Earl Warren: Perma Life Mufflers, Incorporated, et al., petitioners versus International Parts Corporation, et al. Mr. Rolnick, you may continue with your argument.
Robert F. Rolnick: Mr. Chief Justice and may it please the Court. At the time of the recess yesterday, I was at the point where I had described how the respondents had originated their franchise program and formulated a franchise agreement. Pursuant to the terms of which, franchisees were required to maintain resale prices, purchased type products, deal exclusively with the franchisor and indeed it also provided that they were subject to certain other territorial restraints. These provisions were backed up by a 30-day cancellation provision. During the life of the franchisers in question, the franchisor enforced the terms of these agreements rigorously. The details of that enforcement are set forth in our appendix beginning at page 175. Indeed, the enforcement was so rigorous that the respondents terminated one of the petitioners herein after a series of warnings to him that he was not purchasing tail pipes, exhaust pipes and clamps which they sold from Midas, but was rather -- was instead purchasing them from competitors who offered these parts for sale and prices which were substantially below the prices at which respondent sold these products. Indeed, during the course of those warnings, there was a colloquy between one of the principal officers of the respondents and this petitioner in which the principal officer said, “You know, your franchise is like a marriage. This is like cheating on your wife and it is grounds for divorce,” referring to the fact that he had purchase from outside sources. Following this termination, this petitioner, joined by the three other petitioners, initiated this action under Section 4 of the Clayton Act in United States District Court for the Eastern District of Illinois, Northern Division. In that action, the petitioners alleged that they were injured as a result of having been compelled to adhere and adhere strictly to the restrictive provisions in these agreements. They alleged that these restrictive provisions represented violations of Section 1 of the Sherman Act and Section 3 of the Clayton Act. We submit that it was the plainest kind of error for the District Court to dismiss on a motion for summary judgment, this action which had been brought by these petitioners. The District Court applied the doctrine of in pari delicto, the doctrine that these petitioners were at equal fault. We believe that under the circumstances of this case, the in pari delicto doctrine is not applicable and indeed, we submit that the in pari delicto doctrine is not applicable to any action brought under Section 4 of the Clayton Act. The doctrine is not applicable to the facts in this case when it is examined in light of the restrictions which the respondents imposed. These restrictions were of no benefit to the respondents -- to the petitioners. They were in fact of sole benefit, sole and exclusive benefit to the respondents. It is difficult to imagine for example how the petitioners could have profited or benefited from the fact that they were forced, forced to pay more for parts which they purchased from the respondents and they would have paid -- had they purchased these parts from respondents competitors.
Potter Stewart: Of the exclusive territories where some interest of -- some benefit of the petitioners, were they not?
Robert F. Rolnick: The exclusive territories were of benefit to the extent that they authorized the petitioner to sell the respondents’ nationally advertised muffler.
Potter Stewart: No competition in that territory?
Robert F. Rolnick: With no competition in that territory. On the other hand, in meeting out the territories, what the respondents did was limit the area within which the petitioner could sell this Midas muffler. Now, one has to remember that these Midas mufflers were purchased by the petitioner and that this limitation on territory represented an alienation on the restraint -- an alienation restraining the territory within which these petitioners could sell merchandise which they had in fact purchased and paid for.
Potter Stewart: So it goes the alleged antitrust violation. I was simply directing myself to your statement that none of these things were of any benefit to the petitioners.
Robert F. Rolnick: The purchase of the muffler was a benefit. The right to sell the muffler was a benefit and I believe that was independent of the territorial restriction. It was the muffler which we chose to sell. It was the muffler which carry with it the national advertising and the consumer demand which in fact made it pre-sold and it was this that we chose to sell. The territory happened to be something which was of benefit to the respondents because they limited the area, and by limiting the area could presumably have more franchisees.
Speaker: Profitable franchisers?
Robert F. Rolnick: These franchisers were very profitable franchises. They could have been and would have been much more profitable had they not been subjected to the exclusive dealing, tying and place fixing restraints. The profit was derived independently of the restraints. The profit did not arise out of the restraint. The profit arose exclusively out of the sale of the Midas muffler which is I say, carried a very unique guarantee and a vast amount of national advertising.
Abe Fortas: Suppose one of these petitioners decided to go under the automobile muffler business that he have a realistic economic choice between entering into this franchise arrangement with Perma Life or whatever the name of this --
Robert F. Rolnick: Midas.
Abe Fortas: -- Midas or entering into an arrangement with other suppliers?
Robert F. Rolnick: At that time he entered -- these particular petitioners entered into these franchise agreement, there was no other franchise system which had been developed for sale of mufflers.
Abe Fortas: Well, I think I’d like you to broaden your answer to the question whether or not it involved the franchise arrangement. Was there some other way in which a petitioner who felt a call to enter the muffler business could enter the muffler business in his locality without entering into this franchise arrangement with Midas?
Robert F. Rolnick: There is no question about the fact that any particular petitioner could have entered into the retail sale and installation of mufflers without entering into a franchise arrangement which the respondents offered. On the other hand --
Abe Fortas: He would have had adequate supplies available to him on a competitive basis that would enable him to upgrade in the marketplace.
Robert F. Rolnick: He would have had the opportunity to operate in the marketplace but he would not have had a nationally advertised muffler with a unique lifetime guarantee which was -- which -- under which the purchaser could replace that muffler anywhere in the United States.
Abe Fortas: I remember seeing somewhere in the briefs that Midas was about a number of what was it, four or five?
Robert F. Rolnick: Number 5.
Abe Fortas: Number 5 in the share of market?
Robert F. Rolnick: They had 11% of the market.
Abe Fortas: So that there were four companies that were bigger in terms of manufacture and supply of mufflers to the retailers?
Robert F. Rolnick: They were, and this isn’t in the record, there were four other companies; two or three of which were approximately the size of Midas or a little larger, one of which was substantially much larger with 40% or 50% of the market. None of these companies, however, had the type of guarantee which these respondents offered and it was the romance of this guarantee which was advertised on a national scale with over $3.5 million worth of national advertising which created the demand which made this a profitable franchise. Without this advertising and without this guarantee, I doubt and doubt very seriously whether anyone could have entered this business and profited from it. There is one more point I --
Abe Fortas: Well, while the other companies must have sold their mufflers to somebody?
Robert F. Rolnick: The other companies sell their mufflers to automobile dealers, to gasoline stations and that type of thing -- that type buyer -- few of any of them sold them to exclusively muffler installation shops. This was the concept and this was the concept which respondents developed through national advertising.
Abe Fortas: I’m sure you see what’s bothering me that is assuming that in pari delicto has a role, a significant role in this field, if you make that assumption and there is a next question I think which is whether in determining in a particular case the retailers in pari delicto whether he had available to him an alternative or whether because of the economic power of the franchiser, he had no alternative except to enter into this particular agreement. I’m not saying that that’s a controlling consideration, but to my mind, it has a bearing from the resolution of the problem.
Robert F. Rolnick: Well, I think that the answer to that question consists of a multiplicity of factors, one of which is that this again is the one that had the national advertising. The other factor, I think, is the position that we take that the restrictive provisions in this agreement were not essential to the franchise and to the franchise concept. Indeed they had nothing to do with the franchise concept. These restrictive provisions were solely for the benefit of the respondents so that the respondents could feather their own nest so to speak.
Abe Fortas: Now, what’s that got to do with pari delicto?
Robert F. Rolnick: Well, I think it has this to do with pari delicto and that is that in as much as the petitioners had nothing at all to do with the formulation of his program, they cannot be considered equally a fault by having done no more than accept the program which the respondent espoused.
Abe Fortas: You would confine pari delicto to situations where there’s so to speak a partnership with respect to the --
Robert F. Rolnick: A formulation.
Abe Fortas: -- illegal restraints?
Robert F. Rolnick: I would -- if there is a pari delicto doctrine applicable to this kind of action, I would find it to a true co-conspiracy case where the conspirators divided up the market amongst themselves. Thank you.
Earl Warren: Mr. McGee?
