it, can deal with it fairly rapidly on the traditional kind of discrimination basis. We ask you, Your Honor, to close the gap the FPC wishes to open which we thought was closed in 1935. Thank you.
Warren E. Burger: Thank you gentlemen. The case is submitted.