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United States Supreme Court JOHNSON v. DeGRANDY(1994) No. 92-519 Argued: October 4, 1993Decided: June 30, 1994 </s> [Footnote * Page I Together with No. 92-593, De Grandy et al. v. Johnson, Speaker of the Florida House of Representatives, et al., and No. 92-767, United States v. Florida, also on appeal from the same court. </s> In these consolidated cases, a group of Hispanic voters, a group of black voters, and the Federal Government claim that Florida's reapportionment plan for the State's single-member Senate and House districts ("SJR-2G") unlawfully dilutes the voting strength of Hispanics and blacks in the Dade County area, in violation of 2 of the Voting Rights Act of 1965. The State Supreme Court, in a review required by the State Constitution, declared the plan valid under federal and state law, while acknowledging that time constraints precluded full review and authorizing any interested party to bring a 2 challenge in that court. The plaintiffs chose, however, to pursue their claims in federal court. A three-judge District Court reviewed the totality of circumstances, as required by 2 and Thornburg v. Gingles, 478 U.S. 30 , and concluded that the three Gingles preconditions for establishing dilution were satisfied, justifying a finding of vote dilution. Specifically, the court found that voting proceeded largely along racial lines, producing a system of "tripartite politics"; that Hispanics in the Dade County area could constitute a majority in 11 House and 4 Senate districts, but that SJR 2-G had created only 9 House and 3 Senate districts with Hispanic majorities; that an additional majority-black Senate district could have been drawn; and that Page II Florida's minorities had suffered historically from official discrimination, the social, economic, and political effects of which they continued to feel. The court imposed a remedial plan with 11 majority-Hispanic House districts but, concluding that the remedies for blacks and Hispanics in the senatorial districts were mutually exclusive, left SJR 2-G's Senate districts in force. </s> Held: </s> 1. The District Court properly refused to give preclusive effect to the State Supreme Court's decision validating SJR 2-G. Pp. 6-8. </s> 2. There is no violation of 2 in SJR 2-G's House districts, where, in spite of continuing discrimination and racial bloc voting, minority voters form effective voting majorities in a number of House districts roughly proportional to their respective shares in the voting-age population. While such proportionality is not dispositive, it is a relevant fact in the totality of circumstances to be analyzed when determining whether minority voters have "less opportunity than other members of the electorate to participate in the political process and to elect representatives of their choice," 42 U.S.C. 1973(b). Pp. 8-26. </s> (a) This Court assumes without deciding that the first Gingles factor has been satisfied in these cases. Pp. 10-11. </s> (b) While proof of the Gingles factors is necessary to make out a claim that a set of district lines violates 2, it is not necessarily sufficient. Rather, a court must assess the probative significance of the Gingles factors after considering all circumstances with arguable bearing on the issue of equal political opportunity. Here, the court misjudged the relative importance of the Gingles factors and of historical discrimination by equating dilution where these had been found with failure to maximize the number of majority-minority districts. Dilution cannot be inferred from the mere failure to guarantee minority voters maximum political influence. Pp. 11-20. </s> (c) Ruling as the State proposes, that as a matter of law no dilution occurs whenever proportionality exists, would likewise provide a bright-line decisional rule only in derogation of the statutory text. While proportionality is an indication that minority voters have equal political and electoral opportunity in spite of racial polarization, it is no guarantee, and it cannot serve as a short-cut to determining whether a set of districts unlawfully dilutes minority voting strength. Pp. 20-24. </s> (d) This Court need not reach the United States' argument that proportionality should be assessed only on a statewide basis in cases challenging districts for electing a body with statewide Page III jurisdiction. The argument would recast this litigation as it comes before the Court, for up until now the dilution claims have been litigated not on a statewide basis, but on a smaller geographical scale. Pp. 24-26. </s> 3. The District Court's decision to leave undisturbed the State's plan for Senate districts was correct. However, in reaching its decision, the court once again misapprehended the legal test for vote dilution. As in the case of the House districts, the totality of circumstances appears not to support a finding of dilution in the Senate districts. Pp. 26-28. </s> 815 F.Supp. 1550, affirmed in part and reversed in part. </s> SOUTER, J., delivered the opinion of the Court, in which REHNQUIST, C.J., and BLACKMUN, STEVENS, O'CONNOR, and GINSBURG, JJ., joined, and in all but Parts III-B-2, III-B-4, and IV of which KENNEDY, J., joined. O'CONNOR, J., filed a concurring opinion. KENNEDY, J., filed an opinion concurring in part and concurring in the judgment. THOMAS, J., filed a dissenting opinion, in which SCALIA, J., joined. </s> [ JOHNSON v. DeGRANDY, ___ U.S. ___ (1994) </s> , 1] </s> JUSTICE SOUTER delivered the opinion of the Court. </s> These consolidated cases are about the meaning of vote dilution and the facts required to show it, when 2 of the Voting Rights Act of 1965 is applied to challenges to single-member legislative districts. See 79 Stat. 437, as amended, 42 U.S.C. 1973. We hold that no violation of 2 can be found here, where, in spite of continuing discrimination and racial bloc voting, minority voters form effective voting majorities in a number of </s> [ JOHNSON v. DeGRANDY, ___ U.S. ___ (1994) </s> , 2] </s> districts roughly proportional to the minority voters' respective shares in the voting-age population. While such proportionality is not dispositive in a challenge to single-member districting, it is a relevant fact in the totality of circumstances to be analyzed when determining whether members of a minority group have "less opportunity than other members of the electorate to participate in the political process and to elect representatives of their choice." Ibid. </s> I </s> On the first day of Florida's 1992 legislative session, a group of Hispanic voters including Miguel De Grandy (De Grandy plaintiffs) complained in the United States District Court against the speaker of Florida's House of Representatives, the president of its Senate, the Governor, and other state officials (State). The complainants alleged that the districts from which Florida voters had chosen their state senators and representatives since 1982 were malapportioned, failing to reflect changes in the State's population during the ensuing decade. The State Conference of NAACP Branches and individual black voters (NAACP plaintiffs) filed a similar suit, which the three-judge District Court consolidated with the De Grandy case. 1 </s> Several months after the first complaint was filed, on April 10, 1992, the state legislature adopted Senate Joint Resolution 2-G (SJR 2-G), providing the reapportionment plan currently at issue. The plan called for dividing Florida into 40 single-member Senate, and 120 single-member House, districts based on population data </s> [ JOHNSON v. DeGRANDY, ___ U.S. ___ (1994) </s> , 3] </s> from the 1990 census. As the Constitution of Florida required, the state attorney general then petitioned the Supreme Court of Florida for a declaratory judgment that the legislature's apportionment plan was valid under federal and state law. See Fla. Const., Art. III, 16(c). The court so declared, while acknowledging that state constitutional time constraints precluded full review for conformity with 2 of the Voting Rights Act and recognizing the right of any interested party to bring a 2 challenge to the plan in the Supreme Court of Florida. See In re Constitutionality of Senate Joint Resolution 2G, Special Apportionment Session 1992, 597 So.2d 276, 285-286 (Fla. 1992). 2 </s> The De Grandy and NAACP plaintiffs responded to SJR 2-G by amending their federal complaints to charge the new reapportionment plan with violating 2. 3 They claimed that SJR 2-G "`unlawfully fragments cohesive minority communities and otherwise impermissibly submerges their right to vote and to participate in the electoral process,'" and they pointed to areas around the State where black or Hispanic populations could have formed a voting majority in a politically cohesive, </s> [ JOHNSON v. DeGRANDY, ___ U.S. ___ (1994) </s> , 4] </s> reasonably compact district (or in more than one), if SJR 2-G had not fragmented each group among several districts or packed it into just a few. De Grandy v. Wetherell, 815 F.Supp. 1550, 1559-1560 (ND Fla. 1992). </s> The Department of Justice filed a similar complaint, naming the State of Florida and several elected officials as defendants and claiming that SJR 2-G diluted the voting strength of blacks and Hispanics in two parts of the State in violation of 2. The Government alleged that SJR 2-G diluted the votes of the Hispanic population in an area largely covered by Dade County (including Miami) and the black population in an area covering much of Escambia County (including Pensacola). 4 App. 75. The District Court consolidated this action with the other two and held a 5-day trial, followed immediately by an hours-long hearing on remedy. </s> At the end of the hearing, on July 1, 1992, the District Court ruled from the bench. It held the plan's provisions for state House districts to be in violation of 2 because "more than [SJR 2-G's] nine Hispanic districts may be drawn without having or creating a regressive effect upon black voters," and it imposed a remedial plan offered by the De Grandy plaintiffs calling for 11 majority-Hispanic House districts. App. to Juris. Statement 2a, 203a. As to the Senate, the court found that a fourth majority-Hispanic district could be drawn in addition to the three provided by SJR 2-G, but only at the expense of black voters in the area. Id., at 202a; 815 F.Supp., at 1560. The court was of two minds about the implication of this finding, once observing that it meant the legislature's plan for the Senate was a violation of 2 but without a remedy, once saying the </s> [ JOHNSON v. DeGRANDY, ___ U.S. ___ (1994) </s> , 5] </s> Plan did not violate 2 at all. 5 In any event, it ordered elections to be held using SJR 2-G's senatorial districts. </s> In a later, expanded opinion the court reviewed the totality of circumstances as required by 2 and Thornburg v. Gingles, 478 U.S. 30 (1986). In explaining Dade County's "tripartite politics," in which "ethnic factors . . . predominate over all other[s]. . .," 815 F.Supp., at 1572, the court found political cohesion within each of the Hispanic and black populations, but none between the two, id., at 1569, and a tendency of non-Hispanic whites to vote as a bloc to bar minority groups from electing their chosen candidates except in a district where a given minority makes up a voting majority. 6 Id., at 1572. The court further found that the nearly </s> [ JOHNSON v. DeGRANDY, ___ U.S. ___ (1994) </s> , 6] </s> one million Hispanics in the Dade County area could be combined into 4 Senate and 11 House districts, each one relatively compact and with a functional majority of Hispanic voters, id., at 1568-1569, whereas SJR 2-G created fewer majority-Hispanic districts; and that one more Senate district with a black voting majority could have been drawn, id., at 1576. Noting that Florida's minorities bore the social, economic, and political effects of past discrimination, the court concluded that SJR 2-G impermissibly diluted the voting strength of Hispanics in its House districts and of both Hispanics and blacks in its Senate districts. Id., at 1574. The findings of vote dilution in the senatorial districts had no practical effect, however, because the court held that remedies for the blacks and the Hispanics were mutually exclusive; it consequently deferred to the state legislature's work as the "fairest" accommodation of all the ethnic communities in South Florida. Id., at 1580. </s> We stayed the judgment of the District Court, 505 U.S. ___ (1992), and noted probable jurisdiction, 507 U.S. ___ (1993). </s> II </s> Before going to the issue at the heart of these cases, we need to consider the District Court's refusal to give preclusive effect to the decision of the State Supreme Court validating SJR 2-G. The State argues that the claims of the De Grandy plaintiffs should have been dismissed as res judicata because they had a full and fair opportunity to litigate vote dilution before the State Supreme Court, see In re Constitutionality of Senate Joint Resolution 2G, Special Apportionment Session 1992, 597 So.2d 276, 285 (Fla. 1992). The premise, however, is false, exaggerating the review afforded the De Grandy plaintiffs in the state court and ignoring that court's own opinion of its judgment's limited scope. Given the state constitutional mandate to review </s> [ JOHNSON v. DeGRANDY, ___ U.S. ___ (1994) </s> , 7] </s> apportionment resolutions within 30 days, see Fla. Const., Art. III, 16(c), the Supreme Court of Florida accepted briefs and evidentiary submissions, but held no trial. In that court's own words, it was "impossible . . . to conduct the complete factual analysis contemplated by the Voting Rights Act . . . within the time constraints of article III," and its holding was accordingly "without prejudice to the right of any protestor to question the validity of the plan by filing a petition in this Court alleging how the plan violates the Voting Rights Act." 597 So.2d at 282, 285-286. </s> The State balks at recognizing this express reservation by blaming the De Grandy plaintiffs for not returning to the State Supreme Court with the 2 claims. But the plaintiffs are free to litigate in any court with jurisdiction, and their choice to forgo further, optional state review hardly converted the state constitutional judgment into a decision following "full and fair opportunity to litigate," Allen v. McCurry, 449 U.S. 90, 104 (1980), as res judicata would require. For that matter, a federal court gives no greater preclusive effect to a state court judgment than the state court itself would do, Marrese v. American Academy of Orthopaedic Surgeons, 470 U.S. 373, 384 -386 (1985), and the Supreme Court of Florida made it plain that its preliminary look at the vote dilution claims would have no preclusive effect under Florida law. </s> The State does not, of course, argue that res judicata bars the claims of the United States, which was not a party in the Florida Supreme Court action. It contends, instead, that the Federal Government's 2 challenge deserved dismissal under this Court's Rooker/Feldman abstention doctrine, under which a party losing in state court is barred from seeking what in substance would be appellate review of the state judgment in a United States District Court, based on the losing party's claim that the state judgment itself violates the loser's federal </s> [ JOHNSON v. DeGRANDY, ___ U.S. ___ (1994) </s> , 8] </s> rights. See District of Columbia Court of Appeals v. Feldman, 460 U.S. 462, 482 (1983); Rooker v. Fidelity Trust Co., 263 U.S. 413, 416 (1923). But the invocation of Rooker/Feldman is just as inapt here, for, unlike Rooker or Feldman, the United States was not a party in the state court. It was in no position to ask this Court to review the state court's judgment, and has not directly attacked it in this proceeding. Cf. Feldman, supra, at 468, and n. 2, 472, and n. 8 (suing District of Columbia Court of Appeals); Rooker, supra, at 414 (seeking to have state court's judgment declared null and void). The United States merely seeks to litigate its 2 case for the first time, and the Government's claims, like those of the private plaintiffs, are properly before the federal courts. </s> III </s> On the merits of the vote dilution claims covering the House districts, the crux of the State's argument is the power of Hispanics under SJR 2-G to elect candidates of their choice in a number of districts that mirrors their share of the Dade County area's voting-age population (i.e., 9 out of 20 House districts); this power, according to the State, bars any finding that the plan dilutes Hispanic voting strength. The District Court is said to have missed that conclusion by mistaking our precedents to require the plan to maximize the number of Hispanic-controlled districts. </s> The State's argument takes us back to ground covered last Term in two cases challenging single-member districts. See Voinovich v. Quilter, 507 U.S. ___ (1993); Growe v. Emison, 507 U.S. ___ (1993). In Growe, we held that a claim of vote dilution in a single-member district requires proof meeting the same three threshold conditions for a dilution challenge to a multimember district: that a minority group be "`sufficiently large and geographically compact to constitute a majority in a </s> [ JOHNSON v. DeGRANDY, ___ U.S. ___ (1994) </s> , 9] </s> single-member district'"; that it be "`politically cohesive'"; and that "`the white majority vot[e] sufficiently as a bloc to enable it . . . usually to defeat the minority's preferred candidate.'" Id., at ___ (slip op., at 14) (quoting Thornburg v. Gingles, 478 U.S., at 50 -51). Of course, as we reflected in Voinovich and amplify later in this opinion, "the Gingles factors cannot be applied mechanically and without regard to the nature of the claim." 507 U.S., at ___ (slip op., at 10). </s> In Voinovich we explained how manipulation of district lines can dilute the voting strength of politically cohesive minority group members, whether by fragmenting the minority voters among several districts where a bloc-voting majority can routinely out-vote them, or by packing them into one or a small number of districts to minimize their influence in the districts next door. See 507 U.S. ___ (slip op., at 5). Section 2 prohibits either sort of line-drawing where its result, "`interact[ing] with social and historical conditions," impairs the ability of a protected class to elect its candidate of choice on an equal basis with other voters." Ibid. (quoting Gingles, supra, at 47). 7 </s> Plaintiffs in Growe and Voinovich failed to show vote dilution because the former did not prove political cohesiveness of the minority group, Growe, supra, at ___ (slip op., at 16), and the latter showed no significant white bloc voting, Voinovich, supra, at ___ (slip op., at 11). Here, on the contrary, the District Court found, and the State does not challenge, the presence of both these Gingles preconditions. The dispute in this litigation </s> [ JOHNSON v. DeGRANDY, ___ U.S. ___ (1994) </s> , 10] </s> centers on two quite different questions: whether Hispanics are sufficiently numerous and geographically compact to be a majority in additional single-member districts, as required by the first Gingles factor; and whether, even with all three Gingles conditions satisfied, the circumstances in totality support a finding of vote dilution when Hispanics can be expected to elect their chosen representatives in substantial proportion to their percentage of the area's population. </s> A </s> When applied to a claim that single-member districts dilute minority votes, the first Gingles condition requires the possibility of creating more than the existing number of reasonably compact districts with a sufficiently large minority population to elect candidates of its choice. The District Court found the condition satisfied by contrasting SJR 2-G with the De Grandy plan for the Dade County area, which provided for 11 reasonably compact districts, each with a voting-age population at least 64 percent Hispanic. 815 F.Supp., at 1580. While the percentage figures are not disputed, the parties disagree about the sufficiency of these super-majorities to allow Hispanics to elect representatives of their choice in all 11 districts. The District Court agreed with plaintiffs that the super-majorities would compensate for the number of voting-age Hispanics who did not vote, most commonly because they were recent immigrants who had not become citizens of the United States. Id., at 1567-1568. The State protests that fully half of the Hispanic voting-age residents of the region are not citizens, with the result that several districts in the De Grandy plan lack enough Hispanic voters to elect candidates of their choice without cross-over votes from other ethnic groups. On these assumptions, the State argues that the condition necessary to justify tinkering with the State's plan disappears. </s> [ JOHNSON v. DeGRANDY, ___ U.S. ___ (1994) </s> , 11] </s> We can leave this dispute without a winner. The parties' ostensibly factual disagreement raises an issue of law about which characteristic of minority populations (e.g., age, citizenship) ought to be the touchstone for proving a dilution claim and devising a sound remedy. These cases may be resolved, however, without reaching this issue or the related question whether the first Gingles condition can be satisfied by proof that a so-called influence district may be created (that is, by proof that plaintiffs can devise an additional district in which members of a minority group are a minority of the voters, but a potentially influential one). As in the past, we will assume without deciding that, even if Hispanics are not an absolute majority of the relevant population in the additional districts, the first Gingles condition has been satisfied in these cases. See Voinovich, supra, at ___ - ___ (slip op., at 5-6); see also Growe, supra, at ___, n. 5 (slip op., at 15, n. 5) (declining to reach the issue); Gingles, 478 U.S., at 46 -47, n. 12 (same). </s> B </s> We do, however, part company from the District Court in assessing the totality of circumstances. The District Court found that the three Gingles preconditions were satisfied, and that Hispanics had suffered historically from official discrimination, the social, economic, and political effects of which they generally continued to feel, 815 F.Supp., at 1573-1574. Without more, and on the apparent assumption that what could have been done to create additional Hispanic super-majority districts should have been done, the District Court found a violation of 2. But the assumption was erroneous, and more is required, as a review of Gingles will show. </s> 1 </s> Thornburg v. Gingles, supra, prompted this Court's </s> [ JOHNSON v. DeGRANDY, ___ U.S. ___ (1994) </s> , 12] </s> first reading of 2 of the Voting Rights Act after its 1982 amendment. 8 Section 2(a) of the amended Act prohibits any "standard, practice, or procedure . . . which results in a denial or abridgement of the right of any citizen of the United States to vote on account of race or color [or membership in a language minority group]. . . ." Section 2(b) provides that a denial or abridgment occurs where, </s> "based on the totality of circumstances, it is shown that the political processes leading to nomination or election in the State or political subdivision are not equally open to participation by members of a class of citizens protected by subsection (a) in that its members have less opportunity than other members of the electorate to participate in the political process and to elect representatives of their choice. The extent to which members of a protected class have been elected to office in the State or political subdivision is one circumstance which may be considered: Provided, That nothing in this section establishes a right to have members of a protected class elected in numbers equal to their proportion in the population." 42 U.S.C. 1973(b). </s> Gingles provided some structure to the statute's "totality of circumstances" test in a case challenging multimember legislative districts. See 478 U.S., at 46 -51. The Court listed the factors put forward as relevant in the Senate Report treating the 1982 amendments, 9 and held that </s> [ JOHNSON v. DeGRANDY, ___ U.S. ___ (1994) </s> , 13] </s> "[w]hile many or all of [them] may be relevant to a claim of vote dilution through submergence in multimember districts, unless there is a conjunction of the following circumstances, the use of multimember districts generally will not impede the ability of minority voters to elect representatives of their choice. Stated succinctly, a bloc voting majority must usually be able to defeat candidates supported by a politically cohesive, geographically insular minority group." Id., at 48-49 (footnote omitted) (emphasis in original). </s> The Court thus summarized the three now-familiar Gingles factors (compactness/numerousness, minority cohesion or bloc voting, and majority bloc voting) as "necessary preconditions," id., at 50, for establishing vote dilution by use of a multimember district. </s> But if Gingles so clearly identified the three as </s> [ JOHNSON v. DeGRANDY, ___ U.S. ___ (1994) </s> , 14] </s> generally necessary to prove a 2 claim, it just as clearly declined to hold them sufficient in combination, either in the sense that a court's examination of relevant circumstances was complete once the three factors were found to exist, or in the sense that the three in combination necessarily and in all circumstances demonstrated dilution. This was true not only because bloc voting was a matter of degree, with a variable legal significance depending on other facts, id., at 55-58, but also because the ultimate conclusions about equality or inequality of opportunity were intended by Congress to be judgments resting on comprehensive, not limited, canvassing of relevant facts. Lack of electoral success is evidence of vote dilution, but courts must also examine other evidence in the totality of circumstances, including the extent of the opportunities minority voters enjoy to participate in the political processes. Id., at 46, 79-80; id., at 98-99 (O'CONNOR, J., concurring in judgment). To be sure, some 2 plaintiffs may have easy cases, but although lack of equal electoral opportunity may be readily imagined and unsurprising when demonstrated under circumstances that include the three essential Gingles factors, that conclusion must still be addressed explicitly, and without isolating any other arguably relevant facts from the act of judgment. 10 </s> [ JOHNSON v. DeGRANDY, ___ U.S. ___ (1994) </s> , 15] </s> 2 </s> If the three Gingles factors may not be isolated as sufficient, standing alone, to prove dilution in every multimember district challenge, a fortiori they must not be when the challenge goes to a series of single-member districts, where dilution may be more difficult to grasp. Plaintiffs challenging single-member districts may claim not total submergence, but partial submergence; not the chance for some electoral success in place of none, but the chance for more success in place of some. When the question thus comes down to the reasonableness of drawing a series of district lines in one combination of places rather than another, judgments about inequality may become closer calls. As facts beyond the ambit of the three Gingles factors loom correspondingly larger, factfinders cannot rest uncritically on assumptions about the force of the Gingles factors in pointing to dilution. </s> The cases now before us, of course, fall on this more complex side of the divide, requiring a court to determine whether provision for somewhat fewer majority-minority districts than the number sought by the plaintiffs was dilution of the minority votes. The District Court was accordingly required to assess the probative significance of the Gingles factors critically after considering the further circumstances with arguable bearing on the issue of equal political opportunity. </s> [ JOHNSON v. DeGRANDY, ___ U.S. ___ (1994) </s> , 16] </s> We think that, in finding dilution here, the District Court misjudged the relative importance of the Gingles factors and of historical discrimination, measured against evidence tending to show that in spite of these facts, SJR 2-G would provide minority voters with an equal measure of political and electoral opportunity. </s> The District Court did not, to be sure, commit the error of treating the three Gingles conditions as exhausting the enquiry required by 2. Consistently with Gingles, the court received evidence of racial relations outside the immediate confines of voting behavior and found a history of discrimination against Hispanic voters continuing in society generally to the present day. But the District Court was not critical enough in asking whether a history of persistent discrimination reflected in the larger society and its bloc-voting behavior portended any dilutive effect from a newly proposed districting scheme, whose pertinent features were majority-minority districts in substantial proportion to the minority's share of voting-age population. The court failed to ask whether the totality of facts, including those pointing to proportionality, 11 showed that the new </s> [ JOHNSON v. DeGRANDY, ___ U.S. ___ (1994) </s> , 17] </s> scheme would deny minority voters equal political opportunity. </s> Treating equal political opportunity as the focus of the enquiry, we do not see how these district lines, apparently providing political effectiveness in proportion to voting-age numbers, deny equal political opportunity. The record establishes that Hispanics constitute 50 percent of the voting-age population in Dade County and under SJR 2-G would make up super-majorities in 9 of the 18 House districts located primarily within the county. Likewise, if one considers the 20 House districts located at least in part within Dade County, the record indicates that Hispanics would be an effective voting majority in 45 percent of them (i.e., nine), and would constitute 47 percent of the voting-age population in the area. 815 F.Supp., at 1580; App. to Juris. Statement 180a-183a. In other words, under SJR 2-G, Hispanics in the Dade County area would enjoy substantial proportionality. On this evidence, we think the State's scheme would thwart the historical tendency to exclude Hispanics, not encourage or perpetuate it. Thus in spite of that history and its legacy, including the racial cleavages that characterize Dade County politics today, we see no grounds for holding in this case that SJR 2-G's district lines diluted the votes cast by Hispanic voters. </s> The De Grandy plaintiffs urge us to put more weight on the District Court's findings of packing and fragmentation, allegedly accomplished by the way the State drew certain specific lines: "the line of District 116 separates heavily Hispanic neighborhoods in District 112 from the rest of the heavily Hispanic Kendall Lakes area and the Kendall area," so that the line divides "neighbors making up the . . . same housing development in Kendall Lakes," and District 114 "packs" Hispanic voters, while Districts 102 and 109 "fragmen[t]" them. 815 F.Supp., at 1569 (internal quotation marks omitted). </s> [ JOHNSON v. DeGRANDY, ___ U.S. ___ (1994) </s> , 18] </s> We would agree that, where a State has split (or lumped) minority neighborhoods that would have been grouped into a single district (or spread among several) if the State had employed the same line-drawing standards in minority neighborhoods as it used elsewhere in the jurisdiction, the inconsistent treatment might be significant evidence of a 2 violation, even in the face of proportionality. The District Court, however, made no such finding. Indeed, the propositions the Court recites on this point are not even phrased as factual findings, but merely as recitations of testimony offered by plaintiffs' expert witness. While the District Court may well have credited the testimony, the court was apparently wary of adopting the witness's conclusions as findings. But even if one imputed a greater significance to the accounts of testimony, they would boil down to findings that several of SJR 2-G's district lines separate portions of Hispanic neighborhoods, while another district line draws several Hispanic neighborhoods into a single district. This, however, would be to say only that lines could have been drawn elsewhere, nothing more. But some dividing by district lines and combining within them is virtually inevitable and befalls any population group of substantial size. Attaching the labels "packing" and "fragmenting" to these phenomena, without more, does not make the result vote dilution when the minority group enjoys substantial proportionality. </s> 3 </s> It may be that the significance of the facts under 2 was obscured by the rule of thumb apparently adopted by the District Court, that anything short of the maximum number of majority-minority districts consistent with the Gingles conditions would violate 2, at least where societal discrimination against the minority had occurred and continued to occur. But reading the first </s> [ JOHNSON v. DeGRANDY, ___ U.S. ___ (1994) </s> , 19] </s> Gingles condition in effect to define dilution as a failure to maximize in the face of bloc voting (plus some other incidents of societal bias to be expected where bloc-voting occurs) causes its own dangers, and they are not to be courted. </s> Assume a hypothetical jurisdiction of 1,000 voters divided into 10 districts of 100 each, where members of a minority group make up 40 percent of the voting population and voting is totally polarized along racial lines. With the right geographic dispersion to satisfy the compactness requirement, and with careful manipulation of district lines, the minority voters might be placed in control of as many as 7 of the 10 districts. Each such district could be drawn with at least 51 members of the minority group, and whether the remaining minority voters were added to the groupings of 51 for safety or scattered in the other three districts, minority voters would be able to elect candidates of their choice in all seven districts. 12 The point of the hypothetical is not, of course, that any given district is likely to be open to such extreme manipulation, or that bare majorities are likely to vote in full force and strictly along racial lines, but that reading 2 to define dilution as any failure to maximize tends to obscure the very object of the statute and to run counter to its textually stated purpose. One may suspect vote dilution from political famine, but one is not entitled to suspect (much less infer) dilution from mere failure to guarantee a political feast. However prejudiced a society might be, it would be absurd to suggest that the failure of a districting scheme to provide a minority group with </s> [ JOHNSON v. DeGRANDY, ___ U.S. ___ (1994) </s> , 20] </s> effective political power 75 percent above its numerical strength 13 indicates a denial of equal participation in the political process. Failure to maximize cannot be the measure of 2. </s> 4 </s> While, for obvious reasons, the State agrees that a failure to leverage minority political strength to the maximum possible point of power is not definitive of dilution in bloc-voting societies, it seeks to impart a measure of determinacy by applying a definitive rule of its own: that, as a matter of law, no dilution occurs whenever the percentage of single-member districts in which minority voters form an effective majority mirrors the minority voters' percentage of the relevant population. 14 Proportionality so defined, see n. 11, supra, would thus be a safe harbor for any districting scheme. </s> The safety would be in derogation of the statutory text and its considered purpose, however, and of the </s> [ JOHNSON v. DeGRANDY, ___ U.S. ___ (1994) </s> , 21] </s> ideal that the Voting Rights Act attempts to foster. An inflexible rule would run counter to the textual command of 2, that the presence or absence of a violation be assessed "based on the totality of circumstances." 42 U.S.C. 1973(b). The need for such "totality" review springs from the demonstrated ingenuity of state and local governments in hobbling minority voting power, McCain v. Lybrand, 465 U.S. 236, 243 -246 (1984), a point recognized by Congress when it amended the statute in 1982: "since the adoption of the Voting Rights Act, [some] jurisdictions have substantially moved from direct, over[t] impediments to the right to vote to more sophisticated devices that dilute minority voting strength," Senate Report 10 (discussing 5). In modifying 2, Congress thus endorsed our view in White v. Regester, 412 U.S. 755 (1973), that "whether the political processes are `equally open' depends upon a searching practical evaluation of the `past and present reality,'" Senate Report 30 (quoting 412 U.S., at 766 , 770). In a substantial number of voting jurisdictions, that past reality has included such reprehensible practices as ballot box stuffing, outright violence, discretionary registration, property requirements, the poll tax, and the white primary; and other practices censurable when the object of their use is discriminatory, such as at-large elections, runoff requirements, anti-single-shot devices, gerrymandering, the impeachment of officeholders, the annexation or deannexation of territory, and the creation or elimination of elective offices. 15 </s> [ JOHNSON v. DeGRANDY, ___ U.S. ___ (1994) </s> , 22] </s> Some of those expedients could occur even in a jurisdiction with numerically demonstrable proportionality; the harbor safe for States would thus not be safe for voters. 16 It is, in short, for good reason that we have been, and remain, chary of entertaining a simplification of the sort the State now urges upon us. Cf. Gingles, 478 U.S., at 77 ("[P]ersistent proportional representation . . . [may] not accurately reflect the minority group's ability to elect its preferred representatives"). </s> Even if the State's safe harbor were open only in cases of alleged dilution by the manipulation of district lines, however, it would rest on an unexplored premise of highly suspect validity: that, in any given voting jurisdiction (or portion of that jurisdiction under consideration), the rights of some minority voters under 2 may be traded off against the rights of other members of the same minority class. Under the State's view, the most blatant racial gerrymandering in half of a county's single member districts would be irrelevant under 2 if offset by political gerrymandering in the other half, so long as proportionality was the bottom line. But see Baird v. Consolidated City of Indianapolis, 976 F.2d 357, 359 (CA7 1992) ("A balanced bottom line does not foreclose proof of discrimination along the way"); City of Richmond v. United States, 422 U.S. 358, 378 -379 (1975) (territorial annexation aimed at diluting black votes forbidden by 5, regardless of its actual effect). </s> Finally, we reject the safe harbor rule because of a tendency the State would itself certainly condemn, a </s> [ JOHNSON v. DeGRANDY, ___ U.S. ___ (1994) </s> , 23] </s> tendency to promote and perpetuate efforts to devise majority-minority districts even in circumstances where they may not be necessary to achieve equal political and electoral opportunity. Because in its simplest form the State's rule would shield from 2 challenge a districting scheme in which the number of majority-minority districts reflected the minority's share of the relevant population, the conclusiveness of the rule might be an irresistible inducement to create such districts. It bears recalling, however, that, for all the virtues of majority-minority districts as remedial devices, they rely on a quintessentially race-conscious calculus aptly described as the "politics of second best," see B. Grofman, L. Handley, & R. Niemi, Minority Representation and the Quest for Voting Equality 136 (1992). If the lesson of Gingles is that society's racial and ethnic cleavages sometimes necessitate majority-minority districts to ensure equal political and electoral opportunity, that should not obscure the fact that there are communities in which minority citizens are able to form coalitions with voters from other racial and ethnic groups, having no need to be a majority within a single district in order to elect candidates of their choice. Those candidates may not represent perfection to every minority voter, but minority voters are not immune from the obligation to pull, haul, and trade to find common political ground, the virtue of which is not to be slighted in applying a statute meant to hasten the waning of racism in American politics. </s> It is enough to say that, while proportionality in the sense used here is obviously an indication that minority voters have an equal opportunity, in spite of racial polarization, "to participate in the political process and to elect representatives of their choice," 42 U.S.C. 1973(b), the degree of probative value assigned to </s> [ JOHNSON v. DeGRANDY, ___ U.S. ___ (1994) </s> , 24] </s> proportionality may vary with other facts. 17 No single statistic provides courts with a short-cut to determine whether a set of single-member districts unlawfully dilutes minority voting strength. </s> 5 </s> While the United States concedes the relevance of proportionality to a 2 claim, it would confine proportionality to an affirmative defense, and one to be made only on a statewide basis in cases that challenge districts for electing a body with statewide jurisdiction. In this case, the United States would have us treat any claim that evidence of proportionality supports the State's plan as having been waived because the State made no argument in the District Court that the proportion of districts statewide in which Hispanics constitute an effective voting majority mirrors the proportion of statewide Hispanic population. 18 </s> [ JOHNSON v. DeGRANDY, ___ U.S. ___ (1994) </s> , 25] </s> The argument has two flaws. There is, first, no textual reason to segregate some circumstances from the statutory totality, to be rendered insignificant unless the defendant pleads them by way of affirmative defense. Second, and just as importantly, the argument would recast these cases as they come to us, in order to bar consideration of proportionality except on statewide scope, whereas, up until now, the dilution claims have been litigated on a smaller geographical scale. It is, indeed, the plaintiffs themselves, including the United States, who passed up the opportunity to frame their dilution claim in statewide terms. While the United States points to language in its complaint alleging that the redistricting plans dilute the votes of "Hispanic citizens and black citizens in the State of Florida," App. 77, the complaint identifies "several areas of the State" where such violations of 2 are said to occur, and then speaks in terms of Hispanics in the Dade County area (and blacks in the area of Escambia County). Id., at 75-76. Nowhere do the allegations indicate that claims of dilution "in the State of Florida" are not to be considered in terms of the areas specifically mentioned. The complaint alleges no facts at all about the contours, demographics, or voting patterns of any districts outside the Dade County or Escambia County areas, and neither the evidence at trial nor the opinion of the District Court addressed white bloc voting and political cohesion of minorities statewide. The De Grandy plaintiffs even voluntarily dismissed their claims of Hispanic vote dilution outside the Dade County area. See 815 F.Supp., at 1559, n. 13. Thus we have no occasion to decide which frame of reference should have been used if the parties had not apparently agreed in the District </s> [ JOHNSON v. DeGRANDY, ___ U.S. ___ (1994) </s> , 26] </s> Court on the appropriate geographical scope for analyzing the alleged 2 violation and devising its remedy. </s> 6 </s> In sum, the District Court's finding of dilution did not address the statutory standard of unequal political and electoral opportunity, and reflected instead a misconstruction of 2 that equated dilution with failure to maximize the number of reasonably compact majority-minority districts. Because the ultimate finding of dilution in districting for the Florida House was based on a misreading of the governing law, we hold it to be clearly erroneous. See Gingles, 478 U.S., at 79 . </s> IV </s> Having found insufficient evidence of vote dilution in the drawing of House districts in the Dade County area, we look now to the comparable districts for the state Senate. As in the case of House districts, we understand the District Court to have misapprehended the legal test for vote dilution when it found a violation of 2 in the location of the Senate district lines. Because the court did not modify the State's plan, however, we hold the ultimate result correct in this instance. </s> SJR 2-G creates 40 single-member Senate districts, five of them wholly within Dade County. Of these five, three have Hispanic super-majorities of at least 64 percent, and one has a clear majority of black voters. Two more Senate districts crossing county lines include substantial numbers of Dade County voters, and in one of these, black voters, although not close to a majority, are able to elect representatives of their choice with the aid of cross-over votes. 815 F.Supp., at 1574, 1579. </s> Within this seven-district Dade County area, both minority groups enjoy rough proportionality. The voting-age population in the seven-district area is 44.8 percent </s> [ JOHNSON v. DeGRANDY, ___ U.S. ___ (1994) </s> , 27] </s> Hispanic and 15.8 percent black. Record, U.S. Exh. 7. Hispanics predominate in 42.9 percent of the districts (three out of seven), as do blacks in 14.3 percent of them (one out of seven). While these numbers indicate something just short of perfect proportionality (42.9 percent against 44.8; 14.3 percent against 15.8), the opposite is true of the five districts located wholly within Dade County. 19 </s> The District Court concentrated not on these facts, but on whether additional districts could be drawn in which either Hispanics or blacks would constitute an effective majority. The court found that indeed a fourth senatorial district with an Hispanic super-majority could be drawn, or that an additional district could be created with a black majority, in each case employing reasonably compact districts. Having previously established that each minority group was politically cohesive, that each labored under a legacy of official discrimination, and that whites voted as a bloc, the District Court believed it faced "two independent, viable Section 2 claims." 815 F.Supp., at 1577. Because the court did not, however, think it was possible to create both another Hispanic district and another black district on the same map, it concluded that no remedy for either violation was practical and, deferring to the State's plan as a compromise policy, imposed SJR 2-G's senatorial districts. Id., at 1580. </s> We affirm the District Court's decision to leave the State's plan for Florida State Senate districts undisturbed. </s> [ JOHNSON v. DeGRANDY, ___ U.S. ___ (1994) </s> , 28] </s> As in the case of the House districts, the totality of circumstances appears not to support a finding of vote dilution here, where both minority groups constitute effective voting majorities in a number of state Senate districts substantially proportional to their share in the population, and where plaintiffs have not produced evidence otherwise indicating that under SJR 2-G voters in either minority group have "less opportunity than other members of the electorate to participate in the political process and to elect representatives of their choice." 42 U.S.C. 1973(b). </s> V </s> There being no violation of the Voting Rights Act shown, we have no occasion to review the District Court's decisions going to remedy. The judgment of the District Court is accordingly affirmed in part and reversed in part. </s> It is so ordered. </s> Footnotes [Footnote 1 The complaints also challenged Florida's congressional districts, but that element of the litigation has been resolved separately, see De Grandy v. Wetherell, 794 F.Supp. 1076 (ND Fla. 1992) (three-judge court), and without appeal. </s> [Footnote 2 In an additional step not directly relevant to this appeal, the State submitted SJR 2-G to the Department of Justice for preclearance pursuant to 42 U.S.C. 1973c ( 5 of the Voting Rights Act of 1965). Five Florida counties, but not Dade County, are subject to preclearance. De Grandy v. Wetherell, 815 F.Supp. 1550, 1574 (ND Fla. 1992). When the Attorney General of the United States refused to preclear the plan's Senate districts for the Hillsborough County area and the state legislature refused to revise the plan, the Supreme Court of Florida ordered the adjustments necessary to obtain preclearance, 601 So.2d 543 (Fla. 1992); it is the version of SJR 2-G so adjusted that is at issue in this litigation. 815 F.Supp., at 1557-1558. </s> [Footnote 3 The complaint also alleged violation of Art. I, 2 and the Fourteenth and Fifteenth Amendments of the United States Constitution, but these claims were later dismissed voluntarily. </s> [Footnote 4 The Voting Rights Act and constitutional claims as to the Escambia County area were settled by the parties and are not at issue in this appeal. </s> [Footnote 5 The court's judgment filed July 2, 1992, App. to Juris. Statement 5a, said SJR 2-G's state senatorial districts "do not violate Section 2," but its subsequent opinion explaining the judgment said the senatorial districts do indeed violate 2, and that its earlier language "should be read as holding that the Florida Senate plan does not violate Section 2 such that a different remedy must be imposed." 815 F.Supp., at 1582 (emphasis added). Any conflict in these two formulations is of no consequence here. "This Court `reviews judgments, not statements in opinions,'" California v. Rooney, 483 U.S. 307, 311 (1987) (per curiam) (quoting Black v. Cutter Laboratories, 351 U.S. 292, 297 (1956)), and the De Grandy plaintiffs and the United States have appealed the failure of the District Court to provide relief for alleged 2 violations in SJR 2-G's senatorial districts. The State is entitled to "urge any grounds which would lend support to the judgment below," Dayton Bd. of Ed. v. Brinkman, 433 U.S. 406, 419 (1977), including the argument it makes here that the District Court was correct not to impose a remedy different from SJR 2-G because the State's reapportionment plan did not violate 2. </s> [Footnote 6 The Court recognizes that the terms "black," "Hispanic," and "white" are neither mutually exclusive nor collectively exhaustive. We follow the practice of the District Court in using them as rough indicators of South Florida's three largest racial and linguistic minority groups. </s> [Footnote 7 See also 478 U.S., at 50 , n. 16 (discussing vote dilution through gerrymandering district lines). For earlier precedents recognizing that racial gerrymanders have played a central role in discrimination against minority groups, see Gomillion v. Lightfoot, 364 U.S. 339 (1960); Perkins v. Matthews, 400 U.S. 379 (1971); Connor v. Finch, 431 U.S. 407 (1977). </s> [Footnote 8 Congress amended the statute to reach cases in which discriminatory intent is not identified, adding new language designed to codify White v. Regester, 412 U.S. 755, 766 (1973). S. Rep. No. 97-417, p. 2 (1982) (hereinafter Senate Report). </s> [Footnote 9 As summarized in Gingles, 478 U.S., at 44 -45, [t]he Senate Report specifies factors which typically may be relevant </s> [ JOHNSON v. DeGRANDY, ___ U.S. ___ (1994) </s> , 13] </s> to a 2 claim: the history of voting-related discrimination in the State or political subdivision; the extent to which voting in the elections of the State or political subdivision is racially polarized; the extent to which the State or political subdivision has used voting practices or procedures that tend to enhance the opportunity for discrimination against the minority group, such as unusually large election districts, majority vote requirements, and prohibitions against bullet voting; the exclusion of members of the minority group from candidate slating processes; the extent to which minority group members bear the effects of past discrimination in areas such as education, employment, and health, which hinder their ability to participate effectively in the political process; the use of overt or subtle racial appeals in political campaigns; and the extent to which members of the minority group have been elected to public office in the jurisdiction. [Senate Report 28-29] The Report notes also that evidence demonstrating that elected officials are unresponsive to the particularized needs of the members of the minority group and that the policy underlying the State's or the political subdivision's use of the contested practice or structure is tenuous may have probative value. Id., at 29." </s> [Footnote 10 If challenges to multimember districts are likely to be the easier plaintiffs' cases, it is worth remembering that, even in multimember district challenges, proof of the Gingles factors has not always portended liability under 2. In Baird v. Consolidated City of Indianapolis, 976 F.2d 357 (1992), the Seventh Circuit confronted a scheme for electing a City-County Council of 29 members. Voters chose 25 of their representatives from single-member districts and 4 at large, from a district representing the entire area. Black plaintiffs brought a vote dilution claim challenging the lines for single-member districts and the existence of the four-member at-large district. After the Council had redrawn its single-member districts to rectify dilution there, the District Court held, and the </s> [ JOHNSON v. DeGRANDY, ___ U.S. ___ (1994) </s> , 15] </s> Seventh Circuit affirmed, that the four-member district did not dilute black voting strength because proof of the three Gingles factors was not enough "if other considerations show that the minority has an undiminished right to participate in the political process." Id., at 359. The "other considerations" in Baird included the fact that the new single-member districts were so drawn that blacks formed a voting majority in seven of them (28 percent of the single-member districts and 24 percent of the entire Council) while blacks constituted 21 percent of the local population; and that while the four at-large seats tended to go to Republicans, one of the Republicans elected in 1991 was black. Id., at 358, 361. </s> [Footnote 11 "Proportionality," as the term is used here, links the number of majority-minority voting districts to minority members' share of the relevant population. The concept is distinct from the subject of the proportional representation clause of 2, which provides that "nothing in this section establishes a right to have members of a protected class elected in numbers equal to their proportion in the population." 42 U.S.C. 1973b. This proviso speaks to the success of minority candidates, as distinct from the political or electoral power of minority voters. Cf. Senate Report 29, n. 115 (minority candidates' success at the polls is not conclusive proof of minority voters' access to the political process). And the proviso also confirms what is otherwise clear from the text of the statute, namely that the ultimate right of 2 is equality of opportunity, not a guarantee of electoral success for minority-preferred candidates of whatever race. </s> [Footnote 12 Minority voters might instead be denied control over a single seat, of course. Each district would need to include merely 51 members of the majority group; minority voters fragmented among the 10 districts could be denied power to affect the result in any district. </s> [Footnote 13 When 40 percent of the population determines electoral outcomes in seven out of ten districts, the minority group can be said to enjoy effective political power 75 percent above its numerical strength. </s> [Footnote 14 See Brief for Appellees in Nos. 92-593, 92-767, p. 20 ("If the statutory prohibition against providing minorities `less opportunity than other members of the electorate . . . to elect representatives of their choice' is given its natural meaning, it cannot be violated by a single-member district plan that assures minority groups voting control over numbers of districts that are numerically proportional to their population in the area where presence of the three Gingles preconditions has been established"). The parties dispute whether the relevant figure is the minority group's share of the population, or of some subset of the population, such as those who are eligible to vote, in that they are United States citizens, over 18 years of age, and not registered at another address (as students and members of the military often are). Because we do not elevate this proportion to the status of a magic parameter, and because it is not dispositive here, we do not resolve that dispute. See supra, at 11. </s> [Footnote 15 See generally J. M. Kousser, The Shaping of Southern Politics: Suffrage Restriction and the Establishment of the One-Party South, 1880-1910 (1974); Kousser, The Undermining of the First Reconstruction, Lessons for the Second, in Minority Vote Dilution 27 (C. Davidson ed. 1984); Hearings on the Extension of the Voting Rights Act before the Subcommittee on Civil and Constitutional Rights of the House Committee on the Judiciary, 97th Cong., 1st Sess., </s> [ JOHNSON v. DeGRANDY, ___ U.S. ___ (1994) </s> , 22] </s> 1999-2022, 2115-2120 (1981). </s> [Footnote 16 The State might say, of course, that ostensibly "proportional" districting schemes that were nonetheless subject to diluting practices would not "assur[e]" minority voters their apparent voting power. But this answer would take us right back to a searching review of the factual totality, leaving the State's defensive rule without any particular utility. </s> [Footnote 17 So, too, the degree of probative value assigned to disproportionality, in a case where it is shown, will vary not only with the degree of disproportionality but with other factors as well. "[T]here is no indication that Congress intended to mandate a single, universally applicable standard for measuring undiluted minority voting strength, regardless of local conditions and regardless of the extent of past discrimination against minority voters in a particular State or political subdivision." Gingles, 478 U.S., at 94 -95 (O'CONNOR, J., concurring in judgment). </s> [Footnote 18 The argument for proportionality statewide favors the State if it is based on the proportion of Hispanic citizens of voting age statewide. According to census data not available at the time of trial, and thus not in the record, Hispanics constitute 7.15 percent of the citizen voting-age population of Florida, which corresponds to eight or nine Hispanic-majority House districts (120 x 7.15% = 8.58). If, instead, one calculates the proportion of statewide Hispanic-majority House districts on the basis of total population or voting-age population, the result favors plaintiffs. Hispanics constitute 12.2 percent of the State's total population and 11.7 percent of the State's voting-age population, corresponding to 14 or 15 seats (120 </s> [ JOHNSON v. DeGRANDY, ___ U.S. ___ (1994) </s> , 25] </s> x 12.2 = 14.64; 120 x 11.7 = 14.04). We need not choose among these calculations to decide these cases. </s> [Footnote 19 In the five districts wholly within Dade County, where Hispanics are concentrated, the voting-age population is 53.9 percent Hispanic and 13.5 percent black. Sixty percent of the districts are Hispanic-majority (three out of five), and 20 percent are black-majority (one out of five), so that each minority group protected by 2 enjoys an effective voting majority in marginally more districts than proportionality would indicate (60 percent over 53.9; 20 percent over 13.5). </s> [ JOHNSON v. DeGRANDY, ___ U.S. ___ (1994) </s> , 1] </s> JUSTICE O'CONNOR, concurring. </s> The critical issue in this case is whether 2 of the Voting Rights Act of 1965, 42 U.S.C. 1973, requires courts to "maximize" the number of districts in which minority voters may elect their candidates of choice. The District Court, applying the maximization principle, operated "on the apparent assumption that what could have been done to create additional Hispanic super-majority districts should have been done." Ante, at 11. The Court today makes clear that the District Court was in error, and that the Voting Rights Act does not require maximization. Ante, at 20 ("[f]ailure to maximize cannot be the measure of 2"); ante, at 26 (the District Court </s> [ JOHNSON v. DeGRANDY, ___ U.S. ___ (1994) </s> , 2] </s> improperly "equated dilution with failure to maximize the number of reasonably compact majority-minority districts"). </s> But today's opinion does more than reject the maximization principle. The opinion's central teaching is that proportionality - defined as the relationship between the number of majority-minority voting districts and the minority group's share of the relevant population - is always relevant evidence in determining vote dilution, but is never itself dispositive. Lack of proportionality is probative evidence of vote dilution. "[A]ny theory of vote dilution must necessarily rely to some extent on a measure of minority voting strength that makes some reference to the proportion between the minority group and the electorate at large." Thornburg v. Gingles, 478 U.S. 30, 84 (1986) (O'CONNOR, J., concurring in judgment). Thus, in evaluating the Gingles preconditions and the totality of the circumstances a court must always consider the relationship between the number of majority-minority voting districts and the minority group's share of the population. Cf. id., at 99 ("the relative lack of minority electoral success under a challenged plan, when compared with the success that would be predicted under the measure of undiluted minority voting strength the court is employing, can constitute powerful evidence of vote dilution"). </s> The Court also makes clear that proportionality is never dispositive. Lack of proportionality can never by itself prove dilution, for courts must always carefully and searchingly review the totality of the circumstances, including the extent to which minority groups have access to the political process. Ante, at 14. Nor does the presence of proportionality prove the absence of dilution. Proportionality is not a safe harbor for States; it does not immunize their election schemes from 2 challenge. Ante, at 20-24. </s> In sum, the Court's carefully crafted approach treats </s> [ JOHNSON v. DeGRANDY, ___ U.S. ___ (1994) </s> , 3] </s> proportionality as relevant evidence, but does not make it the only relevant evidence. In doing this, the Court makes clear that 2 does not require maximization of minority voting strength, yet remains faithful to 2's command that minority voters be given equal opportunity to participate in the political process and to elect representatives of their choice. With this understanding, I join the opinion of the Court. </s> [ JOHNSON v. DeGRANDY, ___ U.S. ___ (1994) </s> , 1] </s> JUSTICE KENNEDY, concurring in part and concurring in the judgment. </s> At trial, the plaintiffs alleged that the State violated 2 of the Voting Rights Act of 1965, 42 U.S.C. 1973, by not creating as many majority-minority districts as was feasible. The District Court agreed and found a violation of 2, thus equating impermissible vote dilution with the failure to maximize the number of majority-minority districts. I agree with the Court that the District Court's maximization theory was an erroneous application of 2. </s> A more difficult question is whether proportionality, ascertained by comparing the number of majority-minority </s> [ JOHNSON v. DeGRANDY, ___ U.S. ___ (1994) </s> , 2] </s> districts to the minority group's proportion of the relevant population, is relevant in deciding whether there has been vote dilution under 2 in a challenge to election district lines. The statutory text does not yield a clear answer. </s> The statute, in relevant part, provides: "The extent to which members of a protected class have been elected to office in the State or political subdivision is one circumstance which may be considered [in determining whether there has been vote dilution]: Provided, that nothing in this section establishes a right to have members of a protected class elected in numbers equal to their proportion in the population." 1973(b) (emphasis in original). By its terms, this language addresses the number of minorities elected to office, not the number of districts in which minorities constitute a voting majority. These two things are not synonymous, and it would be an affront to our constitutional traditions to treat them as such. The assumption that majority-minority districts elect only minority representatives, or that majority-white districts elect only white representatives, is false as an empirical matter. See Voinovich v. Quilter, 507 U.S. ___, ___ (1993) (slip op., at 4, 11); A. Thernstrom, Whose Votes Count? Affirmative Action and Minority Voting Rights 210-216 (1987); C. Swain, Black Faces, Black Interests, ch. 6 (1993). And on a more fundamental level, the assumption reflects "the demeaning notion that members of the defined racial groups ascribe to certain "minority views" that must be different from those of other citizens." Metro Broadcasting, Inc. v. FCC, 497 U.S. 547, 636 (1990) (KENNEDY, J., dissenting); see also United Jewish Organizations v. Carey, 430 U.S. 144, 186 -187 (1977) (Burger, C.J., dissenting). </s> Although the statutory text does not speak in precise terms to the issue, our precedents make clear that proportionality, or the lack thereof, has some relevance to a vote dilution claim under 2. In a unanimous </s> [ JOHNSON v. DeGRANDY, ___ U.S. ___ (1994) </s> , 3] </s> decision last Term, we recognized that single-member districts were subject to vote dilution challenges under 2, and further that "[d]ividing [a politically cohesive] minority group among various [single-member] districts so that it is a majority in none" is one "device for diluting minority voting power" within the meaning of the statute. Voinovich v. Quilter, 507 U.S., at ___ (slip op., at 5-6). If "the fragmentation of a minority group among various districts" is an acknowledged dilutive device, id., at ___ (slip op., at 6), it follows that analysis under 2 takes some account of whether the number of majority-minority districts falls short of a statistical norm. Cf. Washington v. Davis, 426 U.S. 229, 242 (1976) (discriminatory impact relevant to allegation of intentional discrimination). Both the majority and concurring opinions in Thornburg v. Gingles, 478 U.S. 30 (1986), reflect the same understanding of the statute. See id., at 50, n. 16 (In a "gerrymander case, plaintiffs might allege that the minority group that is sufficiently large and compact to constitute a single-member district has been split between two or more multimember or single-member districts, with the effect of diluting the potential strength of the minority vote"); id., at 84 (O'CONNOR, J., concurring in judgment) ("[A]ny theory of vote dilution must necessarily rely to some extent on a measure of minority voting strength that makes some reference to the proportion between the minority group and the electorate at large"). Indeed, to say that proportionality is irrelevant under the 2 results test is the equivalent of saying (contrary to our precedents) that no 2 vote dilution challenges can be brought to the drawing of single-member districts. </s> To be sure, placing undue emphasis upon proportionality risks defeating the goals underlying the Voting Rights Act of 1965, as amended. See Gingles, supra, at 99 (O'CONNOR, J., concurring in judgment). As today's decision provides, a lack of proportionality is "never </s> [ JOHNSON v. DeGRANDY, ___ U.S. ___ (1994) </s> , 4] </s> dispositive" proof of vote dilution, just as the presence of proportionality "is not a safe harbor for States [and] does not immunize their election schemes from 2 challenge." Ante, at 2 (O'CONNOR, J., concurring); see also ante, at 24, n. 17. But given our past construction of the statute, I would hesitate to conclude that proportionality has no relevance to the 2 inquiry. </s> It is important to emphasize that the precedents to which I refer, like today's decision, only construe the statute, and do not purport to assess its constitutional implications. See Chisom v. Roemer, 501 U.S. 380, 418 (1991) (KENNEDY, J., dissenting). Operating under the constraints of a statutory regime in which proportionality has some relevance, States might consider it lawful and proper to act with the explicit goal of creating a proportional number of majority-minority districts in an effort to avoid 2 litigation. Likewise, a court finding a 2 violation might believe that the only appropriate remedy is to order the offending State to engage in race-based redistricting and create a minimum number of districts in which minorities constitute a voting majority. The Department of Justice might require (in effect) the same as a condition of granting preclearance, under 5 of the Act, 42 U.S.C. 1973c, to a State's proposed legislative redistricting. Those governmental actions, in my view, tend to entrench the very practices and stereotypes the Equal Protection Clause is set against. See Metro Broadcasting, Inc. v. FCC, supra, at 636-637 (KENNEDY, J., dissenting). As a general matter, the sorting of persons with an intent to divide by reason of race raises the most serious constitutional questions. </s> "The moral imperative of racial neutrality is the driving force of the Equal Protection Clause." Richmond v. J. A. Croson Co., 488 U.S. 469, 518 (1989) (KENNEDY, J., concurring in part and concurring in judgment). Racial classifications "are by their very nature odious to a free people whose institutions are founded upon the </s> [ JOHNSON v. DeGRANDY, ___ U.S. ___ (1994) </s> , 5] </s> doctrine of equality," and are presumed invalid. Shaw v. Reno, 509 U.S. ___, ___ (1993) (slip op., at 11) (internal quotation marks omitted); see also A. Bickel, The Morality of Consent 133 (1975). This is true regardless of "the race of those burdened or benefited by a particular classification." Croson, supra, at 494 (opinion of O'CONNOR, J.); 488 U.S., at 520 (SCALIA, J., concurring in judgment). Furthermore, "[i]t is axiomatic that racial classifications do not become legitimate on the assumption that all persons suffer them in equal degree." Powers v. Ohio, 499 U.S. 400, 410 (1991); see also Plessy v. Ferguson, 163 U.S. 537, 560 (1896) (Harlan, J., dissenting). </s> These principles apply to the drawing of electoral and political boundaries. As Justice Douglas, joined by Justice Goldberg, stated 30 years ago: </s> "When racial or religious lines are drawn by the State, the multiracial, multireligious communities that our Constitution seeks to weld together as one become separatist; antagonisms that relate to race or to religion rather than to political issues are generated. . . . Since that system is at war with the democratic ideal, it should find no footing here." Wright v. Rockefeller, 376 U.S. 52, 67 (1964) (dissenting opinion). </s> In like fashion, Chief Justice Burger observed that the "use of a mathematical formula" to assure a minimum number of majority-minority districts "tends to sustain the existence of ghettos by promoting the notion that political clout is to be gained or maintained by marshaling particular racial, ethnic, or religious groups in enclaves." United Jewish Organizations v. Carey, 430 U.S., at 186 (dissenting opinion). And last Term in Shaw, we voiced our agreement with these sentiments, observing that "[r]acial gerrymandering, even for remedial purposes, may balkanize us into competing racial </s> [ JOHNSON v. DeGRANDY, ___ U.S. ___ (1994) </s> , 6] </s> factions; it threatens to carry us further from the goal of a political system in which race no longer matters - a goal that the Fourteenth and Fifteenth Amendments embody, and to which the Nation continues to aspire. 509 U.S., at ___ (slip op., at 26). </s> Our decision in Shaw alluded to, but did not resolve, the broad question whether "the intentional creation of majority-minority districts, without more, always gives rise to an equal protection claim." Id., at ___ (slip op., at 17) (internal quotation marks omitted); see also id., at ___ (slip op., at 26). While recognizing that redistricting differs from many other kinds of state decisionmaking "in that the legislature always is aware of race when it draws district lines, just as it is aware of age, economic status, religion and political persuasion," we stated that "the difficulty of determining from the face of a single-member districting plan that it purposefully distinguishes between voters on the basis of race" does "not mean that a racial gerrymander, once established, should receive less scrutiny under the Equal Protection Clause than other state legislation classifying citizens by race." Id., at ___ (emphasis in original). We went on to hold that "a reapportionment scheme so irrational on its face that it can be understood only as an effort to segregate voters into separate voting districts because of their race" must be subject to strict scrutiny under the Equal Protection Clause. Id., at ___ (slip op., at 26); see also id., at ___, ___ (slip op., at 17, 21). Given our decision in Shaw, there is good reason for state and federal officials with responsibilities related to redistricting, as well as reviewing courts, to recognize that explicit race-based districting embarks us on a most dangerous course. It is necessary to bear in mind that redistricting must comply with the overriding demands of the Equal Protection Clause. But no constitutional claims were brought here, and the Court's opinion does not address any constitutional issues. Cf. </s> [ JOHNSON v. DeGRANDY, ___ U.S. ___ (1994) </s> , 7] </s> Voinovich v. Quilter, 507 U.S., at ___ (slip op., at 9). </s> With these observations, I concur in all but Parts III-B-2, III-B-4 and IV of the Court's opinion, and in its judgment. </s> [ JOHNSON v. DeGRANDY, ___ U.S. ___ (1994) </s> , 1] </s> JUSTICE THOMAS, with whom JUSTICE SCALIA joins, dissenting. </s> For the reasons I explain in Holder v. Hall, ante, I would vacate the judgment of the District Court and remand with instructions to dismiss the actions consolidated in these cases for failure to state a claim under 2 of the Voting Rights Act of 1965. 42 U.S.C. 1973. Each of the actions consolidated in these cases asserted that Florida's apportionment plan diluted the vote of a minority group. In accordance with the views I express in Holder, I would hold that an apportionment plan is not a "standard, practice, or procedure" that may be challenged under 2. I therefore respectfully dissent. Page I