Glenn W. McGee: Mr. Chief Justice and may it please the Court. The issue before us this morning is really a narrow issue, but it is not quite as narrow as my brother, Mr. Rolnick implied yesterday. The court below did not hold that simply by the execution of these franchise arrangements that the plaintiffs became in pari delicto. In the opinion, a portion of which we have set out at page 23 of our brief, the Court specifically states the factors which to it rendered these plaintiffs in pari delicto. In addition to the initial entering into the agreement, the Court says, “Each plaintiff thereafter eagerly sought additional shops. Furthermore, each plaintiff cooperated with the defendants and all other Midas dealers in the conduct which plaintiffs now assert was illegal. Each plaintiff accepted the benefits arising out of the franchise agreements.
Byron R. White: You suggest that the -- that the franchisee benefited from the restrictions which they have now objected to?
Glenn W. McGee: Mr. Justice White, it is our position that this entire franchise concept which was created by the defendants and in which the plaintiffs joined by its very nature carried with it certain restrictions and that these restrictions in turn created additional restrictions so that each of the parties --
Byron R. White: Let’s assume for the moment that these were not found below, but assume for the moment that these restrictions have violated the Sherman Act. I suppose they were for the benefit of at least the Midas?
Glenn W. McGee: Mr. Justice White, we think they were for the benefit of both Midas and the dealer.
Byron R. White: Well, show me how they benefited the dealers that this exclusion from purchasing from others for example?
Glenn W. McGee: The Midas concept was that specialization in exhaust system parts backed by national advertising would bring in to the point of shops people who were never before had been conscious of automotive exhaust systems. This emphasis on exclusivity, this advertising by the plaintiffs and by the defendants of the advantages or specialization --
Byron R. White: But why wouldn’t it -- they will be wholly consistent with that for a franchisee to be able to purchase a similar part or a similar system from the competitor and also a specialist.
Glenn W. McGee: The concept envisioned that the Midas trade and service marks which each plaintiff displayed in his place of business would be part of the attraction of this whole arrangement. That the plaintiffs in exchange for Midas giving up the right to sell the muffler to other dealers in their territory would concentrate on Midas. That the dealers, being protected from intra-brand competition of course would have to prohibit wholesale sellers among the dealers in order to be sure of that protection from competition.
Byron R. White: But I suppose the government -- would you concede or not that the government could have gotten an injunction against this agreement?
Glenn W. McGee: Mr. Justice White, we have to realize that we are talking in this case about 1955 and not 1968. And certainly in 1968, we are not upholding the legality of the provisions of this franchise agreement. We have assumed that for purposes of this motion that the arrangement was illegal.
Byron R. White: Now what if a franchisee comes to Midas and says, “Look, we find this profitable arrangement. The Midas has a good, very good product and we can make money on it, lots of money even by living up to this provision, but we don’t like them. And we want to be able to buy a competing system and have Midas on one side of the shop and XYZ on the other side and we’ll advertise both and both companies are going to advertise” and that the Midas says “Sorry, no. You might make more money that way, but you’re either with us 100% or not at all”.
Glenn W. McGee: Well, Mr. Justice White --
Byron R. White: Do you say then that in pari delicto would still apply if the --
Glenn W. McGee: No, I -- well, we would --
Byron R. White: If the franchisee said, “Well, if that’s the way it is. I’d rather have you this way than not at all”.
Glenn W. McGee: No, it isn’t Mr. Justice White. We wouldn’t say that in pari delicto would apply to that case. We say, our position in our Brief that the three circumstances have to coincide before there’s pari delicto. There has to be a voluntary arrangement containing certain restrictions on both parties which entered into in the expectation of profit. They have to participate in that arrangement --
Byron R. White: But it was such a loaded word, that “voluntary” but --
Glenn W. McGee: We concede that, they have to enter into that arrangement and they have to accept the benefits from the arrangement. Then, there comes a disagreement and a falling out and one sues the other on the basis that the arrangement was illegal and claiming that he might have made more profits if he had not been subject to those restrictions in the first place. And we say that only then, only in the circumstances really of this case does pari delicto apply. You have to have full and voluntary participation. It’s not enough that they merely enter into an agreement or consent to these restrictions of which you’re speaking. They have to cooperate, they have to work with them and they have to profit from them.
Byron R. White: Well, you don’t think it’s essential to where in pari delicto to apply that it would be shown that the person who is suing benefited himself from the restrictions which he is now objecting to.
Glenn W. McGee: We don’t think that’s essential, but we think that (Voice Overlap) happened here.
Byron R. White: In Balance do you think it’s enough if it’s just shown that he made a profit out of the whole arrangement?
Glenn W. McGee: Yes, sir.
Byron R. White: Even if it was not to his economic benefit to live up to the restriction?
Glenn W. McGee: We say that it had to be that as economic benefit to live up to the restrictions because rightly or wrongly, no matter what they thought, all of these restrictions were in equitably, interwoven in the program from which they obtained profit. And who can tell whether or not they would’ve obtained profit absent one or more of these restrictions. And it is the fact that --
Byron R. White: Well, that’s a matter -- that might be a matter of proof on damages but I don’t know why should it be in pari delicto, why should they be precluded from proving that by a defense like this?
Glenn W. McGee: Because they did give up these rights voluntarily to accept the benefits of the entire program. If they wanted to renounce, they should renounce the whole program or if they perhaps if they had come to the defendants in the way that Your Honor described, we would not be here today, but the point is that they didn’t. That in this particular case, these particular plaintiffs terminated Midas. We did not terminate them. What they wanted was not relief from these restrictions. What these plaintiffs wanted was still more franchise agreements. They wanted still more exclusive territories.
Byron R. White: Will you, in a word, then you say that in pari delicto -- pari delicto applies even though a plaintiff can show that he would have made more money absent to these restrictions with them, but that he certainly voluntarily went along with the scheme because he could still make a pretty good profit with restrictions. You think that’s part of the suit on those facts?
Glenn W. McGee: On the facts that he could -- he thinks he could show that he could make more money absent the restriction.
Byron R. White: But if I have to make a choice which I obviously do, I’m going to do -- live up to this restriction.
Glenn W. McGee: Well, let me say in this case that that they did make that choice when they terminated Midas. They went into a program sponsored by Midas competitors. That program did not contain these allegedly illegal restrictions. That program gave them the exclusive territories for the whole State of Michigan for one, for all of Washington D.C. for another and that program did not prove successful and it was only then that they brought the suit.
Byron R. White: That might be a matter of proof as to -- but what about the defense on those facts?
Glenn W. McGee: The defense that they could have made more money elsewhere?
Byron R. White: The defense in pari delicto that they participated in the scheme itself.
Glenn W. McGee: I think it’s enough. If they participated in a scheme if they accepted the benefits if they later renounce and sued claiming that they could have made more, but that’s enough to apply in pari delicto irrespective of what the proof might have been as to what they could have done elsewhere.
Byron R. White: So you have to make your objection known and then all you can sue for later is what happens to you after that objection.
Glenn W. McGee: I don’t -- I didn’t quite comprehend your question Mr. Justice White.
Byron R. White: Well, a while ago I thought you’ve said that if the franchisee makes his objection known to the -- to Midas, he had made his objection known to Midas and said “I could make more money without these restrictions but if you insist, I will stick with it.” You wouldn't insist on in pari -- you said you wouldn’t be here on that?
Glenn W. McGee: I said there is possibility that we wouldn’t be here because that is not the facts that we have that what their -- these plaintiffs’ particular objections were directed to were not the restrictions but the fact that we didn’t give them even more territories. Their complaint, paragraph 22m, specifically says that one of the plaintiffs’ claims for damages is that these defendants refused the repeated request of the plaintiffs for additional franchises. It was not the restrictions to which they were objecting.
Abe Fortas: As I read your brief, I would call your attention to Simpson against Union Oil Company. As I read your brief you distinguished that case solely on the grounds that in pari delicto as such was not discussed in this Court’s opinion. Simpson against Union Oil Company did deal with the question of whether the plaintiff was barred triple damage action by a consent. There was a franchise arrangement, was it not?
Glenn W. McGee: Yes, Mr. Justice Fortas.
Abe Fortas: Now forgetting about the technical point as to whether in pari delicto was adjudicated, is there a material difference in the basic factual situation in your mind between Simpson and your case?
Glenn W. McGee: We think that there is both a factual and a legal distinction of Simpson. Certainly on the legal grounds there, there was purely consent and passive acceptance by Simpson of the terms imposed by Union Oil Company. There was not the participation which we have shown here by Simpson in the terms of his agreement with Union Oil.
Abe Fortas: I don’t understand that. What participation?
Glenn W. McGee: We have set forth in our brief in some detail the testimony of the plaintiff, Mr. Max Ross who explained that these dealers, as members of the National Advisory Counsel, which were the top ten Midas dealers, and in regional and national dealer meetings as the elder statesman of this group in counseling dealers, discussed all aspects of this program. Mr. Ross specifically said that these were very comprehensive discussions lasting from morning to night.
Abe Fortas: Alright, you say in number one, the point of distinction is that in the present case, the franchisees did participate in the discussion or something of the sort of the terms of the arrangement. What’s the other distinction?
Glenn W. McGee: In more than just the terms in developing the entire concept and how it would work. As the other distinction is concerned that there of course factually the Oil Company had terminated the dealer. The dealer did not terminate the franchisor.
Abe Fortas: And that happened in one of the cases before us?
Glenn W. McGee: In this case, Mr. Pierce first terminated a franchise Adamira and later on we followed up with terminations of the rest of his franchise although he initiated the first one --
Abe Fortas: What difference does that make, to be terminated?
Glenn W. McGee: Actually, it makes a difference only and that it shows that these plaintiffs were not subject to the restrictions. It wasn’t the restrictions which really decided the issue. They were voluntarily getting rid of Midas. They thought they could earn more in another program. Now in addition, of course, the comparison in size and equality of bargaining power between a corner gas station and Union Oil Company and these plaintiffs and Midas, which at the time we’re talking about, were selling $5 million in total sales, not Midas but in total sales, simply doesn’t match up. There’s too much power in the hands of Union Oil and the Court rightly said there that this implied a certain lack of freedom to deal on the part of the dealer. Whereas here, I think we have shown that they all were not -- may be not of equal bargaining power but certainly capable of bargaining for themselves and which is also shown by the fact that they terminated us rather than our terminating them.
Abe Fortas: And those are the three points of distinction and any others between this case and Simpson against Union Oil?
Glenn W. McGee: I think that the fact that in Union Oil and Simpson and all the gas station cases, the dealer there is tied to the oil company, to the supplier by a lease of real state or equipment so that when either the real state lease is terminated or the sales agreement is terminated, that dealer is out of business. He has no choice. Whereas in our case, there is no lease of real state; there is no lease of equipment. And as shown here, the dealers did continue in business from the same exact places selling mufflers and other additional products in competition with Midas which certainly didn’t happen in Simpson.
Byron R. White: Well, if the franchisee had simply violated the exclusive dealing condition of the franchise and it simply bought from a competitor and sold the competitors goods along with Midas and Midas had terminated the franchise at that time for violation of the exclusive dealing provision, would you still have the same argument?
Glenn W. McGee: If the dealer, if you’re talking about one of these plaintiffs and that were the only circumstance, I think that it would be irrelevant to pari -- in pari delicto as to the reason for its termination.
Byron R. White: You don’t think Simpson would even apply then?
Glenn W. McGee: Pardon me, sir?
Byron R. White: You don’t think Simpson would apply then?
Glenn W. McGee: Well, Simpson, Mr. Justice White, was the mere passive acceptance by that plaintiff, by that dealer of the conditions laid down. That is not the fact here. That is not the case here. Mr. Ross explained how they discussed these things from morning to night, how this thing was a program, a society, an affiliation and how it was a group of people with a common interest in mind and that all of them worked together to develop this concept. They all thought again, rightly or wrongly, that exclusive dealing was necessary. It is not much different from the situation which the Court faced in United States versus General Motors in the Los Angeles situation where there, it was the dealers who initiated the Boycott against the sales to discounters and the Court there said that this amounted to a horizontal conspiracy among the dealers and the company so that if you followed it to its logical conclusion, General Motors would be able to sue the dealers for that violation. I don’t think that the Court would want to come to that result and yet in pari delicto, it doesn’t apply in this case. In an antitrust cases, the result is reached not only in General Motors, but that any two horizontal price fixers, competitors -- each of whom gives up his right to fix his prices in the expectation that the group action will prove profitable, but sue the other because the other does not comply with the agreement.
Byron R. White: You mean like the franchisee could sue Midas here for -- if it happened to sell to somebody else in the exclusive territory?
Glenn W. McGee: No, what I mean is that if the franchisee here can sue Midas for the exclusive arrangement, then Midas can sue the dealer for keeping him -- for not allowing Midas to put other dealers in that territory and I don’t think that that either makes more effective law enforcement or makes much sense economically or judicially. We think that it is clear that the application of the in pari delicto defense here will further the policies of the antitrust laws. Petitioners have urged that affirmance to the Court of Appeals would mean that the Court has legitimate ties to immunize franchisees. But that is not at all so. That is not our position; we know that is not the law. The true victim, the true person who enters into these contracts solely because it’s the only one available, still has the right under Simpson and under the other coercion cases. But when they have participated to the extent they have participated here, when they have asked for additional franchises, when they have met and decided on such parts of the program as prevention of wholesale sales. When, as Mr. Ross said, “It’s a society, it’s a group”, then you don’t have that situation. And we think that those people who participate actively in these violations should also be precluded from suing under the antitrust laws. It was not the mere execution of the franchise arrangement which rendered the plaintiffs in pari delicto here. Petitioners own authorities recognize that there is a place for in pari delicto in the antitrust laws. The authors of both the law review articles which the petitioners cite in both of their briefs indicate that in pari delicto should be retained as a defense against Section 4 actions in order to discourage persons from participating in illegal activities. Denying the defense will encourage them to remain in these illegal arrangements and to enter into them in the expectation that if the thing doesn’t work out, they might secure treble damages. Way back in 1899, this Court explained in McMillan v. Hoffman that if parties’ two illegal arrangements recognize that one may enter into them, they place themselves outside the protection of the law, the less inclined will they be to enter into such arrangements. And in that way, the public will secure rigid adherence to the law. I would also like to point out that the facts here --
Byron R. White: I suppose you would argue then on -- on the basis here that if a competitor sued, one Midas competitor sued, he should be able to sue both Midas and the franchisees as co-conspirator?
Glenn W. McGee: We say that for purposes of in pari delicto that the dealer amounts to a co-conspirator. The determination of a substantive liability in a conspiracy case by a competitor is not within the purview of our contention here, Mr. Justice White.
Byron R. White: You don’t think he has -- you wouldn’t think you would have to attain the status of a co-conspirator to -- before he was barred by pari delicto.
Glenn W. McGee: No, we say that he has to meet those three requirements. He has to voluntarily participate, actively promote and accept the benefits and then sue alleging that it was illegal and that he might have done better elsewhere, only under those circumstances will in pari delicto apply.
Potter Stewart: I don’t see why he wouldn’t be a co-conspirator as a defendant in a suit by a plaintiff competitor of Midas but that’s not your case?
Glenn W. McGee: No, but certainly the facts here and to me at least indicate that these plaintiffs would have mean as much a co-conspirator as were the gear defendants in General Motors in the Los Angeles Boycott case. So that extent, Mr. Justice White, yes I think that they could be properly joined if I were suing Midas as a competitor of Midas. And after all, it is the public which is damaged by Section 3 and that the public has been damaged as much by the action of the dealer as the supplier, certainly the dealer should be held responsible. As to our alternative defense, the fact that the petitioners here also maintain that we should be precluded from establishing that we were a single traitor. Here, all the corporate defendants were owned by Nathan and Gordon Sherman; each of the individual defendants operated only in it's corporate capacity. There was no holding out of separate corporations. Midas did not sell any goods or hire any people. This was not the same as the keeper-steward situation where there were separate divisions, separate executives who dealt separately with the plaintiffs. This was purely a single unit, a small family owned business. And before I sit down, I should like to report, Mr. Justice Fortas, in response to your question to Mr. Rolnick that the figures which he is relying on here are contained in an antitrust complaint filed by the United States against one of Midas’ competitors and that those figures indicate sales, total sales of automotive exhaust products in the United States of sum of $160 million. In 1955, Midas’ total sales or international parts total sales, not just Midas sales were some $5 million which means that most we were around 3% of the market. His complaint alleges that we tripled our sales from 1955 to the time that this case was decided and I also think that it’s important that that case refers to the fact that the manufacturers of passenger automobile such as General Motors, Ford, Chrysler and Studebaker are in this business, are particularly in the installation business. And although it doesn’t reveal any figures in that complaint for what they have sold or what their dealers sold, saying that they get their mufflers from some of Midas’ competitors, I think that the fact that these large companies are in this business, makes clear that what we’re trying to do is enable ourselves to compete with this new concept and with this new idea.