United States Supreme Court COMMISSIONER v. SCHLEIER(1995) No. 94-500 Argued: March 27, 1995Decided: June 14, 1995 </s> On his 1986 federal income tax return, Erich Schleier (hereinafter respondent) included as gross income the backpay portion, but not the liquidated damages portion, of an award that he received in settlement of a claim under the Age Discrimination in Employment Act of 1967 (ADEA). After the Commissioner issued a deficiency notice, asserting that the liquidated damages should have been included as income, respondent initiated Tax Court proceedings, contesting that ruling and seeking a refund for the tax he had paid on his backpay. The Tax Court agreed with respondent that the entire settlement constituted "damages received . . . on account of personal injuries or sickness" within the meaning of 104(a)(2) of the Internal Revenue Code and was therefore excludable from gross income. The Court of Appeals affirmed. </s> Held: </s> Recovery under the ADEA is not excludable from gross income. A taxpayer must meet two independent requirements before a recovery may be excluded under 104(a)(2): the underlying cause of action giving rise to the recovery must be "based upon tort or tort type rights", and the damages must have been received "on account of personal injuries or sickness." Respondent has failed to satisfy either requirement. Pp. 4-14. </s> (a) No part of respondent's settlement is excludable under 104(a)(2)'s plain language. Recovery for back wages does not satisfy the critical requirement of being "on account of" any personal injury, and no personal injury affected the amount of back wages recovered. In addition, this Court explicitly held in Trans World Airlines, Inc v. Thurston, 469 U.S. 111, 125 , that Congress intended the ADEA's liquidated damages to be punitive in nature; thus, Page II they serve no compensatory function and cannot be described as being "on account of personal injuries." Pp. 4-9. </s> (b) There is also no basis for excluding respondent's recovery from gross income under the Commissioner's regulation interpreting 104(a)(2). Even if respondent were correct that this action is based on "tort or tort type rights" within 26 CFR 1.104-1(c)'s meaning, this requirement is not a substitute for the statutory requirement that the amount be received "on account of personal injuries or sickness"; it is an additional requirement. Pp. 10-11. </s> (c) Nor is respondent's recovery based upon "tort or tort type rights" as that term was construed in Burke, where this Court rejected the argument that a taxpayer's backpay settlement under pre-1991 Title VII of the Civil Rights Act of 1964 should be excluded from gross income. Two elements that distinguish the ADEA from pre-1991 Title VII - namely the ADEA rights to a jury trial and liquidated damages - are insufficient to bring the ADEA within Burke's conception of a "tort or tort type righ[t]," for the statute lacks the primary characteristic of such an action: the availability of compensatory damages. Moreover, satisfaction of Burke's "tort or tort type" inquiry does not eliminate the need to satisfy the other requirement for excludability discussed herein. Pp. 11-13. </s> 26 F.3d 1119, reversed. </s> STEVENS, J., delivered the opinion of the Court, in which REHNQUIST, C. J., and KENNEDY, GINSBURG, and BREYER, JJ., joined. SCALIA, J., concurred in the judgment. O'CONNOR, J., filed a dissenting opinion, in which THOMAS, J., joined, and in Part II of which SOUTER, J., joined. </s> [ COMMISSIONER v. SCHLEIER, ___ U.S. ___ (1995) </s> , 1] </s> JUSTICE STEVENS delivered the opinion of the Court. </s> The question presented is whether 104(a)(2) of the Internal Revenue Code authorizes a taxpayer to exclude from his gross income the amount received in settlement of a claim for backpay and liquidated damages under the Age Discrimination in Employment Act of 1967 (ADEA). </s> I </s> Erich Schleier (respondent) 1 is a former employee of United Airlines, Inc. (United). Pursuant to established policy, United fired respondent when he reached the age of 60. Respondent then filed a complaint in Federal District Court alleging that his termination violated the ADEA. </s> The ADEA "broadly prohibits arbitrary discrimination in the workplace based on age." Lorillard v. Pollard, 434 U.S. 575, 577 (1978); Trans World Airlines, Inc. v. Thurston, 469 U.S. 111, 120 (1985); see also McKennon v. Nashville Banner Publishing Co., 513 U.S. __ (slip op., at 4) (1995). Subject to certain defenses, see 29 U.S.C. 623(f) (1988 ed. and Supp. V), 4 and 12 of </s> [ COMMISSIONER v. SCHLEIER, ___ U.S. ___ (1995) </s> , 2] </s> the ADEA make it unlawful for an employer, inter alia, to discharge any individual between the ages of 40 and 70 "because of such individual's age." 29 U.S.C. 623(a)(1) and 631(a). The ADEA incorporates many of the enforcement and remedial mechanisms of the Fair Labor Standards Act (FLSA). Like the FLSA, the ADEA provides for "such legal or equitable relief as may be appropriate to effectuate the purposes of this chapter." 626(b). That relief may include "without limitation judgments compelling employment, reinstatement or promotion." Ibid. More importantly for respondent's purposes, the ADEA incorporates FLSA provisions that permit the recovery "of wages lost and an additional equal amount as liquidated damages." 216(b). See generally McKennon, 513 U.S., at __ (slip op., at 4-5). </s> Despite these broad remedial mechanisms, there are two important constraints on courts' remedial power under the ADEA. First, unlike the FLSA, the ADEA specifically provides that "liquidated damages shall be payable only in cases of willful violations of this chapter." 29 U.S.C. 626(b); see Trans World Airlines, Inc. v. Thurston, 469 U.S., at 125 . Second, the Courts of Appeals have unanimously held, and respondent does not contest, that the ADEA does not permit a separate recovery of compensatory damages for pain and suffering or emotional distress. 2 </s> [ COMMISSIONER v. SCHLEIER, ___ U.S. ___ (1995) </s> , 3] </s> Respondent's ADEA complaint was consolidated with a class action brought by other former United employees challenging United's policy. The ADEA claims were tried before a jury, which determined that United had committed a willful violation of the ADEA. The District Court entered judgment for the plaintiffs, but that judgment was reversed on appeal. See Monroe v. United Air Lines, Inc., 736 F.2d 394 (CA7 1984). The parties then entered into a settlement, pursuant to which respondent received $145,629. Half of respondent's award was attributed to "backpay" and half to "liquidated damages." United did not withhold any payroll or income taxes from the portion of the settlement attributed to liquidated damages. </s> When respondent filed his 1986 federal income tax return, he included as gross income the backpay portion of the settlement, but excluded the portion attributed to liquidated damages. The Commissioner issued a deficiency notice, asserting that respondent should have included the liquidated damages as gross income. Respondent then initiated proceedings in the Tax Court, claiming that he had properly excluded the liquidated damages. Respondent also sought a refund for the tax he had paid on the backpay portion of the settlement. The Tax Court agreed with respondent that the entire settlement constituted "damages received . . . on account of personal injuries or sickness" within the meaning of 104(a)(2) of the Code and was therefore excludable from gross income. Relying on a prior Circuit decision that had in turn relied on our decision in United States v. Burke, 504 U.S. 229 (1992), the Court of Appeals for the Fifth Circuit affirmed. Because the Courts of Appeals have reached inconsistent conclusions as to the </s> [ COMMISSIONER v. SCHLEIER, ___ U.S. ___ (1995) </s> , 4] </s> taxability of ADEA recoveries in general and of the United settlement in particular, compare Downey v. Commissioner, 33 F.3d 836 (CA7 1994) (United settlement award is taxable) with Schmitz v. Commissioner, 34 F.3d 790 (CA9 1994) (United settlement award is excludable), we granted certiorari, 513 U.S. __ (1994). Our consideration of the plain language of 104(a), the text of the regulation implementing 104(a)(2), and our reasoning in Burke convinces us that a recovery under the ADEA is not excludable from gross income. </s> II </s> Section 61(a) of the Internal Revenue Code provides a broad definition of "gross income": "Except as otherwise provided in this subtitle, gross income means all income from whatever source derived." 26 U.S.C. 61(a). We have repeatedly emphasized the "sweeping scope" of this section and its statutory predecessors. Commissioner v. Glenshaw Glass Co., 348 U.S. 426, 429 (1955). See also United States v. Burke, 504 U.S., at 233 ; Helvering v. Clifford, 309 U.S. 331, 334 (1940). We have also emphasized the corollary to 61(a)'s broad construction, namely the "default rule of statutory interpretation that exclusions from income must be narrowly construed." United States v. Burke, 504 U.S., at 248 (SOUTER, J., concurring in judgment); see United States v. Centennial Savings Bank FSB, 499 U.S. 573, 583 -584 (1991); Commissioner v. Jacobson, 336 U.S. 28, 49 (1949); United States v. Burke, 504 U.S., at 244 (SCALIA, J., concurring in judgment). </s> Respondent recognizes 61(a)'s "sweeping" definition and concedes that his settlement constitutes gross income unless it is expressly excepted by another provision in the Code. Respondent claims, however, that his settlement proceeds are excluded from 61(a)'s reach </s> [ COMMISSIONER v. SCHLEIER, ___ U.S. ___ (1995) </s> , 5] </s> by 26 U.S.C. 104(a). 3 Section 104(a) provides an exclusion for five categories of "compensation for personal injuries or sickness." Respondent argues that his settlement award falls within the second of those categories, which excludes from gross income "the amount of any damages received . . . on account of personal injuries or sickness." 104(a)(2). </s> In our view, the plain language of the statute undermines respondent's contention. Consideration of a </s> [ COMMISSIONER v. SCHLEIER, ___ U.S. ___ (1995) </s> , 6] </s> typical recovery in a personal injury case illustrates the usual meaning of "on account of personal injuries." Assume that a taxpayer is in an automobile accident, is injured, and as a result of that injury suffers (a) medical expenses, (b) lost wages, and (c) pain, suffering, and emotional distress that cannot be measured with precision. If the taxpayer settles a resulting lawsuit for $30,000 (and if the taxpayer has not previously deducted her medical expenses, see 104(a)), the entire $30,000 would be excludable under 104(a)(2). The medical expenses for injuries arising out of the accident clearly constitute damages received "on account of personal injuries." Similarly, the portion of the settlement intended to compensate for pain and suffering constitutes damages "on account of personal injury." 4 Finally, the recovery for lost wages is also excludable as being "on account of personal injuries," as long as the lost wages resulted from time in which the taxpayer was out of work as a result of her injuries. See, e.g., Threlkeld v. Commissioner, 87 T. C. 1294, 1300 (1986) (hypothetical surgeon who loses finger through tortious conduct may exclude any recovery for lost wages because "[t]his injury . . . will also undoubtedly cause special damages including loss of future income"), aff'd, 848 F.2d 81 (CA6 1988). The critical point this hypothetical illustrates is that each element of the settlement is recoverable not simply because the taxpayer received a tort settlement, but rather because each element of the settlement satisfies the requirement set forth in 104(a)(2) (and in all of the other subsections of 104(a)) </s> [ COMMISSIONER v. SCHLEIER, ___ U.S. ___ (1995) </s> , 7] </s> that the damages were received "on account of personal injuries or sickness." </s> In contrast, no part of respondent's ADEA settlement is excludable under the plain language of 104(a)(2). Respondent's recovery of back wages, though at first glance comparable to our hypothetical accident victim's recovery of lost wages, does not fall within 104(a)(2)'s exclusion because it does not satisfy the critical requirement of being "on account of personal injury or sickness." Whether one treats respondent's attaining the age of 60 or his being laid off on account of his age as the proximate cause of respondent's loss of income, neither the birthday nor the discharge can fairly be described as a "personal injury" or "sickness." Moreover, though respondent's unlawful termination may have caused some psychological or "personal" injury comparable to the intangible pain and suffering caused by an automobile accident, it is clear that no part of respondent's recovery of back wages is attributable to that injury. Thus, in our automobile hypothetical, the accident causes a personal injury which in turn causes a loss of wages. In age discrimination, the discrimination causes both personal injury and loss of wages, but neither is linked to the other. The amount of back wages recovered is completely independent of the existence or extent of any personal injury. In short, 104(a)(2) does not permit the exclusion of respondent's back wages because the recovery of back wages was not "on account of" any personal injury and because no personal injury affected the amount of back wages recovered. </s> Respondent suggests, nonetheless, that the liquidated damages portion of his settlement fits comfortably within the plain language of 104(a)(2)'s exclusion. He cites our observation in Overnight Motor Transportation Co. v. Missel, 316 U.S. 572 (1942), that liquidated damages under the FLSA "are compensation, not a penalty or </s> [ COMMISSIONER v. SCHLEIER, ___ U.S. ___ (1995) </s> , 8] </s> punishment," and that such damages might compensate for "damages too obscure and difficult of proof for estimate." Id., at 584-585; see also Brooklyn Savings Bank v. O'Neil, 324 U.S. 697, 707 (1945). He argues that Congress must be presumed to have known of our interpretation of liquidated damages when it incorporated FLSA's liquidated damages provision into the ADEA, and that Congress must therefore have intended that liquidated damages under the ADEA serve, at least in part, to compensate plaintiffs for personal injuries that are difficult to quantify. </s> We agree with respondent that if Congress had intended the ADEA's liquidated damages to compensate plaintiffs for personal injuries, those damages might well come within 104(a)(2)'s exclusion. There are, however, two weaknesses in respondent's argument. First, even if we assume that Congress was aware of the Court's observation in Overnight Motor that the liquidated damages authorized by the FLSA might provide compensation for some "obscure" injuries, it does not necessarily follow that Congress would have understood that observation as referring to injuries that were personal rather than economic. Second, and more importantly, we have previously rejected respondent's argument: We have already concluded that the liquidated damages provisions of the ADEA were a significant departure from those in the FLSA, see Lorillard v. Pons, 434 U.S., at 581 ; Trans World Airlines, Inc. v. Thurston, 469 U.S., at 126 , and we explicitly held in Thurston: "Congress intended for liquidated damages to be punitive in nature." Id., at 125. 5 </s> [ COMMISSIONER v. SCHLEIER, ___ U.S. ___ (1995) </s> , 9] </s> Our holding in Thurston disposes of respondent's argument and requires the conclusion that liquidated damages under the ADEA, like back wages under the ADEA, are not received "on account of personal injury or sickness." 6 </s> [ COMMISSIONER v. SCHLEIER, ___ U.S. ___ (1995) </s> , 10] </s> III </s> Respondent seeks to circumvent the plain language of 104(a)(2) by relying on the Commissioner's regulation interpreting that section. Section 1.104-1(c) of the Treasury Regulations, 26 CFR 1.104-1(c) (1994), provides: </s> "Section 104(a)(2) [of the Internal Revenue Code] excludes from gross income the amount of any damages received (whether by suit or agreement) on account of personal injuries or sickness. The term `damages received (whether by suit or agreement)' means an amount received (other than workmen's compensation) through prosecution of a legal suit or action based upon tort or tort type rights, or through a settlement agreement entered into in lieu of such prosecution." </s> Respondent contends that an action to recover damages for a violation of the ADEA is "based upon tort or tort type rights" as those terms are used in that regulation, and that his settlement is thus excludable under the plain language of the regulation. </s> Even if we accept respondent's characterization of the action, but see infra, at __, there is no basis for excluding the proceeds of his settlement from his gross income. The regulatory requirement that the amount be received in a tort type action is not a substitute for the statutory requirement that the amount be received "on account of personal injuries or sickness"; it is an additional requirement. Indeed, the statutory requirement is repeated in the regulation. As the Commissioner argues in her brief, an exclusion from gross income is authorized by the regulation "only when it both (i) was received through prosecution or settlement of an `action based upon tort or tort type rights'. . . and (ii) was received `on account of personal injuries or sickness.'" Reply </s> [ COMMISSIONER v. SCHLEIER, ___ U.S. ___ (1995) </s> , 11] </s> Brief for Petitioner 2. 7 We need not decide whether the Commissioner would have authority to dispense entirely with the statutory requirement, because she disclaims any intent to do so, and the text of the regulation does not belie her disclaimer. Thus, respondent's reliance on the text of the regulation is unpersuasive. </s> IV </s> Respondent also suggests that our decision in United States v. Burke, 504 U.S. 229 (1992), compels the conclusion that his settlement award is excludable. In Burke, we rejected the taxpayer's argument that the payment received in settlement of her backpay claim under the pre-1991 version of Title VII of the Civil Rights Act of 1964 was excludable from her gross income. Our decision rested on the conclusion that such a claim was not based upon "tort or tort type rights" within the meaning of the regulation quoted above. For two independent reasons, we think Burke provides no foundation for respondent's argument. </s> First, respondent's ADEA recovery is not based upon "tort or tort type rights" as that term was construed in Burke. In Burke, we examined the remedial scheme established by the pre-1991 version of Title VII. Noting that "Title VII does not allow awards for compensatory or punitive damages," and that "instead, it limits available remedies to backpay, injunctions, and other </s> [ COMMISSIONER v. SCHLEIER, ___ U.S. ___ (1995) </s> , 12] </s> equitable relief," we concluded that Title VII was not tort-like because it addressed "`legal injuries of an economic character.'" 504 U.S., at 238 , 239. </s> Respondent points to two elements of the ADEA that he argues distinguish it from the remedial scheme at issue in Burke: First, the ADEA provides for jury trial, see 29 U.S.C. 626(b); Lorillard v. Pons, 434 U.S., at 585 ; but cf. Lehman v. Nakshian, 453 U.S. 156 (1981); and second, the ADEA allows for liquidated damages. We do not believe that these features of the ADEA are sufficient to bring it within Burke's conception of a "tort type righ[t]." It is true, as respondent notes, that we emphasized in Burke the lack of a right to a jury trial and the absence of any provision for punitive damages as factors distinguishing the pre-1991 Title VII action from traditional tort litigation, id., at 238-240. We did not, however, indicate that the presence of either or both of those factors would be sufficient to bring a statutory claim within the coverage of the regulation. </s> In our view, respondent's argument gives insufficient attention to what the Burke Court recognized as the primary characteristic of an "action based upon . . . tort type rights": the availability of compensatory remedies. Indeed, we noted that "one of the hallmarks of traditional tort liability is the availability of a broad range of damages to compensate the plaintiff `fairly for injuries caused by the violation of his legal rights.'" Id., at 235. We continued: "Although these damages often are described in compensatory terms . . . , in many cases they are larger than the amount necessary to reimburse actual monetary loss sustained or even anticipated by the plaintiff, and thus redress intangible elements of injury that are deemed important, even though not pecuniary in [their] immediate consequence[s]." Ibid (internal quotation marks omitted). Against this background, we found critical that the pre-1991 version of Title VII provided no compensation "for any of the </s> [ COMMISSIONER v. SCHLEIER, ___ U.S. ___ (1995) </s> , 13] </s> other traditional harms associated with personal injury, such as pain and suffering, emotional distress, harm to reputation, or other consequential damages." Id., at 239. </s> Like the pre-1991 version of Title VII, the ADEA provides no compensation "for any of the other traditional harms associated with personal injury." Monetary remedies under the ADEA are limited to back wages, which are clearly of an "economic character," and liquidated damages, which we have already noted serve no compensatory function. Thus, though this is a closer case than Burke, we conclude that a recovery under the ADEA is not one that is "based upon tort or tort type rights." </s> Second, and more importantly, the holding of Burke is narrower than respondent suggests. In Burke, following the framework established in the IRS regulations, we noted that 104(a)(2) requires a determination whether the underlying action is "based upon tort or tort type rights." United States v. Burke, 504 U.S., at 234 . In so doing, however, we did not hold that the inquiry into "tort or tort type rights" constituted the beginning and end of the analysis. In particular, though Burke relied on Title VII's failure to qualify as an action based upon tort type rights, we did not intend to eliminate the basic requirement found in both the statute and the regulation that only amounts received "on account of personal injuries or sickness" come within 104(a)(2)'s exclusion. Thus, though satisfaction of Burke's "tort or tort type" inquiry is a necessary condition for excludability under 104(a)(2), it is not a sufficient condition. 8 </s> [ COMMISSIONER v. SCHLEIER, ___ U.S. ___ (1995) </s> , 14] </s> In sum, the plain language of 104(a)(2), the text of the applicable regulation, and our decision in Burke establish two independent requirements that a taxpayer must meet before a recovery may be excluded under 104(a)(2). First, the taxpayer must demonstrate that the underlying cause of action giving rise to the recovery is "based upon tort or tort type rights"; and second, the taxpayer must show that the damages were received "on account of personal injuries or sickness." For the reasons discussed above, we believe that respondent has failed to satisfy either requirement, and thus no part of his settlement is excludable under 104(a)(2). </s> The judgment is reversed. </s> It is so ordered. </s> JUSTICE SCALIA concurs in the judgment. </s> Footnotes [Footnote 1 Helen Schleier is also a respondent because she and her husband Erich filed a joint return. </s> [Footnote 2 See, e. g., Vasquez v. Eastern Air Lines, Inc., 579 F.2d 107 (CA1 1978); Johnson v. Al Tech Specialties Steel Corp., 731 F.2d 143, 147 (CA2 1984); Rogers v. Exxon Research & Engineering Co., 550 F.2d 834 (CA3 1977); Slatin v. Stanford Research Institute, 590 F.2d 1292) (CA4 1979); Dean v. American Security Ins. Co., 559 F.2d 1036 (CA5 1977), cert. denied, 434 U.S. 1066 (1978); Hill v. Spiegel, Inc., 708 F.2d 233 (CA6 1983); Pfeiffer v. Essex Wire Corp., 682 F.2d 684, 687-688 (CA7) cert. denied, 459 U.S. 1039 (1982); Fiedler v. Indianhead Truck Line, Inc., 670 F.2d 806 (CA8 1982); Schmitz v. Commissioner, 34 F.3d 790 (CA9 1994); Perrell v. Finance America Corp., 726 F.2d 654 (CA10 1984); Goldstein v. Manhattan Industries, Inc., 758 F.2d 1435, 1446 (CA11 </s> [ COMMISSIONER v. SCHLEIER, ___ U.S. ___ (1995) </s> , 3] </s> 1985). See generally, H. Eglit, 2 Age Discrimination 18.19 (1982 and Supp. 1984); J. Kalet, Age Discrimination in Employment Law 110-111 (1986). </s> [Footnote 3 At the time of respondent's return, 104(a) provided in relevant part: </s> "Compensation for injuries or sickness </s> "(a) In general. - Except in the case of amounts attributable to (and not in excess of) deductions allowed under section 213 (relating to medical, etc., expenses) for any prior taxable year, gross income does not include - </s> "(1) amounts received under workmen's compensation acts as compensation for personal injuries or sickness; </s> "(2) the amount of any damages received (whether by suit or agreement and whether as lump sums or as periodic payments) on account of personal injuries or sickness; </s> "(3) amounts received through accident or health insurance for personal injuries or sickness (other than amounts received by an employee, to the extent such amounts (A) are attributable to contributions by the employer which were not includable in the gross income of the employee, or (B) are paid by the employer); </s> "(4) amounts received as a pension, annuity, or similar allowance for personal injuries or sickness resulting from active service in the armed forces of any country or in the Coast and Geodetic Survey or the Public Health Service, or as a disability annuity payable under the provisions of section 808 of the Foreign Service Act of 1980; and </s> "(5) amounts received by an individual as disability income attributable to injuries incurred as a direct result of a violent attack which the Secretary of State determines to be a terrorist attack and which occurred while such individual was an employee of the United States engaged in the performance of his official duties outside the United States." 26 U.S.C. 104 (1988 ed. and Supp. V). </s> In 1989, 104(a) was amended, adding, inter alia, the following provision: "Paragraph (2) shall not apply to any punitive damages in connection with a case not involving physical injury or physical sickness." Ibid. </s> [Footnote 4 Though the text of 104(a)(2) might be considered ambiguous on this point, it is by now clear that 104(a)(2) encompasses recoveries based on intangible as well as tangible harms. See United States v. Burke, 504 U.S., at 235 , n. 6; id., at 244, and n. 3 (SCALIA, J., concurring in judgment) (acknowledging that "`personal injuries or sickness'" includes nonphysical injuries). </s> [Footnote 5 We find it noteworthy that the Court in Thurston was presented with many of the arguments offered by respondent today. For example, to counter the argument that "the ADEA liquidated damages provision is punitive," the Equal Employment Opportunity Commission (EEOC) argued that "the legislative history of the liquidated damages provision </s> [ COMMISSIONER v. SCHLEIER, ___ U.S. ___ (1995) </s> , 9] </s> in the ADEA - as in the FLSA - shows that such damages are designed to provide full compensation to the employee, rather than primarily to punish the employer." Brief for the EEOC in Transworld Airlines, Inc. v. Thurston, O. T. 1984, Nos. 83-997 and 83-1325, p. 36. The EEOC continued: "Thus, Congress focused on the need to be fair to the employee, and to provide him full compensation for nonpecuniary damages not readily calculable, including emotional injuries such as humiliation and loss of self respect." Id., at 36-37. See also id., at 37 (relying on Overnight Motor). Against this background, the Court's statement that "Congress intended for liquidated damages to be punitive in nature" can only be taken as a rejection of the argument that those damages are also (or are exclusively) compensatory. </s> We recognize that the House Conference Report accompanying the 1978 Amendments to the ADEA contains language that supports respondent. See H. R. Conf. Rep. No. 95-950 (1978). However, this evidence was before the Court in Thurston, see Brief for the EEOC 37, and the Court did not find it persuasive. We see no reason to reach a different result now. </s> Moreover, there is much force to the Court's conclusion in Thurston that the ADEA's liquidated damages provisions are punitive. Under our decision in Thurston, liquidated damages are only available under the ADEA if "the employer . . . knew or showed reckless disregard for the matter of whether its conduct was prohibited by the ADEA." 469 U.S., at 126 (internal quotation marks omitted). If liquidated damages were designed to compensate ADEA victims, we see no reason why the employer's knowledge of the unlawfulness of his conduct should be the determinative factor in the award of liquidated damages. </s> [Footnote 6 We find odd the dissent's suggestion, post, at 6, that our holding today assumes that the intangible harms of discrimination do not constitute personal injuries. We of course have no doubt that the intangible harms of discrimination can constitute personal injury, and that compensation for such harms may be excludable under 104(a)(2). However, to acknowledge that discrimination may cause intangible harms is not to say that the ADEA compensates for such harms, or that any of the damages received were on account of those harms. </s> [Footnote 7 We recognize that the Commissioner has arguably in the past treated the regulation as though its second sentence superseded the first sentence. See, e. g., United States v. Burke, 504 U.S., at 242 , n. 1 (SCALIA, J., concurring in judgment). In this case, however, the Commissioner unambiguously contends that the regulation is not intended to eliminate the "on account of" requirement from the statutory language. In view of the Commissioner's differing interpretations of her own regulation, we do not accord her present litigating position any special deference. We do agree, however, that she reads the regulation correctly in this case. </s> [Footnote 8 We recognize that a recent revenue ruling from the IRS seems to rely on the same reading of Burke urged by respondent. See Rev. Rul. 93-88, 1993-2 Cum. Bull. 61. Though this Revenue Ruling is not before us, we note that "the Service's interpretive rulings do not have the force and effect of regulations," Davis v. United States, 495 U.S. 472, 484 (1990), and they may not be used to overturn the plain language of a statute, </s> [ COMMISSIONER v. SCHLEIER, ___ U.S. ___ (1995) </s> , 14] </s> see, e.g., Bartels v. Birmingham, 332 U.S. 126, 132 (1947). </s> [ COMMISSIONER v. SCHLEIER, ___ U.S. ___ (1995) </s> , 1] </s> JUSTICE O'CONNOR, with whom JUSTICE THOMAS joins and with whom JUSTICE SOUTER joins with respect to Part II, dissenting. </s> Age discrimination inflicts a personal injury. Even under the principles set forth in United States v. Burke, 504 U.S. 229 (1992), the damages received from a claim of such discrimination under the Age Discrimination in Employment Act of 1967 (ADEA) are received "on account of" that personal injury and therefore excludable from taxable income under 26 U.S.C. 104(a) (2). Unless the Court reads 104(a)(2) to permit exclusion only of damages received for tangible injuries (i. e., physical and mental injuries) - a reading rejected by eight Members of the Court in Burke and contradicted by an agency's reasonable interpretation of the statute it administers - the inescapable conclusion is that ADEA damage awards are excludable. </s> I </s> It is not disputed that the damages received by petitioners constitute gross income under 26 U.S.C. 61(a) unless excluded elsewhere; the question is whether such damages fall within 104(a)(2), which excludes from taxable income "the amount of any </s> [ COMMISSIONER v. SCHLEIER, ___ U.S. ___ (1995) </s> , 2] </s> damages received (whether by suit or agreement and whether as lump sum or periodic payments) on account of personal injuries or sickness . . . ." What constitutes "damages received on account of personal injuries" is not obvious from the text or history of the statute, and since 1960 Internal Revenue Service (IRS) regulations have defined the phrase with reference to traditional tort principles: "The term `damages received (whether by suit or agreement)' means an amount received . . . through prosecution of a legal suit or action based upon tort or tort type rights, or through a settlement agreement entered into in lieu of such prosecution." 25 Fed. Reg. 11490 (1960); 26 CFR 1.104-1(c) (1994). </s> At one point in time, determining whether damages received from a lawsuit were excludable under 104(a)(2) and the applicable regulation was a fairly straightforward task. In Threldkeld v. Commissioner, 87 T. C. 1294, 1299 (1986), aff'd, 848 F.2d 81 (CA6 1988), the Tax Court, in a 15-1 decision, set forth the test as follows: </s> "Section 104(a)(2) excludes from income amounts received as damages on account of personal injuries. Therefore, whether the damages received are paid on account of `personal injuries' should be the beginning and the end of the inquiry. To determine whether the injury complained of is personal, we must look to the origin and character of the claim . . ., and not to the consequences of the injury." 87 T. C., at 1299. </s> Thus, under Threldkeld, damages from a lawsuit were excludable under 104(a)(2) so long as they were received "on account of any invasion of the rights that an individual is granted by virtue of being a person in the sight of the law." Id., at 1308. </s> Under this standard, ADEA damages surely are excludable. "[D]iscrimination in the workplace causes </s> [ COMMISSIONER v. SCHLEIER, ___ U.S. ___ (1995) </s> , 3] </s> personal injury cognizable for purposes of 104(a)(2), . . . and there can be little doubt on this point." Burke, supra, at 249 (O'CONNOR, J., dissenting). We have recognized that "racial discrimination . . . is a fundamental injury to the individual rights of a person." Goodman v. Lukens Steel Co., 482 U.S. 656, 661 (1987). Such offense to the rights and dignity of the individual attaches regardless of whether the discrimination is based on race, sex, age, or other suspect characteristics. See, e. g., Price Waterhouse v. Hopkins, 490 U.S. 228, 265 (1989) (O'CONNOR, J., concurring in judgment) ("[W]hatever the final outcome of a decisional process, the inclusion of race or sex as a consideration within it harms both society and the individual"); EEOC v. Wyoming, 460 U.S. 226, 231 (1983) (Age discrimination "inflict[s] on individual workers the economic and psychological injury accompanying the loss of the opportunity to engage in productive and satisfying occupations"). Thus, prior to 1992, courts generally relied on Threldkeld to hold that damages awarded under the ADEA were excludable from income because they were received on account of personal injuries. See, e. g., Pistillo v. Commissioner, 912 F.2d 145 (CA6 1990); Rickel v. Commissioner, 900 F.2d 655 (CA3 1990); Redfield v. Insurance Co. of North America, 940 F.2d 542 (CA9 1991). </s> Things changed, however, with United States v. Burke, supra. In that case, the Court of Appeals, relying on Threldkeld, held that race discrimination violative of Title VII infringes upon a victim's personal rights and thus that damages received therefrom are properly excludable under 104(a)(2). Agreeing that discrimination violates personal rights, this Court nevertheless reversed because the statutory remedies do not "recompense a Title VII plaintiff for any of the other traditional harms associated with personal injury, such as pain and suffering, emotional distress, harm to reputation, or </s> [ COMMISSIONER v. SCHLEIER, ___ U.S. ___ (1995) </s> , 4] </s> other consequential damages (e. g., a ruined credit rating)." 504 U.S., at 239 . </s> I dissented from the Court's decision in Burke because "the remedies available to Title VII plaintiffs do not fix the character of the right they seek to enforce," id., at 249, and I remain of that view today. Dean Prosser presciently observed years ago that "[t]he relation between the remedies in contract and tort presents a very confusing field, still in process of development, in which few courts have made any attempt to chart a path." W. Prosser, Law of Torts 635 (3d ed. 1964) (footnote omitted). Three decades later, and despite the Court's attempt to chart a path in Burke (or perhaps because of it), whether a remedy sounds in tort often depends on arbitrary characterizations. Compare Schmitz v. Commissioner, 34 F.3d 790, 794 (CA9 1994) (ADEA liquidated damages are tort like because they "compensate victims for damages which are too obscure and difficult to prove"), with Downey v. Commissioner, 33 F.3d 836, 840 (CA7 1994) (ADEA liquidated damages, "as the name implies, compensate a party for those difficult to prove losses that often arise from a delay in the performance of obligations - as a type of contract remedy"). </s> The Court today sidesteps these difficulties by laying down a new per se rule: an illegal discharge based on age cannot "fairly be described as a `personal injury' or `sickness.'" Ante, at 7. To justify this conclusion, the Court offers a hypothetical car crash, the injuries from which cause the taxpayer to miss work. She would be able, in such circumstances, to exclude the recovered lost wages because they would constitute damages received "`on account of personal injuries.'" Ante, at 6. By contrast, in the Court's view, ADEA damages are not excludable because they are not "`on account of' any personal injury and because no personal injury affected the amount of back wages recovered." Ante, at 7. </s> [ COMMISSIONER v. SCHLEIER, ___ U.S. ___ (1995) </s> , 5] </s> This reasoning assumes the wrong answer to the fundamental question of this case: What is a personal injury? Eight Justices in Burke agreed that discrimination inflicts a personal injury under 104(a)(2). See 504 U.S., at 239 -240; id., at 247 (SOUTER, J., concurring in judgment); id., at 249 (O'CONNOR, J., dissenting). Only JUSTICE SCALIA disagreed, arguing instead that the phrase "personal injuries" under 104(a)(2) "is necessarily limited to injuries to physical or mental health," id., at 244; in his view, employment discrimination, without more, does not inflict a personal injury because it is only a legal injury that causes economic deprivation, ibid. Whatever the merits of this view, it was rejected by the Court in Burke and wisely not advanced by the Commissioner in this case, see Brief for Petitioner 10, 25, n. 15. </s> Although the Court professes agreement with the view that "personal injury" within the meaning of 104(a)(2) comprehends both tangible and intangible harms, ante, at 6, n. 4, the Court's analysis contradicts this fundamental premise. The Court's hypothetical contrast between wages lost due to a car crash and wages lost due to illegal discrimination would be significant only if one presumes that there is a relevant difference for purposes of 104(a)(2) between the car crash and the illegal discrimination. But such a difference exists only if one reads "personal injuries," as JUSTICE SCALIA did in Burke, to include only tangible injuries. Those physical and mental injuries, of course, differ from the economic and stigmatic harms that discrimination inflicts upon its victims, but it is a difference without relevance under 104(a)(2) - at least in the view of eight Justices in Burke, and the view that the Court professes to adopt today, ante, at 6, n. 4. The injuries from discrimination that the ADEA redresses - like the harm to reputation and loss of business caused by a dignitary tort like defamation, see Burke, supra, at 234-235; id. at 247 (SOUTER, J., concurring in judgment) - may not </s> [ COMMISSIONER v. SCHLEIER, ___ U.S. ___ (1995) </s> , 6] </s> always manifest themselves in physical symptoms, but they are no less personal, see supra, at 2-3, and thus no less worthy of excludability under 104(a)(2). The Court states: "Whether one treats respondent's attaining the age of 60 or his being laid off on account of his age as the proximate cause of respondent's loss of income, neither the birthday nor the discharge can fairly be described as a `personal injury' or `sickness.'" Ante, at 7. This assertion, the key to the Court's analysis, is not reconcilable with the Court's recognition that the intangible harms of illegal discrimination constitute "personal injuries" under 104(a)(2). </s> The Court argues that although "the intangible harms of discrimination can constitute personal injury" within the meaning of 104(a)(2), "to acknowledge that discrimination may cause intangible harms is not to say . . . that any of the damages received were on account of those harms." Ante, at 9, n. 6. The logic of this argument is rather hard to follow. If the harms caused by discrimination constitute personal injury, then amounts received as damages for such discrimination are received "on account of personal injuries" and should be excludable under 104(a)(2). </s> II </s> Even overlooking this fundamental defect in the Court's analysis, ADEA damages should be excludable from taxable income under our precedents. The Court in Burke deferred to the applicable IRS regulation, 26 CFR 1.104-1(c) (1994), and stated that "discrimination could constitute a `personal injury' for purposes of 104(a)(2) if the relevant cause of action evidenced a tort-like conception of injury and remedy." 504 U.S., at 239 . The Court held that a suit based on Title VII was not based upon "tort or tort type rights," 26 CFR 1.104-1(c) (1991), however, because Title VII does not entitle "victims of race-based employment discrimination </s> [ COMMISSIONER v. SCHLEIER, ___ U.S. ___ (1995) </s> , 7] </s> to obtain a jury trial at which `both equitable and legal relief, including compensatory and, under certain circumstances, punitive damages may be awarded.'" 504 U.S., at 240 (quoting Johnson v. Railway Express Agency, Inc., 421 U.S. 454, 460 (1975)). </s> Unlike Title VII, the ADEA expressly provides that any person aggrieved may bring a civil action and "shall be entitled to a trial by jury of any issue of fact in any . . . action for recovery of amounts owing as a result of a violation of this chapter," 29 U.S.C. 626(c)(2) (emphasis added). More important, the ADEA does not limit relief to back wages, but instead authorizes courts to grant the panoply of "such legal or equitable relief as will effectuate the purposes" of the Act, 29 U.S.C. 626(c)(1) (emphasis added), and it expressly provides for liquidated damages in addition to back wages, 29 U.S.C. 626(b). The Court emphasizes that liquidated damages under the ADEA are punitive in nature, ante, at 8, but it is an emphasis without relevance. Punitive damages are traditionally available only in tort. See 3 Dobbs, Law of Remedies 118 (2d ed. 1993) ("The rule against punitive damages prevails even if the breach [of contract] is wilful or malicious, as long as the breach does not amount to an independent tort"). Thus, whether the liquidated damages available under the ADEA are characterized as compensatory, or as a form of punitive damages, it is clear that the remedies available under the ADEA go beyond Title VII's limited focus on "`legal injuries of an economic character,'" Burke, ___ U.S., at ___ (quoting Albemarle Paper Co v. Moody, 422 U.S. 405, 418 (1975)). Plaintiffs claiming age discrimination, then, are not limited to the "circumscribed remedies available under Title VII," Burke, supra, at 240, but instead may sue under the ADEA, which appears to be one of the "other federal antidiscrimination statutes offering . . . broad remedies" distinguished by Burke, see id., at 241. </s> [ COMMISSIONER v. SCHLEIER, ___ U.S. ___ (1995) </s> , 8] </s> These distinctions qualify an ADEA suit as a "tort type" action under Burke, and should entitle a prevailing plaintiff to exclude damages recovered therefrom from taxable income under 104(a)(2) and the applicable IRS regulation, 26 CFR 1.104-1(c) (1994). The Court seeks to avoid this conclusion by asserting that our decision in Burke and the IRS regulation that it interpreted do not conclusively determine the scope of 104(a)(2). Both, according to the Court, ante, at 13, impose a necessary condition that the suit be tort or tort like, but neither states that this showing is sufficient for excludability under 104(a)(2). This contention is untenable. </s> The Court's decision in Burke makes clear that it was deciding conclusively what 104(a)(2) permits to be excluded. After quoting the language of 104(a)(2), the Court introduced its analysis with the following: "Neither the text nor the legislative history of 104(a)(2) offers any explanation of the term `personal injuries.' Since 1960, however, IRS regulations formally have linked identification of a personal injury for purposes of 104(a)(2) to traditional tort principles." 504 U.S., at 234 . The Court then quoted language from the IRS regulation, 29 CFR 1.104-1(c), which identified recovery from a suit "based on tort or tort type rights" as the hallmark of excludability under 104(a)(2). Every member of the Court so understood the opinion - that the scope of 104(a)(2) is defined in terms of traditional tort principles. See id., at 246-247 (SOUTER, J., concurring in judgment); id., at 249 (O'CONNOR, J., dissenting). Even JUSTICE SCALIA, who disagreed with the Court that "personal injury or sickness" included nonphysical injuries, see id., at 243-244 (SCALIA, J., concurring in judgment), agreed that the IRS regulation is "descriptive of the ambit of 104(a)(2) as a whole," id., at 242, n. 1. </s> For 35 years the IRS has consistently interpreted its regulation, 29 CFR 1.104-1(c), as conclusively establishing the requirements of 104(a)(2). See Rev. Rul. 85-98, </s> [ COMMISSIONER v. SCHLEIER, ___ U.S. ___ (1995) </s> , 9] </s> 1985-2 Cum. Bull. 51. This was the interpretation the Commissioner pressed upon us in Burke, see Brief for United States in United States v. Burke, O. T. 1991, No. 91-42, pp. 22-23; formally affirmed after Burke, see Rev. Rul. 93-88, 1993-2 Cum. Bull. 61; presented to the courts below, see Brief for Appellant in No. 93-5555 (CA5), p. 28, n. 16; and advanced in the opening briefs before us, see Brief for Petitioner 14, n. 5, 16-17, n. 7. It is only in one sentence in her reply brief that the Commissioner expressed a view at odds with 35 years of administrative rulings, agency practice, and representations to the courts - a sentence that the Court expands into its holding today. </s> The Court states that it does not accord the Commissioner's reply brief any special deference in light of the "differing interpretations of her own regulation," ante, at 11, n. 7. But ignoring the Commissioner's off-hand assertion in this case does not wipe the slate clean. There still remain 35 years of formal interpretations upon which taxpayers have relied and of agency positions upon which courts, including this one, have based their decisions. Unless the Court is willing to declare these positions to be unreasonable, they cannot be ignored. See Lyng v. Payne, 476 U.S. 926, 939 (1986). The Court asserts that "`the Service's interpretive rulings do not have the force and effect of regulations,'" ante, at 13, n. 7 (quoting Davis v. United States, 495 U.S. 472, 484 (1990)). That is true; it also says nothing about the deference courts must give to such reasonable interpretations, and a fuller exposition of our precedent indicates that the level of deference is substantial. Davis states: "Although the Service's interpretive rulings do not have the force and effect of regulations, we give an agency's interpretations and practices considerable weight where they involve the contemporaneous construction of a statute and where they have been in long use." Ibid. (citations omitted). </s> [ COMMISSIONER v. SCHLEIER, ___ U.S. ___ (1995) </s> , 10] </s> The Court states that the Commissioner "reads the regulation correctly in this case." Ante, at 11, n. 7. Even if true, that statement says nothing about whether her interpretation for the past 35 years is reasonable. Both may be reasonable; such is the nature of ambiguity. In any event, I do not agree that the Commissioner's reply brief correctly reads the regulation to impose a necessary, but not sufficient, condition for excludability under 104(a)(2). Although the regulation purports to interpret the term "damages received (whether by suit or agreement)," that term is unambiguous; it plainly includes all kinds of damages - inflicted on property or person, based on contract or tort, received by suit or agreement. Read in context, the regulation seeks to define the overall ambit of 104(a)(2) specifically the concept of "personal injuries," the ambiguity of which gives rise to controversies over the scope of the exclusion under 104(a)(2). The regulation is subtitled, "Damages received on account of personal injuries or sickness," and its first sentence reads: "Section 104(a)(2) excludes from gross income the amount of any damages received (whether by suit or agreement) on account of personal injuries or sickness." 29 CFR 1.104-1(c) (1994). In light of the expansive scope of these statements and the futility of any attempt to define only "damages received," the regulation is more sensibly read as defining the entire scope of 104(a)(2). </s> Finally, the Court states that agency rules and regulations "may not be used to overturn the plain language of a statute." Ante, at 13, n. 7. But the language of the statute is anything but plain. As the Court noted in Burke, "[n]either the text nor the legislative history of 104(a)(2) offers any explanation of the term `personal injuries.'" 504 U.S., at 234 . That is why the IRS promulgated its regulation in 1960 linking the slippery concept of personal injury to traditional tort principles. The Court today stops short of declaring this regulation </s> [ COMMISSIONER v. SCHLEIER, ___ U.S. ___ (1995) </s> , 11] </s> unreasonable; it merely asserts that the regulation's requirement of a tort or tort like injury is in addition to, not in place of, the statutory requirement that the damages be received "on account of personal injuries or sickness." But, as noted above, it is not clear where besides the definition of personal injury there is room in the statute for the agency to graft on this additional requirement. It is surely more reasonable to read the regulation as defining an ambiguous statutory phrase, rather than as imposing a superfluous precondition without any statutory basis. </s> For these reasons, I respectfully dissent. Page I

United States Supreme Court DOVE v. UNITED STATES(1976) No. 75-543 Argued: Decided: January 19, 1976 </s> Petitioner's death pending review by certiorari requires dismissal of petition. Durham v. United States, 401 U.S. 481 , overruled. </s> Certiorari dismissed. See 506 F.2d 1398. </s> PER CURIAM. </s> The Court is advised that the petitioner died at New Bern, N.C., on November 14, 1975. The petition for certiorari is therefore dismissed. To the extent that Durham v. United States, 401 U.S. 481 (1971), may be inconsistent with this ruling, Durham is overruled. </s> It is so ordered. </s> MR. JUSTICE WHITE dissents. </s> [423 U.S. 325, 326]

United States Supreme Court LYON v. SINGER(1950) No. 512 Argued: Decided: June 5, 1950 </s> 1. In these suits to collect from a statutory bank liquidator claims allegedly entitled to preference under New York Banking Law 606, arising from transactions with a Japanese corporation blocked under Executive Orders Nos. 8389 and 8832, this Court accepts the determination of the New York Court of Appeals that, under New York law, these claims arose from transactions in New York and were entitled to preference. Pp. 842-843. </s> 2. Since the New York court conditioned enforcement of the claims upon licensing by the Alien Property Custodian, federal control over alien property remains undiminished. Propper v. Clark, 337 U.S. 472 , distinguished. P. 842. </s> 3. This Court agrees that, at the time the New York judgments were entered, no licenses had been issued to these claimants; and it affirms the judgments below. P. 843. </s> 299 N. Y. 113, 139, 85 N. E. 2d 894, 906, affirmed. </s> [Footnote * Together with No. 527, Singer v. Yokohama Specie Bank, Ltd. et al.; No. 513, Lyon, Superintendent of Banks, v. Banque Mellie Iran; and No. 528, Banque Mellie Iran v. Lyon, Superintendent of Banks, also on certiorari to the same court. </s> Edward Feldman argued the cause for Lyon, Superintendent of Banks. With him on the briefs was Daniel Gersen. </s> Albert R. Connelly argued the cause for Singer. With him on the brief was George S. Collins. </s> Allen T. Klots argued the cause for Banque Mellie Iran. With him on the brief were Peter H. Kaminer and Merrill E. Clark, Jr. </s> By special leave of Court, James L. Morrisson argued the cause for the United States, as amicus curiae, supporting petitioner in Nos. 512 and 513, urging reversal or [339 U.S. 841, 842] modification of the judgment in No. 512, and affirmance in No. 527. With him on the briefs were Solicitor General Perlman and Harold I. Baynton. </s> PER CURIAM. </s> Certiorari was granted in these cases to review federal issues respecting the administration of frozen alien property. 339 U.S. 902 . </s> The cases arose from suits brought by claimants Singer and Banque Mellie Iran to collect from a statutory bank liquidator claims allegedly entitled to a preference under New York Banking Law 606, arising from transactions with a Japanese corporation, blocked under Executive Orders Nos. 8389, 5 Fed. Reg. 1400; 8832, 6 Fed. Reg. 3715. The New York Court of Appeals held that the transactions gave rise to a preferred claim in the liquidation but that payment by the liquidator must await specific licensing by the Alien Property Custodian of the transactions underlying the claims. Singer v. Yokohama Specie Bank, Ltd., 293 N. Y. 542, 58 N. E. 2d 726, 299 N. Y. 113, 85 N. E. 2d 894; Banque Mellie Iran v. Yokohama Specie Bank, Ltd., 299 N. Y. 139, 85 N. E. 2d 906. </s> Those opposed to the judgments urge that, as a matter of federal law, the freezing order prevented the creation of any claim recognizable under 606 of the New York Banking Law. </s> Oral argument and study of the record have convinced us that the judgments of the New York Court of Appeals are not inconsistent with the First War Powers Act of 1941, 301, 55 Stat. 839, or the above Executive Orders. We accept the New York court's determination that under New York law these claims arose from transactions in New York and were entitled to a preference. Since the New York court conditioned enforcement of the claims upon licensing by the Alien Property Custodian, federal control over alien property remains undiminished. Our [339 U.S. 841, 843] decision in Propper v. Clark, 337 U.S. 472 , does not require a contrary conclusion. There the liquidator claimed title to frozen assets adversely to the Custodian, and sought to deny the Custodian's paramount power to vest the alien property in the United States. No such result follows from the New York court's judgments in the present cases. </s> Since we further agree that, at the time the New York judgments were entered, no licenses had been issued to these claimants, we affirm the judgments below. </s> Affirmed. </s> MR. JUSTICE FRANKFURTER is of the opinion that since the federal question in Nos. 513 and 528 has been eliminated by the license granted by the Director, Office of Alien Property, no jurisdiction to review remains in this Court. Therefore, the writs of certiorari in these two cases should be dismissed. </s> [339 U.S. 841, 844]

United States Supreme Court OSCAR GRUSS & SON v. UNITED STATES(1967) No. 1060 Argued: Decided: May 8, 1967 </s> Review by this Court of District Court's dismissal of appellant, New Haven railroad bondholder's, complaint challenging ICC's Penn-Central merger order held inappropriate pending outcome of ICC's further consideration of that order, see Baltimore & Ohio R. Co. v. United States, ante, p. 372, and New Haven railroad inclusion proceedings. </s> 261 F. Supp. 386, vacated and remanded. </s> Myron S. Isaacs for appellant. </s> Solicitor General Marshall, Assistant Attorney General Turner, Robert W. Ginnane and Jerome Nelson for the United States et al., Hugh B. Cox and Henry P. Sailer for the Pennsylvania Railroad Co. et al., and Joseph Auerbach for Smith et al., appellees. </s> PER CURIAM. </s> Appellant is a bondholder of the New York, New Haven & Hartford Railroad Company (the New Haven), which is now undergoing a reorganization under 77 of the Bankruptcy Act, 11 U.S.C. 205. On April 6, 1966, the Interstate Commerce Commission directed inclusion of the New Haven in the merger of the New York Central Railroad Company and the Pennsylvania Railroad Company as soon as terms and conditions could be settled, but approved the Penn-Central merger and authorized its consummation prior to such inclusion. Appellant then petitioned the Commission to reconsider this order. The Commission allowed appellant to intervene but denied the petition to reconsider, and appellant then challenged the Commission's order of April 6 in the District Court, [386 U.S. 776, 777] which dismissed the complaint on the ground, among others, that appellant lacked standing to attack the Penn-Central merger. Since that time this Court has reviewed other aspects of the Commission's order approving the merger and has directed a remand to the Commission for further proceedings. Baltimore & Ohio R. Co. v. United States, ante, p. 372. Since the order which appellant's suit attacked is now subject to further consideration by the Commission and since proceedings to achieve inclusion of the New Haven are also under way before the Commission, it appears inappropriate to review the decision of the District Court at this time. Rather, we vacate the order of the District Court and remand the case to that court. Should appellant still be dissatisfied with the ultimate order of the Commission in the merger proceedings, it may attempt a fresh challenge in the District Court. </s> It is so ordered. </s> [386 U.S. 776, 778]

United States Supreme Court BERRY v. DOLES(1978) No. 76-1690 Argued: Decided: June 26, 1978 </s> In 1968 the Georgia statute covering the voting procedures for election of the three members of the Peach County Board of Commissioners of Roads and Revenues was amended so that instead of all three posts being filled at four-years intervals, the single at-large member was to be elected to a two-year term in 1968 and to a four-year term at subsequent elections. Shortly before the 1976 primary election for two seats on the Board not including the at-large post, appellants brought an action to enforce 5 of the Voting Rights Act of 1965, which requires changes in voting procedures to be submitted for approval either to the United States District Court for the District of Columbia or to the Attorney General. After the scheduled 1976 primary and general elections, a three-judge District Court enjoined further enforcement of the 1968 amendment until appellees effected compliance with 5, but refused to set aside the 1976 elections, noting "an apparent lack of any discriminatory purpose or effect surrounding the use of the law in the 1976 elections." Held: The District Court erred in denying affirmative relief as to the 1976 election, and should enter an order allowing appellees 30 days within which to apply for federal approval of the 1968 voting change under 5. </s> Affirmed in part and reversed in part. </s> PER CURIAM. </s> This appeal presents a challenge to the scope of the remedy allowed by a three-judge District Court for the Middle District of Georgia for failure of appellees to comply with the approval provisions of 5 of the Voting Rights Act of 1965, 79 Stat. 439, as amended, 42 U.S.C. 1973c (1970 ed., Supp. V). </s> In 1968, the State of Georgia enacted a statute intended to stagger the terms of the three members of the Peach County Board of Commissioners of Roads and Revenues. The then-existing statute, adopted in 1964, provided that all three posts were to be filled at four-year intervals. By operation of the [438 U.S. 190, 191] 1968 amendment, the single at-large member was to be elected to a two-year term in 1968 and to a four-year term at subsequent general elections. Appellees concede, and the three-judge court found, that the 1968 statute constituted a change in voting procedures subject to the provisions of 5 and that the change had been implemented without first having been submitted for approval either to the United States District Court for the District of Columbia or to the Attorney General as required by 5. </s> Four days prior to the August 10, 1976, primary election for the two seats on the Board not including the at-large post, appellants filed this action to enforce the requirements of 5. Appellants' requests for declaratory and injunctive relief were not acted upon until after the scheduled 1976 primary and general elections. </s> On February 28, 1977, the three-judge court, without a hearing, enjoined further enforcement of the 1968 statute until such time as appellees effected compliance with 5. However, the District Court refused appellants' request to set aside the 1976 elections, noting "the rather technical changes made in the county's election law by the 1968 amendment and, more important, the apparent lack of any discriminatory purpose or effect surrounding the use of the law in the 1976 elections." In expressly limiting its order to prospective relief, the District Court also relied on our decision in Allen v. State Board of Elections, 393 U.S. 544 (1969). </s> On April 26, 1977, the three-judge court denied appellants' motion for reconsideration. </s> In this Court, appellants take the position that the relief awarded in this case is wholly inadequate in failing to remedy the existing 5 violation. Appellants assert that by refusing either to set aside the 1976 election or to order that all three Board members be elected in 1978, the District Court, at least until the 1980 election, leaves undisturbed the effects of the 5 violation, thereby acknowledging that, at least for a time, local officials may successfully disregard 5 requirements. [438 U.S. 190, 192] </s> Appellees urge us to affirm the District Court judgment on grounds that the 1976 election involved the two Board posts which were not mentioned in the 1968 statute. Accordingly, appellees argue, election to these posts is not subject to 5. However, even assuming that the District Court had the power to effect one of the alternative remedies suggested by appellants, appellees believe that the court below was correct in refusing to do so. </s> At our request, the United States, as amicus curiae, has filed a brief in this case. The Government takes the view, espoused by appellants, that the 1976 election was affected by the voting change prescribed in the 1968 statute and that the District Court's failure to require prompt compliance with 5 permits the violation to continue. It is the submission of the United States that the question whether the staggering of Board terms provided for by state statute in this case necessarily has a racially discriminatory effect should properly be promptly submitted to either the District Court for the District of Columbia or to the Attorney General in conformity with the approval procedures set forth in 5. </s> In Perkins v. Matthews, 400 U.S. 379 (1971), decided after Allen, supra, we had occasion to address the remedy issue which now confronts us. We indicated in that case that "[i]n certain circumstances . . . it might be appropriate to enter an order affording local officials an opportunity to seek federal approval and ordering a new election only if local official fail to do so or if the required federal approval is not forthcoming." 400 U.S., at 396 -397. The circumstances present here make such a course appropriate. </s> In this case, appellees' undisputed obligation to submit the 1968 voting law change to a forum designated by Congress has not been discharge. We conclude that the requirement of federal scrutiny imposed by 5 should be satisfied by appellees without further delay. Accordingly, we adopt the suggestion of the United States that the District Court should enter an [438 U.S. 190, 193] order allowing appellees 30 days within which to apply for approval of the 1968 voting change under 5. If approval is obtained, the matter will be at an end. If approval is denied, appellants are free to renew to the District Court their request for simultaneous election of all members of the Board at the 1978 general election. </s> The judgment of the District Court is affirmed insofar as it holds that appellees have violated the approval provisions of 5 of the Voting Rights Act; the judgment is reversed insofar as it denies affirmative relief, and the case is remanded to the District Court with instructions to issue an order allowing appellees 30 days within which to apply for approval of the 1968 voting change under 5, and for further proceedings consistent with this opinion. </s> It is so ordered. </s> MR. JUSTICE BRENNAN, with whom MR. JUSTICE MARSHALL joins, concurring. </s> I join the Court's opinion. The Court is surely correct that the District Court committed reversible error by not, at the very least, ordering the Peach County officials to seek preclearance of the voting change enforced in the 1976 election and affording appellants the opportunity, if prior approval is not granted, to seek an order that would cut short the terms of the two Commissioners elected in 1976 and require a new election under the pre-1968 law. The District Court manifestly erred in refusing to order such relief on the basis of its conclusion that the change was "rather technical" with no "apparent discriminatory purpose or effect." Nothing could be clearer than that a district court - other, of course, than the District Court for the District of Columbia - has no jurisdiction to assess the purpose or effect of any voting change. See, e. g., United States v. Board of Supervisors, 429 U.S. 642 (1977); Perkins v. Matthews, 400 U.S. 379, 385 (1971). </s> Although the Court does not reach this issue, I think it clear [438 U.S. 190, 194] that, if the Peach County officials do not hereafter obtain federal preclearance for the 1968 change, the District Court must order a new election for all three posts at the earliest feasible time - that here being the regularly scheduled 1978 election. For if a designated federal entity cannot hereafter approve the 1968 voting change as racially neutral, it follows necessarily that there is a substantial probability that the 1976 election itself perpetrated racial discrimination in voting. To permit the results of the 1976 election to stand in the face of such a determination would be to do precisely what 5 was designed to forbid: allow the burdens of litigation and delay to operate in favor of the perpetrators and against the victims of possibly racially discriminatory practices. See South Carolina v. Katzenbach, 383 U.S. 301, 335 (1966). </s> However, while I, therefore, agree that the District Court committed reversible error, I am also of the view that, in the circumstances of this case, a strong argument can be made that, whether or not preclearance can be obtained, the only sufficient remedy is to set aside the 1976 election and order a new election under the pre-1968 law. Here, the Peach County officials could not have reasonably believed at the time of the 1976 election that the 1968 voting change could continue to be validly enforced without obtaining prior federal approval; thus the situation is quite different from that present in cases like Perkins v. Matthews, supra, where the scope of the 5 duty had been unsettled at the time of the election that was under attack. </s> If, in cases like the present one, the remedy of ordering a new election is not to be required in all cases, the political units covered by 5 may have a positive incentive flagrantly to disregard their clear obligations and not to seek preclearance of proposed voting changes. For covered jurisdictions will then know that a 5 violation, if a suit is brought, can only result in their being denied the right to continue to enforce those voting changes that could not have received federal approval in the [438 U.S. 190, 195] first place. As to all other voting changes, the sole effect of a suit for noncompliance with the approval provisions will be the limited sanction of requiring the political unit to obtain the federal approval which it should have received before any change was instituted. </s> The legislative background of 5 strongly suggests to me that Congress expressly intended to preclude such a state of affairs. Section 5, of course, was intended to prevent those States which had a history of racial discrimination in voting from adhering to their long-established practices of continually contriving new laws to deprive blacks of any newly won voting rights. Congress sought to place the burden of inertia and litigation delay on the perpetrators of the discrimination by requiring affected States voluntarily to submit any new law affecting voting for federal approval before it became effective. The remedial theory the Court embraces today may retard, not further, the objective of having polities voluntarily comply with 5, for a possible consequence may well be that a very large share of the burden of implementing federal policy will be placed on public and private enforcement. We ought to have the benefit of full briefing and oral argument to help indicate whether this will be the case. </s> I do not regard Perkins v. Matthews, supra, as necessarily supporting the Court's decision. While it is true that the Court there stated that there might be circumstances in which it would be appropriate to order a new election only if federal approval for the voting change were not procured within a specified time period, 400 U.S., at 396 , the context of this statement clearly suggests that it is intended to apply only to cases in which it had not been reasonably clear at the time of the election that the change was covered by 5. Ibid. * </s> [438 U.S. 190, 196] </s> However, since there is no disposition on the part of my colleagues to note probable jurisdiction and set the case down for oral argument, I join the Court's opinion. </s> [Footnote * I recognize that the case involves a voting change first implemented in 1968. This fact does not, however, necessarily support the Court's decision. Since the duty to comply with 5 is a continuing one and applied to Peach County's enforcement of the 1968 change in the 1976 [438 U.S. 190, 196] election, a strong argument can be made that the only relevant consideration should be that the 5 duty was clear in 1976. </s> MR. JUSTICE POWELL, concurring in the judgment. </s> Although I believe that the wiser course would be simply to affirm the judgment below, I go along reluctantly with the Court's resolution of this case rather than bring it here for argument. I am willing to do this only because I consider it most unlikely that the Attorney General could find any reasoned basis for denying approval of the change at issue in this case. Thus, it is improbable that the court below ever will have to pass on the request to cut short the terms of the two Commissioners elected in 1976 which the Court allows appellants to "renew" if the change is not approved. Ante, at 193. I write to emphasize my view that the three-judge court cannot be faulted for its common-sense handling of this case. I do not understand the Court to disagree with this view. </s> I </s> The facts and procedural posture of this case deserve a fuller treatment than the Court gives them. Under a state law enacted in 1964, the Board of Commissioners of Roads and Revenues for Peach County, Ga., is composed of three members, assigned to numbered posts. 1964 Ga. Laws No. 800, 1, p. 2627. Posts 1 and 2 are filled by residents of designated districts, and Post 3 is elected at large. Until 1968, all three posts were elected simultaneously for four-year terms. In 1968, the Georgia Legislature enacted a statute providing for a partial staggering of the Commissioners' terms. 1968 Ga. Laws No. 800, 2A, p. 2473. Under the statute, Post 3, the at-large seat, was to be elected to a two-year term in 1968, and thereafter to four-year terms. No change was made in [438 U.S. 190, 197] the terms of the other two Commissioners. The result is that the election for Post 3 no longer is held at the same time as the election for the other two posts. 1 </s> Elections were held under the amendment in 1968, 1970, 1972, and 1974 without challenge. It was only on August 6, 1976 - four days before the 1976 primary election - that appellants filed this lawsuit seeking to enjoin that election and the general election on the ground that the amendment had not received the imprimatur of the Attorney General or the District Court for the District of Columbia as required by 5 of the Voting Rights Act of 1965. A single judge of the District Court, acting promptly, ruled on appellants' motion for a preliminary injunction before the primary election was held. That judge, "seriously question[ing]" whether the change even was covered by 5, and apparently in view of the tardiness of the suit - which to this day has not been explained - sensibly refused to enjoin the election. App. to Jurisdictional Statement 7a. </s> After the 1976 primary and general elections for Posts 1 and 2 had been held, a three-judge District Court was convened. That court concluded that the 1968 amendment was subject to the preclearance requirements of 5 after all, and it enjoined enforcement of the 1968 amendment until those requirements had been met. "Given the rather technical changes made in the county's election law by the 1968 amendment and, more important, the apparent lack of any discriminatory purpose or effect surrounding the use of the law in the 1976 elections," however, the court denied appellants' request to set aside those elections. Id., at 2a-3a, citing Allen v. State [438 U.S. 190, 198] Board of Elections, 393 U.S. 544, 571 -572 (1969). 2 The three-judge court thereupon "dissolve[d] itself and remand[ed] the case to the originating judge for such other and further proceedings consistent with this opinion as may be required." App. to Jurisdictional Statement 4a. </s> Appellants then filed a motion for reconsideration and modification of the three-judge court's order. In this motion appellants - for the first time - asked the three-judge court to order that all three posts stand for election in 1978 if the change was not approved by then, thus cutting short the terms of the two Commissioners elected in 1976. See Jurisdictional Statement 7 n. 1, 15-16; Brief for United States as Amicus Curiae 4. The three-judge court refused to consider this belated request, stating: "The problem of relief is a question for a single-judge court." App. to Jurisdictional Statement 5a. Appellants, however, did not accept this clear invitation to press their request before a single-judge court. </s> Instead, they brought the instant appeal, urging the Court either to set aside the 1976 elections, or to cut short the terms of the two Commissioners elected in 1976 by declaring all three posts open in 1978. The United States as amicus curiae does not support appellants' request that the 1976 election be set aside. Neither does it support appellants' request that the Court declare all three posts open in 1978. Instead, it seeks relief that appellants never have requested, either in the court below or in this Court. It asks the Court to enter an order directing the District Court to give appellees 30 days within which to seek 5 preclearance. If preclearance is not sought or if the change is not approved, the United States then argues that the District Court should be directed to allow appellants "to renew their request for election of all three members at [438 U.S. 190, 199] the same time." Brief for United States as Amicus Curiae 8. The United States, like the Court today, see n. 7, infra, carefully takes no position on whether the District Court should grant such further relief if this request is "renewed." </s> In my view, the Court would be fully justified in holding that the United States, which is not a party to this suit and did not participate in the court below, is barred from injecting a new issue into the case by requesting the Court to grant relief that appellants themselves never have sought. It would be equally justified in holding that appellants are barred from asking the Court to declare all three posts open in 1978 after the three-judge court declined to rule on this belated request and after appellants ignored that court's express invitation to press their request before a single-judge court. As a general rule, this Court does not and should not allow parties or amici to raise issues here that were not raised in or ruled upon by the lower courts. Neither should this Court encourage parties to bypass avenues of relief that are open to them in the lower courts. The facts that the case is a Voting Rights Act case, and that the amicus is the United States, provide no justification for departing from these salutary principles. </s> II </s> Since the Court has chosen, without explanation, to depart from these principles, I briefly address the question of relief that is presented. Appellees do not challenge the three-judge court's holding that 5, as it has been expanded by judicial decision since enactment of the 1968 amendment at issue here, requires preclearance of that amendment. Nor do they challenge that court's entry of an injunction against enforcing the amendment in future elections until the change is approved. All they ask is that if the change is not approved, such a ruling should not be applied retroactively to abrogate the result of elections already held. In my view, there is much force to their plea. </s> This case is a classic example of how 5, enacted to further [438 U.S. 190, 200] the exercise of an important constitutional right, has been judicially expanded to cover the most inconsequential change in any aspect of election procedure. 3 Given this expansion, when courts are called upon to decide whether to grant retroactive relief, they should distinguish the minor or technical change from the substantive change that is likely to result in discrimination. In refusing to set aside the 1976 election, the three-judge court, much to its credit, did just this. Significantly, the Court today does not disturb that judgment, despite appellants' prayer that it do so. 4 </s> It must be remembered that the Voting Rights Act imposes restrictions unique in the history of our country on a limited number of selected States. 5 The need to bring a measure of [438 U.S. 190, 201] common sense to its application is underscored further by the fact that state and local officials now are supplicants for the Attorney General's dispensation of approval under 5 "at the rate of over 1,000 per year, and this rate is by no means indicative of the number of submissions involved if all covered States and political units fully complied with the preclearance requirement, as interpreted by the Attorney General." United States v. Sheffield Board of Comm'rs, 435 U.S. 110, 147 (1978) (STEVENS, J., dissenting) (footnote omitted). When a change is submitted, the Attorney General may block its implementation simply by stating, within 60 days, that he is unable to conclude that it does not have discriminatory purpose or effect. Georgia v. United States, 411 U.S. 526, 537 (1973). As a result, "the State may be left more or less at sea," id., at 544 (WHITE, J., dissenting), unable to put into effect such routine and trivial changes as the movement of a polling place or a precinct boundary line. 6 </s> Thus, although I agree with the Court that the three-judge court did not err in refusing to set aside the 1976 elections, I remain dubious as to whether it would be any more proper for that court to order all three posts to stand for election in 1978 if the change is not approved. As the Court's order is framed, however, this question still is open in the District Court if the change is not approved. 7 Perhaps that court will be able to [438 U.S. 190, 202] perceive some distinction that is not apparent to me between setting aside the 1976 elections - the denial of which relief this Court upholds - and achieving essentially the same result by cutting short the terms of the two Commissioners elected in 1976 by ordering all three posts to stand for election in 1978. Because I consider it unlikely that the three-judge court ever will have to face this question, I acquiesce in the disposition of the Court remanding "with instructions to issue an order allowing appellees 30 days within which to apply for approval of the 1968 voting change under 5, and for further proceedings consistent with [the Court's] opinion." Ante, at 193. </s> Footnotes [Footnote 1 It should be noted that the amendment was enacted before this Court, by judicial interpretation, extended the coverage of the Voting Rights Act of 1965 in, e. g., Allen v. State Board of Elections, 393 U.S. 544 (1969), and Perkins v. Matthews, 400 U.S. 379 (1971). Thus, when the amendment was enacted, there was no reason to suspect that 5 preclearance was required. </s> [Footnote 2 In giving only prospective effect to its decision in Allen, the Court took into account the fact that "the discriminatory purpose or effect of [the challenged] statutes, if any, has not been determined by any court." 393 U.S., at 572 . </s> [Footnote 3 In Perkins v. Matthews, supra, the Court held that " 5 requires prior submission of any changes in the location of polling places." 400 U.S., at 388 . There are thousands of precincts and polling places in the jurisdictions covered by the Act, and changes in precinct boundary lines and polling places are necessary at frequent intervals to accommodate inevitable population shifts. But under the Court's interpretation of the Act, a locality that moves a single precinct line or polling place half a block is required first to obtain permission from Washington. </s> [Footnote 4 The Court thus rejects MR. JUSTICE BRENNAN'S suggestion, ante, at 193, that the District Court "erred in refusing to order [retroactive] relief on the basis of its conclusion that the change was `rather technical' with no `apparent discriminatory purpose or effect.'" See also Allen v. State Board of Elections, 393 U.S., at 572 , quoted in n. 2, supra; Perkins v. Matthews, 400 U.S., at 396 . </s> [Footnote 5 As MR. JUSTICE STEVENS recently has written: "[The] so-called `preclearance' requirement is one of the most extraordinary remedial provisions in an Act noted for its broad remedies. Even the Department of Justice has described it as a `substantial departure . . . from ordinary concepts of our federal system'; its encroachment on state sovereignty is significant and undeniable." United States v. Sheffield Board of Comm'rs, 435 U.S. 110, 141 (1978) (dissenting opinion) (footnote omitted). Mr. Justice Harlan made much the same point by describing 5 as "a revolutionary innovation in American government" which applies only to "a handful of States." Allen v. State Board of Elections, supra, at 585, 586 (concurring in part and dissenting in part). </s> [Footnote 6 One would like to assume that the Attorney General exercises this unprecedented power to veto state and local legislation personally and with the most thoughtful deliberation. But, as previously noted, applications for his dispensation flow to Washington at a rate of over 1,000 per year - almost 4 per business day. Even if the Attorney General had no duties other than those imposed upon him by 5, one might doubt whether it would be possible for him to pass judgment, with care and sensitivity, upon each change in election laws or procedure submitted for his approval. </s> [Footnote 7 The Court "adopt[s] the suggestion of the United States that the District Court should enter an order allowing appellees 30 days within which to apply for approval of the 1968 voting change under 5. . . . If [438 U.S. 190, 202] approval is denied, appellants are free to renew to the District Court their request for simultaneous election of all members of the Board at the 1978 general election." Ante, at 192-193. </s> It then remands the case "to the District Court with instructions to issue an order allowing appellees 30 days within which to apply for approval of the 1968 voting change under 5, and for further proceedings consistent with this opinion." Ante, at 193. But the Court does not direct the District Court to grant any "renewed" request that appellants may make. All that it orders is that the District Court allow appellees 30 days within which to seek preclearance and allow appellants to "renew" their request for simultaneous elections in 1978 if the change is not approved. </s> MR. JUSTICE REHNQUIST, with whom MR. JUSTICE STEVENS joins, dissenting. </s> No party to this case has requested this Court to issue an order requiring or allowing appellees to apply for approval of the 1968 voting change under 5 of the Voting Rights Act of 1965. The United States, when requested by this Court to express its views, made such a request. But the United States is only an amicus curiae in this case, and it has no standing to request relief which has never been requested by the parties. The opinion of the Court goes not merely beyond the scope of any relief sought from the District Court, but also decides questions beyond those presented in the jurisdictional statement [438 U.S. 190, 203] of appellants. In so doing, of course, the opinion is contrary to our Rule 15, which provides: "Only the questions set forth in the jurisdictional statement or fairly comprised therein will be considered by the court." </s> I would affirm the judgment of the District Court in its entirety. </s> [438 U.S. 190, 204]

United States Supreme Court U.S. v. NATIONAL ASSN. SECURITIES DEALERS(1975) No. 73-1701 Argued: March 17, 1975Decided: June 26, 1975 </s> Section 22 (d) of the Investment Company Act of 1940 provides that "no dealer shall sell [mutual-fund shares] to any person except a dealer, a principal underwriter, or the issuer, except at a current public offering price described in the prospectus." Section 22 (f) authorizes mutual funds to impose restrictions on the negotiability and transferability of shares, provided they conform with the fund's registration statement and do not contravene any rules and regulations that the Securities and Exchange Commission (SEC) may prescribe in the interests of the holders of all of the outstanding securities. Section 2 (a) (6) defines a "broker" as a person engaged in the business of effecting transactions in securities for the account of others, and 2 (a) (11) defines a "dealer" as a person regularly engaged in the business of buying and selling securities for his own account. The Maloney Act of 1938 ( 15A of the Securities Exchange Act of 1934) supplements the SEC's regulation of over-the-counter markets by providing a system of cooperative self-regulation through voluntary associations of brokers and dealers. The Government brought this action against appellee National Association of Securities Dealers (NASD), certain mutual funds, mutual-fund underwriters, and broker-dealers, alleging that appellees, in violation of 1 of the Sherman Act, combined and agreed to restrict the sale and fix the resale prices of mutual-fund shares in secondary market transactions between dealers, from an investor to a dealer, and between investors through brokered transactions, and sought to enjoin such agreements. Count I of the complaint charged a horizontal combination and conspiracy among NASD's members to prevent the growth of a secondary dealer market in the purchase and sale of mutual-fund shares, the Government contending that such count was not to be read as a direct attack on NASD rules, but on NASD's interpretations and appellees' extension of the rules so as to include a secondary market. Counts II-VIII alleged various vertical restrictions on secondary [422 U.S. 694, 695] market activities. The District Court dismissed the complaint on the grounds that 22 (d) and (f), when read in conjunction with the Maloney Act, afforded antitrust immunity from all of the challenged practices. It further determined that, apart from this statutory immunity, the pervasive regulatory scheme established by these statutes conferred an implied immunity from antitrust sanction. The court concluded that the 22 (d) price maintenance mandate for sales by "dealers" applied to transactions in which a broker-dealer acts as statutory "broker" rather than a statutory "dealer," and thus that 22 (d) governs transactions in which the broker-dealer acts as an agent for an investor as well as those in which he acts as a principal selling shares for his own account. Held: </s> 1. Neither the language nor legislative history of 22 (d) justifies extending the section's price maintenance mandate beyond its literal terms to encompass transactions by broker-dealers acting as statutory "brokers." Pp. 711-720. </s> (a) To construe 22 (d) to cover all broker-dealer transactions would displace the antitrust laws by implication and also would impinge on the SEC's more flexible authority under 22 (f). Implied antitrust immunity can be justified only by a convincing showing of clear repugnancy between the antitrust laws and the regulatory system, and here no such showing has been made. Pp. 719-720. </s> (b) Such an expansion of 22 (d)'s coverage would serve neither this Court's responsibility to reconcile the antitrust and regulatory statutes where feasible nor the Court's obligation to interpret the Investment Company Act in a manner most conducive to the effectuation of its goals. P. 720. </s> 2. The vertical restrictions sought to be enjoined in Counts II-VIII are among the kinds of agreements authorized by 22 (f), and hence such restrictions are immune from liability under the Sherman Act. Pp. 720-730. </s> (a) The restrictions on transferability and negotiability contemplated by 22 (f) include restrictions on the distribution system for mutual-fund shares as well as limitations on the face of the shares themselves. To interpret the section as covering only the latter would disserve the broad remedial function of the section, which, as a complement to 22 (d)'s protection against disruptive price competition caused by dealers' "bootleg market" trading of mutual-fund shares, authorizes the funds and the SEC to deal more flexibly with other detrimental trading practices [422 U.S. 694, 696] by imposing SEC-approved restrictions on transferability and negotiability. Pp. 722-725. </s> (b) To contend, as the Government does, that the SEC's exercise of regulatory authority has been insufficient to give rise to an implied immunity for agreements conforming with 22 (f) misconceives the statute's intended operation. By its terms 22 (f) authorizes properly disclosed restrictions unless they are inconsistent with SEC rules or regulations and thus authorizes funds to impose transferability or negotiability restrictions subject to SEC disapproval. Pp. 726-728. </s> (c) The SEC's authority would be compromised if the agreements challenged in Counts II-VIII were deemed actionable under the Sherman Act. There can be no reconciliation of the SEC's authority under 22 (f) to permit these and similar restrictive agreements with the Sherman Act's declaration that they are illegal per se. In this instance the antitrust laws must give way if the regulatory scheme established by the Investment Company Act is to work. Pp. 729-730. </s> 3. The activities charged in Count I are neither required by 22 (d) nor authorized under 22 (f), and therefore cannot find antitrust shelter therein. The SEC's exercise of regulatory authority under the Maloney and Investment Company Acts is sufficiently pervasive, however, to confer implied immunity from antitrust liability for such activities. Pp. 730-735. </s> 374 F. Supp. 95, affirmed. </s> POWELL, J., wrote the opinion of the Court, in which BURGER, C. J., and STEWART, BLACKMUN, and REHNQUIST, JJ., joined. WHITE, J., filed a dissenting opinion, in which DOUGLAS, BRENNAN, and MARSHALL, JJ., joined, post, p. 735. </s> Gerald P. Norton argued the cause for the United States. With him on the briefs were Solicitor General Bork, Assistant Attorney General Kauper, Howard E. Shapiro, and Daniel R. Hunter. </s> Lee Loevinger argued the cause for appellees. With him on the brief for appellees Bache & Co., Inc., et al., were Owen M. Johnson, Jr., and David J. Saylor. Briefs were filed by Joseph B. Levin, Lloyd J. Derrickson, and [422 U.S. 694, 697] Dennis C. Hensley for appellee National Association of Securities Dealers, Inc.; by Robert E. Jensen and Richard M. Phillips for appellees Wellington Management Co. et al.; by William R. Meagher for appellees Fidelity Fund. Inc., et al.; by Herbert J. Miller, Jr., for appellee Vance, Sanders & Co., Inc.; and by Marvin Schwartz and Mark I. Fishman for appellee Massachusetts Investors Growth Stock Fund, Inc. </s> Walter P. North argued the cause for the Securities and Exchange Commission as amicus curiae urging affirmance. With him on the brief was Lawrence E. Nerheim. </s> Opinion of the Court by MR. JUSTICE POWELL, announced by MR. JUSTICE BLACKMUN. </s> This appeal requires the Court to determine the extent to which the regulatory authority conferred upon the Securities and Exchange Commission by the Maloney Act, 52 Stat. 1070, as amended, 15 U.S.C. 78o-3, and the Investment Company Act of 1940, 54 Stat. 789, as amended, 15 U.S.C. 80a-1 et seq., displaces the strong antitrust policy embodied in 1 of the Sherman Act, 26 Stat. 209, as amended, 15 U.S.C. 1. At issue is whether certain sales and distribution practices employed in marketing securities of open-end management companies, popularly referred to as "mutual funds," are immune from antitrust liability. We conclude that they are, and accordingly affirm the judgment of the District Court. </s> I </s> An "investment company" invests in the securities of other corporations and issues securities of its own. 1 </s> [422 U.S. 694, 698] Shares in an investment company thus represent proportionate interests in its investment portfolio, and their value fluctuates in relation to the changes in the value of the securities it owns. The most common form of investment company, the "open end" company or mutual fund, is required by law to redeem its securities on demand at a price approximating their proportionate share of the fund's net asset value at the time of redemption. 2 In order to avoid liquidation through redemption, mutual funds continuously issue and sell new shares. These features - continuous and unlimited distribution and compulsory redemption - are, as the Court recently recognized, "unique characteristic[s]" of this form of investment. United States v. Cartwright, 411 U.S. 546, 547 (1973). </s> The initial distribution of mutual-fund shares is conducted by a principal underwriter, often an affiliate of [422 U.S. 694, 699] the fund, and by broker-dealers 3 who contract with that underwriter to sell the securities to the public. The sales price commonly consists of two components, a sum calculated from the net asset value of the fund at the time of purchase, and a "load," a sales charge representing a fixed percentage of the net asset value. The load is divided between the principal underwriter and the broker-dealers, compensating them for their sales efforts. 4 </s> The distribution-redemption system constitutes the primary market in mutual-fund shares, the operation of which is not questioned in this litigation. The parties agree that 22 (d) of the Investment Company Act requires broker-dealers to maintain a uniform price in sales in this primary market to all purchasers except the fund, its underwriters, and other dealers. And in view of this express requirement no question exists that antitrust immunity must be afforded these sales. This case [422 U.S. 694, 700] focuses, rather, on the potential secondary market in mutual-fund shares. </s> Although a significant secondary market existed prior to enactment of the Investment Company Act, little presently remains. The United States agrees that the Act was designed to restrict most of secondary market trading, but nonetheless contends that certain industry practices have extended the statutory limitation beyond its proper boundaries. The complaint in this action alleges that the defendants, appellees herein, combined and agreed to restrict the sale and fix the resale prices of mutual-fund shares in secondary market transactions between dealers, from an investor to a dealer, and between investors through brokered transactions. 5 Named as defendants are the National Association of Securities Dealers (NASD), 6 and certain mutual funds, 7 mutual-fund underwriters, 8 and securities broker-dealers. 9 </s> [422 U.S. 694, 701] </s> The United States charges that these agreements violate 1 of the Sherman Act, 15 U.S.C. 1, 10 and prays that they be enjoined under 4 of that Act. </s> Count I charges a horizontal combination and conspiracy among the members of appellee NASD to prevent [422 U.S. 694, 702] the growth of a secondary dealer market in the purchase and sale of mutual-fund shares. See n. 42, infra. Counts II-VIII, by contrast, allege various vertical restrictions on secondary market activities. In Counts II, IV, and VI the United States charges that the principal underwriters and broker-dealers entered into agreements that compel the maintenance of the public offering price in brokerage transactions of specified mutual-fund shares, and that prohibit interdealer transactions by allowing each broker-dealer to sell and purchase shares only to or from investors. 11 Count VIII alleges that the broker-dealers entered into other, similar contracts and combinations with numerous principal underwriters. Counts III, V, and VII allege violations on the part of the principal underwriters and the funds themselves. In Counts III and VII the various defendants [422 U.S. 694, 703] are charged with entering into contracts requiring the restrictive underwriter-dealer agreements challenged in Counts II and VI. Count V charges that the agreement between one fund and its underwriter restricted the latter to serving as a principal for its own account in all transactions with the public, thereby prohibiting brokerage transactions in the fund's shares. App. 14. </s> After carefully examining the structure, purpose, and history of the Investment Company Act, 15 U.S.C. 80a-1 et seq., and the Maloney Act, 15 U.S.C. 78o-3, the District Court held that this statutory scheme was "`incompatible with the maintenance of (an) antitrust action,'" 374 F. Supp. 95, 109 (DC 1973), quoting Silver v. New York Stock Exchange, 373 U.S. 341, 358 (1963). The court concluded that 22 (d) and (f) of the Investment Company Act, when read in conjunction with the Maloney Act, afford antitrust immunity for all of the practices here challenged. The court further held that apart from this explicit statutory immunity, the pervasive regulatory scheme established by these statutes confers an implied immunity from antitrust sanction in the "narrow area of distribution and sale of mutual fund shares." 374 F. Supp., at 114. The court accordingly dismissed the complaint, and the United States appealed to this Court. 12 </s> The position of the United States in this appeal can be summarized briefly. Noting that implied repeals of the antitrust laws are not favored, see, e. g., United States v. Philadelphia National Bank, 374 U.S. 321, 348 (1963), the United States urges that the antitrust immunity conferred by 22 of the Investment Company [422 U.S. 694, 704] Act should not extend beyond its precise terms, none of which, it maintains, requires or authorizes the practices here challenged. The United States maintains, moreover, that the District Court expanded the limits of the implied-immunity doctrine beyond those recognized by decisions of this Court. In response, appellees advance all of the positions relied on by the District Court. They are joined by the Securities and Exchange Commission (hereinafter SEC or Commission), which asserts as amicus curiae that the regulatory authority conferred upon it by 22 (f) of the Investment Company Act displaces 1 of the Sherman Act. The SEC contends, therefore, that the District Court properly dismissed Counts II-VIII but takes no position with respect to Count I. </s> II </s> A </s> The Investment Company Act of 1940 originated in congressional concern that the Securities Act of 1933, 48 Stat. 74, 15 U.S.C. 77a et seq., and the Securities Exchange Act of 1934, 48 Stat. 881, 15 U.S.C. 78a et seq., were inadequate to protect the purchasers of investment company securities. Thus, in 30 of the Public Utility Holding Company Act, 49 Stat. 837, 15 U.S.C. 79z-4. Congress directed the SEC to study the structures, practices, and problems of investment companies with a view toward proposing further legislation. Four years of intensive scrutiny of the industry culminated in the publication of the Investment Trust Study and the recommendation of legislation to rectify the problems and abuses it identified. After extensive congressional consideration, the Investment Company Act of 1940 was adopted. </s> The Act vests in the SEC broad regulatory authority [422 U.S. 694, 705] over the business practices of investment companies. 13 We are concerned on this appeal with 22 of the Act, 15 U.S.C. 80a-22, which controls the sales and distribution of mutual-fund shares. The questions presented require us to determine whether 22 (d) obligates appellees to engage in the practices challenged in Counts II-VIII and thus necessarily confers antitrust immunity on them. If not, we must determine whether such practices are authorized by 22 (f) and, if so, whether they are immune from antitrust sanction. Resolution of these issues will be facilitated by examining the nature of the problems and abuses to which 22 is addressed, a matter to which we now turn. </s> B </s> The most thorough description of the sales and distribution practices of mutual funds prior to passage of the [422 U.S. 694, 706] Investment Company Act may be found in Part III of the Investment Trust Study. 14 That Study, as Congress has recognized, see 15 U.S.C. 80a-1, forms the initial basis for any evaluation of the Act. </s> Prior to 1940 the basic framework for the primary distribution of mutual-fund shares was similar to that existing today. The fund normally retained a principal underwriter to serve as a wholesaler of its shares. The principal underwriter in turn contracted with a number of broker-dealers to sell the fund's shares to the investing public. 15 The price of the shares was based on the fund's net asset value at the approximate time of sale, and a sales commission or load was added to that price. </s> Although prior to 1940 the primary distribution system for mutual-fund shares was similar to the present one, a number of conditions then existed that largely disappeared following passage of the Act. The most prominently discussed characteristic was the "two-price system," which encouraged an active secondary market under conditions that tolerated disruptive and discriminatory trading practices. The two-price [422 U.S. 694, 707] system reflected the relationship between the commonly used method of computing the daily net asset value of mutual-fund shares and the manner in which the price for the following day was established. The net asset value of mutual funds, which depends on the market quotations of the stocks in their investment portfolios, fluctuates constantly. Most funds computed their net asset values daily on the basis of the fund's portfolio value at the close of exchange trading, and that figure established the sales price that would go into effect at a specified hour on the following day. During this interim period two prices were known: the present day's trading price based on the portfolio value established the previous day; and the following day's price, which was based on the net asset value computed at the close of exchange trading on the present day. One aware of both prices could engage in "riskless trading" during this interim period. See Investment Trust Study pt. III, pp. 851-852. </s> The two-price system did not benefit the investing public generally. Some of the mutual funds did not explain the system thoroughly, and unsophisticated investors probably were unaware of its existence. See id., at 867. Even investors who knew of the two-price system and understood its operation were rarely in a position to exploit it fully. It was possible, however, for a knowledgeable investor to purchase shares in a rising market at the current price with the advance information that the next day's price would be higher. He thus could be guaranteed an immediate appreciation in the market value of his investment, 16 although this advantage [422 U.S. 694, 708] was obtained at the expense of the existing shareholders, whose equity interests were diluted by a corresponding amount. 17 The load fee that was charged in the sale of mutual funds to the investing public made it difficult for these investors to realize the "paper gain" obtained in such trading. Because the daily fluctuation in net asset value rarely exceeded the load, public investors generally were unable to realize immediate profits from the two-price system by engaging in rapid in-and-out trading. But insiders, who often were able to purchase shares without paying the load, did not operate under this constraint. Thus insiders could, and sometimes did, purchase shares for immediate redemption at the appreciated value. See n. 24, infra, and sources cited therein. </s> The two-price system often afforded other advantages to underwriters and broker-dealers. In a falling market they could enhance profits by waiting to fill orders with shares purchased from the fund at the next day's anticipated lower price. In a similar fashion, in a rising market they could take a "long position" in mutual-fund shares by establishing an inventory in order to satisfy anticipated purchases with securities previously obtained at a lower price. Investment Trust Study pt. III, pp. 854-855. In each case the investment company would [422 U.S. 694, 709] receive the lower of the two prevailing prices for its shares, id., at 854, and the equity interests of shareholders would suffer a corresponding dilution. </s> As a result, an active secondary market in mutual-fund shares existed. Id., at 865-867. Principal underwriters and contract broker-dealers often maintained inventory positions established by purchasing shares through the primary distribution system and by buying from other dealers and retiring shareholders. 18 Additionally, a "bootleg market" sprang up, consisting of broker-dealers having no contractual relationship with the fund or its principal underwriter. These bootleg dealers purchased shares at a discount from contract dealers or bought them from retiring shareholders at a price slightly higher than the redemption price. Bootleg dealers would then offer the shares at a price slightly lower than that required in the primary distribution system, thus "initiating a small scale price war between retailers and tend[ing] generally to disrupt the established offering price." Id., at 865. </s> Section 22 of the Investment Company Act of 1940 was enacted with these abuses in mind. Sections 22 (a) and (c) were designed to "eliminat[e] or reduc[e] so far as reasonably practicable any dilution of the value of other outstanding securities . . . or any other result of [the] purchase, redemption or sale [of mutual fund securities] which is unfair to holders of such other outstanding securities." 15 U.S.C. 80a-22 (a). They authorize [422 U.S. 694, 710] the NASD and the SEC to regulate certain pricing and trading practices in order to effectuate that goal. 19 Section 22 (b) authorizes registered securities associations and the SEC to prescribe the maximum sales commissions or loads that can be charged in connection with a primary distribution; and 22 (e) protects the right of redemption by restricting mutual funds' power to suspend redemption or postpone the date of payment. </s> The issues presented in this litigation revolve around subsections (d) and (f) of 22. Bearing in mind the history and purposes of the Investment Company Act, we now consider the effect of these subsections on the [422 U.S. 694, 711] question of potential antitrust liability for the practices here challenged. </s> III </s> Section 22 (d) prohibits mutual funds from selling shares at other than the current public offering price to any person except either to or through a principal underwriter for distribution. It further commands that "no dealer shall sell [mutual-fund shares] to any person except a dealer, a principal underwriter, or the issuer, except at a current public offering price described in the prospectus." 15 U.S.C. 80a-22 (d). 20 By its terms, 22 (d) excepts interdealer sales from its price maintenance requirement. Accordingly, this section cannot be relied upon by appellees as justification for the restrictions imposed upon interdealer transactions. At issue, rather, is the narrower question whether the 22 (d) price maintenance mandate for sales by "dealers" applies to transactions in which a broker-dealer acts as a statutory "broker" rather than a statutory "dealer." The District Court concluded that it does, and thus that 22 (d) governs transactions in which the broker-dealer acts as an agent for an investor as well as those in which he acts as a principal selling shares for his own account. </s> A </s> The District Court's decision reflects an expansive [422 U.S. 694, 712] view of 22 (d). The Investment Company Act specifically defines "broker" and "dealer" 21 and uses the terms distinctively throughout. 22 Appellees maintain, however, that the definition of "dealer" is sufficiently broad to require price maintenance in brokerage transactions. In support of this position appellees assert that the critical elements of the dealer definition are that the term relates to a "person" rather than to a transaction and that the person must engage "regularly" in the sale and purchase of securities to qualify as a dealer. It is argued, therefore, that any person who purchases and sells securities with sufficient regularity to qualify as a statutory dealer is thereafter bound by all dealer restrictions, regardless of the nature of the particular [422 U.S. 694, 713] transaction in question. We do not find this argument persuasive. </s> Appellees' reliance on the statutory reference to "person" in defining dealer adds little to the analysis, for the Act defines "broker," "investment banker," "issuer," "underwriter," and others to be "persons" as well. See 15 U.S.C. 80a-2 (a) (6), (21), (22), and (40). In each instance, the critical distinction relates to their transactional capacity. Moreover, we think that appellees' reliance on the regularity requirement in the dealer definition places undue emphasis on that element at the expense of the remainder of the provision. On the face of the statute the most apparent distinction between a broker and a dealer is that the former effects transactions for the account of others and the latter buys and sells securities for his own account. We therefore cannot agree that the terms of the Act compel the conclusion that a broker-dealer acting in a brokerage capacity would be bound by the 22 (d) dealer mandate. Indeed, the language of the Act suggests the opposite result. </s> Even if we assume, arguendo, that the statutory definition is ambiguous, we find nothing in the contemporaneous legislative history of the Investment Company Act to justify interpreting 22 (d) to encompass brokered transactions. That history is sparse, 23 and [422 U.S. 694, 714] suggests only that 22 (d) was considered necessary to curb abuses that had arisen in the sales of securities to insiders. 24 </s> The prohibition against insider trading would seem adequately served by the first clause of 22 (d), which prevents mutual funds from selling shares at other than the public offering price to any person except a principal underwriter or dealer. See n. 20, supra. 25 The further [422 U.S. 694, 715] restriction on dealer sales bears little relation to insider trading, however, and logically would be thought to serve some other purpose. The obvious effect of the dealer prohibition is to shield the primary distribution system from the competitive impact of unrestricted dealer trading in the secondary markets, a concern that was reflected in the Study, see Investment Trust Study pt. III, p. 865. The SEC perceives this to be one of the purposes of this provision. 26 </s> But concluding that protection of the primary distribution system is a purpose of 22 (d) does little to resolve the question whether Congress intended to require strict price maintenance in all broker-dealer transactions with the investing public. By its terms, 22 (d) protects only against the possibly disruptive effects of secondary dealer sales which, as statutorily defined, constituted the most active secondary market existing prior to the Act's passage. Nothing in the contemporary history suggests that Congress was equally concerned with possible disruption from investor transactions in outstanding shares conducted through statutory brokers. [422 U.S. 694, 716] </s> Nor do we think that the history attending subsequent congressional consideration of the Act provides adequate support for appellees' contention that 22 (d) requires strict price maintenance in all broker-dealer transactions in mutual-fund shares. To be sure, portions of the testimony of SEC Chairman Cohen before the House Subcommittee on Commerce and Finance in 1967 suggested that the price maintenance requirement of 22 (d) encompassed all broker-dealers, irrespective of how they obtained the traded shares, 27 and on other occasions the Chairman referred to sales by brokers when discussing mutual-fund transaction. 28 Appellees also can point to congressional characterizations of 22 (d) that suggest that some members of Congress understood the reach of that provision to be as broad as the District Court thought. 29 </s> [422 U.S. 694, 717] </s> Appellees maintain that this history indicates that Congress always intended 22 (d) to control broker as well as dealer transactions, and that it re-enacted the amended 22 with that purpose in mind. The District Court accepted this position, and it is not without some support in this historical record. 30 But impressive evidence to the contrary is found in the position consistently maintained by the SEC. Responding to an inquiry in 1941, the SEC General Counsel stated that 22 (d) did not bar brokerage transactions in mutual-fund shares: </s> "In my opinion the term `dealer,' as used in section 22 (d), refers to the capacity in which a broker-dealer is acting in a particular transaction. It follows, therefore, that if a broker-dealer in a particular transaction is acting solely in the capacity of agent for a selling investor, or for both a selling investor and a purchasing investor, the sale may be made at a price other than the current offering price described in the prospectus. . . . </s> "On the other hand, if a broker-dealer is acting for his own account in a transaction and as principal [422 U.S. 694, 718] sells a redeemable security to an investor, the public offering price must be maintained, even though the sale is made through another broker who acts as agent for the seller, the investor, or both. </s> "As section 22 (d) itself states, the offering price is not required to be maintained in the case of sales in which both the buyer and the seller are dealers acting as principals in the transaction." Investment Company Act, Rel. No. 78, Mar. 4, 1941, 11 Fed. Reg. 10992 (1941). </s> This substantially contemporaneous interpretation of the Act has consistently been maintained in subsequent SEC opinions, see Oxford Co., Inc., 21 S. E. C. 681, 690 (1946); Mutual Funds Advisory, Inc., Investment Company Act Rel. No. 6932, p. 3 (1972). The same position was asserted in a recent staff report, see 1974 Staff Report 105 n. 2, 107 n. 2, and 109, was relied on by the SEC in its subsequent decision to encourage limited price competition in brokered transactions, 31 and is advanced by it as [422 U.S. 694, 719] amicus curiae in this Court. This consistent and longstanding interpretation by the agency charged with administration of the Act, while not controlling, is entitled to considerable weight. See, e. g., Saxbe v. Bustos, 419 U.S. 65 (1974); Investment Co. Institute v. Camp, 401 U.S. 617, 626 -627 (1971); Udall v. Tallman, 380 U.S. 1, 16 (1965). </s> B </s> The substance of appellees' position is that the dealer prohibition of 22 (d) should be interpreted in generic rather than statutory terms. The price maintenance requirement of that section accordingly would encompass all broker-dealer transactions with the investing public and would shelter them from antitrust sanction. But such an expansion of 22 (d) beyond its terms would not only displace the antitrust laws by implication, it also would impinge seriously on the SEC's more flexible regulatory authority under 22 (f). 32 </s> Implied antitrust immunity is not favored, and can be justified only by a convincing showing of clear repugnancy between the antitrust laws and the regulatory system. [422 U.S. 694, 720] See, e. g., United States v. Philadelphia National Bank, 374 U.S., at 348 ; United States v. Borden Co., 308 U.S. 188, 197 -206 (1939). We think no such showing has been made. Moreover, in addition to satisfying our responsibility to reconcile the antitrust and regulatory statutes where feasible, Silver v. New York Stock Exchange, 373 U.S., at 356 -357, we must interpret the Investment Company Act in a manner most conducive to the effectuation of its goals. We conclude that appellees' interpretation of 22 (d) serves neither purpose, and cannot be justified by the language or history of that section. </s> We therefore hold that the price maintenance mandate of 22 (d) cannot be stretched beyond its literal terms to encompass transactions by broker-dealers acting as statutory "brokers." Congress defined the limitations for the mandatory price maintenance requirement of the Investment Company Act. "We are not only bound by those limitations but we are bound to construe them strictly, since resale price maintenance is a privilege restrictive of a free economy." United States v. McKesson & Robbins, 351 U.S. 305, 316 (1956). Accordingly, we hold that the District Court erred in relying on 22 (d) in determining that the activities here questioned are immune from antitrust liability. </s> IV </s> Our determination that the restrictions on the secondary market are not immunized by 22 (d) does not end the inquiry, for the District Court also found them sheltered from antitrust liability by 22 (f). Appellees, joined by the SEC, defend this ruling and urge that it requires dismissal of the challenge to the vertical restrictions sought to be enjoined in Counts II-VIII. </s> Section 22 (f) authorizes mutual funds to impose [422 U.S. 694, 721] restrictions on the negotiability and transferability of their shares, provided they conform with the fund's registration statement and do not contravene any rules and regulations the Commission may prescribe in the interest of the holders of all of the outstanding securities. 33 The Government does not contend that the vertical restrictions are not disclosed in the registration statements of the funds in question. Nor does it assert that the agreements imposing such restrictions violate Commission rules and regulations. Indeed, it could not do so, because to date the SEC has prescribed no such standards. Instead the Government maintains that the contractual restrictions do not come within the meaning of the Act, asserting that 22 (f) does not authorize the imposition of restraints on the distribution system rather than on the shares themselves. The Government thus apparently urges that the only limitations contemplated by this section are those that appear on the face of the certificate itself. The Government also urges that the SEC's unexercised power to prescribe rules and regulations is insufficient to create repugnancy between its regulatory authority and the antitrust laws. </s> Our examination of the language and history of 22 (f) persuades us, however, that the agreements challenged in Counts II-VIII are among the kinds of restrictions Congress contemplated when it enacted that section. And this conclusion necessarily leads to a determination that they are immune from liability under the Sherman Act, [422 U.S. 694, 722] for we see no way to reconcile the Commission's power to authorize these restrictions with the competing mandate of the antitrust laws. </s> A </s> Unlike 22 (d), 22 (f) originated in the Commission-sponsored bill considered in the Senate subcommittee hearings that preceded introduction of the compromise proposal later enacted into law. The Commission-sponsored provision authorized the SEC to promulgate rules, regulations, or orders prohibiting restrictions on the transferability or negotiability of mutual-fund shares, S. 3580, 22 (d) (2), 76th Cong., 3d Sess. (1940). 34 Commission testimony indicates that it considered this authority necessary to allow regulatory control of industry measures designed to deal with the disruptive effects of "bootleg market" trading and with other detrimental trading practices identified in the Investment Trust Study. 35 </s> [422 U.S. 694, 723] </s> The Study indicates, moreover, that a number of funds had begun to deal with these problems prior to passage of the Act. And while their methods may have included the imposition of restrictive legends on the face of the certificate, see n. 35, supra, they were by no means confined to such narrow limits. A number of funds imposed controls on the activities of their principal underwriters, see Investment Trust Study pt. III, pp. 868-869; and in some instances the funds required the underwriters to impose similar restrictions on the dealers, see id., at 869, or entered into these restrictive agreements with the dealers themselves, id., at 870-871. </s> In view of the history of the Investment Company Act, we find no justification for limiting the range of possible transfer restrictions to those that appear on the face of the certificate. The bootleg market was primarily a problem of the distribution system, and bootleg dealers found a source of supply in the contract dealers as well as in retiring shareholders. See id., at 865. Moreover, the Study indicates that part of the bootleg distribution system consisted of "trading firms" that served as wholesalers of mutual-fund securities in much the same fashion as the principal underwriters. These trading firms primarily purchased and sold shares to and from other dealers, Investment Trust Study pt. II. p. 327, frequently offering them at a price slightly lower than [422 U.S. 694, 724] the discounted rate charged to dealers in the primary distribution system. Id., at 327-328. Thus trading firms not only helped supply the bootleg dealers whose sales undercut those of the contract dealers, they competed with the principal underwriters by offering a source for lower cost shares that inevitably discouraged participation in the primary distribution system. See id., at 328 n. 85. </s> The bootleg market was a complex phenomenon whose principal origins lay in the distribution system itself. In view of this history, limitation of the industry's ability, subject of course to SEC regulation, to reach these problems at their source would constitute an inappropriate contraction of the remedial function of the statute. 36 Indeed, in view of the role of trading firms and interdealer transactions in the maintenance of the bootleg market, the narrow interpretation of 22 (f) urged by the Government would seem to afford inadequate authority to deal with the problem. </s> Together, 22 (d) and 22 (f) protect the primary distribution system for mutual-fund securities. Section 22 (d), by eliminating price competition in dealer sales, inhibits the most disruptive factor in the pre-1940's mutual market and thus assures the maintenance of a viable sales system. Section 22 (f) complements this protection by authorizing the funds and the SEC to deal more flexibly with other detrimental trading practices by [422 U.S. 694, 725] imposing SEC-approved restrictions on transferability and negotiability. The Government's limiting interpretation of 22 (f) compromises this flexible mandate, and cannot be accepted. </s> We find support for our interpretation of 22 (f) in the views expressed by the SEC shortly after the passage of the Act. Rule 26 (j) (2), proposed by the NASD to curb abuses identified in the Study and the congressional hearings, provided limitations on underwriter sales and redemptions to or from dealers who are not parties to sales agreements. In commenting on this proposed rule, the SEC characterized it as a "restriction on the transferability of securities," and specifically adverted to its power to regulate such restrictions under 22 (f). National Association of Securities Dealers, Inc., 9 S. E. C. 38, 44-45 and n. 10 (1941). As indicated above, see supra, at 719, and sources there cited, this contemporaneous interpretation by the responsible agency is entitled to considerable weight. We therefore conclude that the restrictions on transferability and negotiability contemplated by 22 (f) include restrictions on the distribution system for mutual-fund shares as well as limitations on the face of the shares themselves. The narrower interpretation of this provision advanced by the Government would disserve the broad remedial function of the statute. 37 </s> [422 U.S. 694, 726] </s> The Government's additional contention that the SEC's exercise of regulatory authority has been insufficient to give rise to an implied immunity for agreements conforming with 22 (f) misconceives the intended operation of the statute. By its terms, 22 (f) authorizes properly disclosed restrictions unless they are inconsistent with SEC rules or regulations. The provision thus authorizes funds to impose transferability or negotiability restrictions, subject to Commission disapproval. In view of the evolution of this provision, there can be no doubt that this is precisely what Congress intended. </s> Section 22 (f) as originally introduced would have authorized the SEC to promulgate rules, regulations, or orders prohibiting restrictions on the redeemability or transferability of mutual-fund shares. Congressional consideration of that provision raised some question whether existing restrictions on transferability and negotiability would remain valid unless specifically disapproved by the SEC. 38 The compromise provision, which [422 U.S. 694, 727] subsequently was enacted into law, eliminated this uncertainty, however, and manifested a more positive attitude toward self-regulation. </s> Thus 22 (f) specifically recognizes that mutual funds can impose such restrictions on the distribution system provided they are disclosed in the registration statement and conform to any rules and regulations that the SEC might adopt. In addition, 22 (f) alters the focus of Commission scrutiny. Whereas the original provision allowed the SEC to make rules that serve "the public interest or . . . the protection of investors," S. 3580, 22 (d) (2), supra, 22 (f) as enacted limits the Commission's rulemaking authority to the protection of the "interests of the holders of all of the outstanding securities of such investment company." 15 U.S.C. 80a-22 (f). Viewed in this historical context, the statute reflects a clear congressional determination that, subject to Commission oversight, mutual funds should be allowed to retain the initiative in dealing with the potentially adverse effects of disruptive trading practices. </s> The Commission repeatedly has recognized the role of private agreements in the control of trading practices in the mutual-fund industry. For example, in First Multifund of America, Inc., Investment Company Act Rel. No. 6700 (1971), [1970-1971 Transfer Binder] CCH Fed. Sec. L. Rep. § 78,209, p. 80,602, it looked to restrictive agreements similar to those challenged in this litigation to ascertain an investment advisor's capacity in a particular transaction. At no point did it intimate that those agreements were not legitimate. 39 Likewise, [422 U.S. 694, 728] Commission reports repeatedly have acknowledged the significant role that private agreements have played in restricting the growth of a secondary market in mutual-fund shares. 40 Until recently the Commission has allowed the industry to control the secondary market through contractual restrictions duly filed and publicly disclosed. Even the SEC's recently expressed intention to introduce an element of competition in brokered transactions reflects measured caution as to the possibly adverse impact of a totally unregulated and restrained brokerage market on the primary distribution system. See n. 31, supra. The Commission's acceptance of fund-initiated restrictions for more than three decades hardly represents abdication of its regulatory responsibilities. Rather, we think it manifests an informed administrative judgment that the contractual restrictions employed by the funds to protect their shareholders were appropriate means for combating the problems of the industry. The SEC's election not to initiate restrictive rules or regulations is precisely the kind of administrative oversight of private practices that Congress contemplated when it enacted 22 (f). </s> We conclude, therefore, that the vertical restrictions sought to be enjoined in Counts II-VIII are among the kinds of agreements authorized by 22 (f) of the Investment Company Act. [422 U.S. 694, 729] </s> B </s> The agreements questioned by the United States restrict the terms under which the appellee underwriters and broker-dealers may trade in shares of mutual funds. Such restrictions, effecting resale price maintenance and concerted refusals to deal, normally would constitute per se violations of 1 of the Sherman Act. See, e. g., Klor's, Inc. v. Broadway-Hale Stores, Inc., 359 U.S. 207, 211 -213 (1959); Fashion Originators' Guild of America, Inc. v. FTC, 312 U.S. 457, 465 -468 (1941). Here, however, Congress has made a judgment that these restrictions on competition might be necessitated by the unique problems of the mutual-fund industry, and has vested in the SEC final authority to determine whether and to what extent they should be tolerated "in the interests of the holders of all the outstanding securities" of mutual funds. 