Abe Fortas: You mean those figures don’t cover all replacement mufflers and exhaust systems?
Glenn W. McGee: Frankly, I’m not sure. I think what they do is, they are the manufacturing figures of the companies that they say comprise the industry, but they don’t at all purport to deal with figures for installation sales.
Abe Fortas: Oh well, the question is whether General Motors and Ford and so on buy at least replacement mufflers from these companies, the sales which included in those figures?
Glenn W. McGee: I can’t answer that and I can answer from the complaint which of course is not in the record. Finally, we think that the case is right for summary judgment. We don’t believe that they have raised any issue as to any material fact in accordance with the requirements of section -- of Rule 51e. We filed an Affidavit which was consisted solely of their testimony in the court below. And we filed an Affidavit of the Shamans, which was not contradicted. Throughout the proceedings below, they did not challenge the statement in our appendix summarizing the plaintiffs’ testimony nor did they challenge the Sherman Affidavit. These counsels thoroughly, familiar with both the rules on the facts by assertions have said that there are factual issues. But here again, in the briefs before this Court, there are no citations to the record. There are no indications of true evidence with respect to the issues which they attempt to raise respecting coercion, Mr. Pierce’s termination and our conspiracy. By their motion to the District Court to secure additional discovery only on the matter of trademarks, they recognized that everything necessary for this decision was before the District Court and the Court’s decision should be affirmed. Thank you.
Earl Warren: Mr. Rolnick?
Robert F. Rolnick: The statement was made earlier that these petitioners cooperated with the respondents and the enforcement or in the publication of these restrictive arrangements. Now, this just isn’t so. It is inaccurate and the record doesn’t bear that out. The record is plain, absolutely plain that these petitioners were coerced into buying exclusively from the respondents. At page 194 in the record, there is a --
Byron R. White: Coerced into accepting exclusive territories?
Robert F. Rolnick: They were offered the franchise which contained an exclusive territory and they had the freedom either to accept the exclusive territory as it was proposed or reject it.
Byron R. White: You are not suggesting that this exclusive territory was not of benefit to --
Robert F. Rolnick: The exclusive territory was a benefit. The limitation upon the exclusive territory was a detriment. The right to sell this muffler per se was a benefit because it carried with it again national advertising but the restriction (Voice Overlap).
Byron R. White: But it wasn’t going to have any Midas competition in its own territory?
Robert F. Rolnick: That is absolutely true Your Honor, but the territory which was granted was restricted and this restriction on the territory which constituted the detriment.
Byron R. White: What will be your damage claim if this case is reversed? Now what would you claim damages from?
Robert F. Rolnick: I will claim damages from the price fixing, exclusive dealing, the tying and if we can prove damages from the territorial arrangement, we will allege damages with respect to that too, but our primary claims are based on exclusive dealing, tying and place fixing.
Byron R. White: Well, I suppose Midas could sensibly ask you to the damages for restricting them from selling in your territory?
Robert F. Rolnick: It possibly could but they haven’t done so. There was a reference in argument to the fact that we cooperated in formulating this plan and the reference was to a National Advisory Council. I want to point out that this National Advisory Council was created 22 months, 22 months after. This franchise agreement was offered and accepted by any of the petitioners here and at the time that franchise agreement was accepted -- the time it was accepted, these very restrictions were in the agreement. That National Advisory Council didn’t discuss the restrictions that were in this agreement. They didn’t promulgate these restrictions. What the National Advisory Council discussed and what the record shows they discussed was how to increase your sales? What kind of advertising to use? What kind of people to employ? They didn’t discuss whether we should buy exclusively from Midas. They didn’t discuss whether we should maintain prices fixed by Midas. They discussed the plain everyday operation of the Midas Muffler Shop. Now, there was a reference, Mr. Justice Fortas, to the complaint in the AP Parts case and the extent of the market. And the complaint there reads, paragraph 14 and I think it’s plain from the complaint what the scope of the market is, “The Gorlick group is the largest supplier of automotive exhaust systems and parts for the replacement trade accounting from more than 42% of a total dollar volume of such manufacture and sale in 1959.” I want to point out that the comparison of Mr. McGee made was between 1959 sales or $160 million in 1955 sales of $5 million when an accurate comparison should be a $160 million in 1959 against $17 million by the respondents, which makes approximately 11% of the market. During the same year, Walker Manufacturing Company, Meremade Automotive and International Parts Corporation, accounted for approximately 22%, 13% and 11% respectively. Approximately 95% of Orban industries exhaust systems and parts sold for the replacement trade in that year were sold by Orban to automobile manufacturers. And I submit that on the basis of that complaint where the government carefully showed the sales to automotive manufacturers that this encompasses the entire market. Simpson versus Union Oil which was referred to is directly applicable to the present situation. In that case, this Court said that a franchisee had standing to sue. We think we have the same standing. We have done nothing more, nothing more than accept the restrictions which these franchisors placed in their agreements to start with and we submit they had no right to tie these restrictions to the sale of their Midas Muffler and that in fact is what they did.
Hugo L. Black: What are the restrictions?
Robert F. Rolnick: The restrictions are resale price maintenance which applied to trademarks as well as non-trademarks tail pipes, exhaust pipes and clamps. In other words, they required as to maintain the price.
Hugo L. Black: What about the purchase of clamps?
Robert F. Rolnick: They required us to purchase clamps and maintain the price on them despite the fact that those parts were not trademarked and were readily available from other sources of supply.
Hugo L. Black: Is that a part of the Midas Muffler?
Robert F. Rolnick: It is not a part of the Midas Muffler.
Hugo L. Black: Entirely separate?
Robert F. Rolnick: Entirely separate and distinct. Now, as I said, Simpson versus Union Oil is directly applicable. We did nothing more than to accept these franchises with the restrictions which they imposed. We had nothing to do with the restrictions. I think the necessity for allowing this type of action is well-stated in our petition for writ in which we said and I think it sums up our theory behind this. I see my time is up so --
Earl Warren: You may state that if it’s brief?
Robert F. Rolnick: The drastic implications of the Seventh Circuit’s holding can be partially measured by reference to its perspective application to franchising, which is one of the most rapidly going methods of distribution today in the United States. Franchising is currently a $70 billion a year industry with 450,000 franchisees. The point being that if the franchisors are allowed to use their agreement as a shield to protect themselves, they have the ability to enforce restrictions which violate the antitrust laws by claiming later that the signature to that agreement constituted consent or in pari delicto. We do not think this proposition can stand. Thank you.


Warren E. Burger: We will resume arguments at this time in Brown against General Services Administration. Mr. Schnapper, you may proceed when you are ready.
Eric Schnapper: Mr. Chief Justice and may it please the Court. Yesterday, I delineated several possible rules that the Court might adapt with regard to the question of exhaustion in Section 1981 cases brought by federal employees. We believe that the Court should adapt among these the same rule that was adapted by this Court last term in Johnson against the Railway Express Agency. As you recall in Johnson, the issue was whether an employee of the REA who wanted to sue under Section 1981 should or indeed could, postpone that Section 1981 action until he had exhausted the administrative remedies created by Title VII. This Court held unanimously that such an employee need not exhaust those remedies and, indeed, under certain circumstances could not postpone this 1981 action while he did so. We believe the same rule should be applied to federal employees and we ground that contention on a variety of considerations. First, as this Court noted in Morton against Mancari, Congress in 1972 concluded that the administrative procedure which is involved here was ineffective for the most part and had served to impede rather than advance the congressional and national policy of eliminating discrimination in employment. That congressional determination, of course, was based on extensive hearings and a broad factual inquiry. In 1975, the Commission on Civil Rights conducted a similar extensive inquiry and also reached the same conclusion, namely, that the administrative procedures involved had not changed since Congress’ first investigation and that they continue to fail to afford to federal employees a meaningful and fair opportunity for vindication of their claims of employment discrimination. We believe that these findings should be accepted by the Court and that they undercut completely any basis for exhaustion rule under these circumstances. We believe that the policy of exhaustion fundamentally rests on there being a reasonable possibility that the pursuit of the procedure involved will in fact yield the relief that the employee wants, and therefore, obviate the need for judicial intervention. There simply is no realistic possibility that that will occur in the administrative process. And in that regard, this case of course presents a somewhat unique situation because normally we do not have these kinds of findings by the Congress or the Civil Rights Commission as to the defects in the procedure and because of those findings, we think that any presumption that the process -- cases simply cannot be indulged in. Second, even without regard to those findings, any federal employee who sued prior to proceeding all the way through the administrative process would be entitled to claim that, in fact, it would have been futile for him to do so or to go further than he did. And in view of the congressional and commission findings, that he would certainly be able to establish a prima facie case on it. And so, we find that the Courts in any one of these cases was involved in a complex and time-consuming factual inquiry as to whether or not further proceedings would have been warranted. For example, in this case, it might be possible to have a trial as to whether or not going to the Appeals Review Board would be efficacious. We think, for the reasons set out by the Court in Alexander versus Gardner-Denver that it makes more sense for the Court simply o proceed and devote their time directly to a trial on the merits than to what, in many cases, would be a much more cumbersome and time-consuming proceeding as to whether or not the administrative process involved was in fact and under the circumstances likely be efficacious.
William H. Rehnquist: The alternative, of course, would be the opposite rule that has been involved in many cases, the presumption is in favor of exhaustion and it is up to the person who claims that exhaustion would be futile, but make it a rather specific showing to that effect?
Eric Schnapper: Well, with regard to my second contention, we think the employee would be entitled to make that specific showing and the resulting trial would be more cumbersome than a trial on the merits. But I think with regard to the presumption, it is true in a sense that a presumption is the only way you are ever going to find that this process is effective because if you look at the process where there are findings of Congress and the Civil Rights Commission, you will have to conclude otherwise.
William H. Rehnquist: What do you say that the findings of the Civil Rights Commission can conclude this Court?
Eric Schnapper: Well, they are not binding, the conclusions. The conclusions of Congress are entitled some substantial weight.
William H. Rehnquist: Well, I would think the way you would interpret that is to say that if they are entitled the weight that it supports an intent on the part of Congress to not require exhaustion, that you do not use that as an independent lever by which this Court simply concludes on its own that exhaustion is not required?
Eric Schnapper: Well, I think what the government invites the Court to do is to fashion a rule with regard to exhaustion that it is based on the assumption that the administrative process is efficacious and what we are suggesting is that Congress and the Civil Rights Commission have found that they are not, and you cannot blink that reality. Any request for an exhaustion rule ultimately puts that in issue and normally it would be resolved in a case by case basis. But we think, in view of those findings and of the general policy in this area of independent overlapping remedies, that it would make more sense to just have the simple and straightforward and more administrative rule that exhaustion need not be required. It would be possible to follow the procedure you suggest, but then in this case, for example, we would have to have a trial about the Appeals Review Board and would have to conduct an investigation about that.
William H. Rehnquist: Is that true in the normal administrative situation where you have a presumption that the administrative remedies are going to be exhausted. You have a trial in every individual case as to whether, with respect to this particular litigant, he might or might not have gotten some relief?
Eric Schnapper: Normally, this Court does in fact inquire whether under the specific circumstances of the case it would have been probably efficacious to go forward. Now, that may or may not require a trial. It may be apparent on the undisputed facts that it would or would have not have been, but in the case of the administrative procedure there are a variety of defects, some which are apparent on the face of the regulation, some of which are more complicated. For example, we have noted there are problems of discrimination in the selection of the personnel who administer the procedure, that substantive Title VII law is not in fact followed by these decisions, that the people who administer the procedure are not familiar with Title VII law and have no expertise in the area. Now, you could not, in a particular case, require exhaustion in the assumption that all of that was not true and while, perhaps in most cases, those claims which seem sufficiently extraordinary is not to want a plenary judicial inquiry. In this case, of course, those contentions are the same contentions advanced and sustained by the Congress of United States and Civil Rights Commission. I think the least would be entitled to a trial. But, the same problem existed in Alexander versus Gardner-Denver with regard to whether there should be deference to the decision of an arbitrator. And, the Court included that while it might be appropriate in some cases and not others, it was administratively simpler just to go ahead and have the case tried, and that is what we think should occur here.
Harry A. Blackmun: Perhaps you have covered this. I want to be positive though for my own notes. I take it you concede that 1972 amendment is retroactive so far as the petitioner is concerned?
Eric Schnapper: We believe that it is. Finally, with regard to exhaustion, we think that the general policy of independent overlapping remedies which was acknowledged and stressed in this Court’s decision in Johnson should be applied here. In Johnson, of course, the Court noted that the administrative procedure involved had to set up under Title VII, and the Title VII had not required that that procedure be followed by private employees suing under 1981. We think that the same rule should be applied here. It is important to bear in mind that the clear and unequivocal congressional intent behind Title VII was to give federal employees the same judicial remedies that are already enjoyed by private employees. This Court in Boeing against Sharpe (ph), of course, suggested that it would be unthinkable as a matter of substantive law that the rules in the area of discrimination applying to the federal government should be any less stringent than the rules applying to state and local governments. We think the same thing is true with regard to judicial remedies. If Mr. Brown had worked for the Railway Express Agency, if he had worked for the State of Illinois, or if he had worked for the City of Richmond, there is no question that he would be able to maintain the suit and we think he should enjoy no less efficacious judicial remedies merely because he worked for the United States. I would like to reserve the balance of my time.
Warren E. Burger: Very well. Mr. Wallace.
Lawrence G. Wallace: Mr. Chief Justice and may it please the Court. This case and the next case to be argued, Chandler against Roudebush, will to a large extent, determine the future efficacy of the administrative process which has been established pursuant to statute as a remedy for claims of employment discrimination within the Federal Civil Service and the respective role of the Courts and the administrative process in determining the merits of the thousands of claims that are filed each year. Both cases involve promotion situations in which, in accordance with the normal civil service practice, the applicants were screened for qualifications by those responsible for personnel management and both the complainant and the person selected were rated as highly qualified in each case for the particular vacancy for which the promotion was to occur and then the decision as to which of the highly qualified individual should be promoted was made by the supervisor with the program responsibility. In Chandler, the complainant differed from the person selected in sex and race, and claimed discrimination on the basis of sex and race. In Brown, the complainant differed from the person selected in race and claimed discrimination on the basis of race. Now, looking at the Brown complaint, more specifically to see what was at issue, the Brown complaint was carried administratively through the hearing process as well as the informal counseling processes that proceeded and through the agency decision based on the recommendation of the complaints examiner. That recommendation is reproduced in the appendix to this case and turning to page 37a in the findings of fact and conclusions the examiner first noted, and this is the basis on which the appointing authority acted, that both Mr. Robert Owen Bee (ph), and at the bottom of page 37a, who was selected and the complaint Mr. Brown were rated as highly qualified for the position. Under the circumstances, the relative experience, education, and background of both Mr. Owen Bee and Mr. Brown are irrelevant to the issues in as much as the rating of highly qualified place these two individuals in the same area of competition for the position. Now, that is irrelevant for purposes of determining whether there was discrimination. There may have been reliance by the appointing authority on these differences, but the inquiry was into what did the appointing authority rely on and this is spelled out in some detail on the next four pages of the appendix. For one thing, there was testimony, on page 38a just above the middle, from the candidates’ supervisors who unanimously recommended Mr. Owen Bee over Mr. Brown and termed Mr. Brown uncooperative. An example is noted of an instance in which Mr. Brown had been requested by one of his supervisors to perform a management survey of the federal telecommunication's record center, but had refused because he thought the request had been made as a favor rather. Well, this is the basis on which the supervisor acted. What I am trying to bring to the Court’s attention --
Potter Stewart: My question was what does that mean as a matter of fact, he had to refuse because he thought that Mr. Gallo had made this request as a favor. I do not understand the meaning of that?