15 U.S.C. 80a-22 (f). </s> The SEC, the federal agency responsible for regulating the conduct of the mutual-fund industry, urges that its authority will be compromised seriously if these agreements are deemed actionable under the Sherman Act. 41 We agree. There can be no reconciliation of its authority under 22 (f) to permit these and similar restrictive agreements with the Sherman Act's declaration that they are illegal per se. In this instance the antitrust laws must give way if the regulatory scheme established [422 U.S. 694, 730] by the Investment Company Act is to work. Silver v. New York Stock Exchange, 373 U.S. 341 (1963). We conclude, therefore, that such agreements are not actionable under the Sherman Act, and that the District Court properly dismissed Counts II-VIII. </s> V </s> It remains to be determined whether the District Court properly dismissed Count I of the Government's complaint, which charged activities allegedly constituting a horizontal conspiracy between the NASD and its members to "prevent the growth of a secondary dealer market and a brokerage market in the purchase and sale of mutual fund shares." App. 9. </s> The precise nature of the allegations of the complaint are obscured by subsequent concessions made by the Government to the District Court and reiterated here. It is clear, however, that Count I alleges activities that are neither required by 22 (d) nor authorized under 22 (f). And since they cannot find antitrust shelter in these provisions of the Investment Company Act, the question presented is whether the SEC's exercise of regulatory authority under this statute and the Maloney Act is sufficiently pervasive to confer an implied immunity. We hold that it is, and accordingly affirm the District Court's dismissal of this portion of the complaint. </s> Count I originally appeared to be a general attack on the NASD's role in encouraging the restrictions on secondary market activities challenged in the remainder of the Government's complaint. The acts charged in Count I focused in large part on NASD rules, and on information distributed by that association to its members. 42 </s> [422 U.S. 694, 731] Subsequently the Government advised the District Court that its complaint was not to be read as a direct attack on NASD rules, however, and it repeated that position before this Court. 43 The Government now contends that [422 U.S. 694, 732] its complaint should be interpreted as a challenge to various unofficial NASD interpretations and to appellees' extension of the rules in a manner that inhibits a secondary market. </s> In view of the scope of the SEC's regulatory authority over the activities of the NASD, the Government's decision to withdraw from direct attack on the association's rules was prudent. The SEC's supervisory authority over the NASD is extensive. Not only does the Maloney Act require the SEC to determine whether an association satisfies the strict statutory requirements of that Act and thus qualifies to engage in supervised regulation of the trading activities of its membership, 15 U.S.C. 78o-3 (b), it requires registered associations thereafter to submit for Commission approval any proposed rule changes, 78o-3 (j). The Maloney Act additionally authorizes the SEC to request changes in or supplementation of association rules, a power that recently has been exercised with respect to some of the precise conduct questioned in this litigation, see n. 31, supra. If such a request is not complied with, the SEC may order such changes itself. 78o-3 (k) (2). </s> The SEC, in its exercise of authority over association rules and practices, is charged with protection of the public interest as well as the interests of shareholders, see, e. g., 78o-3 (a) (1), (b) (3), and (c), and it repeatedly has indicated that it weighs competitive concerns in the exercise of its continued supervisory responsibility. See, e. g., National Association of Securities Dealers, Inc., 19 S. E. C. 424, 436-437, 486-487 [422 U.S. 694, 733] (1945); National Association of Securities Dealers, Inc., 9 S. E. C., at 43-46; see also 1974 Staff Report 105, 109. As the Court previously has recognized, United States v. Socony-Vacuum Oil Co., 310 U.S. 150, 227 n. 60 (1940), the investiture of such pervasive supervisory authority in the SEC suggests that Congress intended to lift the ban of the Sherman Act from association activities approved by the SEC. </s> We further conclude that the Government's attack on NASD interpretations of those rules cannot be maintained under the Sherman Act, for we see no meaningful distinction between the Association's rules and the manner in which it construes and implements them. Each is equally a subject of SEC oversight. </s> Finally, we hold that the Government's additional challenges to the alleged activities of the membership of the NASD designed to encourage the kinds of restraints averred in Counts II-VIII likewise are precluded by the regulatory authority vested in the SEC by the Maloney and Investment Company Acts. It should be noted that the Government does not contend that appellees' activities have had the purpose or effect of restraining competition among the various funds. 44 Instead, the Government urges in Count I that appellees' alleged conspiracy was designed to encourage the suppression of intrafund secondary market activities, precisely the restriction that the SEC consistently has approved pursuant to 22 (f) for nearly 35 years. This close relationship is fatal to the Government's complaint, as the Commission's regulatory approval of the restrictive agreements [422 U.S. 694, 734] challenged in Counts II-VIII cannot be reconciled with the Government's attack on the ancillary activities averred in Count I. And this conclusion applies with equal force now that the SEC has determined to introduce a controlled measure of competition into the secondary market. </s> There can be little question that the broad regulatory authority conferred upon the SEC by the Maloney and Investment Company Acts enables it to monitor the activities questioned in Count I, and the history of Commission regulations suggests no laxity in the exercise of this authority. 45 To the extent that any of appellees' ancillary activities frustrate the SEC's regulatory objectives it has ample authority to eliminate them. 46 </s> Here implied repeal of the antitrust laws is "necessary to make the [regulatory scheme] work." Silver v. New York Stock Exchange, 373 U.S., at 357 . In generally similar situations, we have implied immunity in particular and discrete instances to assure that the federal agency entrusted with regulation in the public interest could carry out that responsibility free from the disruption of conflicting judgments that might be voiced by courts exercising jurisdiction under the antitrust laws. See [422 U.S. 694, 735] Hughes Tool Co. v. Trans World Airlines, 409 U.S. 363 (1973); Pan American World Airways, Inc. v. United States, 371 U.S. 296 (1963). In this instance, maintenance of an antitrust action for activities so directly related to the SEC's responsibilities poses a substantial danger that appellees would be subjected to duplicative and inconsistent standards. This is hardly a result that Congress would have mandated. We therefore hold that with respect to the activities challenged in Court I of the complaint, the Sherman Act has been displaced by the pervasive regulatory scheme established by the Maloney and Investment Company Acts. </s> Affirmed. </s> Footnotes [Footnote 1 The Investment Company Act of 1940 defines "investment company" to include any issuer of securities which </s> "(1) is or holds itself out as being engaged primarily, or proposes [422 U.S. 694, 698] to engage primarily, in the business of investing, reinvesting, or trading in securities; </s> "(2) is engaged or proposes to engage in the business of issuing face-amount certificates of the installment type, or has been engaged in such business and has any such certificate outstanding; or </s> "(3) is engaged or proposes to engage in the business of investing, reinvesting, owning, holding, or trading in securities, and owns or proposes to acquire investment securities having a value exceeding 40 per centum of the value of such issuer's total assets (exclusive of Government securities and cash items) on an unconsolidated basis." 15 U.S.C. 80a-3 (a). </s> This broad definition is qualified, however, by a series of specific exemptions. See 83a-3 (b) and (c). </s> [Footnote 2 See 15 U.S.C. 80a-2 (a) (32), 80a-22 (e). </s> Management investment companies whose securities lack this redeemability feature are defined as "closed end" companies, 80a-5, and their sales and distribution practices are regulated under 23 of the Act. 15 U.S.C. 80a-23. Section 22 of the Act, the provision under consideration in this appeal, governs the sales and distribution practices of "open end" companies only. </s> [Footnote 3 In this opinion we will use the term "broker-dealer" to refer generally to persons registered under the Securities Exchange Act of 1934, 48 Stat. 895, 15 U.S.C. 78o et seq., and authorized to effect transactions or induce the purchase or sale of securities pursuant to the authorization of that Act. We also will refer separately to "brokers" and "dealers" as defined by the Investment Company Act, see 15 U.S.C. 80a-2 (a) (6) and (11), to describe the capacity in which a broker-dealer acts in a particular transaction. </s> [Footnote 4 The Act defines "sales load" to be the difference between the public offering price and the portion of the sales proceeds that is invested or held for investment purposes by the issuer. 80a-2 (a) (35). Most mutual funds charge this sales load in order to encourage vigorous sales efforts on the part of underwriters and broker-dealers. There are some funds that do not charge this additional sales fee. These "no load" funds generally sell directly to the investor without relying on the promotional and sales efforts of underwriters and broker-dealers. See SEC Report of the Division of Investment Management Regulation, Mutual Fund Distribution and Section 22 (d) of the Investment Company Act of 1940, p. 112 (Aug. 1974) (hereinafter 1974 Staff Report). </s> [Footnote 5 Two additional private antitrust actions premised on similar theories were filed in the District Court and subsequently dismissed, Haddad v. Crosby Corp. and Gross v. National Assn. of Securities Dealers, Inc., 374 F. Supp. 95 (DC 1973). The Court of Appeals for the District of Columbia Circuit stayed those appeals to await the resolution of this case, and the petition of one of the parties for certiorari before judgment was denied, Gross v. National Assn. of Securities Dealers, Inc., 419 U.S. 843 (1974). </s> Subsequent to the filing of the United States' complaint some 50 private suits purporting to be class actions under Fed. Rule Civ. Proc. 23 were filed in various District Courts around the country. These cases were transferred to the United States District Court for the District of Columbia by the Judicial Panel on Multidistrict Litigation, In re Mutual Fund Sales Antitrust Litigation, Civil Action No. Misc. 103-73. See 374 F. Supp., at 97 n. 4. The District Court deferred determination of whether the actions could be maintained as class actions under Rule 23 and additionally postponed discovery and other activity pending disposition of the motion to dismiss in this case. 374 F. Supp., at 114. </s> [Footnote 6 The NASD is registered under 15A of the Securities Exchange [422 U.S. 694, 701] Act of 1934, 15 U.S.C. 78o-3, the so-called Maloney Act of 1938. The Maloney Act supplements the Securities and Exchange Commission's regulation of the over-the-counter markets by providing a system of cooperative self-regulation through voluntary associations of brokers and dealers. The Act provides that associations may register with the Commission pursuant to specified terms and conditions, and authorizes them to promulgate rules designed to prevent fraudulent and manipulative practices; to promote equitable principles of trade; to safeguard against unreasonable profits and charges; and generally to protect investors and the public interest. 78o-3 (b) (8). The Act also authorizes the SEC to exercise a significant oversight function over the rules and activities of the registered associations. See, e. g., 78o-3 (b), (e), (h), (j), and (k). The NASD is presently the only association registered under this Act. </s> [Footnote 7 The mutual funds named as defendants in this action are Massachusetts Investors Growth Stock Fund, Inc., Fidelity Fund, Inc., and Wellington Fund, Inc. </s> [Footnote 8 The defendant underwriters include the Crosby Corp., Vance, Sanders & Co., and the Wellington Management Co. </s> [Footnote 9 Named as defendant broker-dealers are the following: Merrill Lynch, Pierce, Fenner & Smith, Inc., Bache & Co., Inc., Reynolds Securities Corp., E. I. duPont, Glore Forgan, Inc., E. F. Hutton, Inc., Walston & Co., Inc., Dean Witter & Co., Inc., Paine, Webber, Jackson & Curtis, Inc., and Hornblower & Weeks-Hemphill, Noyes, Inc. </s> [Footnote 10 Section 1 of the Sherman Act provides in pertinent part: </s> "Every contract, combination in the form of trust or otherwise, or conspiracy, in restraint of trade or commerce among the several States, or with foreign nations, is declared to be illegal. . . . "Every person who shall make any contract or engage in any combination or conspiracy declared by sections 1 to 7 of this title to be illegal shall be deemed guilty of a misdemeanor, and, on conviction thereof, shall be punished by fine not exceeding fifty thousand dollars, or by imprisonment not exceeding one year, or by both said punishments, in the discretion of the court." </s> [Footnote 11 The violations alleged in Count II are typical of those charged in Counts IV and VI. In Count II, appellee Crosby, a principal underwriter of appellee Fidelity Fund, Inc., is charged with entering into contracts and combinations with appellee broker-dealers, the substantial terms of which are that </s> "(a) each broker/dealer must maintain the public offering price in any brokerage transaction in which it participates involving the purchase or sale of shares of the Fidelity Funds; and </s> "(b) each broker/dealer must sell shares of the Fidelity Funds only to investors or the fund and purchase such shares only from investors or the fund." App. 10-11. </s> Count VI, in addition to charging restrictive agreements similar to the above, alleged that appellee Wellington, a principal underwriter, agreed to act only as an agent of the appropriate mutual fund in all transactions with the broker-dealers. Id., at 15. </s> The alleged effect of the restrictive agreement charged in § (a) was to inhibit the growth and development of a brokerage market in mutual-fund shares. The alleged effect of the restriction identified in § (b), by contrast, was to inhibit interdealer transactions and thus to restrict the growth and development of a secondary dealer market. App. 11. </s> [Footnote 12 The Court noted probable jurisdiction on October 15, 1974. 419 U.S. 822 . Accordingly, the recent amendments to the Expediting Act, 88 Stat. 1709, 15 U.S.C. 29 (1970 ed., Supp. IV), do not affect our jurisdiction. </s> [Footnote 13 For example, the Act requires companies to register with the SEC, 15 U.S.C. 80a-8. See also 80a-7. Companies also must register all securities they issue, see Securities Act of 1933, 15 U.S.C. 77f; Investment Company Act, 15 U.S.C. 80a-24 (a), and must submit for SEC inspection copies of the sales literature they send to prospective investors. 80a-24 (b). The Investment Company Act requires the submission and periodic updating of detailed financial reports and documentation and the semiannual transmission of reports containing similar information to the shareholders. 80a-29. It also imposes controls and restrictions on the internal management of investment companies: establishing minimum capital requirements, 80a-14; limiting permissible methods for selecting directors, 80a-16; and establishing certain qualifications for persons seeking to affiliate with the companies, 80a-9. Finally, the Act imposes a number of controls on the internal practices of investment companies. For example, it requires a majority shareholder vote for certain fundamental business decisions, 80a-13, and limits certain dividend distributions, 80a-19. See generally The Mutual Fund Industry: A Legal Survey, 44 Notre Dame Law. 732 (1969). </s> [Footnote 14 H. R. Doc. No. 279, 76th Cong., 1st Sess. (1940) (hereinafter Investment Trust Study pt. III). Part I of the Investment Trust Study is printed as H. R. Doc. No. 707, 75th Cong., 3d Sess. (1938). Part II of the Study is printed as H. R. Doc. No. 70, 76th Cong., 1st Sess. (1939) (hereinafter Investment Trust Study pt. II). For additional discussion of the operations of open-end management investment companies, see 1974 Staff Report; SEC Report of the Staff on the Potential Economic Impact of a Repeal of Section 22 (d) of the Investment Company Act of 1940 (Nov. 1972); H. R. Rep. No. 2337, 89th Cong., 2d Sess. (1966); SEC Report of the Special Study of Securities Markets, c. XI - Open-End Investment Companies (Mutual Funds), H. R. Doc. No. 95, pt. 4, 88th Cong., 1st Sess. (1963) (hereinafter 1963 Special Study). </s> [Footnote 15 The broker-dealers operating within the primary distribution system are denominated "contract dealers" in the Study and will be so identified in this opinion. </s> [Footnote 16 The Study indicates that mutual funds increasingly began to disclose more information about the existence and operation of the two-price system. See Investment Trust Study pt. III, pp. 867-868. And in some instances the funds encouraged broker-dealers to explain to potential incoming investors the immediate appreciation in investment value that could be obtained from the pricing system in [422 U.S. 694, 708] the hope of encouraging the purchase of shares. Id., at 854. See Hearings on S. 3580 before a Subcommittee of the Senate Committee on Banking and Currency, 76th Cong., 3d Sess., pt. 1, p. 138 (1940) (hereinafter 1940 Senate Hearings). </s> [Footnote 17 The existing shareholders' equity interests were diluted because the incoming investors bought into the fund at less than the actual value of the shares at the time of purchase. Moreover, SEC testimony indicated that this dilution could be substantial. In one instance the Commission calculated that the two-price system resulted in a loss to existing shareholders of one trust of some $133,000 in a single day Id., at 139-140. </s> [Footnote 18 Contract dealers trading from an inventory position often could obtain an additional profit from the sales load. When the dealer acted as an agent for the fund and traded from the primary distribution system, the dealer and the underwriter divided the load charge in accordance with the sales agreement. But the dealer could retain the full load when he filled the purchase order from an inventory position in shares purchased from retiring shareholders or other dealers. Investment Trust Study pt. III, pp. 858-859. </s> [Footnote 19 Sections 22 (a) and (c) reflect the same basic relationship between the SEC and the NASD that is established by the Maloney Act. See n. 6, supra. Section 22 (a) authorizes registered securities associations, in this case the NASD, to prescribe rules for the regulation of these matters. 15 U.S.C. 80a-22 (a). The industry thus is afforded the initial opportunity to police its own practices. If, however, industry self-regulation proves insufficient, 22 (c) authorizes the Commission to make rules and regulations "covering the same subject matter, and for the accomplishment of the same ends as are prescribed in subsection (a)," and proclaims that the SEC rules and regulations supersede any inconsistent rules of the registered securities association. 15 U.S.C. 80a-22 (c). </s> Shortly after enactment of the Investment Company Act the NASD proposed, and the SEC approved, a rule establishing twice-daily pricing. See National Association of Securities Dealers, Inc., 9 S. E. C. 38 (1941). Twice-daily pricing reduced the time period in which persons could engage in riskless trading and correspondingly decreased the potential for dilution. The Commission subsequently provided full protection against the dilutive effects of riskless trading. In late 1968 it exercised its authority under 22 (c) to adopt Rule 22c-1, which requires all funds to establish "forward pricing." Forward pricing eliminates the potential for riskless trading altogether. See Adoption of Rule 22c-1, Investment Company Act Rel. No. 5519 (1968), [1967-1969 Transfer Binder] CCH Fed. Sec. L. Rep. § 77,616; 17 CFR 270.22c-1 (1974). </s> [Footnote 20 This section provides in pertinent part: </s> "No registered investment company shall sell any redeemable security issued by it to any person except either to or through a principal underwriter for distribution or at a current public offering price described in the prospectus, and, if such class of security is being currently offered to the public by or through an underwriter, no principal underwriter of such security and no dealer shall sell any such security to any person except a dealer, a principal underwriter, or the issuer, except at a current public offering price described in the prospectus." </s> [Footnote 21 The Investment Company Act defines a "dealer" to be: </s> "[A]ny person regularly engaged in the business of buying and selling securities for his own account, through a broker or otherwise, but does not include a bank, insurance company, or investment company, or any person insofar as he is engaged in investing, reinvesting, or trading in securities, or in owning or holding securities, for his own account, either individually or in some fiduciary capacity, but not as a part of a regular business." 15 U.S.C. 80a-2 (a) (11). </s> A "broker," by contrast, is defined to be: </s> "[A]ny person engaged in the business of effecting transactions in securities for the account of others, but does not include a bank or any person solely by reason of the fact that such person is an underwriter for one or more investment companies." 80a-2 (a) (6). </s> [Footnote 22 Congress employed the term "broker" without reference to "dealer" in various sections of the Act. See 80a-3 (c) (2), 80a-10 (b) (1), 80a-17 (e) (1) and (2). In other instances, the Act refers to "dealer" without reference to "broker," see 80a-2 (a) (40), 80a-22 (c) and (d). And in some cases, including the very definition of the term "dealer" itself, see n. 21, supra, the Act refers to both "broker" and "dealer" in the same provision, see 80a-1 (b) (2), 80a-9 (a) (1) and (2), and 80a-30 (a). Finally, the Act in some cases refers to the more general term "broker-dealer," see 80a-22 (b) (1) and (2). </s> [Footnote 23 The original Commission-sponsored bill considered in the initial hearings before a Subcommittee of the Senate Banking and Commerce Committee, S. 3580, 76th Cong., 3d Sess. (1940), contained no provision resembling this subsection. Section 22 (d) first emerged in a compromise proposal advanced after a period of intensive consultation between the SEC and industry representatives that followed initial Senate hearings, see 1940 Senate Hearings, pt. 4, pp. 1105-1107, and the Commission subsequently has indicated that this provision was suggested by the industry. See Midamerica Mutual Fund, Inc., 41 S. E. C. 328, 331 (1963); H. R. Rep. No. 2337, 89th Cong., 2d Sess., 219 (1966). Revised legislation reflecting this compromise was [422 U.S. 694, 714] submitted, and further hearing were conducted in the Senate and the House. Both bills were reported favorably by their respective committees, S. Rep. No. 1775, 76th Cong., 3d Sess. (1940); H. R. Rep. No. 2639, 76th Cong., 3d Sess. (1940), and the House bill, with minor amendments not relevant to this appeal, was accepted by the Senate. 86 Cong. Rec. 10069-10071 (1940). </s> This history perhaps explains the dearth of discussion relating to 22 (d). The majority of the Senate hearings were completed before this provision was advanced, and both the Senate and House hearings that followed provide relatively little illumination as to the intended purpose or scope of this subsection. </s> [Footnote 24 Insider trading abuses were identified as a problem during the Senate hearings that preceded submission of the compromise bill containing 22 (d), see 1940 Senate Hearings, pt. 2, pp. 526-527 and 660-661. At the close of the initial Senate hearings an industry representative suggested that the Act should contain a provision prohibiting sales at preferential terms to insiders and others. Id., at 1057. The Commission and industry representatives thereafter met to seek a compromise on the various differences that had been identified in the Senate hearings, and the industry memorandum outlining the nature of the resultant agreement again indicated that a provision should be added to the Act to prohibit insider trading. See Framework of Proposed Investment Company Bill (Title I), Memorandum Embodying Suggestions Resulting from Conferences Between Securities and Exchange Commission and Representatives of Investment Companies (May 13, 1940), printed in Hearings on H. R. 10065 before a Subcommittee of the House Committee on Interstate and Foreign Commerce, 76th Cong., 3d Sess., 99 (1940). </s> [Footnote 25 The insider-trading prohibition is complemented by 22 (g), which precludes issuance of mutual-fund shares for services or property other than cash or securities. 15 U.S.C. 80a-22 (g). </s> [Footnote 26 See Adoption of Rule N-22D-1, Investment Company Act Rel. No. 2798. p. 1 (1958), [1957-1961 Transfer Binder] CCH Fed. See. L. Rep. § 76,625, p. 80,393; Investors Diversified Services, Inc., Investment Company Act Rel. No. 3015 (1960), [1957-1961 Transfer Binder] CCH Fed. Sec. L. Rep. § 76,699, p. 80,620; In re Sideris, Securities Exchange Act Rel. No. 8816, p. 2 (1970); Mutual Funds Advisory, Inc., Investment Company Act Rel. No. 6932, p. 4 (1972). </s> The SEC also has suggested that preventing discrimination among investors was one of the purposes of this provision. See, e. g., In re Sideris, supra; Midamerica Mutual Fund, Inc., 41 S. E. C., at 331; Adoption of Rule N-22D-1, supra. But we do not think that brokerage transactions inevitably would foster the kind of investor discrimination sought to be remedied by this statute. All investors would be equally free to seek to engage in brokered transactions, and the possibility that the more sophisticated or fortuitous investor would profit from this market does not, by itself, bring this category of transactions within the purview of 22 (d). </s> [Footnote 27 Responding to inquiries concerning the relationship of 22 (d) and the operation of state law, Chairman Cohen stated: </s> "The statute is unequivocal. No person, no matter where he gets it, from the issuer, from another dealer, or even from a private person, no broker-dealer may sell a share of a particular fund at a price less than that fixed by the issuer." Hearings on the Investment Company Act Amendments of 1967 before the Subcommittee on Commerce and Finance of the House Committee on Interstate and Foreign Commerce, 90th Cong., 1st Sess., pt. 2, p. 711 (1967). </s> [Footnote 28 Id., at pt. 1, p. 53. </s> [Footnote 29 Senator Sparkman, Chairman of the Senate Banking and Currency Committee which reported the 1970 amendments to the full Senate, stated on the floor of the Senate that 22 (d) "now makes it a Federal crime for anyone to sell mutual fund shares at a price lower than that fixed by the fund's distributor." 115 Cong. Rec. 838 (1969) (emphasis added). Senator Magnuson reflected perhaps a similar view, stating that, as a result of 22 (d), "mutual fund sales charges are totally insulated from price competition." 114 Cong. Rec. 23057 (1968) (emphasis added). </s> The testimony of some witnesses suggests that they shared this expansive view. See, e. g., Hearings on S. 1659 before the Senate [422 U.S. 694, 717] Committee on Banking and Currency, 90th Cong., 1st Sess., pt. 2, p. 741 (1967) (hereinafter 1967 Senate Hearings) (testimony of Mr. Funston, President of the New York Stock Exchange); id., at pt. 1, pp. 348, 356 (testimony of Professor Samuelson); id., at pt. 2, p. 1064 (testimony of Professor Wallich). </s> [Footnote 30 We conclude, however, that the context of the post-enactment history of 22 (d) limits the force of the statements relied upon by appellees. A broker-dealer can serve in either a broker's or a dealer's capacity, and the distinction between the two functions is rather technical and precise. The parties are in general agreement that no significant number of brokered transactions, as statutorily defined, existed prior or subsequent to passage of the Act. In view of the care with which the statute defines these functions and the absence of focus on these distinctions in the statements in the subsequent consideration of 22 (d), we think that the broader characterizations of that section must be viewed with some skepticism. </s> [Footnote 31 Acting in accordance with the recommendations of the Staff Report, the SEC Chairman recently requested that the NASD amend its Rules of Fair Practice to prohibit agreements between underwriters and broker-dealers that preclude broker-dealers, acting as agents, "from matching orders to buy and sell fund shares in a secondary market at competitively determined prices and commission rates." Letter from Mr. Ray Garrett, Jr., Chairman of the SEC to Mr. Gordon S. Macklin, President of the NASD, Nov. 22, 1974, printed in Brief for Appellees Bache & Co. et al., Add. 18. The Chairman further revealed the SEC's intention to exercise its regulatory authority under 22 (f) to neutralize any adverse effects this market might have on the fund's primary distribution system. Id., at Add. 19. As the Staff Report indicates, the Commission's exercise of regulatory authority is premised on its view that 22 (d) does not require strict price maintenance in brokered transactions. See 1974 Staff Report 104. If 22 (d) did control these transactions as well as "dealer" sales, the Commission's ability [422 U.S. 694, 719] to encourage controlled competition in this market would be subject to question. </s> [Footnote 32 The Department of Justice previously suggested a manner in which its interpretation of 22 (d) could be reconciled with the Commission's exercise of regulatory authority over brokered transactions. Addressing the question of possible repeal of 22 (d), the Justice Department suggested that rather than continue to wait for congressional repeal, the Commission should eliminate the adverse effects of price maintenance by freeing all transactions from the 22 (d) mandate through the exercise of its 6 (c) power of exemption, 15 U.S.C. 80a-6 (c). 1974 Staff Report 70. This presumably would leave the SEC free to regulate transactions through the exercise of the powers conferred on it by other provisions of the Act. We need not consider the validity of the Justice Department's broad interpretation of the SEC's power of exemption, for even assuming it to be correct our analysis would not be affected. </s> [Footnote 33 Section 22 (f) of the Act, 15 U.S.C. 80a-22 (f), provides: </s> "No registered open-end company shall restrict the transferability or negotiability of any security of which it is the issuer except in conformity with the statements with respect thereto contained in its registration statement nor in contravention of such rules and regulations as the Commission may prescribe in the interests of the holders of all of the outstanding securities of such investment company." </s> [Footnote 34 Section 22 (d) of the original bill, S. 3580, 76th Cong., 3d Sess. (1940), provided, in pertinent part: </s> "The Commission is authorized, by rules and regulations or order in the public interest or for the protection of investors, to prohibit - </s> . . . . . </s> "(2) restrictions upon the transferability or negotiability of any redeemable security of which any registered investment company is the issuer." </s> [Footnote 35 Testifying before the Senate subcommittee, an SEC spokesman stated: </s> "Now coming to subparagraph (2) of (d), it just says that the Commission shall have the right to make rules and regulations with respect to any restrictions upon the transferability or negotiability of any redeemable security of which any registered investment company is the issuer. </s> "There are some companies that have a provision in their certificates to the effect that you cannot sell that certificate to anybody else, and the only way you can sell it is to sell it back to the company. [422 U.S. 694, 723] That is a technical problem. It presents a whole problem which they call the bootleg market. What happens is that dealers keep switching people from one company to another. In order to prevent these switches, some provisions require that you cannot make these switches but must sell the certificate back to the company. . . . </s> "If the committee wants the provision, we shall recommend what; on the basis of our experience up to the present time, it ought to be; but we think subjects like that ought to be a matter of rules and regulations." 1940 Senate Hearings, pt. 1, pp. 292-293. </s> [Footnote 36 Neither are we convinced of the necessity to limit negotiability or transferability restrictions to those appearing on the face of the certificate in order to assure their adequate disclosure to investors. Section 24 of the Act requires that mutual funds submit for SEC inspection copies of all sales literature that they send to prospective investors. 15 U.S.C. 80a-24 (b). The Commission is therefore fully apprised as to the nature and sufficiency of the disclosure of these restrictions and can, if necessary, require supplementation of the information provided investors. </s> [Footnote 37 Neither do we agree with the Government's suggestion that 22 (f) does not authorize restrictions in contracts between underwriters and dealers in which the fund is not a party. We note, preliminarily, that this position would not save Counts III, V, and VII from dismissal, since they relate to restrictions on underwriter conduct that are imposed by the fund. Even under the most technical reading of the statute these restrictions are "fund-imposed." Moreover, it further appears from the complaint that the agreement challenged in Count II is required by the fund-underwriter agreement challenged in Count III and thus also is "fund-imposed" [422 U.S. 694, 726] in any but the most literal sense. More importantly, however, we think that the Government's position fails to recognize the relationship between the various participants in the distribution chain. As the history of the Investment Company Act recognizes, the relationship between the fund and its principal underwriter traditionally has been a close one. Sections 15 (b) and (c) reflect this fact, requiring, in effect, that funds establish written contracts with the underwriter that must be approved by a majority of the fund's disinterested directors and cannot remain in force for more than two years. 15 U.S.C. 80a-15 (b) and (c). And NASD Rule 26 (c). in effect since 1941, requires that principal underwriters enter into agreements with the dealers who distribute the fund's securities. See National Association of Securities Dealers, Inc., 9 S. E. C., at 44, 48. In view of these requirements, and the broad remedial purpose of 22 (f), we think that the underwriter-dealer agreements challenged in this complaint also must be regarded as fund imposed within the contemplation of the statute. </s> [Footnote 38 See 1940 Senate Hearings, pt. 1, p. 293. </s> [Footnote 39 Commissioner Loomis, dissenting from an SEC determination that an applicant lacked standing to seek an exemption from 17 (a) (1) and 22 (d) of the Act, stated: </s> "I would conclude that applicant is a dealer in its relationship with the fund underwriter because to do otherwise would require us to [422 U.S. 694, 728] ignore or nullify the perfectly lawful requirement in the dealer agreements that applicant act as a dealer. . . . I do not know of anything unlawful about the generally accepted form of dealer agreement used in the investment company industry." Mutual Funds Advisory, Inc., Investment Company Act Rel. No 6932, p. 7 (1972) (dissenting opinion). </s> While the majority disagreed with Commissioner Loomis' assessment of the facts of the case, it did not question his approval of the mentioned dealer agreement. </s> [Footnote 40 See 1963 Special Study 98; 1974 Staff Report 104-106. </s> [Footnote 41 The SEC maintains: </s> "It would nullify the effect of this grant of regulatory authority to the Commission [under 22 (f)] for this Court to hold that a district court may apply antitrust principles to conduct like that alleged in Counts II through VIII, when the expert body designated and empowered by Congress to regulate and supervise that conduct has not heretofore deemed it appropriate to prohibit the conduct." Brief for SEC as Amicus Curiae 54. </s> [Footnote 42 The complaint averred that, in effectuating the conspiracy to restrain the growth of a secondary market in mutual-fund shares, [422 U.S. 694, 731] the NASD, its members, and more particularly the other named defendants, </s> "(a) established and maintained rules which inhibited the development of a secondary dealer market and a brokerage market in mutual fund shares; </s> "(b) established and maintained rules which induced broker/ dealers to enter into sales agreements with principal underwriters, with knowledge that sales agreements contained restrictive provisions which inhibited the development of a secondary dealer market and brokerage market in mutual fund shares; </s> "(c) induced member principal underwriters to include restrictive provisions in their sales agreements; </s> "(d) discouraged persons who made inquiry about the legality of a brokerage market from participating in a brokerage market and distributed misleading information to its members concerning the legality of a brokerage market in mutual fund shares; and </s> "(e) suppressed market quotations for the secondary dealer market." App. 9. </s> [Footnote 43 The Government first indicated abandonment of its attack on the NASD rules during oral argument of appellees' motion to dismiss. See App. 328-332. Notwithstanding clauses (a) and (b) of § 17 of the complaint, see n. 42, supra, the Government's counsel stated that it did not intend to challenge any NASD rule, App. 330. Counsel ambiguously suggested, however, that the members' compliance with those rules had aided and abetted the alleged conspiracy, id., at 332, and stated that informal and secret activities of the Association likewise had tended to inhibit growth of the secondary market, id., at 330. Thereafter, in response to the District Court's invitation to join in the litigation as amicus curiae, the SEC expressed its concern that the action might involve an attack on NASD rules, a matter "over which the Commission is granted exclusive original jurisdiction by Section 15A of the Securities Exchange Act of 1934, 15 U.S.C. 78o-3, et seq. (the Maloney Act)." Letter from Mr. Lawrence E. Nerheim, General Counsel of the SEC, to the District Court, App. 323. The Government thereafter informed the court that the issues it sought to raise did not represent "an attack [422 U.S. 694, 732] upon NASD Rules as such" but rather "aimed at an over-all course of conduct engaged in by the NASD and its members going beyond the NASD's rule-making authority." Letter from Mr. Bruce B. Wilson, Acting Assistant Attorney General for the Antitrust Division, to the District Court, App. 327. It maintains the same position in this Court. See Brief for United States 51 n. 47. </s> [Footnote 44 Indeed, it appears that vigorous interbrand competition exists in the mutual-fund industry - between the load funds themselves, between load and no-load funds, between open-and closed-end companies, and between all of these investment forms and other investments. See 1974 Staff Report 20 et seq. </s> [Footnote 45 As SEC Chairman Garrett observed in his letter submitting the 1974 Staff Report for congressional consideration: "No issuer of securities is subject to more detailed regulation than a mutual fund." Letter from Ray Garrett, Jr., SEC Chairman, to the Honorable John Sparkman, Chairman of the Committee on Banking, Housing, and Urban Affairs, United States Senate (Nov. 4, 1974), contained in 1974 Staff Report, at v. </s> [Footnote 46 The Commission can, for example, require amendment of the NASD rules regulating the conduct of its membership, see 15 U.S.C. 78o-3 (k) (2), or exercise the more general rulemaking power conferred by 38 (a) of the Investment Company Act, 15 U.S.C. 80a-37 (a), to contain any of the challenged activities that might in any way frustrate its regulation of the restrictions it authorizes under 22 (f). </s> MR. JUSTICE WHITE, with whom MR. JUSTICE DOUGLAS, MR. JUSTICE BRENNAN, and MR. JUSTICE MARSHALL join, dissenting. </s> The majority repeats the principle so often applied by this Court that "[i]mplied antitrust immunity is not favored, and can be justified only by a convincing showing of clear repugnancy between the antitrust laws and the regulatory system." Ante, at 719-720. That fundamental rule, though invoked again and again in our decisions, retained its vitality because in the many instances of its evocation it was given life and meaning by a close analysis of the legislation and facts involved in the particular case, an analysis inspired by the "felt indispensable role of antitrust policy in the maintenance of a free economy . . . ." United States v. Philadelphia National Bank, 374 U.S. 321, 348 (1963). Absent that inspiration the principle becomes an archaism at best, and no longer reflects the tense interplay of differing and at times conflicting public policies. </s> Although I do not disagree with much of the Court's opinion in its construction of 22 (d) and (f) of the [422 U.S. 694, 736] Investment Company Act, 54 Stat. 824, as amended, 15 U.S.C. 80a-22 (d) and (f), its ultimate holding, which in contrast to the earlier portions of its opinion is devoid of detailed discussion of the applicable law, I find unacceptable. Under that holding, in light of the context of this case, implied antitrust immunity becomes the rule where a regulatory agency has authority to approve business conduct whether or not the agency is directed to consider antitrust factors in making its regulatory decisions and whether or not there is other evidence that Congress intended to displace judicial with administrative antitrust enforcement. </s> I </s> If Congress itself expressly permits or directs particular private conduct that would otherwise violate the antitrust laws, it can be safely assumed that Congress has made the necessary policy choices and preferred to permit rather than to prevent the acts in question. There is no dispute in this case, for example, that compliance with 22 (d)'s requirement that open-end funds and dealers sell at the public offering price is not subject to attack under the antitrust laws. </s> It also happens that in subjecting areas of commercial activity to regulation, Congress frequently authorizes a regulatory agency to approve certain kinds of transactions if they conform to the appropriate regulatory standard such as the "public interest" or the "public convenience and necessity" and correspondingly provides that, when approved, those transactions will be immune from attack under the antitrust laws. Section 414 of the Federal Aviation Act of 1958, 72 Stat. 770, 49 U.S.C. 1384, for example, provides that any person affected by an order issued under 408, 409, or 412 of that Act, 49 U.S.C. 1378, 1379, 1382, is "relieved from the [422 U.S. 694, 737] operations of the `antitrust laws,'" including the Sherman Act, "insofar as may be necessary to enable such person to do anything authorized, approved, or required by such order." Hughes Tool Co. v. Trans World Airlines, 409 U.S. 363 (1973), thus involved acts and transactions expressly immunized from antitrust scrutiny. Section 5 (11) of the Interstate Commerce Act, 24 Stat. 380, as amended, 49 U.S.C. 5 (11), similarly provides that carriers and their employees participating in a transaction approved or authorized under 5 "shall be and they are relieved from the operation of the antitrust laws . . . ." Also, the Clayton Act itself provides that 7's prohibitions will not apply to transactions duly consummated pursuant to authority given by certain named agencies under any statutory provisions vesting power in those agencies. 38 Stat. 731, as amended, 15 U.S.C. 18. </s> The courts have, of course, recognized express exemptions such as these; but the invariable rule has been "that exemptions from antitrust laws are strictly construed," FMC v. Seatrain Lines, Inc., 411 U.S. 726, 733 (1973), and that exemption will not be implied beyond that given by the letter of the law. In Seatrain the Maritime Commission was authorized by statute to approve and immunize from antitrust challenge seven categories of agreements between shipping companies, including agreements "controlling, regulating, preventing, or destroying competition." The Court, construing narrowly the category arguably embracing the merger agreement under consideration, held that merger agreements between shipping companies were not subject to approval by the Commission and consequently were not entitled to exemption under the antitrust laws. </s> Absent express immunization or its equivalent, private business arrangements are not exempt from the antitrust [422 U.S. 694, 738] laws merely because Congress has empowered an agency to authorize the very conduct which is later challenged in court under the antitrust laws. Where the regulatory standard is the "public interest," or something similar, there is no reason whatsoever to conclude that Congress intended the strong policy of the antitrust laws to be displaced or to be ignored in determining the public interest and in approving or disapproving the questioned conduct. This has been the consistent position of this Court. In United States v. Radio Corp. of America, 358 U.S. 334 (1959), the approval of the Federal Communications Commission of an exchange of television stations was sought as required by statute, The Commission approved the exchange, finding, in accordance with the statutory standard, that the public interest, convenience, and necessity would be served. The United States brought an antitrust action to require divestiture. It was urged in defense that the Commission had been empowered to consider and adjudicate antitrust issues and that its approval immunized the transaction. The Court rejected the defense, Mr. Justice Harlan concurring in the judgment and summarizing the Court's holding as follows: </s> "[A] Commission determination of `public interest, convenience, and necessity' cannot either constitute a binding adjudication upon any antitrust issues that may be involved in the Commission's proceeding or serve to exempt a licensee pro tanto from the antitrust laws, and . . . these considerations alone are dispositive of this appeal." Id., at 353. </s> In California v. FPC, 369 U.S. 482 (1962), the question was whether the authority in the Federal Power Commission to approve mergers in the public interest foreclosed antitrust challenge to an approved [422 U.S. 694, 739] merger. The Court held that agency approval did not confer immunity from 7 of the Clayton Act, even though the agency had taken the competitive factors into account in passing upon the application. A year later, in United States v. Philadelphia Nat. Bank, supra, the Court rejected the contention that "the Bank Merger Act, by directing the banking agencies to consider competitive factors before approving mergers . . . immunizes approved mergers from challenge under the federal antitrust laws." 374 U.S., at 350 (footnote omitted). More recently, we applied this principle in Otter Tail Power Co. v. United States, 410 U.S. 366 (1973). There the Court held that the authority of the Federal Power Commission to order interconnections between power systems of two companies did not exempt company refusal to interconnect from antitrust attack. </s> Under these and other cases it could not be clearer that "[a]ctivities which come under the jurisdiction of a regulatory agency nevertheless may be subject to scrutiny under the antitrust laws," id., at 372, and that agency approval of particular transactions does not itself confer antitrust immunity. </s> The foregoing were the governing principles both before and after Silver v. New York Stock Exchange, 373 U.S. 341 (1963). There, stock exchange members were directed to discontinue private wire service to two nonmember broker-dealers, who were given no notice or opportunity to be heard on the discontinuance. The latter brought suit under 1 and 2 of the Sherman Act, but the Court of Appeals held that the stock exchanges had been exempted from the antitrust laws by the Securities Exchange Act of 1934. This Court reversed. The Act contained no express immunity, and immunity would be implied "only if necessary to make the Securities Exchange Act work, and even then only to the minimum extent necessary." [422 U.S. 694, 740] 373 U.S., at 357 . Conceding that there would be instances of permissible self-regulation which otherwise would violate the antitrust laws, the Court concluded that nothing in the Act required that the deprivations there imposed be immune from the antitrust laws. In arriving at this conclusion, it was noted that the Securities and Exchange Commission had no authority to review specific instances of enforcement of the exchange rules involved and that it was therefore unnecessary to consider any problem of conflict or coextensiveness with the agency's regulatory power. The Court observed, however, that if there had been jurisdiction in the Commission, with judicial review following, "a different case would arise concerning exemption from the operation of laws designed to prevent anticompetitive activity . . . ." Id., at 358 n. 12. </s> Such a different case, we said, was before us in Ricci v. Chicago Mercantile Exchange, 409 U.S. 289, 302 (1973). That case arose in the context of the Commodity Exchange Act. We held that a district court entertaining a private antitrust action should stay its hand while the Commodity Exchange Commission exercised whatever jurisdiction it might have to adjudicate specific claims of violation of exchange rules; but that adjudication, we said, was not a substitute for antitrust enforcement, and the fact that the Commission had jurisdiction to approve or disapprove the challenged conduct and might hold the conduct to be consistent with exchange rules would not, in itself, answer the immunity question. Id., at 302-303, n. 13. </s> On occasion, however, Congress has authorized an agency to adjudicate the legality of specifically defined transactions or commercial behavior in accordance with a competitive standard inconsistent with the controlling criteria under the antitrust laws. In these circumstances, the [422 U.S. 694, 741] Court has concluded that Congress intended to replace normal antitrust enforcement with the administrative regime provided by the statute, subject to judicial review. Pan American World Airways, Inc. v. United States, 371 U.S. 296 (1963), involved certain business conduct within the jurisdiction of the Civil Aeronautics Board. Under the Federal Aviation Act, various transactions by air carriers, if approved by the Board, were expressly immunized from antitrust attack. Also, the Board was given explicit authority under 411 of that Act, 49 U.S.C. 1381, to investigate and bring to a halt all "unfair . . . practices" and "unfair methods of competition," the power under this section to be administered in the light of the "competitive regime" clearly delineated elsewhere in the Act. See 371 U.S., at 308 -309. The Court concluded that Congress, having directed itself to the matter of competition in the airlines industry and having provided a competitive standard to be administered by an agency, had intended to displace the usual enforcement of the antitrust laws through the courts, at least insofar as Government injunction suits were concerned. United States v. Philadelphia National Bank, supra, made it plain that Pan American had not disturbed the usual rule that, without more, agency power to approve, and agency approval itself, do not confer antitrust immunity. 374 U.S., at 351 -352. </s> Gordon v. N. Y. Stock Exchange, Inc., ante, p. 659, decided today, is another instance where Congress has provided an administrative substitute for antitrust enforcement. Section 19 (b) of the Securities Exchange Act of 1934, 48 Stat. 898, as amended, 15 U.S.C. 78s (b), contemplated the fixing by the exchange, and approval or prescription by the Securities and Exchange Commission, of "reasonable rates of commission" to be charged by exchange members. Price fixing [422 U.S. 694, 742] by competitors, however, is wholly at odds with the Sherman Act; under that statute prices fixed by agreement are inherently unreasonable, whatever the level at which they are set. This was the law long prior to the Securities Exchange Act: </s> "The aim and result of every price-fixing agreement, if effective, is the elimination of one form of competition. The power to fix prices, whether reasonably exercised or not, involves power to control the market and to fix arbitrary and unreasonable prices. The reasonable price fixed today may through economic and business changes become the unreasonable price of tomorrow. Once established, it may be maintained unchanged because of the absence of competition secured by the agreement for a price reasonable when fixed. Agreements which create such potential power may well be held to be in themselves unreasonable or unlawful restraints, without the necessity of minute inquiry whether a particular price is reasonable or unreasonable as fixed and without placing on the government in enforcing the Sherman Law the burden of ascertaining from day to day whether it has become unreasonable through the mere variation of economic conditions." United States v. Trenton Potteries Co., 273 U.S. 392 , 397-398 (1927). </s> Thus Congress could not have anticipated that the antitrust laws would apply to stock exchange price fixing approved by the Commission. In this respect, there is a "plain repugnancy between the antitrust and regulatory provisions." United States v. Philadelphia National Bank, supra, at 351 (footnote omitted). </s> The rule of law that should be applied in this case, therefore, as it comes to us from these precedents, is that, absent an express antitrust immunization conferred [422 U.S. 694, 743] by Congress in a statute, such an immunity can be implied only if Congress has clearly supplanted the antitrust laws and their model of competition with a differing competitive regime, defined by particularized competitive standards and enforced by an administrative agency, and has thereby purged an otherwise obvious antitrust violation of its illegality. When viewed in the light of this rule of law, the argument for implied immunity in this case becomes demonstrably untenable. </s> II </s> Section 22 (f) of the Investment Company Act provides that "[n]o registered open-end company shall restrict the transferability or negotiability of any security of which it is the issuer except in conformity with the statements with respect thereto contained in its registration statement nor in contravention of such rules and regulations as the Commission may prescribe in the interests of the holders of all of the outstanding securities of such investment company." The majority concludes from these words and their sparse legislative history that the "funds and the SEC" have the authority to impose "SEC-approved restrictions on transferability and negotiability," ante, at 724, 725, including the restrictions involved here effecting resale price maintenance and concerted refusals to deal, all aimed at stifling competition that might come from the secondary market. The majority concludes that "[t]here can be no reconciliation of [SEC] authority . . . to permit these and similar restrictive agreements" with their illegality under the Sherman Act and that therefore "the antitrust laws must give way if the regulatory scheme established by the Investment Company Act is to work." Ante, at 729, 730. </s> For several reasons, the majority's conclusions are infirm under the controlling authorities. It is plain [422 U.S. 694, 744] that the Act itself contains no express exemptions from the antitrust laws. It is equally plain that the Act does not expressly permit the specific restrictions at issue here in the way that it deals with the public offering price under 22 (d). It would be incredible even to suggest that Congress intended to give participants in the mutual-fund industry, individually or collectively, carte blanche authority to impose whatever restrictions were thought desirable and without regard to the policies of the antitrust laws. The majority does not contend otherwise and rests its case on the power which it finds in the Commission to approve, or to fail to disapprove, the practices challenged here and to immunize them from antitrust scrutiny. </s> It is immediately obvious that the majority has failed to heed the teaching of our cases in several respects. It ignores the rule that "exemptions from antitrust laws are strictly construed" and that implied exemptions are "`strongly disfavored.'" FMC v. Seatrain Lines, Inc., 411 U.S., at 733 . Lurking in the prohibition of 22 (f) against any restrictions on "transferability or negotiability" except those stated in the registration statement, the Court discovers the affirmative power to impose resale price maintenance restrictions, as well as the authority to engage in concerted refusals to deal and similar practices wholly at odds with the antitrust laws. Never before has the Court labored to find hidden immunities from the antitrust laws; and the necessity for the effort is itself at odds with our precedents. </s> The Court's holding that Commission approval automatically brings with it antitrust immunity is also contrary to those cases which have consistently refused to equate agency power to approve conduct with an exemption under the antitrust laws. Those cases, as demonstrated above, uniformly held that actual agency [422 U.S. 694, 745] approval of the very transaction which the statute empowers the agency to approve is not in itself sufficient to exempt the transaction from liability under the Sherman Act, absent express exemption, or its equivalent, under the regulatory statute itself. This is true even where the agency is required to take antitrust considerations into account in approving the transaction or agreement and, a fortiori, where there is no evidence that such factors played any part in agency approval. </s> Here, the Court finds authority in open-end funds, subject to Commission approval, to impose restrictions on "negotiability and transferability"; construes those words generously to include price fixing and concerted boycotts; and then concludes that Commission approval - rather, its failure to disapprove - automatically and without more confers antitrust immunity on the selling practices followed by the particular open-end funds in this case. This result disregards the fact that there is no express provision for immunity in the statute, no direction to the Commission to consider competitive factors, no statutory standard provided for the Commission to follow with respect to competition in the investment company business, no indication that the Commission has considered the competitive impact of the restrictions at issue here, and no other basis for concluding that Congress intended the unilateral business judgment of an investment company, followed by Commission approval, to substitute for and supplant the antitrust laws. </s> The position of the Securities and Exchange Commission, as described and embraced by the Court, is that "its authority will be compromised" if industry practices which the Commission has the power to approve are subject to scrutiny under the antitrust laws. See ante, at 729. But the Commission has made no effort to analyze and [422 U.S. 694, 746] explain the need for these seriously anticompetitive restrictions in the mutual-fund industry. It has never affirmatively and formally approved the specific practices involved in this case, by rule or adjudication. Until recently, it has seemingly left investors and the public to the tender mercies of the industry itself. In fashioning antitrust immunity for these practices, the majority acts in complete disregard of the basis approach mandated by our cases, including the principles approved by the unanimous Court in FMC v. Seatrain Lines, Inc., supra: </s> "The Commission vigorously argues that such agreements can be interpreted as falling within the third category - which concerns agreements `controlling, regulating, preventing, or destroying competition.' Without more, we might be inclined to agree that many merger agreements probably fit within this category. But a broad reading of the third category would conflict with our frequently expressed view that exemptions from antitrust laws are strictly construed, see, e. g., United States v. McKesson & Robbins, Inc., 351 U.S. 305, 316 (1956), and that `[r]epeals of the antitrust laws by implication from a regulatory statute are strongly disfavored, and have only been found in cases of plain repugnancy between the antitrust and regulatory provisions.' United States v. Philadelphia National Bank, 374 U.S. 321, 350 -351 (1963) (footnotes omitted). As we observed only recently: `When . . . relationships are governed in the first instance by business judgment and not regulatory coercion, courts must be hesitant to conclude that Congress intended to override the fundamental national policies embodied in the antitrust laws.' Otter Tail Power Co. v. United States, 410 U.S. 366, 374 (1973). See also Silver v. New York Stock Exchange, 373 U.S. [422 U.S. 694, 747] 341 (1963); Pan American World Airways, Inc. v. United States, 371 U.S. 296 (1963); California v. FPC, 369 U.S. 482 (1962); United States v. Borden Co., 308 U.S. 188 (1939). This principle has led us to construe the Shipping Act as conferring only a `limited antitrust exemption' in light of the fact that `antitrust laws represent a fundamental national economic policy.' Carnation Co. v. Pacific Westbound Conference, 383 U.S., at 219 , 218." 411 U.S., at 732 -733 (footnotes omitted). </s> III </s> Exempting the NASD from antitrust scrutiny based on the existence of Commission power to approve or disapprove NASD rules is likewise unacceptable under our cases for very similar reasons. The majority relies on Hughes Tool Co. v. Trans World Airlines, 409 U.S. 363 (1973), and Pan American World Airways v. United States, 371 U.S. 296 (1963). But in Hughes exemption for the transactions there involved was based on the express immunities conferred by 414 of the Federal Aviation Act; and in Pan American immunity followed from the Board's authority to adjudicate unfair competitive standard Congress itself supplied in the regulatory statute. Nothing comparable is to be found in the relevant provisions of the statutes involved here. </s> It is especially interesting to find the Court on the one hand concluding that the selling practices under scrutiny here are essential to the working of the statutory scheme but on the other hand recognizing that the Commission itself has requested that the NASD rules be amended to prohibit agreements between underwriters and broker-dealers that preclude broker-dealers, acting as agents, from matching orders to buy and sell fund [422 U.S. 694, 748] shares in a secondary market at competitively determined prices and commission rates. Ante, at 718-719, n. 31. </s> The majority's opinion, as a whole, seems to me to reject the basis position found in our cases that "antitrust laws represent a fundamental national economic policy . . . ." Carnation Co. v. Pacific Conference, 383 U.S. 213, 218 (1966). I cannot follow that course and accordingly dissent. </s> [422 U.S. 694, 749]