Lawrence G. Wallace: Mr. Brown’s testimony was that the reason he had not been on the assignment was that he thought it was not a work assignment, but just a favor that had been requested of him in the course of Mr. Gallo’s carrying out of his own responsibilities. Then going on, the evidence was that the recommendations were based on contacts with both men on a day-to-day basis over a period of years noting --
John Paul Stevens: All this evidence was in the form of affidavits, was it not?
Lawrence G. Wallace: That is correct. There is a notation here that Mr. Brown did not seek to cross-examine these witnesses. They could have been brought into the hearing if he had done so. That is noted on page 40a, at the top of the first full paragraph on page 40a of the appendix. Yes?
Potter Stewart: It is still part of the --
Lawrence G. Wallace: Part of the complaints examiner’s --
Potter Stewart: Complaints examiner’s report, right?
Lawrence G. Wallace: That is correct, Your Honor. And there -- towards the bottom of 38a, the evaluation that Mr. Owen Bee had always displayed complete cooperation and willingness to accept the responsibility, whereas, Mr. Brown on occasion would offer some excuse or refuse assignments. Their references to the difference in the work attitudes of the two of them on page 39a, including complaints received from a member of the Data Processing Unit, with whom Brown’s unit had to work, about lack of cooperativeness on Brown’s part and that is again developed in some detail on page 41a. Now, when Mr. Brown went to Court, the recourse that was available to him if he was dissatisfied with the administrative decision based on this record was an appeal to the Civil Service Board, the Appellate Board, which passes on these matters. And turning back to Mr. Brown’s complaint, which is on page, I am looking at pages 4a and 5a of the appendix at the very bottom, the complaint itself specifies when he went and made a resort to Court. The United States Civil Service Commission has been joined as a party defendant because in entertaining and ruling upon the plaintiff’s complaint of racial discrimination, it acted in an arbitrary and capricious manner by failing to make the in-depth inquiry into the alleged racial discrimination as it was to do under the Act. Now, the fact is, this complaint was filed. It happened that he neglected to name all the parties that he meant to name, including the Civil Service Commission which became the subject of further motions proceedings, but the fact is this complaint was filed before the Appeals Review Board of the Civil Service Commission was given any opportunity to review the decision of the agency which was made on the basis of that examination of the complaint and a hearing conducted on behalf of the agency by Civil Service Commission trained examiner. The Civil Service Commission itself had not had an opportunity to act on this compliant. Now, we are told that once the facts are known in a case like this, it is just a legal matter as to which the Civil Service --
William J. Brennan, Jr.: I have noticed that the examiner’s report is dated February 9, 1973. The complaint was filed on May 7, 1973. Now, what should Mr. Brown had done to trigger a review within the Commission?
Lawrence G. Wallace: Well, here--
William J. Brennan, Jr.: Up to February 9?
Lawrence G. Wallace: He was informed at every step of the procedure or had the opportunity to be informed that exactly what he could do at the next step. The record here shows that page 43a and 44a that after the agency decision was made, he was specifically advised by letter and it was certified mail and his receipt is reproduced in the appendix following this latter, that he had the right to appeal to the Civil Service Commission Board of Review at the bottom of 43a and this appeal must be filed within 15 calendar days of receipt of this letter and at the top of 44a. But, if you choose to appeal, you retain the right to file a civil action in Federal Court within 30 days after receipt of the Board’s final decision. If you do not choose to appeal, you also have the right to file a civil action within 30 days of receipt of this letter or 180 days after filing an appeal with the Board of Appeals and Review if no decision has been made. It is true that the regulations are complex, but a complainant is not left to fend for himself in the regulations. He has counseling within the agency. He can get further help from the equal employment officer of his agency, and he is informed specifically of his procedural rights at each step.
William J. Brennan, Jr.: What do you think that all that -- after the receipt of that letter of March 23, until his complaint was filed on May 7?
Lawrence G. Wallace: Nothing is shown in the record. Footnote 3 of the petitioner’s brief indicated that he determined that he would sue and talked with the clerk of the Court who advised him to get counsel and that his suit was not filed within 30 days because three attorneys and several civil rights organizations turned his claim down and he had trouble getting a lawyer. Well, his claim on the merits is unimpressive and this is maybe one reflection of that. The record does not show why he had difficulty getting a lawyer. The fact is he did not file his suit within 30 days as the letter specified he would have to do. This was all premised --
William J. Brennan, Jr.: Though it has it said in that Footnote 3 that within the week of getting a letter, he did go to the District Court?
Lawrence G. Wallace: The record does not reflect it. I do not know, Mr. Justice. In any event, the kind of inquiry to be made in a case like this essentially, is a matter well within the Civil Service Commission’s expertise, namely, whether the kinds of considerations brought out in this report of the hearing are the kinds of considerations that are plausibly relied upon in selecting someone for promotion when the individual applicants do not differ from each other on the basis of race, as is often the case. And this is a matter well within competence and experience of the Civil Service Commission. Most of the policies of exhaustion of administrative remedies are fully applicable here. The administrative process is able to give the complete relief asked for in the compliant in the Court and thereby obviate the need for any resort to the Court if the case is meritorious. There is a role to be played by the application of expertise in assessing the factual situation because it is basically a factual case, not as it reaches this Court, but the claim was basically a factual case and there would at least be an opportunity for narrowing the issues for a judicial review. The considerations that have normally been recited as reasons for requiring exhaustion of administrative remedies are all fully applicable to this situation. Now, we are told that, nonetheless, this Court held in Johnson against Railway Express Co. that at least as to claims under Section 1981, administrative remedies need not be exhausted and indeed cannot be exhausted in some situations under Title VII. But Johnson, it seems to us, reserved the kind of issue involved here. It was written much more narrowly and carefully than that. The issue in Johnson was rather resort to the EEOC conciliation processes was required before a 1981 suit could be filed in a private employment situation in which Congress has not provided a federal administrative remedy which can afford the complete relief sought in a 1981 suit. And the Court carefully noted in Footnote 3 of the Johnson opinion in dealing with an alternative argument, and this is on page 456 and 457 of 421 US, that the complainant there had failed to exhaust his administrative remedy under the Railway Labor Act where Congress had provided a complete administrative remedy that could give him relief, according to the claim, that it did not have to reach that issue because of its holding on the limitations issue which was the controlling issue in Johnson, that the suit was filed out of time. And therefore, we have no occasion here to express a view as to whether or not Section 1981 claim of employment discrimination is ever subject to a requirement that administrative remedies be exhausted in a situation where Congress has provided a full administrative remedy that can give the relief sought in the suit. And, again, on page 466, the opinion is carefully tailored to the private employment situation. So, one of our contentions is that the Court of Appeals correctly ruled in this case that the complaint should be dismissed for exhaustion of administrative remedies. That was an alternative holding of the Court of Appeals in affirming the dismissal of the compliant by the District Court for want of subject matter jurisdiction. Once the District Court granted the government’s motion to dismiss for want of subject matter jurisdiction, of course, the question of the exhaustion did not arise in the District Court, but the Court of Appeals was interested in that as an alternative ground for affirming the dismissal of the --
Byron R. White: With respect to both the 1981 and the --
Lawrence G. Wallace: With respect to all of the claims, and the Court of appeals did not specifically pass on whether relief under any of these theories would be available.
Byron R. White: What about the next case then? Suppose that there was the exhaustion requirement applicable to 1981. The claim was rejected in the administrative process, would the 1981 suit then go forward in Court or would there be a -- there could not be a review on the record, could there?
Lawrence G. Wallace: Well, our contention is that Congress intended Title VII to be the exclusive remedy, but if it were not the exclusive remedy, it seems to us that the normal rule would apply when this lawsuit is brought after exhaustion of the administrative remedy, the suit should be based on a review of the record and the administrative decision.
Byron R. White: Is there any evidence in the Act in terms of the procedure and the hearings that the administrators would take 1981 into consideration?
Lawrence G. Wallace: Not at all. What they were to take into consideration was the substantive standards under Title VII which are, for these purposes, basically the same.
Byron R. White: It seems to follow though that if the administrators rejected whatever claim it was they were considering, that the 1981 suit would then go on to Court de novo?
Lawrence G. Wallace: Well, that is related, as you say, to the issue in Chandler. We do not believe that after this elaborate administrative inquiry into what is essentially a factual claim that a de novo suit would be warranted, and the first point to be made with respect to that is that Congress was, as we view the legislative history, establishing what we regard as the exclusive remedy to handle these federal employment discrimination claims, a remedy which combined both an administrative process and judicial review of these claims with administrative responsibilities to administer effective measures of what might be considered preventive medicine as a very important part of this process. The new statute, Section 717, which is reproduced on page 16a and 17a of the appendix to our brief in this case has elaborate provisions in subsection b about the responsibility of the Civil Service Commission to supervise the agencies of the government in establishing equal opportunity plans of employment and reviewing those plans and the procedures used in the various programs that are known as Affirmative Action, Upward Mobility, the Federal Women’s Program, etcetera. This is to a large extent, where the action has been, so to speak, in this field, I asked the clerk to distribute to each member of the Court testimony last June given by Chairman Hampton of the Civil Service Commission to the Subcommittee on equal opportunities.
William H. Rehnquist: Is this in the record, Mr. Wallace?
Lawrence G. Wallace: No, but these hearings are published. The Committee has published these hearings.
William H. Rehnquist: Has opposing counsel had any notice of this distribution?
Lawrence G. Wallace: I gave it to him yesterday.
William H. Rehnquist: It is a little bit late, it seems to me.
Lawrence G. Wallace: Well, these are public records and the point to be made is that the complaints process and the examination of the complaints process is not the only method that Congress specified or indeed the Congress is looking into in its continuing supervision of this area in alleviating problems in the Federal Civil Service. And the statistical report gave some examples of the inquiries in minority group representation at various grade levels during the period from 1971-1974, at a time when overall federal employment was decreasing. In the notation with respect to grade GS9 which is what the application was for in this case and that is on page 4 and, of course, giving these statistics indicated that there has been an increase of some 2,800 minority personnel in that particular grade level and there are comparable figures more than 2,000 increase with respect to grade GS12, etcetera. Now, to a small extent, those increases may reflect the resolution of the complaints procedures, the kind that are involved in this case, but for the most part, they represent the implementation of the Affirmative Action Programs that the Commission has undertaken and the review that it conducts through its Bureau of Personnel Management Evaluation of the equal opportunity employment plans that the agencies are required to have. And one of the advantages of the administrative process that was established in the 1972 Act is that in the course of ruling and investigating the individual complaint, the complaints examiner is also trained to evaluate the overall program of the agency in this area and to make recommendations, to make that overall program more effective regardless of what he finds with respect to the claim of the particular individual whether that individual has a claim of discrimination against himself has merit or not. The regulations that we have reproduced in the appendix to our brief, the regulation on the hearing specifies on page 38a that the examiner is to look into not only the matter which gave rise to the complaint but also the general environment out of which the complaint arose and he is to make his recommended decision to the agency on the merits of the complaint, including the recommended remedial action where appropriate, and also his recommendations with regard to the general environment out of which the complaint arose. In a case such as the present one, these promotion cases, this is not particularly a typical and many of them, of course, do not even reach the Courts, these promotion cases are the most frequent of the equal employment opportunity complaints. In a case such as this one, it seems likely to us that that aspect of the compliant examiner’s function is more likely to be fruitful than a ruling on the merits where it is very difficult for any tribunal, administrative or judicial to second guess the determination of the person responsible for the program as to which -- the person is rated as highly qualified, he wants to rely on to carry on the program, so long as he has reasons that are independent of racial consideration in such matters. Now --
John Paul Stevens: Mr. Wallace, can you clarify something for me? I may not have followed your argument completely, but does the government agree that prior to 1972 there would have been a 1981 claim?
Lawrence G. Wallace: We have not taken a position on that issue because the Court of Appeals did not reach that question and as we understood the petition for certiorari, the first question presented was a question with respect to the issue the Court of Appeals decided. It has been rephrased in petitioner’s brief so as to present that issue, but we did not think it had been presented to the Court. Now, what is --
John Paul Stevens: Does that necessarily involved?
Lawrence G. Wallace: Well, the Court of Appeals --
John Paul Stevens: If your position is correct that 7, whatever the number is, is an exclusive remedy, that conclusion could only be reached by holding that the 1972 statute amended 1981, if in fact there is a 1981 claim, is that not correct?
Lawrence G. Wallace: That is one way of looking at this, but the fact is there had been a number of cases in this Court in which the Court has concluded that a comprehensive remedy established to deal with a particular subject matter was intended to be the exclusive remedy without determining whether other more generally worded statutes would otherwise be applicable. One that we have discussed at some detail in our brief is the Preiser case and that is exactly the approach that the Court took in the Preiser against Rodriguez and I refer you particularly to 411 U.S. at 488 and 489. There had been a series of other cases that are not cited in the brief which I do want to call the Court’s attention in which the same conclusion was reached with respect to compensation statutes, both prisoner’s compensation and seaman’s compensation statutes, and I did inform counsel of these cases yesterday also Mr. Justice. One is Johansen against United States 343 U.S. 427, Patterson against United States 359 U.S. --
John Paul Stevens: Which citation, 343 U.S.?
Lawrence G. Wallace: 427, Patterson v. United States 359 U.S. 495, and United States v. Demko 385 U.S. 149. Now --
Byron R. White: On the assumption that there was the 1981 action prior to 1972 which I think you do not take the position on it, you must say that we are entitled to assume that there was. You just started out on that assumption and then arrived at your conclusions.
Lawrence G. Wallace: Alright.
Byron R. White: How do you unroll that --
Lawrence G. Wallace: Well, for one thing, the proposition that repeals by implication are not favored which the Court applied in Morton against Mancari was a proposition applicable there to two disparate federal policies reflected in two different statutes, one favoring Indian self government through the Indian preference and the Indian Bureau of Affairs and, the other, the discrimination in employment law which the Court found not to be irreconcilable. And in the absence of any congressional indication that it was seeking to supersede one with the other, the Court held that the two should be given effect and could be given effect. That is quite different from the kinds of cases I have just mentioned in which it was determined that Congress undertook to deal comprehensively with a particular problem and thereby to supersede any judicial remedy that might otherwise exist under more generally worded statutes which have not, at the time Congress was dealing with the issue, been applied to that problem. And that is what we are involved with here. The committee reports in both the House and senate, and they are set out in some detail on page 31 of the Chandler brief that we have filed both in the text and in the Footnote there, show that Congress thought that there was no other remedy and was enacting what it --
Byron R. White: It is the assumption that there was?
Lawrence G. Wallace: But Congress, in acting here, decided that this was the remedy that should exist in a situation in which it assumed that this was the only remedy that would exist. It is quite different from the discussion of the related question in Jones against Mayer in which both the hearings and the discussion on the floor had indicated that that case was in litigation that there might be a remedy under 1982 and that, nonetheless, this alternative remedy was needed, that both remedies were needed. The same thing was true with respect to the application of Title VII to private employment. It was specifically noted that there were remedies under state fair employment practices laws and in the National Labor Relations Board. And, the intention was to preserve the preexisting remedies and add a remedy that would supplement rather than supplant them, as the Court said. With respect to 1981, however, the indications in Congress was that they thought there was not access to the Courts in any other way and that they would set up a comprehensive plan to deal with this through an amalgam of administrative and judicial remedies, and there was good reason for congressional doubt that the sovereign immunity had otherwise been waived. Jones against Mayer had indicated in Footnote 13 of that opinion that 1982, the companion provision, is couched merely in declaratory terms. It provides no other explicit method of enforcement, but that of course, does not prevent a Federal Court from fashioning an effective equitable remedy. That is not the kind of thing the Court says about waivers of sovereign immunity, and there has been no holding that these statutes authorize suit against government. Hurd against Hodge in which it was how the District of Columbia is a state or territory within the meaning of those statutes, was a companion case to Shelley against Kramer involving suit between private individuals to enforce a restrictive covenant. There has never been a case holding that suit against the government has been authorized by 1981 or 1982.