United States Supreme Court GARNER v. LOS ANGELES BOARD(1951) No. 453 Argued: April 25, 1951Decided: June 4, 1951 </s> 1. The Federal Constitution does not forbid a municipality to require its employees to execute affidavits disclosing whether or not they are or ever have been members of the Communist Party or the Communist Political Association. P. 720. </s> 2. In 1941, the California Legislature amended the Charter of the City of Los Angeles so as to provide, in substance, that no person shall hold or retain or be eligible for any public office or employment in the service of the City (1) who advises, advocates or teaches the overthrow by force or violence of the State or Federal Government or belongs to an organization which does so, or (2) who, within the five years prior to the effective date, had so advised, advocated or taught or had belonged to an organization which did so. In 1948, the City passed an ordinance requiring each of its officers and employees to take an oath that he has not within the five years preceding the effective date of the ordinance, does not now, and will not while in the service of the City, advise, advocate or teach the overthrow by force, violence or other unlawful means, of the State or Federal Government or belong to an organization which does so or has done so within such five-year period. Held: The ordinance is not a bill of attainder or ex post facto law, nor, as here construed, does it violate the Due Process Clause of the Fourteenth Amendment. Pp. 720-724. </s> (a) The Charter amendment is valid under the Federal Constitution to the extent that it bars from the City's public service persons who, since its adoption in 1941, advise, advocate or teach the violent overthrow of the Government or who are or become affiliated with any group doing so, since the provisions thus operating prospectively are a reasonable regulation to protect the municipal service. The question of its validity insofar as it purported to apply retrospectively for a five-year period prior to its effective date is not here involved. Pp. 720-721. </s> (b) The ordinance clearly is not ex post facto, since the activity covered by the oath had been proscribed by the Charter in the same terms, for the same purpose, and to the same effect over [341 U.S. 716, 717] seven years before, and two years prior to the period covered by the oath. P. 721. </s> (c) The ordinance is not a bill of attainder, since no punishment is imposed by a general regulation which merely provides standards of qualification and eligibility for public employment. Lovett v. United States, 328 U.S. 303 , distinguished. Pp. 722-723. </s> (d) It is assumed here that the oath will not be construed as affecting adversely persons who during their affiliation with a proscribed organization were innocent of its purpose, or those who severed their relations with any such organization when its character became apparent, or those who were affiliated with organizations which were not engaged in proscribed activities at the time of their affiliation; and that, if this interpretation of the oath is correct, the City will give those petitioners who heretofore refused to take the oath an opportunity to take it as interpreted and resume their employment. As thus construed, the requirement of the oath does not violate the Due Process Clause of the Fourteenth Amendment. Pp. 723-724. </s> 98 Cal. App. 2d 493, 220 P.2d 958, affirmed. </s> In a suit by discharged employees of a city for reinstatement and unpaid salaries, the state court denied relief. 98 Cal. App. 2d 493, 220 P.2d 958. This Court granted certiorari. 340 U.S. 941 . Affirmed, p. 724. </s> Charles J. Katz and Samuel Rosenwein argued the cause for petitioners. With them on the brief was John T. McTernan. </s> Alan G. Campbell argued the cause for respondents. With him on the brief were Ray L. Chesebro, Bourke Jones and A. L. Lawson. </s> A. L. Wirin, Fred Okrand, Loren Miller and Clore Warne filed a brief for the American Civil Liberties Union, as amicus curiae, urging reversal. </s> MR. JUSTICE CLARK delivered the opinion of the Court. </s> In 1941 the California Legislature amended the Charter of the City of Los Angeles to provide in part as follows: </s> ". . . no person shall hold or retain or be eligible for any public office or employment in the service [341 U.S. 716, 718] of the City of Los Angeles, in any office or department thereof, either elective or appointive, who has within five (5) years prior to the effective date of this section advised, advocated or taught, or who may, after this section becomes effective [April 28, 1941], advise, advocate or teach, or who is now or has been within five (5) years prior to the effective date of this section, or who may, after this section becomes effective, become a member of or affiliated with any group, society, association, organization or party which advises, advocates or teaches, or has, within said period of five (5) years, advised, advocated or taught the overthrow by force or violence of the government of the United States of America or of the State of California. </s> "In so far as this section may be held by any court of competent jurisdiction not to be self-executing, the City Council is hereby given power and authority to adopt appropriate legislation for the purpose of effectuating the objects hereof." Cal. Stat. 1941, c. 67. </s> Pursuant to the authority thus conferred, the City of Los Angeles in 1948 passed Ordinance No. 94,004, requiring every person who held an office or position in the service of the city to take an oath prior to January 6, 1949. In relevant part the oath was as follows: </s> "I further swear (or affirm) that I do not advise, advocate or teach, and have not within the period beginning five (5) years prior to the effective date of the ordinance requiring the making of this oath or affirmation, advised, advocated or taught, the overthrow by force, violence or other unlawful means, of the Government of the United States of America or of the State of California and that I am not now and have not, within said period, been or become a member [341 U.S. 716, 719] of or affiliated with any group, society, association, organization or party which advises, advocates or teaches, or has, within said period, advised, advocated or taught, the overthrow by force, violence or other unlawful means of the Government of the United States of America, or of the State of California. I further swear (or affirm) that I will not, while I am in the service of the City of Los Angeles, advise, advocate or teach, or be or become a member of or affiliated with any group, association, society, organization or party which advises, advocates or teaches, or has within said period, advised, advocated or taught, the overthrow by force, violence or other unlawful means, of the Government of the United States of America or of the State of California . . . ." </s> The ordinance also required every employee to execute an affidavit "stating whether or not he is or ever was a member of the Communist Party of the United States of America or of the Communist Political Association, and if he is or was such a member, stating the dates when he became, and the periods during which he was, such a member . . . ." </s> On the final date for filing of the oath and affidavit petitioners were civil service employees of the City of Los Angeles. Petitioners Pacifico and Schwartz took the oath but refused to execute the affidavit. The remaining fifteen petitioners refused to do either. All were discharged for such cause, after administrative hearing, as of January 6, 1949. In this action they sue for reinstatement and unpaid salaries. The District Court of Appeal denied relief. 98 Cal. App. 2d 493, 220 P.2d 958 (1950). We granted certiorari, 340 U.S. 941 (1951). </s> Petitioners attack the ordinance as violative of the provision of Art. I, 10 of the Federal Constitution that "No State shall . . . pass any Bill of Attainder, [or] ex post facto Law . . . ." They also contend that the ordinance [341 U.S. 716, 720] deprives them of freedom of speech and assembly and of the right to petition for redress of grievances. </s> Petitioners have assumed that the oath and affidavit provisions of the ordinance present similar constitutional considerations and stand or fall together. We think, however, that separate disposition is indicated. </s> 1. The affidavit raises the issue whether the City of Los Angeles is constitutionally forbidden to require that its employees disclose their past or present membership in the Communist Party or the Communist Political Association. Not before us is the question whether the city may determine that an employee's disclosure of such political affiliation justifies his discharge. </s> We think that a municipal employer is not disabled because it is an agency of the State from inquiring of its employees as to matters that may prove relevant to their fitness and suitability for the public service. Past conduct may well relate to present fitness; past loyalty may have a reasonable relationship to present and future trust. Both are commonly inquired into in determining fitness for both high and low positions in private industry and are not less relevant in public employment. The affidavit requirement is valid. </s> 2. In our view the validity of the oath turns upon the nature of the Charter amendment (1941) and the relation of the ordinance (1948) to this amendment. Immaterial here is any opinion we might have as to the Charter provision insofar as it purported to apply retrospectively for a five-year period prior to its effective date. We assume that under the Federal Constitution the Charter amendment is valid to the extent that it bars from the city's public service persons who, subsequent to its adoption in 1941, advise, advocate, or teach the violent overthrow of the Government or who are or become affiliated with any group doing so. The provisions operating thus prospectively were a reasonable regulation [341 U.S. 716, 721] to protect the municipal service by establishing an employment qualification of loyalty to the State and the United States. Cf. Gerende v. Board of Supervisors of Elections, 341 U.S. 56 (1951). Likewise, as a regulation of political activity of municipal employees, the amendment was reasonably designed to protect the integrity and competency of the service. This Court has held that Congress may reasonably restrict the political activity of federal civil service employees for such a purpose, United Public Workers v. Mitchell, 330 U.S. 75, 102 -103 (1947), and a State is not without power to do as much. </s> The Charter amendment defined standards of eligibility for employees and specifically denied city employment to those persons who thereafter should not comply with these standards. While the amendment deprived no one of employment with or without trial, yet from its effective date it terminated any privilege to work for the city in the case of persons who thereafter engaged in the activity proscribed. </s> The ordinance provided for administrative implementation of the provisions of the Charter amendment. The oath imposed by the ordinance proscribed to employees activity which had been denied them in identical terms and with identical sanctions in the Charter provision effective in 1941. The five-year period provided by the oath extended back only to 1943. </s> The ordinance would be ex post facto if it imposed punishment for past conduct lawful at the time it was engaged in. Passing for the moment the question whether separation of petitioners from their employment must be considered as punishment, the ordinance clearly is not ex post facto. The activity covered by the oath had been proscribed by the Charter in the same terms, for the same purpose, and to the same effect over seven years before, and two years prior to the period embraced in the oath. Not the law but the fact was posterior. [341 U.S. 716, 722] </s> Bills of attainder are "legislative acts . . . that apply either to named individuals or to easily ascertainable members of a group in such a way as to inflict punishment on them without a judicial trial . . . ." United States v. Lovett, 328 U.S. 303, 315 (1946). Punishment is a prerequisite. See concurring opinion in Lovett, supra, at 318, 324. Whether legislative action curtailing a privilege previously enjoyed amounts to punishment depends upon "the circumstances attending and the causes of the deprivation." Cummings v. Missouri, 4 Wall. 277, 320 (1867). We are unable to conclude that punishment is imposed by a general regulation which merely provides standards of qualification and eligibility for employment. </s> Cummings v. Missouri, 4 Wall. 277 (1867), and Ex parte Garland, 4 Wall. 333 (1867), the leading cases in this Court applying the federal constitutional prohibitions against bills of attainder, recognized that the guarantees against such legislation were not intended to preclude legislative definition of standards of qualification for public or professional employment. Carefully distinguishing an instance of legislative "infliction of punishment" from the exercise of "the power of Congress to prescribe qualifications," the Court said in Garland's case: "The legislature may undoubtedly prescribe qualifications for the office, to which he must conform, as it may, where it has exclusive jurisdiction, prescribe qualifications for the pursuit of any of the ordinary avocations of life." 4 Wall. at 379-380. See also, Cummings v. Missouri, supra, at 318-319. This doctrine was reaffirmed in Dent v. West Virginia, 129 U.S. 114 (1889), in which Mr. Justice Field, who had written the Cummings and Garland opinions, wrote for a unanimous Court upholding a statute elevating standards of qualification to practice medicine. And in Hawker v. New York, 170 U.S. 189 (1898), the Court upheld a statute forbidding [341 U.S. 716, 723] the practice of medicine by any person who had been convicted of a felony. Both Dent and Hawker distinguished the Cummings and Garland cases as inapplicable when the legislature establishes reasonable qualifications for a vocational pursuit with the necessary effect of disqualifying some persons presently engaged in it. </s> Petitioners rely heavily upon United States v. Lovett, 328 U.S. 303 (1946), in which a legislative act effectively separating certain public servants from their positions was held to be a bill of attainder. Unlike the provisions of the Charter and ordinance under which petitioners were removed, the statute in the Lovett case did not declare general and prospectively operative standards of qualification and eligibility for public employment. Rather, by its terms it prohibited any further payment of compensation to named individual employees. Under these circumstances, viewed against the legislative background, the statute was held to have imposed penalties without judicial trial. </s> Nor are we impressed by the contention that the oath denies due process because its negation is not limited to affiliations with organizations known to the employee to be in the proscribed class. We have no reason to suppose that the oath is or will be construed by the City of Los Angeles or by California courts as affecting adversely those persons who during their affiliation with a proscribed organization were innocent of its purpose, or those who severed their relations with any such organization when its character became apparent, or those who were affiliated with organizations which at one time or another during the period covered by the ordinance were engaged in proscribed activity but not at the time of affiant's affiliation. * </s> [341 U.S. 716, 724] We assume that scienter is implicit in each clause of the oath. As the city has done nothing to negative this interpretation, we take for granted that the ordinance will be so read to avoid raising difficult constitutional problems which any other application would present. Fox v. Washington, 236 U.S. 273, 277 (1915). It appears from correspondence of record between the city and petitioners that although the city welcomed inquiry as to its construction of the oath, the interpretation upon which we have proceeded may not have been explicitly called to the attention of petitioners before their refusal. We assume that, if our interpretation of the oath is correct, the City of Los Angeles will give those petitioners who heretofore refused to take the oath an opportunity to take it as interpreted and resume their employment. </s> The judgment as to Pacifico and Schwartz is affirmed. The judgment as to the remaining petitioners is affirmed on the basis of the interpretation of the ordinance which we have felt justified in assuming. </s> Affirmed. </s> [Footnote * In interpreting local legislation proscribing affiliation with defective organizations, the Supreme Court of California has gone beyond the literal text of a statute so as to require knowledge of the character of the organization, as of the time of affiliation, by the person [341 U.S. 716, 724] whose affiliation is in question. In People v. Steelik, 187 Cal. 361, 203 P. 78 (1921), the Court upheld a conviction under the Criminal Syndicalism Act of 1919 which made one guilty of a felony who "is" a member of any one of a certain class of proscribed organizations. The indictment in relevant part alleged that defendants "are and each of them is" a member of a proscribed organization. The court interpreted the statute as defining and the indictment as charging "the offense of criminal syndicalism in that he knowingly belonged" to a proscribed organization. (Emphasis added.) 187 Cal. at 376, 203 P. at 84. </s> MR. JUSTICE FRANKFURTER, concurring in part and dissenting in part. </s> The Constitution does not guarantee public employment. City, State and Nation are not confined to making provisions appropriate for securing competent professional discharge of the functions pertaining to diverse [341 U.S. 716, 725] governmental jobs. They may also assure themselves of fidelity to the very presuppositions of our scheme of government on the part of those who seek to serve it. No unit of government can be denied the right to keep out of its employ those who seek to overthrow the government by force or violence, or are knowingly members of an organization engaged in such endeavor. See Gerende v. Board of Supervisors of Elections, 341 U.S. 56 . </s> But it does not at all follow that because the Constitution does not guarantee a right to public employment, a city or a State may resort to any scheme for keeping people out of such employment. Law cannot reach every discrimination in practice. But doubtless unreasonable discriminations, if avowed in formal law, would not survive constitutional challenge. Surely, a government could not exclude from public employment members of a minority group merely because they are odious to the majority, nor restrict such employment, say, to native-born citizens. To describe public employment as a privilege does not meet the problem. </s> This line of reasoning gives the direction, I believe, for dealing with the issues before us. A municipality like Los Angeles ought to be allowed adequate scope in seeking to elicit information about its employees and from them. It would give to the Due Process Clause an unwarranted power of intrusion into local affairs to hold that a city may not require its employees to disclose whether they have been members of the Communist Party or the Communist Political Association. In the context of our time, such membership is sufficiently relevant to effective and dependable government, and to the confidence of the electorate in its government. I think the precise Madison would have been surprised even to hear it suggested that the requirement of this affidavit was an "Attainder" under Art. I, 10, of the Constitution. For reasons outlined in the concurring opinion in United [341 U.S. 716, 726] States v. Lovett, 328 U.S. 303, 318 , I cannot so regard it. This kind of inquiry into political affiliation may in the long run do more harm than good. But the two employees who were dismissed solely because they refused to file an affidavit stating whether or when they had been members of the Communist Party or the Communist Political Association cannot successfully appeal to the Constitution of the United States. </s> A very different issue is presented by the fifteen employees who were discharged because they refused to take this oath: </s> "I . . . do solemnly swear (or affirm) . . . that I . . . have not, within said period [from December 6, 1943], been or become a member of or affiliated with any group, society, association, organization or party which advises, advocates or teaches, or has, within said period, advised, advocated or taught, the overthrow by force, violence or other unlawful means of the Government of the United States of America, or of the State of California." </s> The validity of an oath must be judged on the assumption that it will be taken conscientiously. This ordinance does not ask the employee to swear that he "knowingly" or "to the best of his knowledge" had no proscribed affiliation. Certainty is implied in the disavowal exacted. The oath thus excludes from city employment all persons who are not certain that every organization to which they belonged or with which they were affiliated (with all the uncertainties of the meaning of "affiliated") at any time since 1943 has not since that date advocated the overthrow by "unlawful means" of the Government of the United States or of the State of California. </s> The vice in this oath is that it is not limited to affiliation with organizations known at the time to have advocated overthrow of government. We have here a very different [341 U.S. 716, 727] situation from that recently before us in Gerende v. Board of Supervisors, 341 U.S. 56 . There the Attorney General of Maryland assured this Court that he would advise the appropriate authorities to accept as the oath required by State law from a candidate for office, an affirmation that he is not engaged in the attempt to overthrow the Government by force or violence and that he is not knowingly a member of an organization engaged in such an attempt. The Attorney General did not give this assurance as a matter of personal relaxation of a legal requirement. He was able to give it on the basis of the interpretation that the Court of Appeals of Maryland, the highest court of that State, had placed upon the legislation. No such assurance was remotely suggested on behalf of Los Angeles. Naturally not. Nothing in the decisions under review would warrant such restricted interpretation of the assailed ordinance. * To find scienter implied in a criminal statute is the obvious way of reading such a statute, for guilty knowledge is the normal ingredient of criminal responsibility. The ordinance before us exacts an oath as a condition of employment; it does not define a crime. It is certainly not open to this Court to rewrite the oath required by Los Angeles of its employees, after the oath as written has been sustained by the California courts. </s> If this ordinance is sustained, sanction is given to like oaths for every governmental unit in the United States. Not only does the oath make an irrational demand. It is [341 U.S. 716, 728] bound to operate as a real deterrent to people contemplating even innocent associations. How can anyone be sure that an organization with which he affiliates will not at some time in the future be found by a State or National official to advocate overthrow of government by "unlawful means"? All but the hardiest may well hesitate to join organizations if they know that by such a proscription they will be permanently disqualified from public employment. These are considerations that cut deep into the traditions of our people. Gregariousness and friendliness are among the most characteristic of American attitudes. Throughout our history they have been manifested in "joining." See Arthur M. Schlesinger, Sr., Biography of a Nation of Joiners, published in 50 American Historical Review 1, reprinted in Schlesinger, Paths to the Present, 23. </s> Giving full scope to the selective processes open to our municipalities and States in securing competent and reliable functionaries free from allegiance to any alien political authority, I do not think that it is consonant with the Due Process Clause for men to be asked, on pain of giving up public employment, to swear to something they cannot be expected to know. Such a demand is at war with individual integrity; it can no more be justified than the inquiry into belief which MR. JUSTICE BLACK, MR. JUSTICE JACKSON and I deemed invalid in American Communications Assn. v. Douds, 339 U.S. 382 . </s> The needs of security do not require such curbs on what may well be innocuous feelings and associations. Such curbs are indeed self-defeating. They are not merely unjustifiable restraints on individuals. They are not merely productive of an atmosphere of repression uncongenial to the spiritual vitality of a democratic society. The inhibitions which they engender are hostile to the best conditions for securing a high-minded and high-spirited public service. [341 U.S. 716, 729] </s> It is not for us to write the oath that Los Angeles may exact. And so as to the fifteen employees I think the case should go back to the State court, with instructions that these petitioners be reinstated unless they refuse to take an oath or affirmation within the scope indicated in this opinion. </s> [Footnote * Nothing in the decision or opinion of the Supreme Court of California in People v. Steelik, 187 Cal. 361, 203 P. 78, indicates that the courts of California would at their own instance read into the Los Angeles oath a limitation which is not there expressed. In the Steelik case the court was considering a statute which provided that "Any person who . . . [o]rganizes or assists in organizing, or is or knowingly becomes a member of, any organization" teaching criminal syndicalism is guilty of a felony. Cal. Stat. 1919, c. 188, 2. The court held only that the word "knowingly" qualified the word "is" in addition to the word "becomes." </s> MR. JUSTICE BURTON, dissenting in part and concurring in part. </s> I. </s> I cannot agree that under our decisions the oath is valid. United States v. Lovett, 328 U.S. 303 ; Ex parte Garland, 4 Wall. 333; Cummings v. Missouri, 4 Wall. 277. The oath is so framed as to operate retrospectively as a perpetual bar to those employees who held certain views at any time since a date five years preceding the effective date of the ordinance. It leaves no room for a change of heart. It calls for more than a profession of present loyalty or promise of future attachment. It is not limited in retrospect to any period measured by reasonable relation to the present. In time this ordinance will amount to the requirement of an oath that the affiant has never done any of the proscribed acts. Cf. Gerende v. Board of Supervisors, 341 U.S. 56 ; American Communications Assn. v. Douds, 339 U.S. 382, 413 -414. </s> The oath is not saved by the fact that it reaches back only to December 6, 1943, and that city employees have been forbidden since April 28, 1941, under 432 of the Los Angeles Charter, to advise, teach or advocate the violent overthrow of the Government. See the Lovett, Garland and Cummings cases, supra. </s> II. </s> I agree with the Court that the judgment should be affirmed as to petitioners Pacifico and Schwartz. They [341 U.S. 716, 730] executed the oath but refused to sign an affidavit calling for information as to their past or present membership in the Communist Party or the Communist Political Association. Such refusal does not now present the question of whether the Constitution permits the City to discharge them from municipal employment on the basis of information in their affidavits. We have before us only the question of whether municipal employees may be required to give to their employer factual information which is relevant to a determination of their present loyalty and suitability for public service. Such loyalty and suitability is no less material in candidates for appointment as municipal employees than in candidates for elective office, Gerende v. Board of Supervisors, supra, or union officers, American Communications Assn. v. Douds, supra. </s> MR. JUSTICE BLACK, dissenting. </s> I agree with the dissenting opinion of MR. JUSTICE DOUGLAS but wish to emphasize two objections to the opinion of the Court: </s> 1. Our per curiam opinion in Gerende v. Board of Supervisors, 341 U.S. 56 , in no way stands for the principle for which the Court cites it today. In Gerende, we upheld a Maryland law that had been interpreted by the highest court of that state to require only an oath that a candidate "is not a person who is engaged `in one way or another in the attempt to overthrow the government by force or violence,' and that he is not knowingly a member of an organization engaged in such an attempt." The oath and affidavit in the present case are obviously not so limited. </s> 2. The opinion of the Court creates considerable doubt as to the continued vitality of three of our past decisions: Cummings v. Missouri, 4 Wall. 277; Ex parte Garland, 4 Wall. 333; United States v. Lovett, 328 U.S. 303 . To [341 U.S. 716, 731] this extent it weakens one more of the Constitution's great guarantees of individual liberty. See, e. g., Dennis v. United States, ante, p. 494, and Breard v. Alexandria, ante, p. 622, decided this day. </s> MR. JUSTICE DOUGLAS, with whom MR. JUSTICE BLACK joins, dissenting. </s> Petitioners are citizens of the United States and civil service employees of the City of Los Angeles. In 1948 the City of Los Angeles passed Ordinance No. 94,004 which requires each of its employees to subscribe to an oath of loyalty which included, inter alia, an affirmation that he does not advise, advocate, or teach, and has not within the five years prior to the effective date of the ordinance "advised, advocated or taught, the overthrow by force, violence or other unlawful means, of the Government of the United States of America or of the State of California," and that he is not and has not within that period been "a member of or affiliated with any group, society, association, organization or party which advises, advocates or teaches, or has, within said period, advised, advocated or taught, the overthrow by force, violence or other unlawful means of the Government of the United States of America, or of the State of California." </s> The ordinance also requires each employee to execute an affidavit stating "whether or not he is or ever was a member of the Communist Party of the United States of America or of the Communist Political Association, and if he is or was such a member, stating the dates when he became, and the periods during which he was, such a member." </s> The ordinance was passed to effectuate the provisions of 432 of the Charter of Los Angeles (Cal. Stat. 1941, c. 67, p. 3409) which provides, inter alia, that no person who has within five years prior to the adoption of 432 advised, [341 U.S. 716, 732] advocated or taught the overthrow by force or violence of the government of the United States or of California, or who during that time has been a member of or affiliated with any group or party which has advised, advocated, or taught that doctrine, shall hold or retain or be eligible for any employment in the service of the city. Thus the ordinance and 432 of the Charter read together make plain that prior advocacy or membership is without more a disqualification for employment. Both the oath and the affidavit are methods for enforcement of that policy. </s> Fifteen of the petitioners refused to sign either the oath or the affidavit. Two took the oath but refused to sign the affidavit. All seventeen were discharged - the sole ground being their refusal to sign the affidavit or to sign and to take the oath, as the case may be. They had an administrative review, which afforded them no relief. This suit was thereupon instituted in the California court, claiming reinstatement and unpaid salaries. Relief was denied by the District Court of Appeal, 98 Cal. App. 2d 493, 220 P.2d 958; and a hearing was denied by the Supreme Court, three justices dissenting. The case is here on certiorari. </s> The case is governed by Cummings v. Missouri, 4 Wall. 277, and Ex parte Garland, 4 Wall. 333, which struck down test oaths adopted at the close of the Civil War. The Cummings case involved provisions of the Missouri Constitution requiring public officials and certain classes of professional people, including clergymen, to take an oath that, inter alia, they had never been "in armed hostility" to the United States; that they had never "by act or word" manifested their "adherence to the cause" of enemies of the country or their "desire" for the triumph of its enemies; that they had never "knowingly and willingly harbored, aided, or countenanced" an enemy; that they [341 U.S. 716, 733] had never been a "member of, or connected with, any order, society, or organization inimical to the government of the United States" or engaged "in guerilla warfare" against its inhabitants; that they had never left Missouri "for the purpose of avoiding enrolment for or draft into the military service of the United States" or become enrolled as a southern sympathizer. </s> The Garland case involved certain Acts of Congress requiring public officials and attorneys practicing before the federal courts to take an oath that they had "voluntarily given no aid, countenance, counsel, or encouragement to persons engaged in armed hostility" against the United States and that they had "neither sought nor accepted, nor attempted to exercise the functions of any office whatever, under any authority or pretended authority in hostility to the United States." The Court amended its rules of admission to require this oath. </s> Cummings, a Catholic priest, was indicted and convicted for teaching and preaching without having first taken the oath. </s> Garland, a member of the Bar of the Court, had served in the Confederate Government, for which he had received a pardon from the President conditioned on his taking the customary oath of loyalty. He applied for permission to practice before the Court without taking the new oath. </s> Article I, 10 of the Constitution forbids any state to "pass any Bill of Attainder" or any "ex post facto Law." Article I, 9 curtails the power of Congress by providing that "No Bill of Attainder or ex post facto Law shall be passed." The Court ruled that the test oaths in the Cummings and Garland cases were bills of attainder and ex post facto laws within the meaning of the Constitution. "A bill of attainder," wrote Mr. Justice Field for the Court, "is a legislative act which inflicts punishment [341 U.S. 716, 734] without a judicial trial." 1 Cummings v. Missouri, supra, p. 323; and see United States v. Lovett, 328 U.S. 303, 317 , 318. The Court held that deprivation of the right to follow one's profession is punishment. A bill of attainder, though generally directed against named individuals, may be directed against a whole class. Bills of attainder usually declared the guilt; here they assumed the guilt and adjudged the punishment conditionally, i. e., they deprived the parties of their right to preach and to practice law unless the presumption were removed by the expurgatory oath. That was held to be as much a bill of [341 U.S. 716, 735] attainder as if the guilt had been irrevocably pronounced. The laws were also held to be ex post facto since they imposed a penalty for an act not so punishable at the time it was committed. </s> There are, of course, differences between the present case and the Cummings and Garland cases. Those condemned by the Los Angeles ordinance are municipal employees; those condemned in the others were professional people. Here the past conduct for which punishment is exacted is single - advocacy within the past five years of the overthrow of the Government by force and violence. In the other cases the acts for which Cummings and Garland stood condemned covered a wider range and involved some conduct which might be vague and uncertain. But those differences, seized on here in hostility to the constitutional provisions, are wholly irrelevant. Deprivation of a man's means of livelihood by reason of past conduct, not subject to this penalty when committed, is punishment whether he is a professional man, a day laborer who works for private industry, or a government employee. The deprivation is nonetheless unconstitutional whether it be for one single past act or a series of past acts. The degree of particularity with which the past act is defined is not the criterion. We are not dealing here with the problem of vagueness in criminal statutes. No amount of certainty would have cured the laws in the Cummings and Garland cases. They were stricken down because of the mode in which punishment was inflicted. </s> Petitioners were disqualified from office not for what they are today, not because of any program they currently espouse (cf. Gerende v. Board of Supervisors, 341 U.S. 56 ), not because of standards related to fitness for the office (cf. Dent v. West Virginia, 129 U.S. 114 ; Hawker v. New York, 170 U.S. 189 ), but for what they once [341 U.S. 716, 736] advocated. They are deprived of their livelihood by legislative act, not by judicial processes. We put the case in the aspect most invidious to petitioners. Whether they actually advocated the violent overthrow of Government does not appear. But here, as in the Cummings case, the vice is in the presumption of guilt which can only be removed by the expurgatory oath. That punishment, albeit conditional, violates here as it did in the Cummings case the constitutional prohibition against bills of attainder. Whether the ordinance also amounts to an ex post facto law is a question we do not reach. </s> Footnotes [Footnote 1 Mr. Justice Field continued: "If the punishment be less than death, the act is termed a bill of pains and penalties. Within the meaning of the Constitution, bills of attainder include bills of pains and penalties. In these cases the legislative body, in addition to its legitimate functions, exercises the powers and office of judge; it assumes, in the language of the text-books, judicial magistracy; it pronounces upon the guilt of the party, without any of the forms or safeguards of trial; it determines the sufficiency of the proofs produced, whether conformable to the rules of evidence or otherwise; and it fixes the degree of punishment in accordance with its own notions of the enormity of the offence." 4 Wall. p. 323. </s> In addition to the history of bills of attainder in England, the draftsmen of the Constitution had before them recent examples of such legislation by the Revolutionary governments of the states. Legislative action against persons of known or suspected Loyalist sympathies included outright attaint of treason or subversion (e. g., Georgia, Act of March 1, 1778; Pennsylvania Laws 1778, c. 49; New York Laws 1779, Third Session, c. 25); proscription and banishment (e. g., Massachusetts, Act of Sept. 1778, Charters and Gen. Laws, c. 48; New Hampshire Laws 1778, Fourth Session, c. 9); confiscation (e. g., Delaware Laws 1778, c. 29b; New Jersey, Act of Dec. 11, 1778, Laws, p. 40); as well as numerous test oaths involving, among other penalties, disqualification from holding office or practicing certain professions. See laws collected in Van Tyne, The Loyalists in the American Revolution, App. B, C; and generally, Thompson, AntiLoyalist Legislation During the American Revolution, 3 Ill. L. Rev. 81, 147. </s> [341 U.S. 716, 737]

United States Supreme Court FLRA v. ABERDEEN PROVING GROUND(1988) No. 86-1715 Argued: February 23, 1988Decided: April 4, 1988 </s> Title VII of the Civil Service Reform Act of 1978 generally requires that federal agencies and labor unions bargain in good faith concerning terms and conditions of employment. A statutory exemption provides that an agency has a duty to bargain when an agency rule or regulation is involved "only if the [Federal Labor Relations Authority (Authority)] has determined . . . that no compelling need . . . exists for the rule or regulation," 5 U.S.C. 7117(a)(2), and details procedures for making that determination. 7117(b). When respondent Aberdeen Proving Ground refused to negotiate an administrative leave proposal by its employees' union because the proposal conflicted with agency regulations, the union filed an unfair labor practice charge with the Authority. An Administrative Law Judge held in respondent's favor, finding that the proposal was inconsistent with agency regulations and was not subject to negotiations because the Authority had not previously determined under 7117(b) that there was no compelling need for the regulations. The Authority reversed, holding, inter alia, that a compelling need determination may be unified with an unfair labor practice proceeding. The Court of Appeals reversed on the ground that a 7117(b) negotiability appeal is the sole means of determining a compelling need question. </s> Held: </s> Section 7117(b) provides the exclusive procedure for determining whether there is a compelling need for an agency regulation. The plain language of Title VII unambiguously provides that the procedure specified in 7117(b) is exclusive rather than one of multiple options. This reading of Title VII is consistent with the statute's legislative history and asserted purpose of achieving a balance between the rights of federal employees to bargain collectively and the public interest in effective government. </s> Affirmed. </s> Ruth E. Peters argued the cause for petitioner. With her on the briefs were William E. Persina and Arthur A. Horowitz. [485 U.S. 409, 410] </s> Lawrence S. Robbins argued the cause for respondent. With him on the brief were Solicitor General Fried, Assistant Attorney General Willard, Deputy Solicitor General Cohen, and William Kanter. </s> PER CURIAM. </s> The Federal Service Labor-Management Relations Statute, Title VII of the Civil Service Reform Act of 1978, 5 U.S.C. 7101 et seq., protects the right of federal employees "to form, join, or assist any labor organization, or to refrain from any such activity," 7102, and requires that federal agencies and labor organizations bargain in good faith concerning the terms and conditions of employment, 7102, 7114, 7116(a)(5), and (b)(5). Recognizing "the special requirements and needs of the Government," 7101(b), Title VII exempts certain matters from the duty to negotiate. One such exemption provides that an agency's duty to bargain extends "to matters which are the subject of any agency rule or regulation . . . only if the [Federal Labor Relations Authority (Authority)] has determined under subsection (b) of this section that no compelling need . . . exists for the rule or regulation." 7117(a)(2). Subsection (b) specifies detailed procedures for determining whether there is a "compelling need" for the agency regulation. We granted certiorari to resolve a conflict between Circuits as to whether 7117(b) provides the exclusive procedure for determining whether there is a compelling need for an agency regulation or whether the Authority alternatively may make a compelling need determination in connection with an unfair labor practice (ULP) proceeding. 484 U.S. 813 (1987). * </s> [485 U.S. 409, 411] </s> In September 1981, the respondent, Aberdeen Proving Ground, notified its employees' union representatives that Aberdeen intended to curtail operations for the three days after Thanksgiving, November 27-29, 1981, and that, as a result, Aberdeen employees would be placed on forced annual leave for Friday, November 27. Thereafter, Aberdeen met with union representatives to discuss leave procedures. Union representatives requested that the employees instead be granted administrative leave; management replied that administrative leave was not permitted by the relevant rules and regulations and that the issue "verges on nonnegotiability." 21 F. L. R. A. 826, 829 (1982). </s> The union then filed an ULP charge with the Authority, and the Authority's General Counsel issued a complaint alleging that Aberdeen's refusal to negotiate concerning the union's administrative leave proposal was a failure to negotiate in good faith. The Administrative Law Judge held in Aberdeen's favor, concluding that the union's proposal was inconsistent with agency regulations and thus not subject to negotiations because the Authority had not previously determined under 7117(b) that there was no compelling need for the regulations. Id., at 834. The Authority reversed, holding that an ULP charge is properly filed where the Government employer undertakes a unilateral change in conditions of employment, even though the union's proposal may conflict with an agency regulation and there has been no compelling need determination. In the Authority's view, in such cases the compelling need determination may be properly unified with the ULP proceeding. 21 F. L. R. A. 814, 816-820 (1986). Finding that the regulation was not justified by a compelling need, the Authority held that Aberdeen had violated its duty to negotiate in good faith. See 7116(a)(1) and (a)(5). </s> The Court of Appeals summarily reversed on the authority of its prior decision in U.S. Army Engineer Center v. FLRA, 762 F.2d 409 (CA4 1985). In U.S. Army Engineer Center the Court of Appeals wrote that "an examination [485 U.S. 409, 412] of the history, policies, and, above all, the language of the Federal Labor-Management Relations Act persuades us that Congress meant the 7117(b) negotiability appeal to be the sole means of determining a compelling need question under the statute." 762 F.2d, at 417. We agree with both the analysis and conclusion of the Court of Appeals. </s> The plain language of Title VII unambiguously provides that where a matter is covered by regulation, no duty to bargain arises until the Authority has first determined that no compelling need justifies adherence to the regulation. Section 7117(a)(2) states unequivocally that "[t]he duty to bargain in good faith shall . . . extend to matters which are the subject of any agency rule or regulation . . . only if the Authority has determined under subsection (b) of this section that no compelling need . . . exists for the rule or regulation." (Emphasis supplied.) As the Court of Appeals noted, the language of the statute is that of a condition precedent. 762 F.2d, at 413. The phrase "only if" denotes exclusivity; it does not suggest one of multiple options. Moreover, the words "has determined under subsection (b) of this section" clearly refer to an event that has come to pass. Thus, the duty to bargain does not arise until the 7117(b) determination has occurred. Section 7117(b) further confirms this reading of the statute. Here, the statute again speaks in exclusive and mandatory terms: "In any case of collective bargaining in which an exclusive representative alleges that no compelling need exists for any rule or regulation . . . which is then in effect and which governs any matter at issue in such collective bargaining, the Authority shall determine under paragraph (2) of this subsection . . . whether such a compelling need exists." (Emphasis supplied.) </s> This plain reading of Title VII is fully consistent with - if not compelled by - the legislative history and asserted purpose of the statute. Title VII strives to achieve a balance between the rights of federal employees to bargain collectively and "the paramount public interest in the effective conduct [485 U.S. 409, 413] of the public's business." Message from the President Transmitting A Draft of Proposed Legislation to Reform the Civil Service Laws 4 (1978), Legislative History of the Federal Service Labor-Management Relations Statute, Title VII of the Civil Service Reform Act of 1978 (Committee Print compiled for the House Committee on Post Office and Civil Service) Print No. 96-7, p. 626 (1979) (Leg. Hist.); see also 124 Cong. Rec. 25600-25601, 25613-25614 (1978) (remarks of Rep. Clay), Leg. Hist. 842-845. </s> Section 7117(b) is carefully constructed to strike such a balance. Under 7117(b) employees are provided with a means to clarify the scope of the agency's duty to bargain; if the agency then refuses to bargain, the union may seek relief through an ULP proceeding. At the same time, 7117(b) provides special procedures designed to promote effective government. For instance, under a 7117(b) negotiability appeal, but not in the ULP forum, the agency that issued the relevant regulation is a necessary party, 7117(b)(4); the Authority's General Counsel is not a party, 7117(b)(3); and the negotiability appeal is presented directly to the Authority, rather than first to an administrative law judge, 5 CFR pt. 2424 (1987). Moreover, a 7117(b) hearing is an expedited proceeding, 7117(b)(3), thus resolving doubt as to whether a regulation is controlling as promptly as practicable. Most importantly, requiring that compelling need be resolved exclusively through a 7117(b) appeal allows agencies to act in accordance with their regulations without an overriding apprehension that their adherence to the regulations might result in sanctions under an ULP proceeding. See 7118(a)(7). To allow compelling need to be adjudicated in the context of an ULP proceeding, without any prior 7117(b) negotiability appeal, would frustrate this careful balance and would disregard Congress' direction that Title VII "be interpreted in a manner consistent with the requirement of an effective and efficient Government." 7101(b). [485 U.S. 409, 414] </s> Although "reviewing courts should uphold reasonable and defensible constructions of an agency's enabling Act, . . . they must not `rubber-stamp . . . administrative decisions that they deem inconsistent with a statutory mandate or that frustrate the congressional policy underlying a statute.'" Bureau of Alcohol, Tobacco and Firearms v. FLRA, 464 U.S. 89, 97 (1983), quoting NLRB v. Brown, 380 U.S. 278, 291 -292 (1965). The Court of Appeals properly concluded that the Authority acted inconsistently with the language and purpose of Title VII in permitting resolution of the compelling need issue in the ULP forum. </s> The judgment of the Court of Appeals is accordingly </s> Affirmed. </s> [Footnote * Compare Defense Logistics Agency v. FLRA, 244 U.S. App. D.C. 22, 754 F.2d 1003 (1985) (permissible for Authority to resolve compelling need in either 7117(b) negotiability appeal or ULP forum in unilateral change cases), with U.S. Army Engineer Center v. FLRA, 762 F.2d 409 (CA4 1985) ( 7117(b) negotiability appeal exclusive procedure to resolve compelling need). </s> [485 U.S. 409, 415]

United States Supreme Court NEW YORK TIMES CO., INC., et al. v. TASINI et al.(2001) No. 00-201 Argued: March 28, 2001Decided: June 25, 2001 </s> Respondent freelance authors (Authors) wrote articles (Articles) for newspapers and a magazine published by petitioners New York Times Company (Times), Newsday, Inc. (Newsday), and Time, Inc. (Time). The Times, Newsday, and Time (Print Publishers) engaged the Authors as independent contractors under contracts that in no instance secured an Author's consent to placement of an Article in an electronic database. The Print Publishers each licensed rights to copy and sell articles to petitioner LEXIS/NEXIS, owner and operator of NEXIS. NEXIS is a computerized database containing articles in text-only format from hundreds of periodicals spanning many years. Subscribers access NEXIS through a computer, may search for articles using criteria such as author and subject, and may view, print, or download each article yielded by the search. An article's display identifies its original print publication, date, section, initial page number, title, and author, but each article appears in isolation--without visible link to other stories originally published in the same periodical edition. NEXIS does not reproduce the print publication's formatting features such as headline size and page placement. The Times also has licensing agreements with petitioner University Microfilms International (UMI), authorizing reproduction of Times materials on two CD-ROM products. One, the New York Times OnDisc (NYTO), is a text-only database containing Times articles presented in essentially the same way they appear in LEXIS/NEXIS. The other, General Periodicals OnDisc (GPO), is an image-based system that reproduces the Times' Sunday Book Review and Magazine exactly as they appeared on the printed pages, complete with photographs, captions, advertisements, and other surrounding materials. The two CD-ROM products are searchable in much the same way as LEXIS/NEXIS; in both, articles retrieved by users provide no links to other articles appearing in the original print publications. </s> The Authors filed this suit, alleging that their copyrights were infringed when, as permitted and facilitated by the Print Publishers, LEXIS/NEXIS and UMI (Electronic Publishers) placed the Articles in NEXIS, NYTO, and GPO (Databases). The Authors sought declaratory and injunctive relief, and damages. In response to the Authors' complaint, the Print and Electronic Publishers raised the privilege accorded collective work copyright owners by §201(c) of the Copyright Act. That provision, pivotal in this case, reads: "Copyright in each separate contribution to a collective work is distinct from copyright in the collective work as a whole, and vests initially in the author of the contribution. In the absence of an express transfer of the copyright or of any rights under it, the owner of copyright in the collective work is presumed to have acquired only the privilege of reproducing and distributing the contribution as part of that particular collective work, any revision of that collective work, and any later collective work in the same series." The District Court granted the Publishers summary judgment, holding, inter alia, that the Databases reproduced and distributed the Authors' works, in §201(c)'s words, "as part of ... [a] revision of that collective work" to which the Authors had first contributed. The Second Circuit reversed, granting the Authors summary judgment on the ground that the Databases were not among the collective works covered by §201(c), and specifically, were not "revisions" of the periodicals in which the Articles first appeared. </s> Held:Section 201(c) does not authorize the copying at issue here. The Publishers are not sheltered by §201(c) because the Databases reproduce and distribute articles standing alone and not in context, not "as part of that particular collective work" to which the author contributed, "as part of ... any revision" thereof, or "as part of ... any later collective work in the same series." Pp.8-21. </s> (a)Where, as here, a freelance author has contributed an article to a collective work, copyright in the contribution vests initially in its author. §201(c). Copyright in the collective work vests in the collective author (here, the Print Publisher) and extends only to the creative material contributed by that author, not to "the preexisting material employed in the work," §103(b). Congress enacted the provisions of the 1976 revision of the Copyright Act at issue to address the unfair situation under prior law, whereby authors risked losing their rights when they placed an article in a collective work. The 1976 Act recast the copyright as a bundle of discrete "exclusive rights," §106, each of which "may be transferred ... and owned separately," §201(d)(2). The Act also provided, in §404(a), that "a single notice applicable to the collective work as a whole is sufficient" to protect the rights of freelance contributors. Together, §404(a) and §201(c) preserve the author's copyright in a contribution to a collective work. Under §201(c)'s terms, a publisher could reprint a contribution from one issue in a later issue of its magazine, and could reprint an article from one edition of an encyclopedia in a later revision of it, but could not revise the contribution itself or include it in a new anthology or an entirely different collective work. Essentially, §201(c) adjusts a publisher's copyright in its collective work to accommodate a freelancer's copyright in her contribution. If there is demand for a freelance article standing alone or in a new collection, the Copyright Act allows the freelancer to benefit from that demand; after authorizing initial publication, the freelancer may also sell the article to others. Cf. Stewart v. Abend, 495 U.S. 207, 229, 230. It would scarcely preserve the author's copyright in a contribution as contemplated by Congress if a print publisher, without the author's permission, could reproduce or distribute discrete copies of the contribution in isolation or within new collective works. Pp.8-12. </s> (b)The Publishers' view that inclusion of the Articles in the Databases lies within the "privilege of reproducing and distributing the [Articles] as part of ... [a] revision of that collective work," §201(c), is unacceptable. In determining whether the Articles have been reproduced and distributed "as part of" a "revision," the Court focuses on the Articles as presented to, and perceptible by, a Database user. See §§102, 101. Here, the three Databases present articles to users clear of the context provided either by the original periodical editions or by any revision of those editions. The Databases first prompt users to search the universe of their contents: thousands or millions of files containing individual articles from thousands of collective works (i.e., editions), either in one series (the Times, in NYTO) or in scores of series (the sundry titles in NEXIS and GPO). When the user conducts a search, each article appears as a separate item within the search result. In NEXIS and NYTO, an article appears to a user without the graphics, formatting, or other articles with which it was initially published. In GPO, the article appears with the other materials published on the same page or pages, but without any material published on other pages of the original periodical. In either circumstance, the Database does not reproduce and distribute the article "as part of" either the original edition or a "revision" of that edition. The articles may be viewed as parts of a new compendium--namely, the entirety of works in the Database. Each edition of each periodical, however, represents only a miniscule fraction of the ever-expanding Database. The massive whole of the Database is not recognizable as a new version of its every small part. Furthermore, the Articles in the Databases may be viewed "as part of" no larger work at all, but simply as individual articles presented individually. That each article bears marks of its origin in a particular periodical suggests the article was previously part of that periodical, not that the article is currently reproduced or distributed as part of the periodical. The Databases' reproduction and distribution of individual Articles--simply as individual Articles--would invade the core of the Authors' exclusive rights. The Publishers' analogy between the Databases and microfilm and microfiche is wanting: In the Databases, unlike microfilm, articles appear disconnected from their original context. Unlike the conversion of newsprint to microfilm, the transfer of articles to the Databases does not represent a mere conversion of intact periodicals (or revisions of periodicals) from one medium to another. The Databases offer users individual articles, not intact periodicals. The concept of "media-neutrality" invoked by the Publishers should therefore protect the Authors' rights, not the Publishers'. The result is not changed because users can manipulate the Databases to generate search results consisting entirely of articles from a particular periodical edition. Under §201(c), the question is not whether a user can assemble a revision of a collective work from a database, but whether the database itself perceptibly presents the author's contribution as part of a revision of the collective work. That result is not accomplished by these Databases. Pp.12-19. </s> (c)The Publishers' warning that a ruling for the Authors will have "devastating" consequences, punching gaping holes in the electronic record of history, is unavailing. It hardly follows from this decision that an injunction against the inclusion of these Articles in the Databases (much less all freelance articles in any databases) must issue. The Authors and Publishers may enter into an agreement allowing continued electronic reproduction of the Authors' works; they, and if necessary the courts and Congress, may draw on numerous models for distributing copyrighted works and remunerating authors for their distribution. In any event, speculation about future harms is no basis for this Court to shrink authorial rights created by Congress. The Court leaves remedial issues open for initial airing and decision in the District Court. Pp.19-21. </s> 206 F.3d 161, affirmed. </s> Ginsburg, J., delivered the opinion of the Court, in which Rehnquist, C.J., and O'Connor, Scalia, Kennedy, Souter, and Thomas, JJ., joined. Stevens, J., filed a dissenting opinion, in which Breyer, J., joined. </s> NEW YORK TIMES COMPANY, INC., etal.,PETITIONERS v. JONATHAN TASINI etal. </s> on writ of certiorari to the united states court ofappeals for the second circuit </s> [June 25, 2001] </s> Justice Ginsburg delivered the opinion of the Court. </s> This copyright case concerns the rights of freelance authors and a presumptive privilege of their publishers. The litigation was initiated by six freelance authors and relates to articles they contributed to three print periodicals (two newspapers and one magazine). Under agreements with the periodicals' publishers, but without the freelancers' consent, two computer database companies placed copies of the freelancers' articles--along with all other articles from the periodicals in which the freelancers' work appeared--into three databases. Whether written by a freelancer or staff member, each article is presented to, and retrievable by, the user in isolation, clear of the context the original print publication presented. </s> The freelance authors' complaint alleged that their copyrights had been infringed by the inclusion of their articles in the databases. The publishers, in response, relied on the privilege of reproduction and distribution accorded them by §201(c) of the Copyright Act, which provides: </s> "Copyright in each separate contribution to a collective work is distinct from copyright in the collective work as a whole, and vests initially in the author of the contribution. In the absence of an express transfer of the copyright or of any rights under it, the owner of copyright in the collective work is presumed to have acquired only the privilege of reproducing and distributing the contribution as part of that particular collective work, any revision of that collective work, and any later collective work in the same series." 17 U.S.C. §201(c). </s> Specifically, the publishers maintained that, as copyright owners of collective works, i.e., the original print publications, they had merely exercised "the privilege" §201(c) accords them to "reproduc[e] and distribut[e]" the author's discretely copyrighted contribution. </s> In agreement with the Second Circuit, we hold that §201(c) does not authorize the copying at issue here. The publishers are not sheltered by §201(c), we conclude, because the databases reproduce and distribute articles standing alone and not in context, not "as part of that particular collective work" to which the author contributed, "as part of ... any revision" thereof, or "as part of ... any later collective work in the same series." Both the print publishers and the electronic publishers, we rule, have infringed the copyrights of the freelance authors. </s> I </s> A </s> Respondents Jonathan Tasini, Mary Kay Blakely, Barbara Garson, Margot Mifflin, Sonia Jaffe Robbins, and David S. Whitford are authors (Authors). Between 1990 and 1993, they wrote the 21 articles (Articles) on which this dispute centers. Tasini, Mifflin, and Blakely contributed 12 Articles to The New York Times, the daily newspaper published by petitioner The New York Times Company (Times). Tasini, Garson, Robbins, and Whitford wrote eight Articles for Newsday, another New York daily paper, published by petitioner Newsday, Inc. (Newsday). Whitford also contributed one Article to Sports Illustrated, a weekly magazine published by petitioner Time, Inc. (Time). The Authors registered copyrights in each of the Articles. The Times, Newsday, and Time (Print Publishers) registered collective work copyrights in each periodical edition in which an Article originally appeared. The Print Publishers engaged the Authors as independent contractors (freelancers) under contracts that in no instance secured consent from an Author to placement of an Article in an electronic database.1 </s> At the time the Articles were published, all three Print Publishers had agreements with petitioner LEXIS/NEXIS (formerly Mead Data Central Corp.), owner and operator of NEXIS, a computerized database that stores information in a text-only format. NEXIS contains articles from hundreds of journals (newspapers and periodicals) spanning many years. The Print Publishers have licensed to LEXIS/NEXIS the text of articles appearing in the three periodicals. The licenses authorize LEXIS/NEXIS to copy and sell any portion of those texts. </s> Pursuant to the licensing agreements, the Print Publishers regularly provide LEXIS/NEXIS with a batch of all the articles published in each periodical edition. The Print Publisher codes each article to facilitate computerized retrieval, then transmits it in a separate file. After further coding, LEXIS/NEXIS places the article in the central discs of its database. </s> Subscribers to NEXIS, accessing the system through a computer, may search for articles by author, subject, date, publication, headline, key term, words in text, or other criteria. Responding to a search command, NEXIS scans the database and informs the user of the number of articles meeting the user's search criteria. The user then may view, print, or download each of the articles yielded by the search. The display of each article includes the print publication (e.g., The New York Times), date (September 23, 1990), section (Magazine), initial page number (26), headline or title ("Remembering Jane"), and author (Mary Kay Blakely). Each article appears as a separate, isolated "story"--without any visible link to the other stories originally published in the same newspaper or magazine edition. NEXIS does not contain pictures or advertisements, and it does not reproduce the original print publication's formatting features such as headline size, page placement (e.g., above or below the fold for newspapers), or location of continuation pages. </s> The Times (but not Newsday or Time) also has licensing agreements with petitioner University Microfilms International (UMI). The agreements authorize reproduction of Times materials on two CD-ROM products, the New York Times OnDisc (NYTO) and General Periodicals OnDisc (GPO). </s> Like NEXIS, NYTO is a text-only system. Unlike NEXIS, NYTO, as its name suggests, contains only the Times. Pursuant to a three-way agreement, LEXIS/NEXIS provides UMI with computer files containing each article as transmitted by the Times to LEXIS/NEXIS. Like LEXIS/NEXIS, UMI marks each article with special codes. UMI also provides an index of all the articles in NYTO. Articles appear in NYTO in essentially the same way they appear in NEXIS, i.e., with identifying information (author, title, etc.), but without original formatting or accompanying images. </s> GPO contains articles from approximately 200 publications or sections of publications. Unlike NEXIS and NYTO, GPO is an image-based, rather than a text-based, system. The Times has licensed GPO to provide a facsimile of the Times' Sunday Book Review and Magazine. UMI "burns" images of each page of these sections onto CD-ROMs. The CD-ROMs show each article exactly as it appeared on printed pages, complete with photographs, captions, advertisements, and other surrounding materials. UMI provides an index and abstracts of all the articles in GPO. </s> Articles are accessed through NYTO and GPO much as they are accessed through NEXIS. The user enters a search query using similar criteria (e.g., author, headline, date). The computer program searches available indexes and abstracts, and retrieves a list of results matching the query. The user then may view each article within the search result, and may print the article or download itto a disc. The display of each article provides no links to articles appearing on other pages of the original print publications.2 </s> B </s> On December 16, 1993, the Authors filed this civil action in the United States District Court for the Southern District of New York. The Authors alleged that their copyrights were infringed when, as permitted and facilitated by the Print Publishers, LEXIS/NEXIS and UMI (Electronic Publishers) placed the Articles in the NEXIS, NYTO, and GPO databases (Databases). The Authors sought declaratory and injunctive relief, and damages. In response to the Authors' complaint, the Print and Electronic Publishers raised the reproduction and distribution privilege accorded collective work copyright owners by 17 U.S.C. §201(c). After discovery, both sides moved for summary judgment. </s> The District Court granted summary judgment for the Publishers, holding that §201(c) shielded the Database reproductions. 972 F.Supp. 804, 806 (1997). The privilege conferred by §201(c) is transferable, the court first concluded, and therefore could be conveyed from the original Print Publishers to the Electronic Publishers. Id., at 816. Next, the court determined, the Databases reproduced and distributed the Authors' works, in §201(c)'s words, "as part of ... [a] revision of that collective work" to which the Authors had first contributed. To qualify as "revisions," according to the court, works need only "preserve some significant original aspect of [collective works]--whether an original selection or an original arrangement." Id., at 821. This criterion was met, in the District Court's view, because the Databases preserved the Print Publishers' "selection of articles" by copying all of the articles originally assembled in the periodicals' daily or weekly issues. Id., at 823. The Databases "highlight[ed]" the connection between the articles and the print periodicals, the court observed, by showing for each article not only the author and periodical, but also the print publication's particular issue and page numbers. Id., at 824 ("[T]he electronic technologies not only copy the publisher defendants' complete original `selection' of articles, they tag those articles in such a way that the publisher defendants' original selection remains evidentonline."). </s> The Authors appealed, and the Second Circuit reversed. 206 F.3d 161 (1999). The Court of Appeals granted summary judgment for the Authors on the ground that the Databases were not among the collective works covered by §201(c), and specifically, were not "revisions" of the periodicals in which the Articles first appeared. Id., at 167-170. Just as §201(c) does not "permit a Publisher to sell a hard copy of an Author's article directly to the public even if the Publisher also offered for individual sale all of the other articles from the particular edition," the court reasoned, so §201(c) does not allow a Publisher to "achieve the same goal indirectly" through computer databases. Id., at 168. In the Second Circuit's view, the Databases effectively achieved this result by providing multitudes of "individually retrievable" articles. Ibid. As stated by the Court of Appeals, the Databases might fairly be described as containing "new antholog[ies] of innumerable" editions or publications, but they do not qualify as "revisions" of particular editions of periodicals in the Databases. Id., at 169. Having concluded that §201(c) "does not permit the Publishers," acting without the author's consent, "to license individually copyrighted works for inclusion in the electronic databases," the court did not reach the question whether the §201(c) privilege is transferable. Id., at 165, and n.2. </s> We granted certiorari to determine whether the copying of the Authors' Articles in the Databases is privileged by 17 U.S.C. §201(c). 