Byron R. White: What about against individuals, individual officers?
Lawrence G. Wallace: Well there, the Courts had indicated that when those suits are attempting to get a promotion within the Civil Service, they are effectively a suit against the United States. That is what the Eighth Circuit had held in the Gnotta case and the --
Byron R. White: It has not been resolved here though?
Lawrence G. Wallace: It has not been resolved here, but it was the premise on which Congress acted and it has been resolved by one Justice here, but not by the Court.[Laughter] And it was the premise on which the Court acted as reflected in those committee reports.
Speaker: (Inaudible)
Lawrence G. Wallace: Yes, Mr. Justice.
Harry A. Blackmun: Back up and rewrite Gnotta and Morton against Mancari.
Lawrence G. Wallace: Well --
Harry A. Blackmun: Or all of them?
Lawrence G. Wallace: [Laughter]As I have indicated, I think they are carefully written not to cover cases that were not before the Court.
Potter Stewart: First of all, there seems to be no issue in this case. you tell me if I am mistaken as to the retroactive application of 717 (c) to a situation where a complaint rose before the enactment of the 1973?
Lawrence G. Wallace: Well, both parties have agreed that when the administrative claim was still pending on the effective date of the statute that under Bradley against Richmond School District that the new statute applies.
Potter Stewart: There is no issue there.
Lawrence G. Wallace: There is no issue between the parties as to that and that was the ruling of the Court of Appeals.
Potter Stewart: But apparently it was litigated in the Court of Appeals?
Lawrence G. Wallace: It was litigated in the Court of Appeals. At that time, the government had not resolved a position to take into the Courts on that question. We since have. We have filed a response to it. It is still pending, petition for rehearing on that issue in a case called Place against Weinberger in which we have confessed error on that question in the particular case.
Potter Stewart: Is it somewhere in the --
Lawrence G. Wallace: That is still pending before the Court.
Potter Stewart: I see.
Lawrence G. Wallace: It is a petition for rehearing that was filed last term into which our response was filed by request last term.
Potter Stewart: Do I misapprehend the structure of your argument when I state my understanding that your part two of your brief, all of your argument with respect to the need to exhaust becomes relevant only if your answer to Mr. Justice White’s question was wrong.
Lawrence G. Wallace: Well --
Potter Stewart: You said that if 717 is exclusive, that is the end of the case, correct?
Lawrence G. Wallace: That is correct or on the other hand, if the Court agrees with us on the exhaustion issue it need not reach the other issue. Either one could be dispositive of --
Potter Stewart: Exclusive and by itself would be dispositive?
Lawrence G. Wallace: Either one by itself could be dispositive, yes Mr. Justice.
Potter Stewart: And part two, your whole exhaustion argument is premised upon the arguendo hypothesis that remedies other than 717 (c) are available?
Lawrence G. Wallace: That is correct, Mr. Justice because the complainant did not comply with the 30-day time limitation providing the suit under Title VII.
Potter Stewart: Premised upon the hypothesis that other remedies are available?
Lawrence G. Wallace: Yes, Your Honor.
Potter Stewart: Thank you.
Lawrence G. Wallace: Thank you.
Warren E. Burger: Mr. Schnapper, you have some time left.
Eric Schnapper: I would like to respond to a number of things raised by the government in this case, and I turn first to the question of whether Title VII repeal these other statutes. The government suggests that the usual rule against repeals by implication applies only when the substantive rules involved are different and not when they are supplementary or complimentary remedies. That is just not the law. At least since Wood versus the United States in 1848, the law has been exactly to the contrary and we set out in our reply brief a number of cases involving supplementary remedies applying this rule against a repeal by implication. The government distinguishes Jones against Mayer by noting that at the time of Jones, Congress had reason to believe that there might be another remedy available. But when Title VII was adapted in 1964, as we have noted in our reply brief, there were numerous statements in the floor of the House and the Senate to the effect that Congress thought there were no other remedies. The legislative history in which Congress indicated they thought there were additional judicial remedies is from 1972, but of course, the statute involved was adapted in 1964 and not in 1972.
William H. Rehnquist: Would there be expressed saving language in the 1964 Act?
Eric Schnapper: I do not believe there was. Moreover, in Sullivan versus Little Hunting Park, the government maintained, and we think correctly, that it really does not matter whether the government thought there was an independent remedy available or not. With regard to Gnotta, we, I must confess do think it was not correctly decided, but as indeed, I think, certainly, the Civil Service Commission was of that opinion when it advised Congress on this matter several years ago and I do understand the Solicitor General in opposing certain audit to have also taken that position.
Speaker: Gnotta --
Eric Schnapper: Gnotta versus the United States. It is the decision by Justice Blackmun when he was on another Court, but be that as it may, not expressly stressed that in that case which was a suit based on discrimination on the grounds of natural origin, there was no provision applicable to that plaintiff comparable to Section 1982. Well, there is such a statute here and it is 1981. With regard to the problem of exhaustion, I think I should state in clear terms what the difference is between the government’s perception of this administrative procedure and ours. We believe that it is an extremely complex procedure, controlled as in Glover by the defendants out of which, at the end, there was no relief granted in fact. The government has indicated in these papers and we have noted similar statistics that out of approximately 26,000 complaints of employment discrimination against the federal government that were initiated with EEO counselors, backpay was awarded to approximately 50 people in the entire year. That compares quiet dramatically with the statistics for the EEOC conciliation procedure which over the same period of time, had twice as many complaints, but got backpay for 49,388 people and suggests, as the government does, that exhaustion should be required here because the federal procedure is better than the EEOC. We suggest that it is, at the least, not supported by the results of the system.
Potter Stewart: Those statistics simply might indicate that the government, as an employer, is more aware of the requirements of non-discrimination in employment than many employers in the private sector?
Eric Schnapper: Well, that is possible but, of course, Congress thought just the contrary when it adapted Title VII. The legislative hearings and committee reports are replete with conclusions that in fact the problems of employment discrimination in the federal government were very serious. The government suggested that all the relief that is sought in this case could have been gotten in the administrative process. Now, without laying aside for a moment our contention that even what is technically available in the administrative process is never in fact given. There are variety of things that simply are not available. There is a 30-day statute of limitations for awards of backpay in the administrative process and that, of course, is not the statute of limitations in Federal Court. The government has what is known --
William H. Rehnquist: What do you mean by 30-day statute of limitations, do you mean at the time of award of maximum backpay, there can be award as 30 days?
Eric Schnapper: No, the way this system works is that you have to -- if the kind of discrimination which you are complaining exists over a period of time, the government will only run back to 30days before the complaint was filed. This particular plaintiff complains that that he has been discriminated against a promotion as a result of an ongoing practice that goes back for several years. He simply could not get relief from most of that on the administrative procedure. It is not allowed. Second, the government has what is known in the practice as a “but for” rule which provides that once discrimination is shown, the burden of proof is on the employee to show that the practice of discrimination was in fact the cause of his non-promotion. Now, the rule in Title VII law and the Courts is exactly the opposite and the difference is of some substantial importance because in the vast majority of cases in which the federal government finds there has been discrimination it does not award backpay to anyway.
Potter Stewart: In this case, of course, your client did make an administrative complaint to his agency and a hearing before a certified complaints examiner and is it your position that not even that much exhaustion of administrative remedies is required? That, instead of doing that, he could have gone directly into the Federal District Court, is that your position?
Eric Schnapper: That is our position. We have laid out a variety of rules and, of course, there are some rules pursuant to which that would have been required. But we think, on the facts of this case, further exhaustion just makes no sense.
Potter Stewart: Without further exhaustion.
Eric Schnapper: Right.
Potter Stewart: I am talking about. Your position is he need not even make an original complaint?
Eric Schnapper: That is our preferred position, but there are a number of other possible rules, under all of which we would win which would encompass at least that much.
Warren E. Burger: Thank you, Gentlemen. The case is submitted.