531 U.S. 978 (2000). Like the Court of Appeals, we conclude that the §201(c) privilege does not override the Authors' copyrights, for the Databases do not reproduce and distribute the Articles as part of a collective work privileged by §201(c). Accordingly, and again like the Court of Appeals, we find it unnecessary to determine whether the privilege is transferable. </s> II </s> Under the Copyright Act, as amended in 1976, "[c]opyright protection subsists ... in original works of authorship fixed in any tangible medium of expression ... from which they can be perceived, reproduced, or otherwise communicated." 17 U.S.C. §102(a). When, as in this case, a freelance author has contributed an article to a "collective work" such as a newspaper or magazine, see §101 (defining "collective work"), the statute recognizes two distinct copyrighted works: "Copyright in each separate contribution to a collective work is distinct from copyright in the collective work as a whole ...." §201(c) (emphasis added). Copyright in the separate contribution "vests initially in the author of the contribution" (here, the freelancer). Ibid. Copyright in the collective work vests in the collective author (here, the newspaper or magazine publisher) and extends only to the creative material contributed by that author, not to "the preexisting material employed in the work," §103(b). See also Feist Publications, Inc. v. Rural Telephone Service Co., 499 U. S. 340, 358 (1991) (copyright in "compilation"--a term that includes "collective works," 17 U.S.C. §101--is limited to the compiler's original "selection, coordination, and arrangement"). </s> Prior to the 1976 revision, as the courts below recognized, see 206 F.3d, at 168; 972 F.Supp., at 815, authors risked losing their rights when they placed an article in a collective work. Pre-1976 copyright law recognized a freelance author's copyright in a published article only when the article was printed with a copyright notice in the author's name. See Copyright Act of 1909, §18, 35 Stat. 1079. When publishers, exercising their superior bargaining power over authors, declined to print notices in each contributor's name, the author's copyright was put in jeopardy. See A. Kaminstein, Divisibility of Copyrights, Study No. 11, in Copyright Law Revision Studies Nos. 11-13, prepared for the Senate Committee on the Judiciary, 86th Cong., 2d Sess., p. 18 (1960). The author did not have the option to assign only the right of publication in the periodical; such a partial assignment was blocked by the doctrine of copyright "indivisibility." See id., at 11. Thus, when a copyright notice appeared only in the publisher's name, the author's work would fall into the public domain, unless the author's copyright, in its entirety, had passed to the publisher. See id., at 18. Such complete transfer might be accomplished by a contract, perhaps one with a provision, not easily enforced, for later retransfer of rights back to the author. See id., at 20-22. Or, absent a specific contract, a court might find that an author had tacitly transferred the entire copyright to a publisher, in turn deemed to hold the copyright in "trust" for the author's benefit. See id., at 18-19; see generally 3 M. Nimmer, Copyright §10.01[C][2], pp. 10-12 to 10-14 (2000). </s> In the 1976 revision, Congress acted to "clarify and improve [this] confused and frequently unfair legal situation with respect to rights in contributions." H.R. Rep. No. 94-1476, p. 122 (1976) (hereinafter H.R. Rep.).3 The 1976 Act rejected the doctrine of indivisibility, recasting the copyright as a bundle of discrete "exclusive rights," 17 U.S.C. §106 (1994 ed. and Supp. V),4 each of which "may be transferred ... and owned separately," §201(d)(2).5 Congress also provided, in §404(a), that "a single notice applicable to the collective work as a whole is sufficient" to protect the rights of freelance contributors. And in §201(c), Congress codified the discrete domains of "[c]opyright in each separate contribution to a collective work" and "copyright in the collective work as a whole." Together, §404(a) and §201(c) "preserve the author's copyright in a contribution even if the contribution does not bear a separate notice in the author's name, and without requiring any unqualified transfer of rights to the owner of the collective work." H.R. Rep. 122. </s> Section 201(c) both describes and circumscribes the "privilege" a publisher acquires regarding an author's contribution to a collective work: </s> "In the absence of an express transfer of the copyright or of any rights under it, the owner of copyright in the collective work is presumed to have acquired only the privilege of reproducing and distributing the contribution as part of that particular collective work, any revision of that collective work, and any later collective work in the same series." (Emphasis added.) </s> A newspaper or magazine publisher is thus privileged to reproduce or distribute an article contributed by a freelance author, absent a contract otherwise providing, only "as part of" any (or all) of three categories of collective works: (a) "that collective work" to which the author contributed her work, (b) "any revision of that collective work," or (c) "any later collective work in the same series." In accord with Congress' prescription, a "publishing company could reprint a contribution from one issue in a later issue of its magazine, and could reprint an article from a 1980 edition of an encyclopedia in a 1990 revision of it; the publisher could not revise the contribution itself or include it in a new anthology or an entirely different magazine or other collective work." H.R. Rep. 122-123. </s> Essentially, §201(c) adjusts a publisher's copyright in its collective work to accommodate a freelancer's copyright in her contribution. If there is demand for a freelance article standing alone or in a new collection, the Copyright Act allows the freelancer to benefit from that demand; after authorizing initial publication, the freelancer may also sell the article to others. Cf. Stewart v. Abend, 495 U.S. 207, 229 (1990) ("[w]hen an author produces a work which later commands a higher price in the market than the original bargain provided, the copyright statute [i.e., the separate renewal term of former 17 U.S.C. §24] is designed to provide the author the power to negotiate for the realized value of the work"); id., at 230 (noting author's "inalienable termination right" under current 17 U.S.C. §§203, 302). It would scarcely "preserve the author's copyright in a contribution" as contemplated by Congress, H.R. Rep. 122, if a newspaper or magazine publisher were permitted to reproduce or distribute copies of the author's contribution in isolation or within new collective works. See Gordon, Fine-Tuning Tasini: Privileges of Electronic Distribution and Reproduction, 66 Brooklyn L.Rev. 473, 484 (2000).6 </s> III </s> In the instant case, the Authors wrote several Articles and gave the Print Publishers permission to publish the Articles in certain newspapers and magazines. It is undisputed that the Authors hold copyrights and, therefore, exclusive rights in the Articles.7 It is clear, moreover, that the Print and Electronic Publishers have exercised at least some rights that §106 initially assigns exclusively to the Authors: LEXIS/NEXIS' central discs and UMI's CD-ROMs "reproduce ... copies" of the Articles, §106(1); UMI, by selling those CD-ROMs, and LEXIS/NEXIS, by selling copies of the Articles through the NEXIS Database, "distribute copies" of the Articles "to the public by sale," §106(3); and the Print Publishers, through contracts licensing the production of copies in the Databases, "authorize" reproduction and distribution of the Articles, §106.8 </s> Against the Authors' charge of infringement, the Publishers do not here contend the Authors entered into an agreement authorizing reproduction of the Articles in the Databases. See supra, at 3, n.1. Nor do they assert that the copies in the Databases represent "fair use" of the Authors' Articles. See 17 U.S.C. §107 ("fair use of a copyrighted work ... is not an infringement"; four factors identified among those relevant to fair use determination). Instead, the Publishers rest entirely on the privilege described in §201(c). Each discrete edition of the periodicals in which the Articles appeared is a "collective work," the Publishers agree. They contend, however, that reproduction and distribution of each Article by the Databases lie within the "privilege of reproducing and distributing the [Articles] as part of ... [a] revision of that collective work," §201(c). The Publishers' encompassing construction of the §201(c) privilege is unacceptable, we conclude, for it would diminish the Authors' exclusive rights in the Articles. </s> In determining whether the Articles have been reproduced and distributed "as part of" a "revision" of the collective works in issue, we focus on the Articles as presented to, and perceptible by, the user of the Databases. See §102 (copyright protection subsists in original works fixed in any medium "from which they can be perceived, reproduced, or otherwise communicated"); see also §101 (definitions of "copies" and "fixed"); Haemmerli, Commentary: Tasini v. New York Times Co., 22 Colum.-VLA. J.L. & Arts 129, 142-143 (1998). In this case, the three Databases present articles to users clear of the context provided either by the original periodical editions or by any revision of those editions. The Databases first prompt users to search the universe of their contents: thousands or millions of files containing individual articles from thousands of collective works (i.e., editions), either in one series (the Times, in NYTO) or in scores of series (the sundry titles in NEXIS and GPO). When the user conducts a search, each article appears as a separate item within the search result. In NEXIS and NYTO, an article appears to a user without the graphics, formatting, or other articles with which the article was initially published. In GPO, the article appears with the other materials published on the same page or pages, but without any material published on other pages of the original periodical. In either circumstance, we cannot see how the Database perceptibly reproduces and distributes the article "as part of" either the original edition or a "revision" of that edition. </s> One might view the articles as parts of a new compendium--namely, the entirety of works in the Database. In that compendium, each edition of each periodical represents only a miniscule fraction of the ever-expanding Database. The Database no more constitutes a "revision" of each constituent edition than a 400-page novel quoting a sonnet in passing would represent a "revision" of that poem. "Revision" denotes a new "version," and a version is, in this setting, a "distinct form of something regarded by its creators or others as one work." Webster's Third New International Dictionary 1944, 2545 (1976). The massive whole of the Database is not recognizable as a new version of its every small part. </s> Alternatively, one could view the Articles in the Databases "as part of" no larger work at all, but simply as individual articles presented individually. That each article bears marks of its origin in a particular periodical (less vivid marks in NEXIS and NYTO, more vivid marks in GPO) suggests the article was previously part of that periodical. But the markings do not mean the article is currently reproduced or distributed as part of the periodical. The Databases' reproduction and distribution of individual Articles--simply as individual Articles--would invade the core of the Authors' exclusive rights under §106.9 </s> The Publishers press an analogy between the Databases, on the one hand, and microfilm and microfiche, on the other. We find the analogy wanting. Microforms typically contain continuous photographic reproductions of a periodical in the medium of miniaturized film. Accordingly, articles appear on the microforms, writ very small, in precisely the position in which the articles appeared in the newspaper. The Times, for example, printed the beginning of Blakely's "Remembering Jane" Article on page 26 of the Magazine in the September 23, 1990, edition; the microfilm version of the Times reproduces that same Article on film in the very same position, within a film reproduction of the entire Magazine, in turn within a reproduction of the entire September 23, 1990, edition. True, the microfilm roll contains multiple editions, and the microfilm user can adjust the machine lens to focus only on the Article, to the exclusion of surrounding material. Nonetheless, the user first encounters the Article in context. In the Databases, by contrast, the Articles appear disconnected from their original context. In NEXIS and NYTO, the user sees the "Jane" Article apart even from the remainder of page 26. In GPO, the user sees the Article within the context of page 26, but clear of the context of page 25 or page 27, the rest of the Magazine, or the remainder of the day's newspaper. In short, unlike microforms, the Databases do not perceptibly reproduce articles as part of the collective work to which the author contributed or as part of any "revision" thereof.10 </s> Invoking the concept of "media neutrality," the Publishers urge that the "transfer of a work between media" does not "alte[r] the character of" that work for copyright purposes. Brief for Petitioners 23. That is indeed true. See 17 U.S.C. §102(a) (copyright protection subsists in original works "fixed in any tangible medium of expression"). But unlike the conversion of newsprint to microfilm, the transfer of articles to the Databases does not represent a mere conversion of intact periodicals (or revisions of periodicals) from one medium to another. The Databases offer users individual articles, not intact periodicals. In this case, media neutrality should protect the Authors' rights in the individual Articles to the extent those Articles are now presented individually, outside the collective work context, within the Databases' new media.11 </s> For the purpose at hand--determining whether the Authors' copyrights have been infringed--an analogy to an imaginary library may be instructive.12 Rather than maintaining intact editions of periodicals, the library would contain separate copies of each article. Perhaps these copies would exactly reproduce the periodical pages from which the articles derive (if the model is GPO); perhaps the copies would contain only typescript characters, but still indicate the original periodical's name and date, as well as the article's headline and page number (if the model is NEXIS or NYTO). The library would store the folders containing the articles in a file room, indexed based on diverse criteria, and containing articles from vast numbers of editions. In response to patron requests, an inhumanly speedy librarian would search the room and provide copies of the articles matching patron-specified criteria. </s> Viewing this strange library, one could not, consistent with ordinary English usage, characterize the articles "as part of" a "revision" of the editions in which the articles first appeared. In substance, however, the Databases differ from the file room only to the extent they aggregate articles in electronic packages (the LEXIS/NEXIS central discs or UMI CD-ROMs), while the file room stores articles in spatially separate files. The crucial fact is that the Databases, like the hypothetical library, store and retrieve articles separately within a vast domain of diverse texts. Such a storage and retrieval system effectively overrides the Authors' exclusive right to control the individual reproduction and distribution of each Article, 17 U.S.C. §§106(1), (3). Cf. Ryan v. Carl Corp., 23 F.Supp. 2d 1146 (ND Cal. 1998) (holding copy shop in violation of §201(c)). </s> The Publishers claim the protection of §201(c) because users can manipulate the Databases to generate search results consisting entirely of articles from a particular periodical edition. By this logic, §201(c) would cover the hypothetical library if, in response to a request, that library's expert staff assembled all of the articles from a particular periodical edition. However, the fact that a third party can manipulate a database to produce a noninfringing document does not mean the database is not infringing. Under §201(c), the question is not whether a user can generate a revision of a collective work from a database, but whether the database itself perceptibly presents the author's contribution as part of a revision of the collective work. That result is not accomplished by these Databases. </s> The Publishers finally invoke Sony Corp. of America v. Universal City Studios, Inc., 464 U.S. 417 (1984). That decision, however, does not genuinely aid their argument. Sony held that the "sale of copying equipment" does not constitute contributory infringement if the equipment is "capable of substantial noninfringing uses." Id., at 442. The Publishers suggest that their Databases could be liable only under a theory of contributory infringement, based on end-user conduct, which the Authors did not plead. The Electronic Publishers, however, are not merely selling "equipment"; they are selling copies of the Articles. And, as we have explained, it is the copies themselves, without any manipulation by users, that fall outside the scope of the §201(c) privilege. </s> IV </s> The Publishers warn that a ruling for the Authors will have "devastating" consequences. Brief for Petitioners 49. The Databases, the Publishers note, provide easy access to complete newspaper texts going back decades. A ruling for the Authors, the Publishers suggest, will punch gaping holes in the electronic record of history. The Publishers' concerns are echoed by several historians, see Brief for Ken Burns etal. as Amici Curiae, but discounted by several other historians, see Brief for Ellen Schrecker etal. as Amici Curiae; Brief for Authors' Guild, Jacques Barzun etal. as Amici Curiae. </s> Notwithstanding the dire predictions from some quarters, see also post, at 16 (Stevens, J., dissenting), it hardly follows from today's decision that an injunction against the inclusion of these Articles in the Databases (much less all freelance articles in any databases) must issue. See 17 U.S.C. §502(a) (court "may" enjoin infringement); Campbell v. Acuff-Rose Music, Inc., 510 U.S. 569, 578, n.10 (1994) (goals of copyright law are "not always best served by automatically granting injunctive relief"). The parties (Authors and Publishers) may enter into an agreement allowing continued electronic reproduction of the Authors' works; they, and if necessary the courts and Congress, may draw on numerous models for distributing copyrighted works and remunerating authors for their distribution. See, e.g., 17 U.S.C. §118(b); Broadcast Music, Inc. v. Columbia Broadcasting System, Inc., 441 U.S. 1, 4-6, 10-12 (1979) (recounting history of blanket music licensing regimes and consent decrees governing their operation).13 In any event, speculation about future harms is no basis for this Court to shrink authorial rights Congress established in §201(c). Agreeing with the Court of Appeals that the Publishers are liable for infringement, we leave remedial issues open for initial airing and decision in the District Court. </s> * * * </s> We conclude that the Electronic Publishers infringed the Authors' copyrights by reproducing and distributing the Articles in a manner not authorized by the Authors and not privileged by §201(c). We further conclude that the Print Publishers infringed the Authors' copyrights by authorizing the Electronic Publishers to place the Articles in the Databases and by aiding the Electronic Publishers in that endeavor. We therefore affirm the judgment of the Court of Appeals. </s> It is so ordered. </s> NEW YORK TIMES COMPANY, INC., etal.,PETITIONERS v. JONATHAN TASINI etal. </s> on writ of certiorari to the united states court ofappeals for the second circuit </s> [June 25, 2001] </s> Justice Stevens, with whom Justice Breyer joins, dissenting. </s> This case raises an issue of first impression concerning the meaning of the word "revision" as used in §201(c) of the 1976 revision of the Copyright Act of 1909 (1976 Act). Ironically, the Court today seems unwilling to acknowledge that changes in a collective work far less extensive than those made to prior copyright law by the 1976 "revision" do not merit the same characterization. </s> To explain my disagreement with the Court's holding, I shall first identify Congress' principal goals in passing the 1976 Act's changes in the prior law with respect to collective works. I will then discuss two analytically separate questions that are blended together in the Court's discussion of revisions. The first is whether the electronic versions of the collective works created by the owners of the copyright in those works (Print Publishers or publishers) are "revision[s]" of those works within the meaning of 17 U.S.C. §201(c). In my judgment they definitely are. The second is whether the aggregation by LEXIS/NEXIS and UMI (Electronic Databases) of the revisions with other editions of the same periodical or with other periodicals within a single database changes the equation. I think it does not. Finally, I will consider the implications of broader copyright policy for the issues presented in this case. </s> I </s> As the majority correctly observes, prior to 1976, an author's decision to publish her individual article as part of a collective work was a perilous one. Although pre-1976 copyright law recognized the author's copyright in an individual article that was included within a collective work, those rights could be lost if the publisher refused to print the article with a copyright notice in the author's name. 3 M. Nimmer & D. Nimmer, Nimmer on Copyright §10.01[C][2], p.10-12 (2001). </s> This harsh rule was, from the author's point of view, exacerbated by the pre-1976 doctrine of copyright "indivisibility," which prevented an author from assigning only limited publication rights to the publisher of a collective work while holding back all other rights to herself.1 Ibid. The indivisibility of copyright, in combination with the danger of losing copyright protection, put significant pressure on an author seeking to preserve her copyright in the contribution to transfer the entire copyright over to the publisher in trust. See Kaminstein, Divisibility of Copyrights, Study No. 11, in Copyright Law Revision Studies Nos. 11-13, prepared for the Senate Committee on the Judiciary, 86th Cong., 2d Sess., 18-22 (1960) (herinafter Kaminstein).2 Such authors were often at the mercy of publishers when they tried to reclaim their copyright. Id., at 21.3 </s> The 1976 Act's extensive revisions of the copyright law had two principal goals with respect to the rights of freelance authors whose writings appeared as part of larger collective works. First, as the legislative history of §201(c) unambiguously reveals, one of its most significant aims was to "preserve the author's copyright in a contribution even if the contribution does not bear a separate notice in the author's name, and without requiring any unqualified transfer of rights to the owner of the collective work." H.R. Rep. No. 94-1476, p. 122 (1976) (hereinafter H.R. Rep.) (discussing the purpose of §201(c)). Indeed, §404(a) states that "a single notice applicable to the collective work as a whole is sufficient" to protect the author's rights. </s> The second significant change effected by the 1976 Act clarified the scope of the privilege granted to the publisher of a collective work. While pre-1976 law had the effect of encouraging an author to transfer her entire copyright to the publisher of a collective work, §201(c) creates the opposite incentive, stating that, absent some agreement to the contrary, the publisher acquires from the author only "the privilege of reproducing and distributing the contribution as part of that particular collective work, any revision of that collective work, and any later collective work in the same series."4 Congress intended this limitation on what the author is presumed to give away primarily to keep publishers from "revis[ing] the contribution itself or includ[ing] it in a new anthology or an entirely different magazine or other collective work." H.R. Rep. 122-123.5 </s> The majority is surely correct that the 1976 Act's new approach to collective works was an attempt to "`clarify and improve the ... confused and frequently unfair legal situation'" that existed under the prior regime. Id., at 122. It is also undoubtedly true that the drafters of the 1976 Act hoped to "enhance the author's position vis-à-vis the patron." Ante, at 9, n.3. It does not follow, however, that Congress' efforts to "preserve the author's copyright in a contribution," H.R. Rep. 122, can only be honored by a finding in favor of the respondent authors. </s> Indeed, the conclusion that the petitioners' actions were lawful is fully consistent with both of Congress' principal goals for collective works in the 1976 Act. First, neither the publication of the collective works by the Print Publishers, nor their transfer to the Electronic Databases had any impact on the legal status of the copyrights of the respondents' individual contributions.6 By virtue of the 1976 Act, respondents remain the owners of the copyright in their individual works. Moreover, petitioners neither modified respondents' individual contributions nor, as I will show in Part II, published them in a "new anthology or an entirely different magazine or other collective work." H.R. Rep. 122-123 (emphasis added). Because I do not think it is at all obvious that the decision the majority reaches today is a result clearly intended by the 1976 Congress, I disagree with the Court's conclusion that a ruling in petitioners' favor would "shrink authorial rights" that "Congress [has] established." Ante, at 21 (emphasis added). </s> II </s> Not only is petitioners' position consistent with Congress' general goals in the 1976 Act, it is also consistent with the text of §201(c). That provision allows the publisher of a collective work to "reproduc[e] and distribut[e] the contribution as part of that particular collective work, any revision of that collective work, and any later collective work in the same series." The central question in this case, then, is whether petitioners are correct when they argue that publication of the respondents' articles in the various Electronic Databases at issue in this case is nothing more than "reproduc[tion] and distribut[ion] [of] the contribution as part of ... revision[s] of [the original] collective work[s]" in which respondents' articles appeared. I agree with petitioners that neither the conversion of the Print Publishers' collective works from printed to electronic form, nor the transmission of those electronic versions of the collective works to the Electronic Databases, nor even the actions of the Electronic Databases once they receive those electronic versions does anything to deprive those electronic versions of their status as mere "revision[s]" of the original collective works. </s> A proper analysis of this case benefits from an incremental approach. Accordingly, I begin by discussing an issue the majority largely ignores: whether a collection of articles from a single edition of the New York Times (i.e., the batch of files the Print Publishers periodically send to the Electronic Databases) constitutes a "revision" of an individual edition of the paper. In other words, does a single article within such a collection exist as "part of" a "revision"? Like the majority, I believe that the crucial inquiry is whether the article appears within the "context" of the original collective work. Ante, at 16. But this question simply raises the further issue of precisely how much "context" is enough. </s> The record indicates that what is sent from the New York Times to the Electronic Databases (with the exception of General Periodicals on Disc (GPO)) is simply a collection of ASCII text files representing the editorial content of the New York Times for a particular day.7 App. 73a. Each individual ASCII file contains the text of a single article as well as additional coding intended to help readers identify the context in which the article originally appeared and to facilitate database searches. Thus, for example, to the original text of an article, the New York Times adds information on the article's "headline, byline and title," "the section of the paper in which the article had originally appeared," and "the page in the paper or periodical on which the article had first appeared." Id., at 75a-76a.8 </s> I see no compelling reason why a collection of files corresponding to a single edition of the New York Times, standing alone, cannot constitute a "revision" of that day's New York Times. It might be argued, as respondents appear to do, that the presentation of each article within its own electronic file makes it impossible to claim that the collection of files as a whole amounts to a "revision." Brief for Respondents Tasini etal. 34. But the conversion of the text of the overall collective work into separate electronic files should not, by itself, decide the question. After all, one of the hallmarks of copyright policy, as the majority recognizes, ante, at 17, is the principle of media neutrality. See H.R. Rep. 53. </s> No one doubts that the New York Times has the right to reprint its issues in Braille, in a foreign language, or in microform, even though such revisions might look and feel quite different from the original. Such differences, however, would largely result from the different medium being employed. Similarly, the decision to convert the single collective work newspaper into a collection of individual ASCII files can be explained as little more than a decision that reflects the different nature of the electronic medium. Just as the paper version of the New York Times is divided into "sections" and "pages" in order to facilitate the reader's navigation and manipulation of large batches of newsprint, so too the decision to subdivide the electronic version of that collective work into individual article files facilitates the reader's use of the electronic information. The bare-bones nature of ASCII text would make trying to wade through a single ASCII file containing the entire content of a single edition of the New York Times an exercise in frustration.9 </s> Although the Court does not separately discuss the question whether the groups of files that the New York Times sends to the Electronic Databases constitute "revision[s]," its reasoning strongly suggests that it would not accept such a characterization. The majority, for example, places significant emphasis on the differences between the various Electronic Databases and microform, a medium that admittedly qualifies as a revision under §201(c).10 As with the conversion of individual editions into collections of separate article-files, however, many of the differences between the electronic versions and microform are necessitated by the electronic medium. The Court therefore appears to back away from principles of media neutrality when it implicitly criticizes ASCII-text files for their inability to reproduce "Remembering Jane" "in the very same position, within a film reproduction of the entire Magazine, in turn within a reproduction of the entire September 23, 1990, edition." Ante, at 16.11 </s> In contrast, I think that a proper respect for media neutrality suggests that the New York Times, reproduced as a collection of individual ASCII files, should be treated as a "revision" of the original edition, as long as each article explicitly refers to the original collective work and as long as substantially the rest of the collective work is, at the same time, readily accessible to the reader of the individual file. In this case, no one disputes that the first pieces of information a user sees when looking at an individual ASCII article file are the name of the publication in which the article appeared, the edition of that publication, and the location of the article within that edition. I agree with the majority that such labeling alone is insufficient to establish that the individual file exists as "part of" a revision of the original collective work. See ante, at 15. But such labeling is not all there is in the group of files sent to the Electronic Databases. </s> In addition to the labels, the batch of electronic files contains the entire editorial content of the original edition of the New York Times for that day. That is, while I might agree that a single article, standing alone, even when coded with identifying information (e.g., publication, edition date, headline, etc.), should not be characterized as a "part of" a larger collective work, I would not say the same about an individual article existing as "part of" a collection of articles containing all the editorial content of that day's New York Times. This is all the more true because, as the District Court correctly noted, it is the Print Publishers' selection process, the editorial process by which the staff of the New York Times, for example, decides which articles will be included in "All the News That's Fit to Print," that is the most important creative element they contribute to the collective works they publish. 972 F.Supp. 804, 823 (SDNY 1997).12 While such superficial features as page placement and column width are lost in ASCII format, the Print Publishers' all-important editorial selection is wholly preserved in the collection of individual article-files sent to the Electronic Databases. </s> To see why an electronic version of the New York Times made up of a group of individual ACSCII article-files, standing alone, may be considered a §201(c) revision, suppose that, instead of transmitting to NEXIS the articles making up a particular day's edition, the New York Times saves all of the individual files on a single floppy disk, labels that disk "New York Times, October 31, 2000," and sells copies of the disk to users as the electronic version of that day's New York Times. The disk reproduces the creative, editorial selection of that edition of the New York Times. The reader, after all, has at his finger tips substantially all of the relevant content of the October 31 edition of the collective work. Moreover, each individual article makes explicit reference to that selection by including tags that remind the reader that it is a part of the New York Times for October 31, 2000. Such a disk might well constitute "that particular collective work"; it would surely qualify as a "revision" of the original collective work. Yet all the features identified as essential by the majority and by the respondents would still be lacking. An individual looking at one of the articles contained on the disk would still see none of the original formatting context and would still be unable to flip the page. </s> Once one accepts the premise that a disk containing all the files from the October 31, 2000, New York Times can constitute a "revision," there is no reason to treat any differently the same set of files, stored in a folder on the hard disk of a computer at the New York Times. Thus, at least before it is republished by the Electronic Databases, the collection of files that the New York Times transmits to them constitutes a revision, in electronic form, of a particular edition of the New York Times. </s> III </s> The next question, then, is whether anything that the Electronic Databases do to the transmitted "revision" strips it of that status. The heart of the Court's reasoning in this respect, as I understand it, is that, once received and processed by Electronic Databases, the data transmitted by the New York Times cannot be viewed as "revisions" within the meaning of §201(c) because of the way that data is stored and made available to the public by those Databases. First, the Court points to the fact that "the three Databases present articles to users clear of the context provided either by the original periodical editions or by any revision of those editions." Ante, at 14. I have already addressed these formatting concerns. Second, and not wholly unrelated to the first point, however, the Court appears to think that the commingling of my hypothetical collection of ASCII article-files from the October 31, 2000, New York Times with similar collections of files from other editions of the New York Times (or from other periodicals) within one database would deprive that collection of revision status. See ibid. Even if my imaginary floppy disk could, in isolation, be considered a revision, the majority might say, that status would be lost if the floppy disk were to contain, not only the files from the October 31, 2000, New York Times, but also from the New York Times for every other day in 2000 (and other years) and from hundreds of other periodicals. I disagree. </s> If my hypothetical October 31, 2000, floppy disk can be a revision, I do not see why the inclusion of other editions and other periodicals is any more significant than the placement of a single edition of the New York Times in a large public library or in a book store. Each individual file still reminds the reader that he is viewing "part of" a particular collective work. And the entire editorial content of that work still exists at the reader's fingertips.13 </s> It is true that, once the revision of the October 31, 2000, New York Times is surrounded by the additional content, it can be conceptualized as existing as part of an even larger collective work (e.g., the entire NEXIS database). See ante, at 14-15. The question then becomes whether this ability to conceive of a revision of a collective work as existing within a larger "collective work" changes the status of the original revision. Section 201(c)'s requirement that the article be published only as "part of ... any revision of that collective work" does not compel any particular answer to that question. A microfilm of the New York Times for October 31, 2000, does not cease to be a revision of that individual collective work simply because it is stored on the same roll of film as other editions of the Times or on a library shelf containing hundreds of other microfilm periodicals. Nor does §201(c) compel the counterintuitive conclusion that the microfilm version of the Times would cease to be a revision simply because its publishers might choose to sell it on rolls of film that contained a year's editions of both the New York Times and the Herald-Tribune. Similarly, the placement of our hypothetical electronic revision of the October 31, 2000, New York Times within a larger electronic database does nothing to alter either the nature of our original electronic revision or the relationship between that revision and the individual articles that exist as "part of" it. </s> Finally, the mere fact that an individual user may either view or print copies of individual articles stored on the Electronic Databases does not change the nature of the revisions contained within those databases. The same media-specific necessities that allow the publishers to store and make available the original collective work as a collection of individual digital files make it reasonable for the Electronic Databases to enable the user to download or print only those files in which the user has a particular interest. But this is no different from microfilm. Just as nothing intrinsic in the nature of microfilm dictates to a user how much or how little of a microform edition of the New York Times she must copy, nothing intrinsic in the Electronic Databases dictates to a user how much (or how little) of a particular edition of the New York Times to view or print. It is up to the user in each instance to decide whether to employ the publisher's product in a manner that infringes either the publisher's or the author's copyright. And to the extent that the user's decision to make a copy of a particular article violates the author's copyright in that article, such infringing third-party behavior should not be attributed to the database.14 See Sony Corp. of America v. Universal City Studios, Inc., 464 U.S. 417, 434 (1984). </s> IV </s> My reading of "revision," as encompassing products like the Electronic Databases, is not the only possible answer to the complex questions presented by this case. It is, nevertheless, one that is consistent with the statutory text and entirely faithful to the statute's purposes. Respect for the policies motivating its enactment, to which I now turn, makes it wrong for the Court to reject this reading of §201(c). </s> It is likely that the Congress that enacted the 1976 revision of the law of copyright did not anticipate the developments that occurred in the 1980s which gave rise to the practices challenged in this litigation. See Miller, Copyright Protection for Computer Programs, Databases, and Computer Generated Works: Is Anything New Since CONTU?, 106 Harv. L.Rev. 977, 979 (1993) (in 1976, "Congress ... decided to avoid grappling with technological issues that obviously required more study than the legislative process was then willing to give them").15 Thus, in resolving ambiguities in the relevant text of the statute, we should be mindful of the policies underlying copyright law. </s> Macaulay wrote that copyright is "a tax on readers for the purpose of giving a bounty to writers." T. Macaulay, Speeches on Copyright 11 (A. Thorndike ed. 1915) That tax restricts the dissemination of writings, but only insofar as necessary to encourage their production, the bounty's basic objective. See U.S. Const., Art.I, §8, cl.8. In other words, "[t]he primary purpose of copyright is not to reward the author, but is rather to secure `the general benefits derived by the public from the labors of authors.'" 1 M. Nimmer & D. Nimmer, Nimmer on Copyright §1.03[A] (2001) (quoting Fox Film Corp. v. Doyal, 286 U.S. 123, 127 (1932)); see also Breyer, The Uneasy Case for Copyright: A Study of Copyright in Books, Photocopies, and Computer Programs, 84 Harv. L.Rev. 281, 282 (1970) (discussing the twin goals of copyright law--protecting the reader's desire for access to ideas and providing incentives for authors to produce them). The majority's decision today unnecessarily subverts this fundamental goal of copyright law in favor of a narrow focus on "authorial rights." Ante, at 21. Although the desire to protect such rights is certainly a laudable sentiment,16 copyright law demands that "private motivation must ultimately serve the cause of promoting broad public availability of literature, music, and the other arts." Twentieth Century Music Corp. v. Aiken, 422 U.S. 151, 156 (1975) (emphasis added). </s> The majority discounts the effect its decision will have on the availability of comprehensive digital databases, ante, at 19-21, but I am not as confident. As petitioners' amici have persuasively argued, the difficulties of locating individual freelance authors and the potential of exposure to statutory damages may well have the effect of forcing electronic archives to purge freelance pieces from their databases.17 "The omission of these materials from electronic collections, for any reason on a large scale or even an occasional basis, undermines the principal benefits that electronic archives offer historians--efficiency, accuracy and comprehensiveness."18 Brief for Ken Burns etal. as Amici Curiae 13. </s> Moreover, it is far from clear that my position even deprives authors of much of anything (with the exception of perhaps the retrospective statutory damages that may well result from their victory today).19 Imagine, for example, that one of the contributions at issue in this case were a copyrighted version of John Keats' Ode on a Grecian Urn, published on page 29 of our hypothetical October 31, 2000, New York Times. Even under my reading of §201(c), Keats retains valuable copyright protection. No matter how well received his ode might be, it is unlikely--although admittedly possible--that it could be marketed as a stand-alone work of art. The ode, however, would be an obvious candidate for inclusion in an anthology of works by romantic poets, in a collection of poems by the same author, or even in "a 400-page novel quoting a [poem] in passing," ante, at 15. The author's copyright would protect his right to compensation for any such use. Cf. Stewart v. Abend, 495 U.S. 207, 228 (1990) (discussing the value to authors of derivative works). Moreover, the value of the ode surely would be enhanced, not decreased, by the accessibility and readership of the October 31, 2000, edition of the New York Times. The ready availability of that edition, both at the time of its first publication and subsequently in libraries and electronic databases, would be a benefit, not an injury, to most authors. Keats would benefit from the poem's continued availability to database users, by his identification as the author of the piece, and by the database's indication of the fact that the poem first appeared in a prestigious periodical on a certain date. He would not care one whit whether the database indicated the formatting context of the page on which the poem appeared. What is overwhelmingly clear is that maximizing the readership of the ode would enhance the value of his remaining copyright uses. </s> Nor is it clear that Keats will gain any prospective benefits from a victory in this case. As counsel for petitioners represented at oral argument, since 1995, the New York Times has required freelance authors to grant the Times "electronic rights" to articles. Tr. of Oral Arg. 7. And the inclusion of such a term has had no effect on the compensation authors receive. See ibid. This is understandable because, even if one accepts the majority's characterization of the Electronic Databases as collections of freestanding articles, demand for databases like NEXIS probably does not reflect a "demand for a freelance article standing alone," ante, at 11, to which the publishers are greedily helping themselves. Cf. Ryan v. Carl Corp., 23 F.Supp. 2d 1146, 1150-1151 (ND Cal. 1998) ("[T]he value added by the publisher to a reproduced article is significant"). </s> Instead, it seems far more likely that demand for the Electronic Databases reflects demand for a product that will provide a user with the means to quickly search through scores of complete periodicals. The comments of historian Douglas Brinkley are instructive in this respect: </s> "`As an historian, when I want to write a biography, if I'm going to write a biography of Bill Clinton, the first thing I would do would be to index The New York Times. I would work through [the] microfiche and get any time Bill Clinton's name ever appeared in The New York Times. I'd get a copy of that. So you'd have boxes of files. So for each month, here's Clinton this month. You then would fill that in with ... other obvious books or articles from Foreign Affairs or Foreign Policy or The New Yorker, or the like and you'd start getting your first biography of Bill Clinton.'" Panel Discussion: The Observer's View (D. Brinkley, M. Frankel, H. Sidey), White House Historical Association (Nov. 16, 2000) (C-SPAN Archives No. 160577) (quoted in Brief for Ken Burns etal. as Amici Curiae 17). </s> Users like Douglas Brinkley do not go to NEXIS because it contains a score of individual articles by Jonathan Tasini.20 Rather, they go to NEXIS because it contains a comprehensive and easily searchable collection of (intact) periodicals. See id., at 8 ("The efficiency, accuracy, reliability, comprehensiveness and immediacy of access offered by searchable full-text digital archives are but afew of the benefits historians and other researcheshave reaped from the advancement in the technology of information"). </s> Because it is likely that Congress did not consider the question raised by this case when drafting §201(c), because I think the District Court's reading of that provision is reasonable and consistent with the statute's purposes, and because the principal goals of copyright policy are better served by that reading, I would reverse the judgment of the Court of Appeals. The majority is correct that we cannot know in advance the effects of today's decision on the comprehensiveness of electronic databases. We can be fairly certain, however, that it will provide little, if any, benefit to either authors or readers. </s> FOOTNOTES Footnote 1 </s> In the District Court, Newsday and Time contended that the freelancers who wrote for their publications had entered into agreements authorizing reproduction of the Articles in the databases. The Court of Appeals ruled that Newsday's defense was waived, and rejected Time's argument on the merits. Neither petitioner presses the contention here. </s> Footnote 2 </s> For example, the GPO user who retrieves Blakely's "Remembering Jane" article will see the entirety of Magazine page 26, where the article begins, and Magazine page 78, where the article continues and ends. The NYTO user who retrieves Blakely's article will see only the text of the article and its identifying information (author, headline, publication, page number, etc.). Neither the GPO retrieval nor the NYTO retrieval produces any text on page 27, page 79, or any other page. The user who wishes to see other pages may not simply "flip" to them. She must conduct a new search. </s> Footnote 3 </s> Two Registers of Copyrights have observed that the 1976 revision of the Copyright Act represented "a break with the two-hundred-year-old tradition that has identified copyright more closely with the publisher than with the author." Letter from M. Peters to Rep. McGovern, reprinted in 147 Cong. Rec. E182 (Feb. 14, 2001) (hereinafter Peters Letter) (quoting Ringer, First Thoughts on the Copyright Act of 1976, 22 N.Y. L. S. L. Rev. 477, 490 (1977)). The intent to enhance the author's position vis-à-vis the patron is also evident in the 1976 Act's work-for-hire provisions. See Community for Creative Non-Violence v. Reid, 490 U. S. 730, 742-750 (1989); see also 17 U.S.C. §203(a)(5) (inalienable authorial right to revoke a copyright transfer). Congress' adjustment of the author/publisher balance is a permissible expression of the "economic philosophy behind the [Copyright Clause]," i.e., "the conviction that encouragement of individual effort [motivated] by personal gain is the best way to advance public welfare." Harper & Row, Publishers, Inc. v. Nation Enterprises, 471 U.S. 539, 558 (1985) (quoting Mazer v. Stein, 347 U.S. 201, 219 (1954)). </s> Footnote 4 </s> As amended, §106 now provides: "Subject to sections 107 through 121, the owner of copyright under this title has the exclusive rights to do and to authorize any of the following: </s> "(1) to reproduce the copyrighted work in copies or phonorecords; </s> "(2) to prepare derivative works based upon the copyrighted work; </s> "(3) to distribute copies or phonorecords of the copyrighted work to the public by sale or other transfer of ownership, or by rental, lease, or lending; </s> "(4) in the case of literary, musical, dramatic, and choreographic works, pantomimes, and motion pictures and other audiovisual works, to perform the copyrighted work publicly; </s> "(5) in the case of literary, musical, dramatic, and choreographic works, pantomimes, and pictorial, graphic, or sculptural works, including the individual images of a motion picture or other audiovisual work, to display the copyrighted work publicly; and </s> "(6) in the case of sound recordings, to perform the copyrighted work publicly by means of a digital audio transmission." </s> Footnote 5 </s> It bears repetition here, see supra, at 7, that we neither decide nor express any view on whether the §201(c) "privilege" may be transferred. </s> Footnote 6 </s> The dissenting opinion suggests that a ruling for the Publishers today would maintain, even enhance, authors' "valuable copyright protection." Post, at 16-17 (opinion of Stevens, J.). We are not so certain. When the reader of an article in a periodical wishes to obtain other works by the article's author, the Databases enable that reader simply to print out the author's articles, without buying a "new anthology ... or other collective work," H.R. Rep. 122-123. In years past, books compiling stories by journalists such as Janet Flanner and Ernie Pyle might have sold less well had the individual articles been freely and permanently available on line. In the present, print collections of reviews, commentaries, and reportage may prove less popular because of the Databases. The Register of Copyrights reports that "freelance authors have experienced significant economic loss" due to a "digital revolution that has given publishers [new] opportunities to exploit authors' works." Peters Letter E182. </s> More to the point, even if the dissent is correct that some authors, in the long-run, are helped, not hurt, by Database reproductions, the fact remains that the Authors who brought the case now before us have asserted their rights under §201(c). We may not invoke our conception of their interests to diminish those rights. </s> Footnote 7 </s> The Publishers do not claim that the Articles are "work[s] made for hire." 17 U.S.C. §201(b). As to such works, the employer or person for whom a work was prepared is treated as the author. Ibid. The Print Publishers, however, neither engaged the Authors to write the Articles as "employee[s]" nor "commissioned" the Articles through "a written instrument signed by [both parties]" indicating that the Articles shall be considered "work[s] made for hire." §101 (1994 ed., Supp. V) (defining "work made for hire"). </s> Footnote 8 </s> Satisfied that the Publishers exercised rights §106 initially assigns exclusively to the Author, we need resolve no more on that score. Thus, we do not reach an issue the Register of Copyrights has argued vigorously. The Register maintains that the Databases publicly "display" the Articles, §106(5); because §201(c) does not privilege "display," the Register urges, the §201(c) privilege does not shield the Databases.See Peters Letter E182-E183. </s> Footnote 9 </s> The dissenting opinion takes as its starting point "what is sent from the New York Times to the Electronic Databases." See post, at 6-11. This case, however, is not ultimately about what is sent between Publishers in an intermediate step of Database production; it is about what is presented to the general public in the Databases. See supra, at 14. Those Databases simply cannot bear characterization as a "revision" of any one periodical edition. We would reach the same conclusion if the Times sent intact newspapers to the Electronic Publishers. </s> Footnote 10 </s> The Court of Appeals concluded NEXIS was infringing partly because that Database did "almost nothing to preserve the copyrightable aspects of the [Print] Publishers' collective works," i.e., their original "selection, coordination, and arrangement." 206 F.3d 161, 168 (CA2 1999). We do not pass on this issue. It suffices to hold that the Databases do not contain "revisions" of the Print Publishers' works "as part of" which the Articles are reproduced and distributed. </s> Footnote 11 </s> The dissenting opinion apparently concludes that, under the banner of "media-neutrality," a copy of a collective work, even when considerably changed, must constitute a "revision" of that collective work so long as the changes were "necessitated by ... the medium." Post, at 9. We lack the dissent's confidence that the current form of the Databases is entirely attributable to the nature of the electronic media, rather than the nature of the economic market served by the Databases. In any case, we see no grounding in §201(c) for a "medium-driven" necessity defense, post, at 9, n.11, to the Authors' infringement claims. Furthermore, it bears reminder here and throughout that these Publishers and all others can protect their interests by private contractual arrangement. </s> Footnote 12 </s> The Publishers have frequently referred to their products as "electronic libraries." We need not decide whether the Databases come within the legal coverage of the term "libraries" as used in the Copyright Act. For even if the Databases are "libraries," the Copyright Act's special authorizations for libraries do not cover the Databases' reproductions. See, e.g., 17 U.S.C. §108(a)(1) (reproduction authorized "without any purpose of direct or indirect commercial advantage"); §108(b)(reproduction authorized "solely for purposes of preservation and security or for deposit for research use"); §108(c) (1994 ed., Supp. V) (reproduction "solely for the purpose of replacement of a copy or phonorecord that is damaged, deteriorating, lost, or stolen, or if the existing format in which the work is stored has become obsolete"). </s> Footnote 13 </s> Courts in other nations, applying their domestic copyright laws, have also concluded that Internet or CD-ROM reproduction and distribution of freelancers' works violate the copyrights of freelancers. See, e.g., Union Syndicale des Journalistes Franais v. SDV Plurimdia (T.G.I., Strasbourg, Fr., Feb. 3, 1998), in Lodging of International Federation of Journalists (IFJ) as Amicus Curiae; S.C. R. L. Central Station v. Association Generale des Journalistes Professionnels de Belgique (CA, Brussels, Belg., 9e ch., Oct. 28, 1997), transl. and ed. in 22 Colum.-VLA J.L. & Arts 195 (1998); Heg v. De Volskrant B. V. (Dist. Ct., Amsterdam, Neth., Sept. 24, 1997), transl. and ed. in 22 Colum.-VLA J.L. & Arts, at 181. After the French Plurimdia decision, the journalists' union and the newspaper-defendant entered into an agreement compensating authors for the continued electronic reproduction of their works. See FR3 v. Syndicats de Journalistes (CA, Colmar, Sept. 15, 1998), in Lodging of IFJ as Amicus Curiae. In Norway, it has been reported, a similar agreement was reached. See Brief for IFJ as Amicus Curiae 18. </s> FOOTNOTES Footnote 1 </s> Contractual attempts to assign such limited rights were deemed by courts to create mere licenses, such that the failure to accompany the article with an individual copyright in the author's name allowed the article to pass into the public domain. See 3 M. Nimmer & D. Nimmer, Nimmer on Copyright §10.01[A], p.10-5; §10.01[C][2], p. 10-12 (2001). </s> Footnote 2 </s> Cf. Goodis v. United Artists Television, Inc., 425 F.2d 397 (CA2 1970) (creating a legal fiction in which the publisher to whom an author gave first publication rights was considered the legal owner of the author's copyright, which the publisher was deemed to hold in trust for the "beneficial owner," the author). </s> Footnote 3 </s> "Usually, publishers are perfectly willing to return copyright to the author, at least with respect to everything except enumerated serial or reprint rights. There have been allegations that smaller publishers sometimes believe that they are entitled to share in the subsidiary rights and refuse to reassign, or insist upon sharing part of the profits of [the] sales to motion picture, television or dramatic users. In these cases, the author must undertake the burden of proving his contract with the publisher and demonstrating his capacity to sue." Kaminstein 21. </s> Footnote 4 </s> Respondents Garson and Robbins argue that the §201(c) privilege is completely nontransferable. See Brief for Respondents Garson etal. 26-29. The District Court properly rejected this argument, see 972 F.Supp. 804, 815-816 (SDNY 1997), which, in my view, is supported by neither the text nor the legislative history of §201(c). Publishers obviously cannot assign their publication privilege to another publisher such that the author's work appears in a wholly different collective work, but nothing in §201(c) clearly prohibits a publisher from merely farming out the mundane task of printing or distributing its collective work or its revision of that collective work. Because neither the majority nor the Court of Appeals has reached this issue, however, see ante, at 7; 206 F.3d 161, 165, and n.2 (CA2 2000), I will not address it further. </s> Footnote 5 </s> As the District Court observed, representatives of authors had objected to an earlier draft of the 1976 Act that might have been read to give publishers the right to change the text of the contributions. That version gave publishers the privilege to print the individual article "`as part of that particular collective work and any revisions of it.'" 972 F.Supp., at 819. Harriet Pilpel, "a prominent author representative," expressed the following concern: </s> "I have but one question with reference to the wording, and that is with respect to the wording at the end of subsection (c) `... and any revisions of it.' If that means `any revision of the collective work' in terms of changing the contributions, or their order, or including different contributions, obviously the magazine writers and photographers would not object. But there is an implication, or at least an ambiguity, that somehow the owner of the collective work has a right to make revisions in the contributions to the collective work. This is not and should not be the law, and consequently I suggest that the wording at the end of subsection (c) be changed to make that absolutely clear.'" 1964 Revision Bill with Discussions and Comments, 89th Cong., 1st Sess., pt. 5, p. 9 (H. Comm. Print 1965), quoted in 972 F.Supp., at 819. </s> Footnote 6 </s> Nor is the majority correct that, even if respondents retained copyright in their individual articles, the conclusion that petitioners could republish their collective works on the Electronic Databases would drain that copyright of value. See infra, at 17. Even on my view of this case, respondents retain substantial rights over their articles. Only the respondents, for example, could authorize the publication of their articles in different periodicals or in new topical anthologies wholly apart from the context of the original collective works in which their articles appeared. </s> Footnote 7 </s> ASCII (American Standard Code for Information Interchange) is a standard means for storing textual data. It assigns a unique binary code for each letter of the alphabet, as well as for numbers, punctuation, and other characters. It cannot be used to convey graphical information. See C. MacKenzie, Coded Character Sets: History and Development 211-213 (1980). </s> Footnote 8 </s> Substantially the same process was used by the other Print Publishers to prepare their files for electronic publication. App. 74a. </s> Footnote 9 </s> An ASCII version of the October 31, 2000, New York Times, which contains 287 articles, would fill over 500 printed pages. Conversely, in the case of graphical products like GPO, the demands that memory-intensive graphics files can place on underpowered computers make it appropriate for electronic publishers to divide the larger collective work into manageably sized subfiles. The individual article is the logical unit. The GPO version of the April 7, 1996, New York Times Magazine, for example, would demand in the neighborhood of 200 megabytes of memory if stored as a single file, whereas individual article files range from 4 to 22 megabytes, depending on the length of the article. </s> Footnote 10 </s> See Brief for Respondent Garson etal. 4-5, n.3. </s> Footnote 11 </s> The majority's reliance on the fact that the GPO user cannot "flip" the page to see material published on other pages, ante, at 5, n. 2, and that the text database articles "appear disconnected from their original context," ante, at 16, appears to be nothing more than a criticism of Electronic Databases' medium-driven decision to break down the periodicals it contains into smaller, less unwieldy article-units. See n. 9, supra. </s> Footnote 12 </s> "The New York Times perhaps even represents the paradigm, the epitome of a publication in which selection alone reflects sufficient originality to merit copyright protection." 972 F.Supp., at 823. </s> Footnote 13 </s> In NEXIS, for example, the reader can gather all the content of the October 31, 2000, New York Times by conducting the following simple search in the correct "library": "date(is 10/31/2000)." </s> Footnote 14 </s> The majority finds that NEXIS infringes by "cop[ying]" and "distribut[ing]" copies of respondents' articles to the public. Perhaps it would be more accurate to say that NEXIS makes it possible for users to make and distribute copies. In any event, the Court has wisely declined to reach the question whether the Electronic Databases publicly "display" the articles within the meaning of §106. Ante, at 13, and n.8. </s> Footnote 15 </s> See also H.R. Rep. 116. In the quarter century since the 1976 Act became law, "the databases [in existence] have grown by a factor of 39 .... In 1975, the 301 databases in existence contained about 52 million records. The 11,681 databases in 1999 contained nearly 12.86 billion records for a growth by a factor of 242." Williams, Highlights of the Online Database Industry and the Internet: 2000, in Proceedings of the 21st Annual National Online Meeting 1 (Williams ed., 2000). </s> Footnote 16 </s> But see Breyer, The Uneasy Case for Copyright: A Study of Copyright in Books, Photocopies, and Computer Programs, 84 Harv. L.Rev. 281, 286-290 (1970) (criticizing the use of copyright as a means of protecting authorial rights). </s> Footnote 17 </s> Indeed, today's decision in favor of authors may have the perverse consequence of encouraging publishers to demand from freelancers a complete transfer of copyright. If that turns out to be the case, we will have come full circle back to the pre-1976 situation. </s> Footnote 18 </s> If the problem is as important as amici contend, congressional action may ultimately be necessary to preserve present databases in their entirety. At the least, Congress can determine the nature and scope of the problem and fashion on appropriate licensing remedy far more easily than can courts. Compare 17 U.S.C. §108(d)(1). </s> Footnote 19 </s> It is important to remember that the prospect of payment by the Print Publishers was sufficient to stimulate each petitioner to create his or her part of the collective works, presumably with full awareness of its intended inclusion in the Electronic Databases. </s> Footnote 20 </s> Even assuming, as the majority does, see ante, at 12, n.6, that the existence of databases like NEXIS may have some adverse effect on the market for stand-alone compilations of authors' contributions to collective works, I fail to see how, on that basis, electronic databases are any different from microform. With respect to effects on the market for stand-alone works, the only difference between the two products is the speed with which digital technology allows NEXIS users to retrieve the desired data. But the 1976 Act was not intended to bar the use of every conceivable innovation in technology that might "`give[] publishers [new] opportunities to exploit authors' works.'" Ibid. Copyright law is not an insurance policy for authors, but a carefully struck balance between the need to create incentives for authorship and the interests of society in the broad accessibility of ideas. See U.S. Const., Art.I, §8, cl.8 (in order to promote production, Congress should allow authors and inventors to enjoy "exclusive Right[s]," but only "for limited Times" (emphasis added)); see also supra, at 15. The majority's focus on authorial incentive comes at the expense of the equally important (at least from the perspective of copyright policy) public interest. </s> Moreover, the majority's single-minded focus on "authorial rights" appears to lead it to believe that, because some authors may benefit from its decision, that decision must be the one intended by Congress. It cites the "`economic philosophy behind the [Copyright Clause]'" as consistent with its view that Congress adjusted "the author/publisher balance" precisely to avoid the types of uses embodied in the Electronic Databases. See ante, at 9, n.3. But, as I have already argued, see supra, at 14-15, there is no indication that Congress ever considered the issue presented in this case. It thus simply begs the question for the majority to argue that the right not to have a work included within the Electronic Databases is an "authorial right" that "Congress [has] established," ante, at 21 (emphasis added), or that--given Congress' failure clearly to address itself to the question--a decision allowing such inclusion would amount to "diminish[ing]" authorial "rights" on the basis of "our conception of their interests." Ante, at 12-13, n.6 (emphasis added).

United States Supreme Court UNITED STATES v. MARINE BANCORPORATION(1974) No. 73-38 Argued: April 23, 1974Decided: June 26, 1974 </s> The United States brought this civil antitrust action under 7 of the Clayton Act to challenge a proposed merger between two commercial banks, which would substitute the acquiring bank for the acquired bank in Spokane, Wash., and would permit the former for the first time to participate directly in the Spokane market. The acquiring bank, appellee National Bank of Commerce (NBC), is a large, nationally chartered bank based in Seattle, Wash., and a wholly owned subsidiary of appellee Marine Bancorporation, Inc., and in terms of assets, deposits, and loans is the second largest banking organization with headquarters in Washington, operating 107 branches in the State, including 59 in the Seattle metropolitan area and 31 in lesser developed eastern sections of the State, but none of which is in the Spokane metropolitan area. The acquired or target bank, appellee Washington Trust Bank (WTB), is a medium-size, state-chartered bank located in Spokane, with seven branches, six in the city and one in a suburb, and is the eighth largest bank with headquarters in Washington and the ninth largest in the State, controlling 17.4% of the 46 commercial banking offices and holding 18.6% or the third largest percentage of the total deposits in the Spokane metropolitan area. (The two banks with the largest percentages in the area hold 42.1% and 31.6% respectively of total deposits.) The Government bases its case exclusively on the potential-competition doctrine, seeking to establish that the merger "may . . . substantially . . . lessen competition" within the meaning of 7: (i) by eliminating the prospect that NBC, absent acquisition of the market share represented by WTB, would enter Spokane de novo or through acquisition of a smaller bank and thus would assist in deconcentrating that market over the long run; (ii) by ending present procompetitive effects allegedly produced in Spokane by NBC's perceived presence on the fringe of the Spokane market; and (iii) by terminating the alleged probability [418 U.S. 602, 603] that WTB as an independent entity would develop by internal expansion or mergers with other medium-size banks into a regional or ultimately statewide actual competitor of NBC and other large banks. The District Court held against the Government on all aspects and dismissed the complaint. Held: </s> 1. As "a necessary predicate" to deciding whether the proposed merger contravenes the Clayton Act, the District Court properly found that the relevant product market was the "business of commercial banking" and that the relevant geographic market was the Spokane metropolitan area. The entire State is not, despite the Government's contrary contention, an appropriate "section of the country" within the meaning of 7, since for the purpose of this case the appropriate "section of the country" and the "relevant geographic market" are the same, being the area in which the acquired firm is an actual, direct competitor, and since moreover the Government has not shown that the effect of the merger on a statewide basis "may be substantially to lessen competition" within the meaning of 7. Pp. 618-623. </s> 2. While geographic market extension mergers by commercial banks must pass muster under the potential-competition doctrine, the application of the doctrine to commercial banking must take into account the extensive and unique federal and state regulatory restraints on entry into that line of commerce, including controls over the number of bank charters to be granted, prior bank regulatory agency approval of the opening of branches, and state-law restrictions, such as those in Washington, on de novo geographic expansion through branching and multibank holding companies. Pp. 626-630. </s> 3. The Government's evidence of concentration ratios in the Spokane commercial banking market established a prima facie case that that market was sufficiently concentrated to invoke the potential-competition doctrine, and appellees did not demonstrate that such ratios inaccurately depicted the economic characteristics of the Spokane market. Pp. 630-632. </s> 4. In view of the legal barriers to entry, notably state-law prohibitions against de novo branching, branching from a branch office, and multibank holding companies, the Government failed to sustain its burden of proof that the challenged merger violates 7 by eliminating the likelihood that, but for the merger, NBC would enter Spokane de novo by means of sponsorship-acquisition or through a foothold acquisition of a small state bank in the Spokane [418 U.S. 602, 604] area, since it was not shown that either of the proposed alternative methods of entry was feasible or offered a substantial likelihood of ultimately producing deconcentration of the Spokane market or other significant procompetitive effects. Pp. 632-639. </s> 5. The Government's failure to establish that NBC has alternative methods of entry offering a reasonable likelihood of producing significant procompetitive effects is determinative of its contention that without regard to the possibility of future deconcentration of the Spokane market, the challenged merger is illegal because it eliminates NBC as a perceived potential entrant. Assuming that commercial bankers in Spokane are aware of the regulatory barriers that render NBC an unlikely or insignificant potential entrant except by merger with WTB, it is improbable, in light of such barriers, that NBC exerts any meaningful procompetitive influence over Spokane banks by "standing in the wings." Pp. 639-640. </s> 6. The record amply supports the District Court's finding that the Government "failed to establish . . . that there is any reasonable probability that WTB will expand into other banking markets," since at no time in its 70-year history has WTB established branches outside the Spokane area, acquired another bank, or received a merger offer other than the one at issue here. Pp. 640-641. </s> Affirmed. </s> POWELL, J., delivered the opinion of the Court, in which BURGER, C. J., and STEWART, BLACKMUN, and REHNQUIST, JJ., joined. WHITE, J., filed a dissenting opinion, in which BRENNAN and MARSHALL, JJ., joined, post, p. 642. DOUGLAS, J., took no part in the decision of this case. </s> Deputy Solicitor General Friedman argued the cause for the United States. With him on the brief were Solicitor General Bork, Assistant Attorney General Kauper, Howard E. Shapiro, and George Edelstein. </s> R. A. Moen argued the cause for appellees Marine Bancorporation, Inc., et al. With him on the brief was James Wm. Johnston. Lee Loevinger argued the cause for appellee Comptroller of the Currency. With him on the brief were Robert Bloom and Jon D. Hartman. [418 U.S. 602, 605] </s> MR. JUSTICE POWELL delivered the opinion of the Court. </s> The United States brought this civil antitrust action under 7 of the Clayton Act, 38 Stat. 731, as amended, 15 U.S.C. 18, to challenge a proposed merger between two commercial banks. The acquiring bank is a large, nationally chartered bank based in Seattle, Washington, and the acquired bank is a medium-size, state-chartered bank located at the opposite end of the State in Spokane. The banks are not direct competitors to any significant degree in Spokane or any other part of the State. They have no banking offices in each other's home cities. The merger agreement would substitute the acquiring bank for the acquired bank in Spokane and would permit the former for the first time to operate as a direct participant in the Spokane market. </s> The proposed merger would have no effect on the number of banks in Spokane. The United States bases its case exclusively on the potential-competition doctrine under 7 of the Clayton Act. It contends that if the merger is prohibited, the acquiring bank would find an alternative and more competitive means for entering the Spokane area and that the acquired bank would ultimately develop by internal expansion or mergers with smaller banks into an actual competitor of the acquiring bank and other large banks in sections of the State outside Spokane. The Government further submits that the merger would terminate the alleged procompetitive influence that the acquiring bank presently exerts over Spokane banks due to the potential for its entry into that market. </s> After a full trial, the District Court held against the Government on all aspects of the case. We affirm that court's judgment. We hold that in applying the potential-competition [418 U.S. 602, 606] doctrine to commercial banking, courts must take into account the extensive federal and state regulation of banks, particularly the legal restraints on entry unique to this line of commerce. The legal barriers to entry in the instant case, notably state-law prohibitions against de novo branching, against branching from a branch office, and against multibank holding companies, compel us to conclude that the challenged merger is not in violation of 7. </s> I </s> BACKGROUND </s> A. Facts. </s> The acquiring bank, National Bank of Commerce (NBC), is a national banking association with its principal office in Seattle, Washington. Located in the northwest corner of the State, Seattle is the largest city in Washington. NBC is a wholly owned subsidiary of a registered bank holding company, Marine Bancorporation, Inc. (Marine), and in terms of assets, deposits, and loans is the second largest banking organization with headquarters in the State of Washington. At the end of 1971, NBC had total assets of $1.8 billion, total deposits of $1.6 billion, and total loans of $881.3 million. 1 It operates 107 branch banking offices within the State, 59 of which are located in the Seattle metropolitan area and 31 of which are in lesser developed sections of eastern Washington. In order of population, the four major [418 U.S. 602, 607] metropolitan areas in Washington are Seattle, Tacoma, Spokane, and Everett. NBC has no branch offices in the latter three areas. </s> The target bank, Washington Trust Bank (WTB), founded in 1902, is a state bank with headquarters in Spokane. Spokane is located in the extreme eastern part of the State, approximately 280 road miles from Seattle. It is the largest city in eastern Washington, with a population of 170,000 within the corporate limits and of approximately 200,000 in the overall metropolitan area. The city has a substantial commercial and industrial base. The surrounding region is sparsely populated and is devoted largely to agriculture, mining, and timber. Spokane serves as a trade center for this region. NBC, the acquiring bank, has had a longstanding interest in securing entry into Spokane. </s> WTB has seven branch offices, six in the city of Spokane and one in Opportunity, a Spokane suburb. WTB is the eighth largest banking organization with headquarters in Washington and the ninth largest banking organization in the State. At the end of 1971, it had assets of $112 million, total deposits of $95.6 million, and loans of $57.6 million. It controls 17.4% of the 46 commercial banking offices in the Spokane metropolitan area. It is one of 12 middle-size banks in Washington (i. e., banks with assets in the $30 million to $250 million range). </s> WTB is well managed and profitable. From December 31, 1966, to June 30, 1972, it increased its percentage of total deposits held by banking organizations in the Spokane metropolitan area from 16.6% to 18.6%. The amount of its total deposits grew by approximately 50% during that period, a somewhat higher rate of increase than exhibited by all banking organizations operating in Spokane at the same time. 2 Although WTB has exhibited [418 U.S. 602, 608] a pattern of moderate growth, at no time during its 70-year history has it expanded outside the Spokane metropolitan area. </s> As of June 30, 1972, there were 91 national and state banking organizations in Washington. The five largest in the State held 74.3% of the State's total commercial [418 U.S. 602, 609] bank deposits and operated 61.3% of its banking offices. At that time, the two largest in the State, Seattle-First National Bank and NBC, held 51.3% of total deposits and operated 36.5% of the banking offices in Washington. 3 There are six banking organizations operating in the Spokane metropolitan area. One organization, Washington Bancshares, Inc., controls two separate banks and their respective branch offices. As of midyear 1972, this organization in the aggregate held 42.1% of total deposits in the area. Seattle-First National Bank, by comparison, held 31.6%. The target bank held 18.6% of total deposits at that time, placing it third in the Spokane area behind Washington Bancshares, Inc., and Seattle-First National Bank. Thus, taken together, Washington Bancshares, Seattle-First National Bank, and WTB hold approximately 92% of total deposits in the Spokane area. None of the remaining three commercial banks in Spokane holds a market share larger than 3.1%. 4 One of these banks, Farmers & Merchants Bank, has offices only in a Spokane suburb. </s> The degree of concentration of the commercial banking business in Spokane may well reflect the severity of Washington's statutory restraints on de novo geographic expansion by banks. Although Washington permits branching, the restrictions placed on that method of internal [418 U.S. 602, 610] growth are stringent. Subject to the approval of the state supervisor of banking, Washington banks with sufficient paid-in capital may open branches in the city or town in which their headquarters are located, the unincorporated areas of the county in which their headquarters are located, and incorporated communities which have no banking office. Wash. Rev. Code Ann. 30.40.020 (Supp. 1973). But under state law, no state-chartered bank "shall establish or operate any branch . . . in any city or town outside the city or town in which its principal place of business is located in which any bank, trust company or national banking association regularly transacts a banking or trust business, except by taking over or acquiring an existing bank, trust company or national banking association . . . ." Ibid. Since federal law subjects nationally chartered banks to the branching limitations imposed on their state counterparts, 5 national and state banks in Washington are restricted to mergers or acquisitions in order to expand into cities and towns with pre-existing banking organizations. </s> The ability to acquire existing banks is also limited by a provision of state law requiring that banks incorporating in Washington include in their articles of incorporation a clause forbidding a new bank from merging with or permitting its assets to be acquired by another bank for a period of at least 10 years, without the consent of the state supervisor of banking. Wash. Rev. Code Ann. 30.08.020 (7) (1961 and Supp. 1973). 6 In addition, [418 U.S. 602, 611] once a bank acquires or takes over one of the banks operating in a city or town other than the acquiring bank's principal place of business, it cannot branch from the acquired bank. Wash. Rev. Code Ann. 30.40.020 (Supp. 1973). Thus, an acquiring bank that enters a new city or town containing banks other than the acquired bank is restricted to the number of bank offices obtained at the time of the acquisition. Moreover, multibank holding companies are prohibited in Washington. Wash. Rev. Code Ann. 30.04.230 (Supp. 1973). 7 Under state law, no [418 U.S. 602, 612] corporation in Washington may own, hold, or control more than 25% of the capital stock of more than one bank. Ibid. Violations of the one-bank holding company statute are gross misdemeanors carrying a possible penalty of forfeiture of a corporate charter. Ibid. Accordingly, it is not possible in Washington to achieve the rough equivalent of free branching by aggregating a number of unit banks under a bank holding company. 8 </s> B. The Proceedings. </s> In February 1971, Marine, NBC, and WTB agreed to merge the latter into NBC. NBC, as the surviving bank, would operate all eight banking offices of WTB as branches of NBC. In March 1971, NBC and WTB applied to the Comptroller of the Currency pursuant to the [418 U.S. 602, 613] Bank Merger Act of 1966 for approval of the merger. 9 As required by that Act, see 12 U.S.C. 1828 (c) (4), the Comptroller requested "reports on the competitive factors involved" from the Attorney General, the Federal Deposit Insurance Corporation, and the Board of Governors of the Federal Reserve System. Each of these agencies submitted a negative report on the competitive effects of the merger. The Attorney General relied on the reasons advanced in the instant case. The latter two agencies based their conclusions primarily on the degree of concentration in commercial banking in Washington as a whole. </s> The Comptroller approved the merger in a report issued September 24, 1971. He concluded that state law precluded NBC from branching in Spokane and "effectively prevented" NBC from causing a new Spokane bank to be formed which could later be treated as a merger partner. He noted that state law prevented the only independent small bank with offices located within the city boundaries of Spokane from merging with NBC, since that bank was state chartered, had been founded in 1965, and was subject to the minimum 10-year restriction against sale of a new bank set out in Wash. Rev. Code [418 U.S. 602, 614] Ann. 30.08.020 (7) (1961 and Supp. 1973). The Comptroller relied heavily on the view that the merger would contribute to the convenience and needs of bank customers in Spokane by bringing to them services not previously provided by WTB. </s> Acting within the 30-day limitation period set out in the Bank Merger Act of 1966, 12 U.S.C. 1828 (c) (7), the United States then commenced this action in the United States District Court for the Western District of Washington, challenging the legality of the merger under 7 of the Clayton Act. 10 As a result, the merger was automatically stayed. 12 U.S.C. 1828 (c) (7) (A). Pursuant to 12 U.S.C. 1828 (c) (7) (D), the Comptroller intervened in support of the merger as a party defendant. </s> Prior to trial the United States dropped all allegations concerning actual competition between the merger partners. 11 The remainder of the complaint addressed the subject of potential competition. The United States [418 U.S. 602, 615] sought to establish that the merger "may . . . substantially . . . lessen competition" within the meaning of 7 in three ways: by eliminating the prospect that NBC, absent acquisition of the market share represented by WTB, would enter Spokane de novo or through acquisition of a smaller bank and thus would assist in deconcentrating that market over the long run; by ending present procompetitive effects allegedly produced in Spokane by NBC's perceived presence on the fringe of the Spokane market; and by terminating the alleged probability that WTB as an independent entity would develop through internal growth or through mergers with other medium-size banks into a regional or ultimately statewide counterweight to the market power of the State's largest banks. The Government's first theory - alleged likelihood of de novo or foothold entry by NBC if the challenged merger were blocked - was the primary basis upon which this case was presented to the District Court. 12 </s> At the close of final oral argument following a week-long trial, the District Judge ruled for the defendants from the bench. Two weeks later he adopted without change the defendants' proposed findings of facts and conclusions of law, the latter consisting of seven sentences. 1973-1 Trade Cas. § 74,496, p. 94,244 (1973). 13 </s> [418 U.S. 602, 616] The court found that the merger would "substantially" increase competition in commercial banking in the Spokane metropolitan area and would have "no inherent anticompetitive effect . . . ." Ibid. In light of the legal and economic barriers to any other method of entry, the court further found "no reasonable probability" that, absent the challenged merger, NBC would enter the Spokane market in the "reasonably foreseeable future." Id., at 94,245. </s> According to the District Court, Washington law forbade NBC from establishing de novo branches in Spokane, and the Government had failed to establish that there was any existing bank in Spokane other than WTB "available for acquisition by NBC on any reasonably acceptable basis at any time in the foreseeable future, or at all." Ibid. Moreover, any attempt by NBC to enter de novo by assisting in the formation of and then acquiring a newly chartered bank in Spokane "even if it could be legally accomplished," 14 or to undertake a foothold [418 U.S. 602, 617] acquisition, would not be economically feasible. Ibid. In addition to noting the past and projected slow growth of the Spokane area, the court found that the ability to branch in a metropolitan area was essential to effective competition in the banking business. Ibid. Under state law, NBC would be unable to open new branch offices in Spokane if it made a foothold acquisition or helped form and then acquired a new bank. These and other factors rendered "negative" the prospects for growth of a foothold acquisition or of a sponsored bank started from scratch. Ibid. This was confirmed by the experience of another large banking organization not based in Spokane that had entered the city through a foothold acquisition in 1964 and subsequently had been unable to expand the market share of the acquired bank. Id., at 94,245-94,246. </s> The court found no perceptible procompetitive effect deriving from NBC's premerger presence on the fringe of the Spokane market. Id., at 94,246. It also held that the Government had failed to carry its burden of proving a reasonable probability that WTB, absent the merger, would expand beyond the Spokane market by de novo growth or through combination with another medium-size bank. Ibid. It found no probability that NBC would be "entrenched as a dominant bank in the [418 U.S. 602, 618] Spokane metropolitan area" as a result of the merger, and it could find no likelihood that the merger would trigger a series of defensive mergers by other banks in the State. Id., at 94,246-94,247. 15 </s> On the basis of its findings, the District Court dismissed the Government's complaint. The Government thereupon brought this direct appeal under the Expediting Act, 32 Stat. 823, as amended, 15 U.S.C. 29. We noted probable jurisdiction. 414 U.S. 907 (1973). </s> II </s> THE RELEVANT MARKETS </s> Determination of the relevant product and geographic markets is "a necessary predicate" to deciding whether a merger contravenes the Clayton Act. United States v. Du Pont & Co., 353 U.S. 586, 593 (1957); Brown Shoe Co. v. United States, 370 U.S. 294, 324 (1962). The District Court found that the relevant product market "within which the competitive effect of the merger is to be judged" is the "business of commercial banking (and the cluster of products and services denoted thereby). . . ." 1973-1 Trade Cas. § 74,496, p. 94,243. The parties do [418 U.S. 602, 619] not dispute this finding, and in any event it is in full accord with our precedents. 16 </s> The District Court found that the relevant geographic market is the Spokane metropolitan area, "consisting of the City of Spokane and the populated areas immediately adjacent thereto, including the area extending easterly through the suburb of Opportunity toward the Idaho border . . . ." Id., at 94,244. This area extends approximately five miles to the west and south and 10 miles to the north and east of the center of the city. It is wholly within and considerably smaller than Spokane County and is surrounded by a sparsely populated region, with no nearby major metropolitan centers. It contains all eight of the target bank's offices. On the basis of the record, we have no reason to doubt that it constitutes a reasonable approximation of the "localized" banking market in which Spokane banks offer the major part of their services and to which local consumers can practicably turn for alternatives. E. g., United States v. Phillipsburg National Bank, 399 U.S. 350, 362 -365 (1970). It is also the area where "the effect of the merger on competition will be direct and immediate . . .," which as this Court has held is the appropriate "section of the country" for purposes of 7. United States v. Philadelphia National Bank, 374 U.S. 321, 357 (1963). Accordingly, we affirm the District Court's holding that the Spokane metropolitan area is the appropriate geographic market for determining the legality of the merger. </s> Prior to trial the Government stipulated that the Spokane area is a relevant geographic market in the instant [418 U.S. 602, 620] case, and there is no dispute that it is the only banking market in which WTB is a significant participant. Nevertheless, the Government contends that the entire State is also an appropriate "section of the country" in this case. It is conceded that the State is not a banking market. But the Government asserts that the State is an economically differentiated region, because its boundaries delineate an area within which Washington banks are insulated from most forms of competition by out-of-state banking organizations. The Government further argues that this merger, and others it allegedly will trigger, may lead eventually to the domination of all banking in the State by a few large banks, facing each other in a network of local, oligopolistic banking markets. This assumed eventual statewide linkage of local markets, it is argued, will enhance statewide the possibility of parallel, standardized, anticompetitive behavior. This concern for the possible statewide consequences of geographic market extension mergers by commercial banks appears to be an important reason for the Government's recent efforts to block such mergers through an application of the potential-competition doctrine under 7. 17 </s> The Government's proposed reading of the "any section of the country" phrase of 7 is at variance with this Court's 7 cases, and we reject it. Without exception the Court has treated "section of the country" and "relevant geographic market" as identical, 18 and it has defined [418 U.S. 602, 621] the latter concept as the area in which the goods or services at issue are marketed to a significant degree by the acquired firm. E. g., Philadelphia National Bank, supra, at 357-362. 19 In cases in which the acquired firm markets its products or services on a local, regional, and national basis, the Court has acknowledged the existence of more than one relevant geographic market. 20 But in no previous 7 case has the Court determined the legality of a merger by measuring its effects on areas where the acquired firm is not a direct competitor. In [418 U.S. 602, 622] urging that the legality of this merger be gauged on a statewide basis, the Government is suggesting that we take precisely that step, because, as it concedes, the section of the country in which WTB markets by far the greatest portion of its services, due to the predominantly localized character of commercial banking, is the Spokane metropolitan area. 21 Under the precedents, we decline the Government's invitation. We hold that in a potential-competition case like this one, the relevant geographic market or appropriate section of the country is the area in which the acquired firm is an actual, direct competitor. </s> Apart from the fact that the Government's statewide approach is not supported by the precedents, it is simply too speculative on this record. There has been no persuasive showing that the effect of the merger on a statewide basis "may be substantially to lessen competition" within the meaning of 7. To be sure, 7 was designed to arrest mergers "at a time when the trend to a lessening of competition in a line of commerce [is] still in its incipiency." Brown Shoe Co., 370 U.S., at 317 . See, e. g., United States v. Von's Grocery Co., 384 U.S. 270, 277 (1966). Moreover, the proscription expressed in 7 against mergers "when a `tendency' toward monopoly or [a] `reasonable likelihood' of a substantial lessening of competition in the relevant market is shown," United States v. Penn-Olin Chemical Co., 378 U.S. 158, 171 (1964), applies alike to actual- and potential-competition cases. Ibid. But it is to be remembered that 7 deals [418 U.S. 602, 623] in "probabilities," not "ephemeral possibilities." Brown Shoe Co., supra, at 323. 22 The Government's underlying concern for a linkage or network of statewide oligopolistic banking markets is, on this record at least, considerably closer to "ephemeral possibilities" than to "probabilities." To assume, on the basis of essentially no evidence, that the challenged merger will tend to produce a statewide linkage of oligopolies is to espouse a per se rule against geographic market extension mergers like the one at issue here. No 7 case from this Court has gone that far, 23 and we do not do so today. For the purpose of this case, the appropriate "section of the country" and the "relevant geographic market" are the same - the Spokane metropolitan area. </s> III </s> POTENTIAL-COMPETITION DOCTRINE </s> The term "potential competitor" appeared for the first time in a 7 opinion of this Court in United States v. El Paso Natural Gas Co., 376 U.S. 651, 659 (1964). El Paso was in reality, however, an actual-competition rather than a potential-competition case. 24 The potential-competition [418 U.S. 602, 624] doctrine has been defined in major part by subsequent cases, particularly United States v. Falstaff Brewing Corp., 410 U.S. 526 (1973). 25 Unequivocal proof that an acquiring firm actually would have entered de novo but for a merger is rarely available. 26 Thus, as Falstaff indicates, the principal focus of the doctrine is on the likely effects of the premerger position of the acquiring firm on the fringe of the target market. In developing and applying the doctrine, the Court has recognized that a market extension merger may be unlawful if the target market is substantially concentrated, if the acquiring firm has the characteristics, capabilities, and economic incentive to render it a perceived potential [418 U.S. 602, 625] de novo entrant, and if the acquiring firm's premerger presence on the fringe of the target market in fact tempered oligopolistic behavior on the part of existing participants in that market. In other words, the Court has interpreted 7 as encompassing what is commonly known as the "wings effect" - the probability that the acquiring firm prompted premerger procompetitive effects within the target market by being perceived by the existing firms in that market as likely to enter de novo. Falstaff, supra, at 531-537. 27 The elimination of such present procompetitive effects may render a merger unlawful under 7. </s> Although the concept of perceived potential entry has been accepted in the Court's prior 7 cases, the potential-competition theory upon which the Government places principal reliance in the instant case has not. The Court has not previously resolved whether the potential-competition doctrine proscribes a market extension merger solely on the ground that such a merger eliminates the prospect for long-term deconcentration of an oligopolistic market that in theory might result if the acquiring firm were forbidden to enter except through a de novo undertaking or through the acquisition of a small existing entrant (a so-called foothold or toehold acquisition). Falstaff expressly reserved this issue. 28 </s> [418 U.S. 602, 626] </s> The Government's potential-competition argument in the instant case proceeds in five steps. First, it argues that the potential-competition doctrine applies with full force to commercial banks. Second, it submits that the Spokane commercial banking market is sufficiently concentrated to invoke that doctrine. Third, it urges us to resolve in its favor the question left open in Falstaff. Fourth, it contends that, without regard to the possibility of future deconcentration of the Spokane market, the challenged merger is illegal under established doctrine because it eliminates NBC as a perceived potential entrant. Finally, it asserts that the merger will eliminate WTB's potential for growth outside Spokane. We shall address those points in the order presented. </s> A. Application of the Doctrine to Commercial Banks. </s> Since United States v. Philadelphia National Bank, 374 U.S. 321 (1963), the Court has taken the view that, as a general rule, standard 7 principles applicable to unregulated industries apply as well to mergers between commercial banks. See also United States v. First National Bank, 376 U.S. 665 (1964). Congress reacted to Philadelphia National Bank by including in the Bank Merger Act of 1966 a "convenience and needs" defense uniquely applicable to commercial banks. 12 U.S.C. 1828 (c) (5) (B) and (c) (7) (B). Subsequent cases have revealed, however, that that defense comes into play only after a district court has made a de novo determination of the status of a bank merger under the Clayton Act. See United States v. Third National Bank, 390 U.S. 171 (1968); United States v. First City National Bank, 386 U.S. 361 (1967). As the Court noted in Phillipsburg National Bank, supra, "the antitrust standards of . . . [418 U.S. 602, 627] Philadelphia National Bank . . . were preserved in the Bank Merger Act of 1966." 399 U.S., at 358 . 29 </s> Although the Court's prior bank merger cases have involved combinations between actual competitors operating in the same geographic markets, an element that distinguishes them factually from this case, they nevertheless are strong precedents for the view that 7 doctrines are applicable to commercial banking. In accord with the general principles of those cases, we hold that geographic market extension mergers by commercial banks must pass muster under the potential-competition doctrine. We further hold, however, that the application of the doctrine to commercial banking must take into account the unique federal and state regulatory restraints on entry into that line of commerce. Failure to do so would produce misconceptions that go to the heart of the doctrine itself. </s> The Government's present position has evolved over a series of eight District Court cases, all of them decided unfavorably to its views. 30 The conceptual difficulty [418 U.S. 602, 628] with the Government's approach, and an important reason why it has been uniformly unsuccessful in the district courts, is that it fails to accord full weight to the extensive federal and state regulatory barriers to entry into commercial banking. 31 This omission is of great importance, because ease of entry on the part of the acquiring firm is a central premise of the potential-competition doctrine. 32 </s> Unlike, for example, the beer industry, see Falstaff Brewing Corp., supra, entry of new competitors into the commercial banking field is "wholly a matter of governmental grace . . ." and "far from easy." Philadelphia National Bank, supra, at 367, and n. 44. Beer manufacturers are free to base their decisions regarding entry and the scale of entry into a new geographic market on nonregulatory considerations, including their own financial capabilities, their long-range goals as to markets, [418 U.S. 602, 629] the cost of creating new production and distribution facilities, and above all the profit prospects in the target market. They need give no thought to public needs and convenience. No comparable freedom exists for commercial banks. Ease of entry into a market presumes ease of exit - i. e., the withdrawal or financial collapse of a certain number of participants in that market. Reflecting this country's bitter experience of four decades ago that "[a] bank failure is a community disaster . . .," 33 entry into and exit from the commercial banking business have been extensively regulated by the Federal and State Governments. The regulatory barriers to entry include federal and state supervisory controls over the number of bank charters to be granted, designed to limit the number of banks operating in any particular market and thus to prevent bank failures. See id., at 328. In addition, no branch, no matter how small, may be opened without prior approval of the appropriate bank regulatory agency. Moreover, there are state-law restrictions, such as those in force in Washington, on de novo geographic expansion through branching and multibank holding companies. As noted earlier, Washington statutes forbid branching into cities and towns where the expanding bank does not maintain its headquarters and other banks operate, and they forbid branching from a branch in such areas. See supra, at 609-611. Similarly, Washington permits only one-bank holding companies. Supra, at 611-612. </s> In Philadelphia National Bank, supra, the Court relied on regulatory barriers to entry to support its conclusion that mergers between banks in direct competition in the same market must be scrutinized with particular care under 7. 374 U.S., at 352 , 367-370, 372. But the same [418 U.S. 602, 630] restrictions on new entry render it difficult to hold that a geographic market extension merger by a commercial bank is unlawful under the potential-competition doctrine. Such limitations often significantly reduce, if they do not eliminate, the likelihood that the acquiring bank is either a perceived potential de novo entrant or a source of future competitive benefits through de novo or foothold entry. Similarly, the Court noted in Philadelphia National Bank that under applicable state law de novo branching in the relevant market was permissible and presented an "alternative to the merger route . . . ." Id., at 370. In this case, by contrast, there are serious questions whether an "alternative to the merger route" through branching or a functional equivalent is a legal or feasible method of entry by NBC into the Spokane market. </s> B. Structure of the Spokane Market. </s> Since the legality of the challenged merger must be judged by its effects on the relevant product and geographic markets, commercial banking in the Spokane metropolitan area, it is imperative to determine the competitive characteristics of commercial banking in that section of the country. The potential-competition doctrine has meaning only as applied to concentrated markets. That is, the doctrine comes into play only where there are dominant participants in the target market engaging in interdependent or parallel behavior and with the capacity effectively to determine price and total output of goods or services. If the target market performs as a competitive market in traditional antitrust terms, the participants in the market will have no occasion to fashion their behavior to take into account the presence of a potential entrant. The present procompetitive effects that a perceived potential entrant may produce in an [418 U.S. 602, 631] oligopolistic market will already have been accomplished if the target market is performing competitively. Likewise, there would be no need for concern about the prospects of long-term deconcentration of a market which is in fact genuinely competitive. </s> In an effort to establish that the Spokane commercial banking market is oligopolistic, the Government relied primarily on concentration ratios indicating that three banking organizations (including WTB) control approximately 92% of total deposits in Spokane. The District Court held against the Government on this point, finding that "a highly competitive market" existed which "does not suffer from parallel or other anticompetitive practices attributable to undue market power." 1973-1 Trade Cas. § 74,496, p. 94,246. The court apparently gave great weight to the testimony of the banks' expert witnesses concerning the number of bank organizations and banking offices operating in the Spokane metropolitan area. The record indicates that neither the Government nor the appellees undertook any significant study of the performance, as compared to the structure, of the commercial banking market in Spokane. </s> We conclude that by introducing evidence of concentration ratios of the magnitude of those present here the Government established a prima facie case that the Spokane market was a candidate for the potential-competition doctrine. On this aspect of the case, the burden was then upon appellees to show that the concentration ratios, which can be unreliable indicators of actual market behavior, see United States v. General Dynamics Corp., 415 U.S. 486 (1974), did not accurately depict the economic characteristics of the Spokane market. In our view, appellees did not carry this burden, and the District Court erred in holding to the contrary. Appellees introduced no significant evidence of the absence of parallel [418 U.S. 602, 632] behavior in the pricing or providing of commercial bank services in Spokane. 34 </s> We note that it is hardly surprising that the Spokane commercial banking market is structurally concentrated. As the Government's expert witness conceded, all banking markets in the country are likely to be concentrated. 35 This is so because as a country we have made the policy judgment to restrict entry into commercial banking in order to promote bank safety. Thus, most banking markets in theory will be subject to the potential-competition doctrine. But the same factor that usually renders such markets concentrated and theoretical prospects for potential-competition 7 cases - regulatory barriers to new entry - will also make it difficult to establish that the doctrine invalidates a particular geographic market extension merger. </s> C. Potential De Novo or Foothold Entry. </s> The third step in the Government's argument, resolution of the question reserved in Falstaff, was the primary basis on which the case was presented to the District [418 U.S. 602, 633] Court 36 and to us. The Government contends that the challenged merger violates 7 because it eliminates the alleged likelihood that, but for the merger, NBC would enter Spokane de novo or through a foothold acquisition. Utilization of one of these methods of entry, it is argued, would be likely to produce deconcentration of the Spokane market over the long run or other procompetitive effects, because NBC would be required to compete vigorously to expand its initially insignificant market share. </s> Two essential preconditions must exist before it is possible to resolve whether the Government's theory, if proved, establishes a violation of 7. It must be determined: (i) that in fact NBC has available feasible means for entering the Spokane market other than by acquiring WTB; and (ii) that those means offer a substantial likelihood of ultimately producing deconcentration of that market or other significant procompetitive effects. The parties are in sharp disagreement over the existence of each of these preconditions in this case. There is no dispute that NBC possesses the financial capability and incentive to enter. The controversy turns on what methods of entry are realistically possible and on the likely effect of various methods on the characteristics of the Spokane commercial banking market. </s> It is undisputed that under state law NBC cannot establish de novo branches in Spokane and that its parent holding company cannot hold more than 25% of the stock of any other bank. Entry for NBC into Spokane therefore must be by acquisition of an existing bank. The Government contends that NBC has two distinct alternatives for acquisition of banks smaller than WTB and that either alternative would be likely to benefit the Spokane commercial banking market. </s> First, the Government contends that NBC could arrange [418 U.S. 602, 634] for the formation of a new bank (a concept known as "sponsorship"), insure that the stock for such a new bank is placed in friendly hands, and then ultimately acquire that bank. Appellees respond that this approach would violate the spirit if not the letter of state-law restrictions on bank branching. They note that this method would require the issuance of either a state or a national charter, and they assert that neither state nor federal banking authorities would be likely to grant a charter for a new bank in a static, "well-banked" market like Spokane. Moreover, it is argued that such officials would be certain to refuse to do so where the purpose of the scheme was to avoid the requirements of the state branching law. 37 Appellees further note that the stock and assets of any new state bank in Washington are inalienable for at least 10 years without approval of state banking officials, see Wash. Rev. Code Ann. 30.08.020 (7), and they argue that such officials would refuse to grant approval for sale as part of a sponsorship plan. </s> The Government counters by pointing to instances in which sponsorship-acquisition of small banks by large banks has occurred in Washington, on occasion with the apparent knowledge and asserted approval of bank regulatory officials and within less than 10 years of the formation of the new bank. 38 Indeed, the Government contends that NBC is presently sponsoring a small bank in an unrelated area of Washington with the purpose of ultimate acquisition and conversion of the bank into a branch of NBC. Appellees reply that if sponsorship by other banks has occasionally occurred, it is nonetheless [418 U.S. 602, 635] illegal under state law and that prior instances of tolerated illegality do not convert an illegal process into a legal one. NBC also denies that it has ever engaged in sponsorship solely for the purpose of acquisition, and it insists that even if a new bank is sponsored there is no guarantee that the sponsor, rather than some other bank willing to outbid it, will acquire the sponsored bank. 39 Appellees further point out, as is confirmed by the record, that the United States has not shown that any bank in Washington has ever used sponsorship-acquisition as a means of entering a major metropolitan area. In fact, the Government's principal witness in support of its sponsorship theory conceded on cross-examination that his bank "wouldn't consider trying to use that method in getting into" a major city. 40 </s> In its findings and conclusions, the District Court did not resolve the question of the status of the Government's proposed sponsorship-acquisition approach under Washington's banking statutes. 41 We similarly decline to decide this issue. Although we note that the intricate [418 U.S. 602, 636] procedure for entry by sponsorship espoused by the Government can scarcely be compared to the de novo entry opportunities available to unregulated enterprises such as beer producers, see Falstaff, supra, we will assume, arguendo, that NBC conceivably could succeed in sponsoring and then acquiring a new bank in Spokane at some indefinite time in the future. It does not follow from this assumption, however, that this method of entry would be reasonably likely to produce any significant procompetitive benefits in the Spokane commercial banking market. To the contrary, it appears likely that such a method of entry would not significantly affect that market. </s> State law would not allow NBC to branch from a sponsored bank after it was acquired. NBC's entry into Spokane therefore would be frozen at the level of its initial acquisition. Thus, if NBC were to enter Spokane by sponsoring and acquiring a small bank, it would be trapped into a position of operating a single branch office in a large metropolitan area with no reasonable likelihood of developing a significant share of that market. 42 This assumed method of entry therefore would offer little realistic hope of ultimately producing deconcentration of the Spokane market. Moreover, it is unlikely that a [418 U.S. 602, 637] single new bank in Spokane with a small market share, and forbidden to branch, would have any other significant procompetitive effect on that market. The Government introduced no evidence, for example, establishing that the three small banks presently in Spokane have had any meaningful effect on the economic behavior of the large Spokane banks. In sum, it blinks reality to conclude that the opportunity for entry through sponsorship, assuming its availability, is comparable to the entry alternatives open to unregulated industries such as those involved in this Court's prior potential-competition cases 43 or would be likely to produce the competitive effects of a truly unfettered method of entry. Since there is no substantial likelihood of procompetitive loss if the challenged merger is undertaken in place of the Government's sponsorship theory, we are unable to conclude that the effect of the former "may be substantially to lessen competition" within the meaning of the Clayton Act. </s> As a second alternative method of entry, the Government proposed that NBC could enter by a foothold acquisition of one of two small, state-chartered commercial banks that operate in the Spokane metropolitan area. 44 Appellees reply that one of those banks is located in a suburb and has no offices in the city of Spokane, that after an acquisition NBC under state law could not branch from the suburb into the city, and that such a [418 U.S. 602, 638] peripheral foothold cannot be viewed as an economically feasible method of entry into the relevant market. Appellees also point out that the second small bank was chartered in 1965 and thus under state law would not have been available for acquisition until at least four years after the 1971 NBC-WTB merger agreement. </s> Granting the Government the benefit of the doubt that these two small banks were available merger partners for NBC, or were available at some not too distant time, it again does not follow that an acquisition of either would produce the long-term market-structure benefits predicted by the Government. Once NBC acquired either of these banks, it could not branch from the acquired bank. This limitation strongly suggests that NBC would not develop into a significant participant in the Spokane market, a prospect that finds support in the record. In 1964, one of the largest bank holding companies in the country, through its Seattle-based subsidiary, acquired a foothold bank with two offices in Spokane. Eight years later this bank, Pacific National Bank, held a mere 2.2% of total bank deposits in the Spokane metropolitan area, an insignificant increase over its share of the market at the date of the acquisition. See n. 2, supra. An officer of this bank, called as a witness by the Government, attributed the poor showing to an inability under state law to establish further branches in Spokane. 45 </s> In sum, with regard to either of its proposed alternative methods of entry, the Government has offered an unpersuasive case on the first precondition of the question reserved in Falstaff - that feasible alternative methods of entry in fact existed. Putting these difficulties aside, the Government simply did not establish the second precondition. It failed to demonstrate that the alternative means [418 U.S. 602, 639] offer a reasonable prospect of long-term structural improvement or other benefits in the target market. In fact, insofar as competitive benefits are concerned, the Government is in the anomalous position of opposing a geographic market extension merger that will introduce a third full-service banking organization to the Spokane market, where only two are now operating, in reliance on alternative means of entry that appear unlikely to have any significant procompetitive effect. 46 Accordingly, we cannot hold for the Government on its principal potential-competition theory. Indeed, since the preconditions for that theory are not present, we do not reach it, and therefore we express no view on the appropriate resolution of the question reserved in Falstaff. We reiterate that this case concerns an industry in which new entry is extensively regulated by the State and Federal Governments. </s> D. Perceived Potential Entry. </s> The Government's failure to establish that NBC has alternative methods of entry that offer a reasonable likelihood of producing procompetitive effects is determinative of the fourth step of its argument. Rational commercial bankers in Spokane, it must be assumed, are aware of the regulatory barriers that render NBC an unlikely or an insignificant potential entrant except by merger with WTB. In light of those barriers, it is improbable that [418 U.S. 602, 640] NBC exerts any meaningful procompetitive influence over Spokane banks by "standing in the wings." </s> Moreover, the District Court found as a fact that "the threat of entry by NBC into the Spokane market by any means other than the consummation of the merger, to the extent any such threat exists, does not have any significant effect on the competitive practices of commercial banks in that market nor any significant effect on the level of competition therein." 1973-1 Trade Cas. § 74,496, p. 94,246. In making this finding, it appears that the District Court "appraised the economic facts" about NBC and the Spokane market "in order to determine whether in any realistic sense [NBC] could be said to be a potential competitor on the fringe of the market with likely influence on existing competition." Falstaff, 410 U.S., at 533 -534 (footnote omitted). Our review of the record indicates that the court's finding was not in error. The Government's only hard evidence of any "wings effect" was a memorandum written in 1962 by an officer of NBC expressing the view that Spokane banks were likely to engage in price competition as NBC approached their market. Evidence of an expression of opinion by an officer of the acquiring bank, not an official of a bank operating in the target market, in a memorandum written a decade prior to the challenged merger does not establish a violation of 7. </s> E. Elimination of WTB's Potential for Growth. </s> In the final step of its argument, the Government challenges the merger on the ground that it will eliminate the prospect that WTB may expand outside its base in Spokane and eventually develop into a direct competitor with large Washington banks in other areas of the State. The District Court found, however, that the Government had "failed to establish . . . that there is any reasonable probability that WTB will expand into [418 U.S. 602, 641] other banking markets . . . ." 1973-1 Trade Cas. § 74,496, p. 94,246. The record amply supports this finding. At no time in its 70-year history has WTB established branches outside the Spokane metropolitan area. Nor has it ever acquired another bank 47 or received a merger offer other than the one at issue here. 48 In sum, the Government's argument about the elimination of WTB's potential for expansion outside Spokane is little more than speculation. It provides no sound basis for overturning the District Court's holding. </s> IV </s> CONCLUSION </s> In applying the doctrine of potential competition to commercial banking, courts must, as we have noted, take into account the extensive federal and state regulation of banks. Our affirmance of the District Court's judgment in this case rests primarily on state statutory barriers to de novo entry and to expansion following entry into a new geographic market. In States where such stringent barriers exist and in the absence of a likelihood of entrenchment, the potential-competition doctrine - grounded as it is on relative freedom of entry on the part of the acquiring firm - will seldom bar a geographic market extension merger by a commercial bank. In States that permit free branching or multibank holding companies, courts hearing cases involving such mergers should take into account all relevant factors, including the barriers to entry created by state and federal control over the issuance of new bank charters. Testimony by responsible regulatory officials that they will not grant new charters in the target market is entitled to great weight, although it is not determinative. To avoid the [418 U.S. 602, 642] danger of subjecting the enforcement of the antitrust laws to the policies of a particular bank regulatory official or agency, courts should look also to the size and growth prospects of the target market, the size and number of banking organizations participating in it, and past practices of regulatory agencies in granting charters. If regulatory restraints are not determinative, courts should consider the factors that are pertinent to any potential-competition case, including the economic feasibility and likelihood of de novo entry, the capabilities and expansion history of the acquiring firm, and the performance as well as the structural characteristics of the target market. </s> The judgment is </s> Affirmed. </s> MR. JUSTICE DOUGLAS took no part in the decision of this case. </s> [For appendix to opinion of the Court, see post, p. 643.] </s> Footnotes [Footnote 1 By comparison, the largest banking organization with headquarters in Washington, Seattle-First National Bank, at the same time had assets of $2.8 billion, deposits of $2.5 billion, and loans of $1.4 billion. The figures shown here and in the text for NBC and Seattle-First National Bank take into account the operations of the two banks within and outside the State of Washington. Subsequent figures, see, e. g., n. 3, infra, reflect operations solely within the State. </s> [Footnote 2 See App. 1220. The following table depicts the relative status of the six banking organizations operating in the Spokane metropolitan area from 1966 to mid-1972. </s> DISTRIBUTION OF TOTAL DEPOSITS HELD BY BANKING ORGANIZATIONS IN THE SPOKANE METROPOLITAN AREA, 1966-1972 </s> (dollars in thousands) </s> 12-31-66 6-30-72 __________ __________ </s> % of % of Banking Organization $ Total $ Total _____________________ ____ ______ ____ ______ </s> Washington Bancshares, Inc. * 155,885 41.1 216,340 42.1 </s> Seattle-First National Bank 145,251 38.3 162,220 31.6 </s> Washington Trust Bank 63,102 16.6 95,464 18.6 Sub Total 364,238 96.1 474,024 92.3 </s> American Commercial Bank 3,552 .9 15,739 3.1 </s> Farmers and Merchants Bank 5,593 1.5 12,558 2.5 </s> Pacific National Bank ** 5,801 1.5 11,152 2.2 </s> Total 379,184 100.0 513,473 100.0 </s> Note: Due to rounding, figures may not add to totals. ---------------------------------------------------------------------------- * Washington Bancshares, Inc., a bank holding company, owns two subsidiaries operating in Spokane, Old National Bank of Washington and First National Bank of Spokane. The deposit totals of these two banks are consolidated under the Washington Bancshares, Inc., entry in the above table. ---------------------------------------------------------------------------- ** The bank at the bottom of the table is a branch (with two banking offices) of Pacific National Bank of Washington, which has its principal office in Seattle. This Seattle bank is in turn a subsidiary of Western Bancorporation, a multistate bank holding company with assets of approximately $14 billion. ---------------------------------------------------------------------------- </s> [Footnote 3 See App. 1165. The relative size of banking organizations in Washington is indicated by a table introduced by the Government and set forth in the Appendix to this opinion. See infra, p. 643. </s> The degree of concentration in commercial banking in Washington has not increased significantly in the last decade. For the 12-year period ending December 31, 1971, the 10 largest banking organizations increased their aggregate share of total deposits by a single percentage point. WTB's percentage of total deposits in the State was essentially stable for this period, decreasing from 1.5% to 1.4%. From 1960 to 1971 the number of commercial banks in Washington increased by five. </s> [Footnote 4 See n. 2, supra. </s> [Footnote 5 12 U.S.C. 36 (c). See First National Bank v. Dickinson, 396 U.S. 122 (1969); First National Bank v. Walker Bank, 385 U.S. 252 (1966). Cf. United States v. Philadelphia National Bank, 374 U.S. 321, 328 (1963). </s> [Footnote 6 This statute provides, in relevant part, that the articles of incorporation of any bank to be initiated in Washington shall state: </s> "(7) That for a stated number of years, which shall be not less than ten nor more than twenty years from the date of approval of [418 U.S. 602, 611] the articles (a) no voting share of the corporation shall, without the prior written approval of the supervisor, be affirmatively voted for any proposal which would have the effect of sale, conversion, merger, or consolidation to or with, any other banking entity or affiliated financial interest, whether through transfer of stock ownership, sale of assets, or otherwise, (b) the corporation shall take no action to consummate any sale, conversion, merger, or consolidation in violation of this subdivision, (c) this provision of the articles shall not be revoked, altered, or amended by the shareholders without the prior written approval of the supervisor, and (d) all stock issued by the corporation shall be subject to this subdivision and a copy hereof shall be placed upon all certificates of stock issued by the corporation." </s> [Footnote 7 This statute provides: </s> "A corporation or association organized under the laws of this state, or licensed to transact business in the state, shall not hereafter acquire any shares of stock of any bank, trust company, or national banking association which, in the aggregate, enable it to own, hold, or control more than twenty-five percent of the capital stock of more than one such bank, trust company, or national banking association: Provided, However, That the foregoing restriction shall not apply as to any legal commitments existing on February 27, 1933: And Provided, Further, That the foregoing restriction shall not apply to prevent any such corporation or association which has its principal place of business in this state from acquiring additional shares of stock in a bank, trust company, or national banking association in which such corporation or association owned twenty-five percent or more of the capital stock on January 1, 1961. </s> "A person who does, or conspires with another or others in doing, [418 U.S. 602, 612] an act in violation of this section shall be guilty of a gross misdemeanor. A corporation that violates this section, or a corporation whose stock is acquired in violation hereof, shall forfeit its charter if it be a domestic corporation, or its license to transact business if it be a foreign corporation; and the forfeiture shall be enforced in an action by the state brought by the attorney general." </s> [Footnote 8 The wisdom of inflexible limitations on de novo bank expansion like those in force in Washington has been questioned. E. g., Baker, State Branch Bank Barriers and Future Shock - Will the Walls Come Tumbling Down?, 91 Banking L. J. 119 (1974); Comment, Bank Branching in Washington: A Need for Reappraisal, 48 Wash. L. Rev. 611 (1973). They inhibit growth by internal expansion and compel banks to resort to mergers and acquisitions in order to enter many new markets. Although other reasons no doubt exist, these limitations ostensibly are designed to prevent banks from encountering financial difficulties through overextending themselves, and they often date from the period of bank failures in the 1930's. If bank safety is their purpose, such restrictions may deserve reconsideration today in light of the extensive range of regulatory controls that otherwise exist, including federal and state supervision of the issuance of new bank charters, controls on interest rates and investments, deposit insurance, and regular, intensive bank inspections. Whatever their efficacy, a question that is not ours to resolve, such barriers to new entry are a fact of banking life in Washington. </s> [Footnote 9 See 80 Stat. 7, 12 U.S.C. 1828 (c) (2) (A) and (c) (5). If in a bank merger the "acquiring, assuming, or resulting bank is to be a national bank . . .," the merger must receive prior written approval from the Comptroller of the Currency. 12 U.S.C. 1828 (c) (2) (A). The Comptroller shall not approve any proposed merger transaction </s> "whose effect in any section of the country may be substantially to lessen competition, or to tend to create a monopoly, or which in any other manner would be in restraint of trade, unless it finds that the anticompetitive effects of the proposed transaction are clearly outweighed in the public interest by the probable effect of the transaction in meeting the convenience and needs of the community to be served." 12 U.S.C. 1828 (c) (5) (B). </s> [Footnote 10 Section 7 of the Clayton Act, 38 Stat. 731, as amended, 64 Stat. 1125, 15 U.S.C. 18, provides in pertinent part: </s> "No corporation engaged in commerce shall acquire, directly or indirectly, the whole or any part of the stock or other share capital and no corporation subject to the jurisdiction of the Federal Trade Commission shall acquire the whole or any part of the assets of another corporation engaged also in commerce, where in any line of commerce in any section of the country, the effect of such acquisition may be substantially to lessen competition, or to tend to create a monopoly." </s> [Footnote 11 In its complaint, the United States alleged that NBC and WTB were in direct competition due to the overlap of correspondent services and because NBC had two small branch offices located in Spokane County, although outside the Spokane metropolitan area. In a pretrial stipulation, however, the parties agreed that "there is no substantial existing competition between NBC and WTB in the Spokane metropolitan area or in any section of the country." App. 367. </s> [Footnote 12 Brief for United States 27-28. </s> [Footnote 13 In adopting, verbatim, proposed findings of fact in a complicated 7 antitrust action, the District Court failed to heed this Court's admonition voiced a decade ago. United States v. El Paso Natural Gas Co., 376 U.S. 651, 656 -657 (1964). This has added considerably to our burden of reviewing the extensive record developed in this case. We have also been hampered by the absence of transcript citations in support of the District Court's findings. It is to be remembered that in a direct-appeal case like this one, we must apply the "clearly erroneous" standard of Fed. Rule Civ. Proc. 52 (a), just as the courts of appeals must in cases governed exclusively by 28 U.S.C. 1291 and 1292. See, e. g., United States v. General [418 U.S. 602, 616] Dynamics Corp., 415 U.S. 486 (1974). We welcome any assistance in performance of the role, as do, undoubtedly, the courts of appeals. </s> With regard to the skeletal conclusions of law entered by the District Court, we reiterate that direct appeals of such cases, "the trials of which usually result in long and complex factual records, come here without the benefit of any sifting by the Courts of Appeals." El Paso Natural Gas Co., supra, at 663 (separate opinion of Harlan, J.). Accordingly, if the District Court does not enter an opinion analyzing the relevant precedents in light of the record, we are deprived of this helpful guidance. </s> [Footnote 14 The court's reservations about the legality of this alleged potential method of entry by NBC into Spokane reflect the fact that the procedure is analogous in substance to de novo branching, yet under state law NBC is prohibited from establishing new branches in Spokane. See Wash. Rev. Code Ann. 30.40.020 (Supp. 1973). The parties are in sharp disagreement over whether the state branching statute proscribes the sponsorship and subsequent acquisition of a new bank. The Government contends that the formation of a new national bank is not governed by state-law restrictions on branching, citing 12 U.S.C. 26, 27. Appellees respond in essence that this would still constitute sub rosa branching in violation of state law. The formation of a new national bank in Spokane would in any event require approval for a new charter from the Comptroller of the Currency. In this regard, the District Court gave "great weight" to the testimony of the Regional Administrator of National Banks that it was unlikely that a charter for a new national bank in Spokane would be granted within the foreseeable future. 1973-1 Trade Cas. § 74,496, p. 94,245. </s> [Footnote 15 The District Court also issued extensive findings of fact concerning the "convenience and needs" defense set out in the Bank Merger Act of 1966, 12 U.S.C. 1828 (c) (5) (B). The court found in essence that NBC, as a full-service bank, would bring to the Spokane area a broad range of banking services that WTB, due to its limited size, is unable to provide. These included increased loan limits, different types of loans, international banking services, computer services, enhanced trust services, and other benefits. The court's findings on this subject led it to the conclusion that even if the merger violated the standards of the Clayton Act, it was nevertheless lawful under the Bank Merger Act of 1966. 1973-1 Trade Cas. § 74,496, pp. 94,247-94,251. In light of our conclusion with regard to 7 of the Clayton Act, we do not address the District Court's findings under the "convenience and needs" defense. </s> [Footnote 16 See United States v. Phillipsburg National Bank, 399 U.S. 350, 359 -362 (1970); United States v. Third National Bank, 390 U.S. 171, 182 n. 15 (1968); United States v. Philadelphia National Bank, 374 U.S., at 356 -357. See also United States v. Alcoa, 377 U.S. 271, 275 n. 3 (1964); United States v. First National Bank, 376 U.S. 665, 667 (1964). </s> [Footnote 17 See, e. g., Baker, Potential Competition in Banking: After Greeley, What?, 90 Banking L. J. 362 (1973); Solomon, Bank Merger Policy and Problems: A Linkage Theory of Oligopoly, 89 Banking L. J. 116 (1972). </s> [Footnote 18 The Court's first case under amended 7 referred to "section of the country" and "geographic market" in the same breath, see Brown Shoe Co. v. United States, 370 U.S. 294, 324 (1962) ("a geographic market (the `section of the country')"), as did the Court's first 7 bank merger case. See Philadelphia National Bank, supra, [418 U.S. 602, 621] at 356 ("`section of the country' (relevant geographical market)"). See also Phillipsburg National Bank, supra, at 362-365. Identity between "section of the country" and relevant geographic market has been assumed in the 7 potential-competition cases. E. g., United States v. Falstaff Brewing Corp., 410 U.S. 526, 527 (1973); United States v. Continental Can Co., 378 U.S. 441, 447 (1964). </s> [Footnote 19 If a challenged combination takes the form of a joint venture by which two firms plan to enter a new area simultaneously, the relevant geographic market is the section of the country in which the newly formed enterprise will market its goods. See United States v. Penn-Olin Chemical Co., 378 U.S. 158 (1964). </s> [Footnote 20 See, e. g., United States v. Pabst Brewing Co., 384 U.S. 546 (1966). Some of the Court's language in Pabst suggests that the Government may challenge a merger under 7 without establishing any relevant geographic market, see id., at 549-550, a suggestion that prompted separate opinions by MR. JUSTICE WHITE, id., at 555, by Mr. Justice Harlan, joined by MR. JUSTICE STEWART, ibid., and by Mr. Justice Fortas. Id., at 561. But Pabst in reality held that the Government had established three relevant markets in which the acquired firm actually marketed its products - a single State, a multistate area, and the Nation as a whole. See id., at 550-551. And in that case the acquiring firm was an actual competitor of the acquired firm in all three relevant geographic markets. Ibid. Thus while Pabst stands for the proposition that there may be more than one relevant geographic market, it did not abandon the traditional view that for purposes of 7 "section of the country" means "relevant geographic market" and the latter concept means the area in which the relevant product is in fact marketed by the acquired firm. </s> [Footnote 21 The record demonstrates in several ways the local character of the area over which WTB exerts a competitive influence. For example, as of January 31, 1972, 90.1% of WTB's deposit accounts originated within the Spokane metropolitan area; 4.1% originated elsewhere in Spokane County; and the remainder came from eastern Washington, western Washington, and other States. App. 1861. </s> [Footnote 22 As MR. JUSTICE MARSHALL noted in Falstaff Brewing Corp., supra, at 555 (separate opinion), "remote possibilities are not sufficient to satisfy the test set forth in 7." Rather, the loss of competition "which is sufficiently probable and imminent" is the concern of 7. United States v. Continental Can Co., supra, at 458. </s> [Footnote 23 We put aside cases where an acquiring firm's market power, existing capabilities, and proposed merger partner are such that the merger would produce an enterprise likely to dominate the target market (a concept known as entrenchment). See FTC v. Procter & Gamble Co., 386 U.S. 568 (1967). Cf. Falstaff Brewing Corp., supra, at 531. There is no allegation that the instant merger would produce entrenchment in the Spokane market. </s> [Footnote 24 The merger declared unlawful in El Paso "removed not merely a potential, but rather an actual, competitor." Turner, Conglomerate [418 U.S. 602, 624] Mergers and Section 7 of the Clayton Act, 78 Harv. L. Rev. 1313, 1371 (1965). Accord, Berger & Peterson, Conglomerate Mergers and Criteria for Defining Potential Entrants, 15 Antitrust Bulletin 489, 498 (1970); Davidow, Conglomerate Concentration and Section Seven: The Limitations of the Anti-Merger Act, 68 Col. L. Rev. 1231, 1242 n. 36 (1968). Prior to the acquisition at issue in El Paso, the acquired firm had entered a tentative supply contract with one of the acquiring firm's substantial customers in the relevant market, compelling the acquiring firm to make significant price and delivery concessions in order to retain that customer. 376 U.S., at 654 -655, 659. The acquired firm was thus "shown by [the] record to have been a substantial factor in the [relevant] market at the time it was acquired . . . ." Id., at 658. The degree of entry that the acquired firm had achieved into the market of the acquiring firm distinguishes El Paso from subsequent cases truly presenting a potential-competition situation. It also distinguishes El Paso from the instant case, where the record demonstrates no analogous penetration of WTB's market by NBC or of NBC's market by WTB. </s> [Footnote 25 See also Ford Motor Co. v. United States, 405 U.S. 562, 567 -568 (1972); id., at 591-592 (separate opinion of BURGER, C. J.); FTC v. Procter & Gamble Co., supra; United States v. Continental Can Co., supra; United States v. Penn-Olin Chemical Co., supra. </s> [Footnote 26 See Brodley, Oligopoly Power Under the Sherman and Clayton Acts - From Economic Theory to Legal Policy, 19 Stan. L. Rev. 285, 357-358 (1967). </s> [Footnote 27 See also, Robinson, Antitrust Developments: 1973, 74 Col. L. Rev. 163, 180-190 (1974); Berger & Peterson, supra; Davidow, supra; Turner, supra, at 1362-1386; Hale & Hale, Potential Competition Under Section 7: The Supreme Court's Crystal Ball, 1964 Sup. Ct. Rev. 171; Note, United States v. Falstaff Brewing Corporation: Potential Competition Re-examined, 72 Mich. L. Rev. 837 (1974). </s> [Footnote 28 See 410 U.S., at 537 : </s> "We leave for another day the question of the applicability of 7 to a merger that will leave competition in the marketplace exactly as it was, neither hurt nor helped, and that is challengeable under 7 only on grounds that the company could, but did not, enter de novo [418 U.S. 602, 626] or through `toe-hold' acquisition and that there is less competition than there would have been had entry been in such a manner." </s> [Footnote 29 See, e. g., Kintner & Hansen, A Review of the Law of Bank Mergers, 14 B. C. Ind. & Com. L. Rev. 213 (1972); Alcorn, Phillipsburg and Beyond - Developing Trends in Substantive Standards for Bank Mergers, 9 Houston L. Rev. 417 (1972); Shull & Horvitz, The Bank Merger Act of 1960: A Decade After, 16 Antitrust Bulletin 859 (1971); Lifland, The Supreme Court, Congress, and Bank Mergers, 32 Law & Contemp. Prob. 15 (1967); Via, Antitrust and the Amended Bank Merger and Holding Company Acts: The Search for Standards, 53 Va. L. Rev. 1115 (1967). Cf. Wu & Connell, Merger Myopia: An Economic View of Supreme Court Decisions on Bank Mergers, 59 Va. L. Rev. 860 (1973). </s> [Footnote 30 In addition to the District Court decision in this case, see United States v. Connecticut National Bank, 362 F. Supp. 240 (Conn. 1973), vacated and remanded, post, p. 656; United States v. United Virginia Bankshares, Inc., 347 F. Supp. 891 (ED Va. 1972); United States v. First National Bancorporation, Inc., 329 F. Supp. 1003 (Colo. 1971), aff'd per curiam, 410 U.S. 577 (1973); United [418 U.S. 602, 628] States v. Idaho First National Bank, 315 F. Supp. 261 (Idaho 1970); United States v. First National Bank of Maryland, 310 F. Supp. 157 (Md. 1970); United States v. First National Bank of Jackson, 301 F. Supp. 1161 (SD Miss. 1969); United States v. Crocker-Anglo National Bank, 277 F. Supp. 133 (ND Cal. 1967) (three-judge court). </s> [Footnote 31 See Robinson, supra, at 189 n. 162; Shenefield, Annual Survey of Antitrust Developments - The Year of the Regulated Industry, 31 Wash. & Lee L. Rev. 1, 37-39 (1974); Hale & Hale, supra, at 179. </s> [Footnote 32 This Court's potential-competition cases have repeatedly noted this factor. E. g., FTC v. Procter & Gamble Co., 386 U.S., at 580 ; United States v. Continental Can Co., 378 U.S., at 464 -465. See J. Bain, Industrial Organization 8 (2d ed. 1968): "The condition of entry . . . determines the relative force of potential competition as an influence or regulator on the conduct and performance of sellers already established in a market." See also P. Areeda, Antitrust Analysis 517 (1967): "The sight of a particular firm `waiting at the market's edge' may emphasize the entry threat, but it is ease of entry, not necessarily an identifiable potential entrant, that limits present market power by reminding existing firms that high profits will attract outsiders." </s> [Footnote 33 Philadelphia National Bank, 374 U.S., at 375 (Harlan, J., dissenting). </s> [Footnote 34 The marketing of many forms of commercial bank services is controlled by government regulation. For example, regulation, not concentration in a banking market, produces parallelism with respect to such important elements of the banking business as interest allowed on savings accounts and interest charged on home mortgage loans. There are also many individualized judgments in the banking business, such as the decision whether to extend credit in various cases, that are not prone to parallel behavior regardless of the concentration of a market. Nevertheless, unfettered competition among banks does exist in a number of areas important to the public, as evidenced by the much-advertised differences in various forms of services offered by banks within the same geographic market. It is with regard to the latter economic activity that actual market behavior, and especially the presence or absence of significant parallel conduct, becomes relevant in this type of case. </s> [Footnote 35 App. 534. </s> [Footnote 36 Brief for United States 27-28. </s> [Footnote 37 The Government called as a witness a former state supervisor of banking. On cross-examination, this witness testified that if the purpose of the organization of a new bank were to establish a potential branch for another bank, he would not regard that as a proper objective under state chartering statutes. App. 768-770. </s> [Footnote 38 Cf. Comment, 48 Wash. L. Rev. 611, 626-628 (1973). </s> [Footnote 39 The Government did not establish that NBC has ever acquired a bank that it had assisted in starting. It did offer substantial evidence that NBC has assisted in the formation of a new bank in south-central Washington, outside any major metropolitan area. NBC undertook this effort in response to the desire of one of its major clients to have a bank in that area. But NBC has no contractual right to acquire that bank, and indeed there is no guarantee that it will ultimately be successful in acquiring it. </s> [Footnote 40 App. 614. </s> [Footnote 41 During the trial, the District Judge commented from the bench that he could not see "anything civilly wrong" with the Government's proposed sponsorship-acquisition approach. He apparently assumed that it was possible. App. 870. In its findings, the court took the view that such a method of entry was not economically feasible, in light of state-law restrictions on branching from a branch and the characteristics of the banking business. 1973-1 Trade Cas. § 74,496, p. 94,245. </s> [Footnote 42 NBC's acquisition of WTB, by comparison, will give it eight banking offices in Spokane and a significant market share. From this position, NBC will be able to have a substantial impact on the Spokane market. </s> The Government suggests that a sponsored bank could create a number of branches before being acquired. Brief for United States 50 n. 47. The Government offered no proof that this has ever occurred in Washington. Undertaking sponsorship on such a scale is probably unrealistic, and it would multiply the problems of obtaining approval of a sponsorship plan from bank regulatory agencies. In any event, nothing in 7 of the Clayton Act requires a firm to go to such lengths in order to avoid a merger that has no effect on concentration in the relevant market in the first place. </s> [Footnote 43 E. g., United States v. Falstaff Brewing Corp., 410 U.S. 526 (1973); FTC v. Procter & Gamble Co., 386 U.S., at 580 . </s> [Footnote 44 The third small bank in Spokane is a branch of a large nationally chartered bank in Seattle, which in turn is owned by a large holding company. There is no allegation that this small bank is a potential foothold acquisition. The Government presses its foothold-acquisition approach with considerably less vigor than its sponsorship theory, which may reflect the fact that under the former approach the total number of banking organizations in Spokane would remain the same. </s> [Footnote 45 App. 1103. </s> [Footnote 46 Cf. Falstaff Brewing Corp., supra, at 561 (separate opinion of MARSHALL, J.): </s> "If the company would have remained outside the market but for the possibility of entry by acquisition, and if it is exerting no influence as a perceived potential entrant, then there will normally be no competitive loss when it enters by acquisition. Indeed, there may even be a competitive gain to the extent that it strengthens the market position of the acquired firm." (Footnote omitted.) </s> [Footnote 47 App. 931. </s> [Footnote 48 Id., at 933. </s> MR. JUSTICE WHITE, with whom MR. JUSTICE BRENNAN and MR. JUSTICE MARSHALL join, dissenting. </s> For the second time this Term, the Court's new antitrust majority has chipped away at the policies of 7 of the Clayton Act. In United States v. General Dynamics Corp., 415 U.S. 486 (1974), the majority sustained the failing-company defense in a new guise. Here, it redefines the elements of potential competition and dramatically escalates the burden of proving that a merger "may be substantially to lessen competition" within the meaning of 7. </s> That we are dealing with a severely concentrated commercial banking market in the Spokane metropolitan area is conceded. The Court also proceeds on the basis that it was open to the Government to make its case by </s> [Dissenting opinion of MR. JUSTICE WHITE continued on p. 644.] [418 U.S. 602, 643] </s> [418 U.S. 602, 644] proving that the NBC-WTB merger would probably cause a substantial lessening of competition in either one of two ways. First, it could be proved that NBC, with the resources and desire to enter the Spokane market, would probably have entered the market either by acquiring one of the small Spokane banks or by sponsoring a new bank and ultimately acquiring it. The merger thus deprived the Spokane market of a new competitor, and produced the requisite anticompetitive effect. Second, it could be shown that NBC's resources and interest in entering the Spokane market were so obvious to or recognized by those already in the market that, as a potential competitor waiting in the wings, NBC very probably exercised a restraining influence on anticompetitive practices in the concentrated Spokane banking market. </s> The majority does not quibble about the fact of NBC's resources and its incentive to extend its banking activities into Spokane. NBC is the State's second largest banking organization with total assets of $1.8 billion as of 1971. It has branched widely in the State of Washington, having a total of 107 branches, 15 of them within 100 miles of Spokane. Two other Seattle banking organizations were already operating in Spokane; and NBC itself had seriously negotiated for an acquisition in that market. Given the opportunity, NBC would obviously enter Spokane. Under Washington law, it could not branch there; but it was free to acquire another bank, given consent of banking authorities. That consent was obtained for the acquisition involved in this case, and it may fairly be assumed that it could have been obtained for the acquisition, not of a major competitor contributing to the concentration in the Spokane market, but of one of the smaller banks - a so-called "toehold" position in the market. </s> Another mode of entry into Spokane was also available to NBC. It could have been instrumental in forming [418 U.S. 602, 645] a new bank in that market and in due course could have merged with the "sponsored" institution. It is argued that this route was all but legally unavailable to NBC, 1 but the sponsored-bank method of expansion has occurred frequently in the State of Washington. The District Court did not hold sponsorship barred by state law. This Court also refrains from so holding and proceeds on the assumption that the sponsored-bank route was available to NBC. Under state law, a merger with the new bank could not take place, without the consent of banking authorities, prior to 10 years from the date the new bank began operations; but consent to merge prior to that time has been obtained in the past. </s> Thus, although branching into Spokane was not legally feasible, there were other modes of entry no less [418 U.S. 602, 646] attractive or less feasible than entering by establishing a new branch. It is incredible that if branching into Spokane had been allowable NBC would not have entered in this way. It is equally unlikely that absent the understandably attractive merger with WTB, NBC would not have proceeded to acquire a smaller bank or to be instrumental in forming a new sponsored bank. </s> The Court apparently assumes this to be the case, but goes on to hold that the Government's proof failed because neither a small new bank nor one of the existing small banks, if acquired, had a realistic chance of deconcentrating the Spokane market to any substantial extent. Also, absent the capability of making substantial inroads on the market shares of the principal banks, it is said that those banks had nothing to fear from NBC as a potential competitor and that NBC therefore had no current influence on competitive practices in the Spokane market. </s> I part company with the majority at this point. The Spokane market was highly concentrated. NBC had the resources and the desire to enter the market. There were no impenetrable legal or economic barriers to its doing so; and it is sufficiently plain from the record that absent merger with WTB, NBC could and would either have made a toehold entry or been instrumental in establishing a sponsored bank in Spokane. But NBC chose to merge with a larger bank and to deprive the market of the competition it would have offered had it entered in either of two other ways. In my opinion, this made out a sufficient prima facie case under 7, which, absent effective rebuttal, entitled the United States to judgment. </s> The Court's sole answer to the Government's proof is that even if NBC would have entered by acquisition or de novo through a sponsored bank, it would have "little realistic hope of ultimately producing deconcentration [418 U.S. 602, 647] of the Spokane market." This was because under Washington law after acquiring an existing or newly formed bank, NBC could not branch from that institution but would be confined to the banking offices which it acquired at the time of the merger. In the Court's opinion, NBC, without branching, would have "no reasonable likelihood of developing a significant share of that market," and the Government's case therefore failed. </s> I cannot accept the per se view that, without branching, an able and willing newcomer to the banking market cannot be considered a sufficiently substantial competitive influence, immediately or in the foreseeable future, so that its loss to the market would warrant application of 7. This is particularly true if the putative entrant is a large and successful banking organization with wide experience in developing new markets. </s> Small banks can be profitable, and they can grow rapidly. The experience of the three small banks in Spokane proves this. Each of them is a profitable bank. The profits of American Commercial Bank, for example, with headquarters in downtown Spokane, rose from $27,740 in 1966 to $132,527 in 1971. The deposits of each of the three small banks have grown. From 1966 to 1972, total bank deposits in the Spokane metropolitan area rose from $379.2 million to $513.5 million, a growth of 35% in six years. Spokane would not appear to be a stagnant banking market, and it provides opportunities for smaller banking concerns. The deposits in the three small banks during the same six years grew from $14.9 million to $39.4 million, an increase of approximately 160%. Their market share, although remaining relatively small, increased from 3.9% to 7.8%. Of course, deposits in the three large banking organizations also grew. Two of them increased their market shares very [418 U.S. 602, 648] slightly, but the third lost ground from 38.3% to 31.6%, for a combined decline of the three from 96% to 92.3%. The small banks thus more than held their own in the Spokane market. This showing of the smaller banks hardly indicates such impotence on the part of small competitors that a new entrant in the market should necessarily be deemed to be without influence in the market and to be beyond recognition under 7. 2 </s> If Seattle-First National Bank, with 31.6% of the deposits in 1972, or Washington Bancshares, Inc., with 42.1%, had acquired either American Commercial Bank or Farmers & Merchants Bank, with 3.1% and 2.5% respectively of Spokane bank deposits, the merger would have been anticompetitive and forbidden by 7, unless saved by the convenience-and-needs proviso of the Bank Merger Act. United States v. Philadelphia National Bank, 374 U.S. 321 (1963). Depriving the market of a new competitor that could achieve similar status in a relatively [418 U.S. 602, 649] short period of time should not be so readily placed beyond the reach of 7 when considering the application of the doctrine of potential competition to market extension mergers. </s> The details on the relative size of individual bank branches in Spokane or elsewhere in metropolitan areas of the State are not in the record; but it is unbelievable that there are no branches that have started very small and grown very large. New branches must make their way, often in head-to-head competition with other banks. Some are more successful than others, and I cannot accept, as a per se legal rule, the notion that a new bank sponsored by NBC in downtown Spokane or elsewhere in the city must be forever deemed to be without substantial competitive impact on the banking community. 3 It is incredible to me that the presence of a major Seattle bank like NBC in downtown Spokane could or would be ignored by the entrenched banking powers or should be ignored for the purposes of applying 7 of the Clayton Act. </s> NBC has 15 branches within a 100-mile radius of Spokane. Those branches have $103 million in total [418 U.S. 602, 650] deposits, including $4.4 million from Spokane customers. Two of these branches are in Spokane County and between them have $11 million in deposits. They also have loans totaling $10.2 million to Spokane interests. NBC is a major financial institution with large lending limits and offering a full line of commercial banking services. It is obviously equipped to penetrate and compete vigorously in the Spokane lending market wholly aside from how fast deposits might grow in a newly established or acquired Spokane bank. It is quite untenable to assert that the competition that might be offered in the Spokane lending market by a new bank formed by this obviously vigorous competitor is too insignificant to warrant the protections of 7. 4 </s> The availability of branching is, of course, an important competitive consideration, but it should not be forgotten that American Commercial Bank, headquartered in downtown Spokane, has four branches and if acquired by NBC would give that bank a substantial operating capacity in Spokane. The majority, nevertheless, even assuming the acquisition of this bank by NBC, insists on its own view of competitive reality and holds [418 U.S. 602, 651] that the loss of NBC as a competitor in place of American must be deemed an insignificant loss to competition. This is true even though one of the major competitors, Seattle-First National Bank, has only seven branches and under the state law already referred to, it is confined to its existing branches. </s> It is also true that if NBC entered Spokane by sponsoring a new bank, the new bank itself could legally branch and create the necessary branch infrastructure for as long as it was not acquired by NBC or another outsider. The majority states that this is "probably unrealistic" and that it would "multiply the problems" of obtaining approval of sponsorship from bank regulatory agencies. But this is sheer speculation; the Court simply has no idea what the attitude of regulatory officials would be in this regard. Furthermore, NBC itself has had experience with sponsored-bank situations, and, as the majority recognizes, it asserts that it has not sponsored banks solely for the purpose of acquisition. Apparently, relationships with a sponsored institution are themselves of inherent value, and the benefits would only increase if the sponsored bank itself branched as it grew. </s> Viewed in this light, the Court's per se rule becomes threadbare indeed when applied to NBC entering by acquisition into the Spokane market. The three existing smaller banks in Spokane have been successful and profitable and have even increased their share of the market in six years. Furthermore, Seattle-First National cannot legally go beyond its present seven branches in the Spokane market, and its share of the market has declined. It is quite unreasonable to think that NBC, if it acquired American Commercial, with its four branches could not be an effective competitor at least against Seattle-First National in Spokane, with its seven branches, or against WTB with its eight. [418 U.S. 602, 652] </s> The Court also errs in holding that NBC, an obvious potential competitor, cannot be deemed to have exercised substantial influence on the Spokane market and that its entry by merger with a major Spokane bank therefore represents no probable injury to competition in that market. To the extent that the Court's holding on this branch of the case rests on its notion that no bank, without branching, can make substantial inroads on the Spokane market, I disagree for reasons already stated. Beyond that, however, the waiting-in-the-wings approach to potential competition rests on what objective factors indicate the perception of the reasonably minded competitor in the Spokane market might be of the likelihood and impact of an entry by NBC, either de novo or by acquisition of a small bank. Predictions of market behavior and competitive success are just not as certain or uniformly held as the Court makes them out to be. Here, before NBC acquired WTB, NBC negotiated to acquire the much smaller Farmers & Merchants Bank - a three-office suburban bank with about $13 million in deposits and 2.5% of the market. The target bank was in the relevant geographic market accepted by the parties and Court. The President of Marine Bancorporation, Maxwell Carlson, had at various times noted that the President and Director of WTB, Philip Stanton, expected NBC to be in Spokane some day. One wonders, if the majority's branch-disability theory is correct, why these bankers even discussed potential entry into the market. The fact is that they did, and it is fair to assume that through informal contacts, and by reason of the prior acquisition discussions, bankers in the market were aware of NBC's interest. The majority would have one believe that even if NBC was interested, no one in the market would take it seriously enough to restrain anticompetitive practices. It is certainly possible, however, that even if bankers in the market doubted that NBC would actually [418 U.S. 602, 653] be successful in acquiring a significant market share, if they entered the market, the possibility of entry and the possibility of competition following entry were sufficiently strong to restrain anticompetitive practices. If bankers thought that there was a probability of entry, which there surely was, but that their losses from such entry could be substantial, if NBC, once in the market, competed more effectively than anticipated, they would take countermeasures and make entry less attractive by refraining from engaging in anticompetitive practices. </s> In the last analysis, one's view of this case, and the rules one devises for assessing whether this merger should be barred, turns on the policy of 7 of the Clayton Act to bar mergers which may contribute to further concentration in the structure of American business. United States v. Philadelphia National Bank, 374 U.S., at 362 -363; United States v. Penn-Olin Chemical Co., 378 U.S. 158, 170 -171 (1964); Brown Shoe Co. v. United States, 370 U.S. 294, 331 -332 (1962). The dangers of concentration are particularly acute in the banking business, since "if the costs of banking services and credit are allowed to become excessive by the absence of competitive pressures, virtually all costs, in our credit economy, will be affected . . . ." Philadelphia Bank, supra, at 372; United States v. Phillipsburg National Bank, 399 U.S. 350, 358 (1970). </s> Unless an otherwise illegal merger is saved by a finding under the Bank Merger Act that it is necessary to serve the convenience and needs of the community, the law requires us in the first instance to judge bank mergers by normal 7 standards. I simply cannot agree with the Court's narrow view of what bank mergers "may . . . substantially . . . lessen competition." </s> With respect to whether depriving the market of the competition offered by a new entrant violates 7, it is not enough under the Court's view that the newcomer [418 U.S. 602, 654] has itself found the market sufficiently attractive to enter and to assume all the start-up costs and risks attendant to a new business undertaking. The Court is willing also to assume that the new business will be profitable and long-lived, for under the approach taken today, it is not enough to show the loss of one or more profitable but small businesses. Apparently, it cannot be assumed that a small business, even when backed by a major enterprise. can or will be successful in competing against the entrenched powers in the market. </s> This thesis erects formidable barriers to the application of the potential-competition doctrine not only in the banking business but in other lines of commerce. 5 To show that the potential entrant, waiting in the wings, is exercising a present influence on the market, or that its loss as a de novo or toehold entrant may be a substantial injury to competition, it will not be enough to prove ability and willingness to enter, along with the probability, or even certainty, of entry. Nor will it suffice to prove that the potential or actual entrant would be a profitable concern and successfully prevent the major figures in the market from increasing their market shares. The courts must also examine conditions in the market and conclude for themselves that there is a realistic expectation that the new entrant will appropriate for itself a substantial part of the business of the major competitors in the market. [418 U.S. 602, 655] </s> The Court then delivers the coup de grace by imposing its own visions of reality in commercial banking markets: without unlimited branching authority in the market involved, no newcomer to the market can be sufficiently successful against others, who have the authority, to be a substantial competitor and to merit recognition under doctrines of potential competition. No new entrant can attain, let us say, 15 or 20 percent of the banking business in the Spokane area unless it has branching authority. The Court apparently insists this will be true no matter where the new banking office is located and no matter who and how well equipped and financed the new entrant may be. This is claiming a prescience that I doubt the Court has and is a view of the effectiveness and worth of competition, though having modest beginnings, that I do not share. Furthermore, the conclusion the Court reaches passes beyond my comprehension when it refuses to concede that NBC, if it acquired American Commercial Bank, with its four branches, could not make substantial inroads on the market shares of any of the major banks in the market, even though one of them is forever limited to seven offices under the present law. </s> [Footnote 1 The evidence, based upon past practices, is entirely to the contrary. NBC has itself employed the procedure with regard to the Columbia Center National Bank located in a shopping center in south central Washington. The techniques it employed included finding an organizer for the bank, controlling the sublease of the land on which the new bank was to be located, through Marine Bancorporation, so as to prevent acquisition by others without its approval, and making sure the majority stock of the bank was in friendly hands. App. 246-280. The record abounds with various examples of the technique by other Washington banks; and federal authorities were aware of many of the methods, as disclosed in the applications for approval of acquisition by the sponsors. The statute also forbids a new bank from merging with or permitting its assets to be acquired by another bank for a period of 10 years but only without the consent of the state supervisor. Suffice it to state that earlier acquisitions have, as the majority recognizes, been made in the past. Surely the fragmentary fears of illegality are not enough to overturn what seems a perfectly well-established technique of market entry not at odds with the language of the state statute. It should be noted that the District Court, although not formally ruling on the state law matter in its findings of fact and conclusions of law, did state during trial that this was, in its view, a feasible means of entry. App. 870. </s> [Footnote 2 The banks rely on the experience of Pacific National Bank of Washington. In 1964, a large bank holding company acquired a toehold in Spokane by acquiring an existing small bank, but by 1972 had only garnered 2.2% of the total bank deposits in Spokane. A vice president of the bank testified at trial that its disappointing share of the market - its 1972 share of industrial and commercial loans was 4.6% - was probably due to its inability to branch. Although this officer also testified that his bank was not opposing the merger of NBC and WTB, he certainly was an interested party. Upon this witness' opinion, the outcome of this case cannot hinge. In light of the objective evidence, which strongly suggests that competition can exist without equality in branch capability, the testimony of this vice president should not be given great weight. It is not only a speculative statement as to the failure of the Pacific National; it is also self-serving to the extent it keeps additional competitors out of the market. As with the testimony of bank officials who profess no interest in entering a market, see United States v. Falstaff Brewing Corp., 410 U.S. 526, 534 -535 (1973), it should only be considered along with the rest of the objective economic evidence. </s> [Footnote 3 Evidence introduced by the Government as to the ability of banks in the other major metropolitan banking markets of Washington - Seattle, Tacoma, and Everett - totally undercuts the Court's assumption that a bank with only one office cannot acquire a substantial enough market share to effect deconcentration. In Seattle, the Bank of California, with only one office, had $112 million in total deposits in 1970, representing 6.27% of the total deposit market. This share can be compared with that of Pacific National Bank of Washington which, with 13 offices, had a 9.38% market share. In Tacoma, the Bank of California-Tacoma had $65.4 million in total deposits which represented a 15.55% market share. Compare this with the 3.17% share of Seattle-First National Bank-Tacoma, with four offices. In Everett, Peoples National Bank of Washington-Everett, with one office, had $17.2 million in total deposits, a 10.83% market share. </s> [Footnote 4 As the majority recognizes, the relevant product market in this case is the cluster of services offered by commercial banks. A main component of that cluster, and one which determines profits, is the ability to provide loans, and it seems to me that a prospect of competition for loans, whether based on deposits garnered in Spokane or elsewhere, has a substantial possibility of effecting deconcentration in at least one segment of the banking business. The fact that profitability and number of offices are not highly correlated is supported by comparing the experience of Washington Bancshares and Seattle-First National Bank. In 1971, the former had 23 offices and a net income of $2.2 million. The latter, with only seven offices, had a net income of $3.5 million. In that same year, although Washington Bancshares had $45.6 million more in deposits than did Seattle-First National, the latter had an edge of $7.2 million in commercial and industrial loans. </s> [Footnote 5 The Court professes to limit its per se rule to "an industry in which new entry is extensively regulated by the State and Federal Governments." The case, as decided, however, does not turn on barriers to entry, but "barriers" to effective competition, once entry is effected, and "barriers" to effective competition are not easily limited to regulated industries. The Court lays itself open for arguments that economic, as well as legal, barriers exist for new competitors. At least it is difficult to see why one should be more controlling than another; in fact, the Court itself blurs the two. </s> [418 U.S. 602, 656]

United States Supreme Court COOPER STEVEDORING CO. v. KOPKE, INC.(1974) No. 73-726 Argued: Decided: May 28, 1974 </s> A longshoreman was injured when, while loading a vessel owned by one respondent and time chartered to the other (hereinafter collectively the Vessel), he stepped into a concealed gap between crates which had previously been loaded by petitioner. The longshoreman then sued the Vessel, which filed a third-party complaint against petitioner. The District Court found both the Vessel and petitioner negligent, and divided the liability equally. On petitioner's appeal, the Court of Appeals affirmed. Held: The award of contribution between joint tortfeasors in a noncollision maritime case was proper under the circumstances. On the facts, no countervailing considerations detract from the well-established maritime rule allowing contribution between joint tortfeasors, since where the longshoreman, not being an employee of petitioner, could have proceeded against either the Vessel or petitioner, or both, and thus could have elected to make petitioner bear its share of the damages, there is no reason why the Vessel should not be accorded the same right. Halcyon Lines v. Haenn Ship Corp., 342 U.S. 282 , distinguished. Pp. 110-115. </s> 479 F.2d 1041, affirmed. </s> MARSHALL, J., delivered the opinion of the Court, in which all Members joined except STEWART. J., who took no part in the decision of the case. </s> Joseph D. Cheavens argued the cause and filed a brief for petitioner. </s> Bruce Dixie Smith argued the cause and filed a brief for respondents. </s> MR. JUSTICE MARSHALL delivered the opinion of the Court. </s> This case concerns the extent to which contribution between joint tortfeasors may be obtained in a maritime [417 U.S. 106, 107] action for personal injuries. The S. S. Karina, a vessel owned and operated by respondent Fritz Kopke, Inc., and under time charter to respondent Alcoa Steamship Co., was loaded at Mobile, Alabama, with palletized crates of cargo by petitioner Cooper Stevedoring Co. The vessel then proceeded to the Port of Houston where longshoremen employed by Mid-Gulf Stevedores, Inc., began to load sacked cargo. The Houston longshoremen had to use the top of the tier of crates loaded by Cooper as a floor on which to walk and stow the Houston cargo. One of these longshoremen, Troy Sessions, injured his back when he stepped into a gap between the crates which had been concealed by a large piece of corrugated paper. </s> Sessions brought suit in the District Court against Kopke and Alcoa (hereinafter collectively the Vessel) seeking to recover damages for his injuries. 1 The Vessel filed a third-party complaint against Cooper alleging that if Sessions was injured by any unseaworthy condition of the vessel or as the result of negligence other than his own, such condition or negligence resulted from the conduct of Cooper and its employees. The Vessel also filed a similar third-party complaint against Mid-Gulf. </s> Prior to trial, Mid-Gulf and the Vessel apparently entered into an agreement under which Mid-Gulf would indemnify the Vessel against any recovery which Sessions might obtain. Pursuant to this agreement, Mid-Gulf was dismissed as a third-party defendant and Mid-Gulf's [417 U.S. 106, 108] attorneys were substituted as counsel for the Vessel. 2 </s> The case then went to trial, after which the District Court, which sat without a jury, orally announced its findings of fact and conclusions of law. The court found that the Vessel's failure either to make adequate arrangements to assure that the stow would not move and leave spaces in the course of its trip from Mobile to Houston or to put some type of dunnage on top of the stow had resulted in an unsafe place to work and unseaworthy condition. The court found that Cooper was also negligent in not stowing the crates in a manner in which longshoremen at subsequent ports could safely work on top of them. Finding it difficult from the evidence to "evaluate exactly the responsibility between the shipowner on the one hand and Cooper on the other," the District Court divided the liability equally between the Vessel and Cooper. 3 Judgment [417 U.S. 106, 109] was entered allowing Sessions to recover $38,679.90 from the Vessel and allowing the Vessel to recover $19,339.95 from Cooper. </s> Cooper appealed, 4 asserting that the District Court's award of contribution in a noncollision maritime case was in direct conflict with this Court's decisions in Halcyon Lines v. Haenn Ship Corp., 342 U.S. 282 (1952), and Atlantic Coast Line R. Co. v. Erie Lackawanna R. Co., 406 U.S. 340 (1972). The Court of Appeals rejected this contention, relying on prior decisions of the Fifth and Second Circuits to the effect that the apparent prohibition against contribution in noncollision maritime cases announced in Halcyon and Atlantic was inapplicable where the joint tortfeasor against whom contribution is sought is not immune from tort liability by statute. See Horton & Horton, Inc. v. T/S J. E. Dyer, 428 F.2d 1131 (CA5 1970), cert. denied, 400 U.S. 993 (1971); Watz v. Zapata Off-Shore Co., 431 F.2d 100 (CA5 1970); In re Seaboard Shipping Corp., 449 F.2d 132 (CA2 1971), cert. denied, 406 U.S. 949 (1972). The Court of Appeals found this principle applicable here since Sessions, in addition to suing the Vessel, could have proceeded directly against Cooper as the latter was not his employer [417 U.S. 106, 110] and, therefore, not shielded by the limited liability of the Longshoremen's and Harbor Workers' Compensation Act, 33 U.S.C. 905. 479 F.2d 1041 (CA5 1973). We granted certiorari to consider this question, 414 U.S. 1127 (1974), and now affirm. </s> Where two vessels collide due to the fault of each, an admiralty doctrine of ancient lineage provides that the mutual wrongdoers shall share equally the damages sustained by each. In The North Star, 106 U.S. 17 (1882), Mr. Justice Bradley traced the doctrine back to the Laws of Oleron which date from the 12th century, and its roots no doubt go much deeper. Even though the common law of torts rejected a right of contribution among joint tortfeasors, the principle of division of damages in admiralty has, over the years, been liberally extended by this Court in directions deemed just and proper. In one line of cases, for example, the Court expanded the doctrine to encompass not only damage to the vessels involved in a collision, but personal injuries and property damage caused innocent third parties as well. See, e. g., The Washington, 9 Wall. 513 (1870); The Alabama, 92 U.S. 695 (1876); The Atlas, 93 U.S. 302 (1876); The Chattahoochee, 173 U.S. 540 (1899). See generally The Max Morris, 137 U.S. 1, 8 -11 (1890). In other cases, the Court has recognized the application of the rule of divided damages in circumstances not involving a collision between two vessels, as where a ship strikes a pier due to the fault of both the shipowner and the pier owner, see Atlee v. Packet Co., 21 Wall. 389 (1875), or where a vessel goes aground in a canal due to the negligence of both the shipowner and the canal company, see White Oak Transp. Co. v. Boston, Cape Cod & New York Canal Co., 258 U.S. 341 (1922). See also The Max Morris, supra, at 13-14. Indeed, it is fair to say that application of the rule of division of damages between [417 U.S. 106, 111] joint tortfeasors in admiralty cases has been as broad as its underlying rationales. The interests of safety dictate that where two parties "are both in fault, they should bear the damage equally, to make them more careful." The Alabama, supra, at 697. And a "more equal distribution of justice" can best be achieved by ameliorating the common-law rule against contribution which permits a plaintiff to force one of two wrongdoers to bear the entire loss, though the other may have been equally or more to blame. See The Max Morris, supra, at 14. </s> Despite the occasional breadth of its dictum, our opinion in Halcyon should be read with this historical backdrop in mind. Viewed from this perspective, and taking into account the factual circumstances presented in that case, we think Halcyon stands for a more limited rule than the absolute bar against contribution in noncollision cases urged upon us by petitioner. 5 </s> In Halcyon, a ship repair employee was injured while making repairs on Halcyon's ship. He sued Halcyon for damages, alleging negligence and unseaworthiness. Since the employee was covered by the Longshoremen's and Harbor Workers' Compensation Act, 33 U.S.C. 901-950, he was prohibited from suing his employer Haenn. Nevertheless Halcyon impleaded Haenn as a joint tortfeasor [417 U.S. 106, 112] seeking contribution for the judgment recovered by the employee. We granted certiorari in Halcyon to resolve a conflict which had arisen among the circuits as to whether a shipowner could recover contribution in these circumstances. See 342 U.S., at 283 -284, and n. 3. One court had held that the employer's limitation of liability vis-a-vis its employee under the Harbor Workers' Act barred contribution. See American Mutual Liability Insurance Co. v. Matthews, 182 F.2d 322 (CA2 1950). Another Circuit had held that the Act did not bar contribution, see United States v. Rothschild Int'l Stevedoring Co., 183 F.2d 181 (CA9 1950), and yet a third Circuit, in the case reviewed in Halcyon, had permitted contribution but limited it to the amount which the injured employee could have compelled the employer to pay had he elected to claim compensation under the Act. 187 F.2d 403 (CA3 1951). </s> Before this Court, both parties in Halcyon agreed that "limiting an employer's liability for contribution to those uncertain amounts recoverable under the Harbor Workers' Act is impractical and undesirable." 342 U.S., at 284 . The Court also took cognizance of the apparent trade-off in the Act between the employer's limitation of liability and the abrogation, in favor of the employee, of common-law doctrines of contributory negligence and assumption of risk. Id., at 285-286. Confronted with the possibility that any workable rule of contribution might be inconsistent with the balance struck by Congress in the Harbor Workers' Act between the interests of carriers, employers, employees, and their respective insurers, we refrained from allowing contribution in the circumstances of that case. </s> These factors underlying our decision in Halcyon still have much force. Indeed, the 1972 amendments to the Harbor Workers' Act re-emphasize Congress' determination [417 U.S. 106, 113] that as between an employer and its injured employee, the right to compensation under the Act should be the employee's exclusive remedy. 6 But whatever weight these factors were properly accorded in the factual circumstances presented in Halcyon, they have no application here. Unlike the injured worker in Halcyon, Sessions was not an employee of Cooper and could have proceeded against either the Vessel or Cooper or both of them to recover full damages for his injury. Had Sessions done so, either or both of the defendants could have been held responsible for all or part of the damages. Since Sessions could have elected to make Cooper bear its share of the damages caused by its negligence, we see no reason why the Vessel should not be accorded the same right. On the facts of this case, then, no countervailing considerations detract from the well-established maritime rule allowing contribution between joint tortfeasors. </s> Our brief per curiam opinion in Atlantic Coast Line R. Co. v. Erie Lackawanna R. Co., 406 U.S. 340 (1972), is fully consistent with this view. In that case a yard brakeman, employed by Erie, brought suit for injuries [417 U.S. 106, 114] sustained while working on a boxcar owned by another railroad, Atlantic, while the boxcar was being transported on a carfloat barge owned by Erie. The accident was allegedly due to a defective footboard and handbrake of the boxcar and the plaintiff sued Atlantic for its negligence in supplying defective equipment. Atlantic sought contribution from Erie on the ground that its negligence was also a factor in causing the injury. The District Court denied contribution, relying on Halcyon. The Court of Appeals affirmed and we granted certiorari because it initially appeared that the decision was inconsistent with the Courts of Appeals' decisions in Horton, Watz, and Seaboard, supra, which had allowed contribution, notwithstanding Halcyon, in situations where the party against whom contribution was sought was not entitled to the limitation-of-liability protections of the Harbor Workers' Act. After oral argument, however, it appeared that the case was factually indistinguishable from Halcyon. Erie, against whom contribution was sought, was the plaintiff's employer, and in Pennsylvania R. Co. v. O'Rourke, 344 U.S. 334 (1953), we recognized that a railroad employee injured while working on a freight car situated on a carfloat in navigable waters was subject exclusively to the Harbor Workers' Act. Erie was therefore entitled to the limitation-of-liability protections of the Harbor Workers' Act, just like the employer in Halcyon. </s> Petitioner argues, however, that this protection was ephemeral in Atlantic since, under Jackson v. Lykes Bros. S. S. Co., 386 U.S. 731 (1967), the injured employee in Atlantic could have sued Erie, the shipowner-employer, for unseaworthiness of the vessel. See also Reed v. The Yaka, 373 U.S. 410 (1963). But the fact that Erie may have been subject to a suit based on unseaworthiness for damages caused by defective boxcar [417 U.S. 106, 115] appliances, compare The Osceola, 189 U.S. 158, 175 (1903), with Gutierrez v. Waterman S. S. Corp., 373 U.S. 206, 213 (1963), did not make it a joint tortfeasor subject to a contribution claim. Contribution rests upon a finding of concurrent fault. Erie's liability, if any, for unseaworthiness of its vessel would have been a strict liability not based upon fault. In other words, even if Erie were negligent, its injured employee was entitled to claim compensation from it under the Harbor Worker's Act, and Erie was accordingly entitled to the protective mantle of the Act's limitation-of-liability provisions. And to the extent Erie was not negligent but nevertheless subject to a suit on a seaworthiness theory, Erie was not a joint tortfeasor against whom contribution could be sought. See Simpson Timber Co. v. Parks, 390 F.2d 353 (CA9), cert. denied, 393 U.S. 858 (1968). </s> In sum, our opinion in Atlantic was not intended to answer the question posed by the present case, as its failure to discuss Horton, Watz, and Seaboard indicates. Rather, Atlantic proves only that our decision in Halcyon was, and still is, good law on its facts. </s> Affirmed. </s> MR. JUSTICE STEWART took no part in the decision of this case. </s> Footnotes [Footnote 1 This suit was commenced prior to the enactment of the 1972 amendments to the Longshoremen's and Harbor Workers' Compensation Act, 33 U.S.C. 901-944 (1970 ed., Supp. II), and all parties agree that the amendments are therefore not applicable. Accordingly we need not decide whether Sessions' suit against the Vessel or the Vessel's third-party complaints against Cooper or Mid-Gulf could be brought under the Act, as amended. See 905 (b). </s> [Footnote 2 Petitioner suggests that the Vessel cannot recover contribution because it has already been fully indemnified for the judgment under its agreement with Mid-Gulf. See W. Prosser, Law of Torts 48-49 (4th ed. 1971). But this suggestion rests on a faulty construction of the agreement between the Vessel and Mid-Gulf. The latter agreed to indemnify the Vessel only to the extent necessary after trial of the lawsuit, and the assumption of the parties was that Mid-Gulf would step into the Vessel's shoes both to defend the suit brought by Sessions and to prosecute the third-party complaint against Cooper. </s> [Footnote 3 Since the District Court concluded that the only apportionment of fault it could reach on the evidence in this case was an equal division, we have no occasion in this case to determine whether contribution in cases such as this should be based on an equal division of damages or should be relatively apportioned in accordance with the degree of fault of the parties. Cf. The Max Morris, 137 U.S. 1, 15 (1890). See also Jacob v. New York City, 315 U.S. 752 (1942); Socony-Vacuum Oil Co. v. Smith, 305 U.S. 424 (1939); The Arizona v. Anelich, 298 U.S. 110 (1936). See generally Staring, Contribution and Division of Damages in Admiralty and Maritime Cases, 45 Calif. L. Rev. 304, 340-344 (1957). </s> [Footnote 4 The Vessel also cross-appealed, contending that the District Court should have allowed it full indemnity from Cooper. The Court of Appeals rejected this argument, relying on the District Court's finding that the Vessel's "conduct precluded its full recovery on the indemnity claim because it failed to fulfill its primary responsibility under its arrangement with Cooper to assure that some type of dunnage was placed on top of the cargo." 479 F.2d 1041, 1042. Cf. Weyerhaeuser S. S. Co. v. Nacirema Operating Co., 355 U.S. 563, 567 (1958). The Vessel did not file a petition for a writ of certiorari to seek review of this aspect of the Court of Appeals' judgment, and we therefore lack jurisdiction to consider its contention that it is entitled to recover full indemnity on the basis of Ryan Stevedoring Co. v. Pan-Atlantic S. S. Corp., 350 U.S. 124 (1956). </s> [Footnote 5 The lower courts have generally not read Halcyon as petitioner suggests, and have continued to recognize a right of contribution in noncollision maritime cases. See, e. g., Crain Bros., Inc. v. Wieman & Ward Co., 223 F.2d 256 (CA3 1955); Moran Towing Corp. v. M. A. Gammino Constr. Co., 409 F.2d 917 (CA1 1969); Coca Cola Co., Tenco Div. v. S. S. Norholt, 333 F. Supp. 946 (SDNY 1971); Dow Chemical Co. v. Tug Thomas Allen, 349 F. Supp. 1354 (ED La. 1972); Bilkay Holding Corp. v. Consolidated Iron & Metal Co., 330 F. Supp. 1313 (SDNY 1971); American Independent Oil Co. v. M. S. Alkaid, 289 F. Supp. 329 (SDNY 1967); Cities Service Refining Corp. v. National Bulk Carriers, Inc., 146 F. Supp. 418 (SD Tex. 1956). </s> [Footnote 6 Under the 1972 amendments, an employee injured on a vessel can bring an action against the vessel for negligence, but the vessel's liability will not be based upon the warranty of seaworthiness or breach thereof. And where the vessel has been held liable for negligence "the employer shall not be liable to the vessel for such damages directly or indirectly and any agreements or warranties to the contrary shall be void." 33 U.S.C. 905 (b) (1970 ed., Supp. II). The intent and effect of this amendment were to overrule this Court's decisions in Seas Shipping Co. v. Sieracki, 328 U.S. 85 (1946), and Ryan Stevedoring Co. v. Pan-Atlantic S. S. Corp., 350 U.S. 124 (1956), insofar as they made an employer circuitously liable for injuries to its employee, by allowing the employee to maintain an action for unseaworthiness against the vessel and allowing the vessel to maintain an action for indemnity against the employer. See H. R. Rep. No. 92-1441, pp. 4-8 (1972); S. Rep. No. 92-1125, pp. 8-12 (1972). </s> [417 U.S. 106, 116]

United States Supreme Court UNITED STATES v. W. T. GRANT CO.(1953) No. 532 Argued: April 9, 1953Decided: May 25, 1953 </s> Under 15 of the Clayton Act, the United States sued in a federal district court to enjoin an individual and six corporations from violating 8 through the holding by the individual of interlocking directorates in three pairs of competing corporations. Thereafter, the individual resigned his directorship in one out of each pair of corporations and filed affidavits disclaiming any intention of resuming such directorates. On motion of the defendants, the court then granted summary judgment dismissing the suit. Held: </s> 1. The power of the Federal Trade Commission under 11 to enforce 8 is not exclusive, and the court had jurisdiction under 15 to entertain the suit. Pp. 631-632. </s> 2. The termination of the interlocking directorates did not render the case moot. Pp. 632-633. </s> 3. The court did not abuse its discretion by refusing to grant injunctive relief. Pp. 633-636. </s> 112 F. Supp. 336, affirmed. </s> The District Court dismissed the Government's suit to enjoin violations of 8 of the Clayton Act, 15 U.S.C. 19. 112 F. Supp. 336. On direct appeal to this Court under 15 U.S.C. 29, affirmed, p. 636. </s> Victor H. Kramer argued the cause for the United States. With him on the brief were Acting Solicitor General Stern, Acting Assistant Attorney General Hodges and Daniel M. Friedman. </s> Eustace Seligman argued the cause for Hancock et al., appellees. With him on the brief was Howard T. Milman. </s> Abe Fortas argued the cause for the Kroger Company, appellee. With him on the brief was Norman Diamond. [345 U.S. 629, 630] Samuel J. Silverman was on the Statement Opposing Jurisdiction and Motion to Dismiss or Affirm. </s> Harry H. Wiggins and Harman Hawkins submitted on brief for S. H. Kress & Co., appellee. </s> MR. JUSTICE CLARK delivered the opinion of the Court. </s> For the first time since the enactment of the Clayton Act in 1914 the Court is called upon to consider 8's prohibitions against interlocking corporate directorates. 1 The Government appeals from judgments dismissing civil actions brought against Hancock and three pairs of corporations which he served as a director, W. T. Grant Co. and S. H. Kress & Co., Sears Roebuck & Co. and Bond Stores, Inc., and Kroger Co. and Jewel Tea Co., Inc. Alleging that the size and competitive relationship of each set of companies brought the interlocks within the reach of 8, the complaints asked the court to order the particular interlocks terminated and to enjoin future violations of 8 by the individual and corporate defendants. Soon after the complaints were filed, Hancock resigned from the boards of Kress, Kroger and Bond. Disclosing the resignations by affidavit, all of the defendants then moved to dismiss the actions as moot. Treated as motions for summary judgment, 2 they were granted by the District Judge. He concluded that there is not "the [345 U.S. 629, 631] slightest threat that the defendants will attempt any future activity in violation of Section 8 [if they have violated it already] . . . ." 112 F. Supp. 336, 338. The Government brought this direct appeal under 2 of the Expediting Act, 32 Stat. 823, as amended, 62 Stat. 989, 15 U.S.C. (Supp. V) 29, contending that the cases were not rendered moot by Hancock's resignations and that it was an abuse of discretion for the trial court to refuse any injunctive relief. </s> Appellees suggest, without arguing the point in extenso, that the judgment should be affirmed because 11 of the Clayton Act vests exclusive 8 enforcement powers in the Federal Trade Commission. 3 Section 11 does authorize the Commission to enforce 8. But any inference that administrative jurisdiction was intended to be exclusive falls before the plain words of 15: "The several district courts of the United States are hereby invested with jurisdiction to prevent and restrain violations of this [345 U.S. 629, 632] Act . . . ." 38 Stat. 736, 15 U.S.C. 25. And the cases have spoken of Congress' design to provide a scheme of dual enforcement for the Clayton Act. United States Alkali Export Assn. v. United States, 325 U.S. 196, 208 (1945); Standard Oil Co. v. United States, 337 U.S. 293, 310 , note 13 (1949). Appellees' failure to press the point denotes its merits. The District Court properly entertained the suits. </s> Both sides agree to the abstract proposition that voluntary cessation of allegedly illegal conduct does not deprive the tribunal of power to hear and determine the case, i. e., does not make the case moot. United States v. Trans-Missouri Freight Assn., 166 U.S. 290 (1897); Walling v. Helmerich & Payne, Inc., 323 U.S. 37 (1944); Hecht Co. v. Bowles, 321 U.S. 321 (1944). A controversy may remain to be settled in such circumstances, United States v. Aluminum Co. of America, 148 F.2d 416, 448 (1945), e. g., a dispute over the legality of the challenged practices. Walling v. Helmerich & Payne, Inc., supra; Carpenters Union v. Labor Board, 341 U.S. 707, 715 (1951). The defendant is free to return to his old ways. 4 This, together with a public interest in having the legality of the practices settled, militates against a mootness conclusion. United States v. Trans-Missouri Freight Assn., supra, at 309, 310. For to say that the case has become moot means that the defendant is entitled to a dismissal as a matter of right, Labor Board v. General Motors Corp., 179 F.2d 221 (1950). The courts have rightly refused to grant defendants such a powerful weapon against public law enforcement. 5 </s> [345 U.S. 629, 633] </s> The case may nevertheless be moot if the defendant can demonstrate that "there is no reasonable expectation that the wrong will be repeated." 6 The burden is a heavy one. Here the defendants told the court that the interlocks no longer existed and disclaimed any intention to revive them. Such a profession does not suffice to make a case moot although it is one of the factors to be considered in determining the appropriateness of granting an injunction against the now-discontinued acts. </s> Along with its power to hear the case, the court's power to grant injunctive relief survives discontinuance of the illegal conduct. Hecht Co. v. Bowles, supra; Goshen Mfg. Co. v. Myers Mfg. Co., 242 U.S. 202 (1916). The purpose of an injunction is to prevent future violations, Swift & Co. v. United States, 276 U.S. 311, 326 (1928), and, of course, it can be utilized even without a showing of past wrongs. But the moving party must satisfy the court that relief is needed. The necessary determination is that there exists some cognizable danger of recurrent violation, something more than the mere possibility which serves to keep the case alive. The chancellor's decision is based on all the circumstances; his discretion is necessarily broad and a strong showing of abuse must be made to reverse it. To be considered are the bona fides of the expressed intent to comply, the effectiveness of the discontinuance and, in some cases, the character of the past violations. </s> The facts relied on by the Government to show an abuse of discretion in this case are these: Hancock's three interlocking directorates viewed as three distinct violations, his failure to terminate them until after suit was [345 U.S. 629, 634] filed despite five years of administrative attempts to persuade him of their illegality, his express refusal to concede that the interlocks in question were illegal under the statute and his failure to promise not to commit similar violations in the future. </s> Were we sitting as a trial court, this showing might be persuasive. But the Government must demonstrate that there was no reasonable basis for the District Judge's decision. 7 In this we think it fails. An individual proclivity to violate the statute need not be inferred from the fact that three violations were charged, particularly since it is only recently that the Government has attempted systematic enforcement of 8. 8 The District Court was not dealing with a defendant who follows one adjudicated violation with others. The only material before the District Judge on the supposed five years of administrative persuasion could easily support an inference that during that time the defendant and the Department of Justice were each trying to determine the legality of his directorships. The Government's remedy under the statute was plain. Postponement of suit indicates doubt on the prosecutor's part as much as intransigence on the defendant's. How much contrition should be expected of a defendant is hard for us to say. This surely is a question better addressed to the discretion of the trial court. The same can be said of the limited disclaimer of future intent. </s> Assuming with the Government that the corporations were properly joined as defendants, 9 the conclusion that there was no abuse of discretion in refusing injunctive relief against Hancock applies a fortiori in their case. [345 U.S. 629, 635] None of the corporations appeared to have engaged in more than one alleged violation. And affidavits filed with the motions to dismiss indicated that these defendants were ignorant of the Government's interest in the interlocks until the suits were filed. Indeed the emphasis on this branch of the case is placed on the refusal of relief against Hancock. The failure to point to circumstances compelling further relief against the corporations speaks for itself. </s> Essentially, the Government's claim is that it was deprived of a trial on the relief issue. But at no time was objection raised to the procedure by which the case was handled. Of course summary judgment procedure could not have been employed were there a "genuine issue as to any material fact." Fed. Rules Civ. Proc. 56. However, after the defendants had moved to dismiss, the Government elected not to file any countervailing affidavits or amend its complaint and stated on oral argument that the truth of the defendants' affidavits was not questioned. To frame a factual dispute, that left the complaint, the only relevant paragraph of which reads: "16. The defendants have threatened to continue and will continue the aforesaid violation of Section 8 of the Clayton Act unless the relief prayed for herein is granted." (Emphasis added.) "The aforesaid violation[s]," the specific interlocks, had been voluntarily terminated and intention to resume them had been negatived under oath. As to the prayer that the defendants be enjoined from any future violations of 8, the complaint alleged no threatened violations other than those specifically charged. In these circumstances, the District Judge could decide that there was no significant threat of future violation and that there was no factual dispute about the existence of such a threat. </s> We conclude that, although the actions were not moot, no abuse of discretion has been demonstrated in the trial [345 U.S. 629, 636] court's refusal to award injunctive relief. Moreover, the court stated its dismissals "would not be a bar to a new suit in case possible violations arise in the future." The judgments are </s> Affirmed. </s> Footnotes [Footnote 1 "SEC. 8. . . . "No person at the same time shall be a director in any two or more corporations, any one of which has capital, surplus, and undivided profits aggregating more than $1,000,000, engaged in whole or in part in commerce, . . . if such corporations are or shall have been theretofore, by virtue of their business and location of operation, competitors, so that the elimination of competition by agreement between them would constitute a violation of any of the provisions of any of the antitrust laws. . . ." 38 Stat. 730, 15 U.S.C. 19. </s> [Footnote 2 Fed. Rules Civ. Proc. 12 (b) (6), 56. </s> [Footnote 3 "SEC. 11. That authority to enforce compliance with sections 2, 3, 7, and 8 of this Act by the persons respectively subject thereto is hereby vested . . . in the Federal Trade Commission where applicable to all other character of commerce to be exercised as follows: "Whenever the Commission . . . shall have reason to believe that any person is violating or has violated any of the provisions of sections 2, 3, 7, and 8 of this Act, it shall issue and serve upon such person and the Attorney General a complaint stating its charges in that respect, and containing a notice of hearing . . . . If upon such hearing the Commission . . . shall be of the opinion that any of the provisions of said sections have been or are being violated, it shall make a report in writing, in which it shall state its findings as to the facts, and shall issue and cause to be served on such person an order requiring such person to cease and desist from such violations, and divest itself of the stock, or other share capital, or assets, held or rid itself of the directors chosen contrary to the provisions of sections 7 and 8 of this Act, if any there be, in the manner and within the time fixed by said order. . . ." 64 Stat. 1126, 15 U.S.C., Supp. V, 21. </s> [Footnote 4 Cf. United States v. Hamburg-Amerikanische Packetfahrt-Actien Gesellschaft, 239 U.S. 466 (1916). </s> [Footnote 5 "When defendants are shown to have settled into a continuing practice or entered into a conspiracy violative of antitrust laws, courts will not assume that it has been abandoned without clear proof. . . . It is the duty of the courts to beware of efforts to defeat injunctive relief by protestations of repentance and reform, especially when abandonment seems timed to anticipate suit, and there is probability of resumption." United States v. Oregon State Medical Society, 343 U.S. 326, 333 (1952). </s> [Footnote 6 United States v. Aluminum Co. of America, supra, at p. 448. </s> [Footnote 7 Cf. United States v. United States Gypsum Co., 340 U.S. 76, 89 (1950), on review of particular antitrust decree provisions. </s> [Footnote 8 See Kramer, Interlocking Directorships and the Clayton Act After 35 Years, 59 Yale L. J. 1266. </s> [Footnote 9 We should not be understood as deciding whether corporations can violate 8 or, for other reasons, be enjoined under the statute. </s> MR. JUSTICE DOUGLAS, with whom MR. JUSTICE BLACK concurs, dissenting. </s> Monopoly and restraints of trade are sometimes the products of practices and devices as ingenious as the minds of men. Sometimes they follow a blunt and direct course as is involved in the acquisition of the assets of a competitor - a way of growth of monopoly power to which the decisions of the Court have given a powerful impetus and encouragement. See especially United States v. Columbia Steel Co., 334 U.S. 495 . More subtle are interlocking arrangements between directorates. This can accomplish disastrous consequences, as Mr. Justice Brandeis pointed out forty years ago. Interlocking directorates between companies which compete stifle the competition. Or to use the words of Mr. Justice Brandeis, the practice substitutes "the pull of privilege for the push of manhood." 1 Moreover, those entwined relations are the stuff out of which concentration of financial power over American industry was built and is maintained. Mr. Justice Brandeis gave one example: 2 </s> "They, the bankers, control the railroads, and controlling the railroads, they were able to control the issue and sale of securities. Being bankers, they bought those securities at a price which they had a [345 U.S. 629, 637] part in fixing or could have a part in fixing. They sold those securities, as bankers, to insurance companies in which they were able to exercise some control as directors. They got the money with which to buy those securities from railroads through their control of the great banking institutions, and then, in their capacity of having control of the railroads, they utilized that money to purchase from great corporations, like the Steel Corporation, what the railroads needed, and in their capacity as controlling other corporations they bought from the Steel Corporation again, and so on until we had the endless chain." </s> The web that is woven may tie many industries, insurance companies, and financial houses together into a vast and friendly alliance that takes the edge off competition. </s> That condition is aggravated here. The interlocking control in the present case is not indirect. Mr. Hancock served as a director for each of three sets of companies which, on the state of the pleadings before us, we must assume to have been competitive. The fact that he resigned under the pressure of these proceedings should not dispose of the case. We are dealing here with professionals whose technique for controlling enterprises and building empires was fully developed and well known long before Mr. Justice Brandeis was crying out against the evils of "the money trust." Mr. Hancock is and has been for some years a partner in the investment banking firm of Lehman Bros. In 1940 he testified that when Lehman Bros. did financing for a company it was their "traditional practice" to ask for representation on the board of directors. 3 </s> It therefore seems to me that a District Judge, faced with violations such as were involved here, would want [345 U.S. 629, 638] to know first, how investment bankers built their empires; second, how this particular firm built its own empire; third, the effect of these banker empires on competition between the companies which are tied to them. </s> The fact that the Lehman partner resigned to avoid a decision on the merits has little, if any, relevancy to the issue in the case, for we are here concerned with the proclivity of the house to indulge in the practice. </s> The relevant issues have never been weighed in this case. The District Court's ruling would be entitled to a presumption of validity if those various factors had been considered. But the District Court made no such considered judgment. It disposed of the case on the basis of mootness, a ruling now conceded to be erroneous. The case should go back for a consideration of the nature and extent of the web which this investment banking house has woven over industry and its effect on the "elimination of competition" within the meaning of 8 of the Clayton Act. 4 Unless we know that much, we are in no position to judge the service an injunction against future violations may do. Unless we know that much, we are in no position to carry out Woodrow Wilson's policy expressed in 8 of the Clayton Act that those interlocking directorates should be prevented which make "those who affect to compete in fact partners and masters of some whole field of business." Message, Joint Session of the Houses of Congress, Jan. 20, 1914. </s> [Footnote 1 See Brandeis, The Endless Chain, Harper's Weekly, Dec. 6, 1913, p. 13, quoted in Lief, The Brandeis Guide to the Modern World, p. 111. </s> [Footnote 2 See his testimony in Hearings, H. R. Committee on the Judiciary, 63d Cong., 2d Sess., on Trust Legislation, vol. 2, p. 922, quoted in Lief, op. cit., supra, note 1, p. 113. </s> [Footnote 3 Hearings, Temporary National Economic Committee, 76th Cong., 3d Sess., Pt. 24, p. 12400. </s> [Footnote 4 In United States v. Sears, Roebuck & Co., 111 F. Supp. 614, 616, decided April 28, 1953, the court ruled that Congress intended by 8 "to nip in the bud incipient violations of the antitrust laws by removing the opportunity or temptation to such violations through interlocking directorates." </s> [345 U.S. 629, 639]

United States Supreme Court PENN-CENTRAL MERGER CASES(1968) No. 778 Argued: Decided: January 15, 1968 </s> [Footnote * No. 778, Baltimore & Ohio Railroad Co. et al. v. United States et al.; No. 779, Norfolk & Western Railway Co. v. United States et al.; No. 830, Oscar Gruss & Son v. United States et al.; No. 831, New York, New Haven & Hartford Railroad Co. First Mortgage 4% Bondholders Committee et al. v. United States et al.; No. 832, Erie-Lackawanna Railroad Co. et al. v. United States et al.; No. 833, Boston & Maine Corp. v. United States et al.; No. 834, Reading Co. v. United States et al.; No. 835, City of Scranton et al. v. United States et al.; and No. 836, John Hancock Mutual Life Insurance Co. et al. v. United States et al., on appeal from the United States District Court for the Southern District of New York, argued December 4, 1967. No. 433, City of Pottsville v. United States et al., on appeal from the United States District Court for the Middle District of Pennsylvania; No. 663, Misc., Borough of Moosic v. United States District Court for the Middle District of Pennsylvania et al.; and No. 664, Misc., City of Scranton et al. v. United States District Court for the Middle District of Pennsylvania et al., on motions for leave to file petitions for writs of mandamus and/or certiorari to the United States District Court for the Middle District of Pennsylvania. </s> Last Term this Court concluded ( 386 U.S. 372 ) that the Interstate Commerce Commission (ICC) erred in permitting immediate consummation of the Penn-Central merger without determining the ultimate fate of the Erie-Lackawanna, Delaware & Hudson, and Boston & Maine railroads (the "protected roads"). The ICC then conducted proceedings on the petitions of those three lines for inclusion in the Norfolk & Western (N & W) system and ordered N & W to acquire the stock of the three "protected roads" on prescribed terms. In the remanded Penn-Central proceedings the ICC reconsidered certain protective conditions previously devised to aid the three roads, imposed amended protective conditions for the interim period between consummation of the Penn-Central merger and the protected lines' inclusion in a major system, and again authorized the immediate consummation of the Penn-Central merger. A three-judge district court for the Southern District of New York enjoined implementation of the merger order pending [389 U.S. 486, 487] review. Actions were also filed in that court to set aside the ICC's order to include the protected roads in the N & W system. Suits challenging the merger and inclusion orders in other courts were stayed to permit orderly disposition of the issues in the Southern District of New York. The District Court for the Southern District of New York dismissed all complaints attacking the merger and inclusion orders and sustained the decisions of the ICC. The Borough of Moosic filed an action in the Middle District of Pennsylvania to set aside the ICC's orders, in which action the City of Scranton and one Shapp intervened. The City of Pottsville's request to intervene was denied. The action was stayed and Moosic, Scranton and Shapp filed petitions for mandamus or certiorari seeking to challenge the stay, which has since been dissolved. Held: </s> 1. The ICC properly and lawfully discharged its duties with respect to the Penn-Central merger, as its findings and conclusions accord with 5 of the Interstate Commerce Act, as amended by the Transportation Act of 1940, and are supported by substantial evidence. Pp. 498-502. </s> (a) Under the congressional policy, set forth in the Act, of consolidating railroads into a "limited number of systems" competition is only one of many considerations in determining the public interest in the merger. Pp. 499-500. </s> (b) The evidence before the ICC, with negligible exceptions, attested to the probability of significant benefit from the merger, not only to the railroads and their investors, but also to shippers and the general public. P. 500. </s> (c) The ICC retains authority over reductions of service and facilities not specifically approved in the merger plans. P. 501. </s> (d) Rail service by the merged company will remain subject to restraining pressures and vigorous competition from other railroads and from motor, water, and air carriers. P. 501. </s> 2. The attack on the orders by certain municipalities and Shapp based on the ICC's alleged failure to consider or properly evaluate the adverse effect of the merger considered in light of the inclusion order does not warrant reversal of the judgment of the District Court for the Southern District of New York. Pp. 502-506. </s> (a) These complainants' petitions for mandamus or certiorari challenging the stay order of the District Court for the Middle District of Pennsylvania are dismissed as moot since the stay order has been dissolved. P. 503. [389 U.S. 486, 488] </s> (b) In its April 6, 1966, opinion approving the merger the ICC considered arguments made by participating communities and stated that the "merger will benefit rather than harm the Commonwealth." Pp. 503-504. </s> (c) Claims of specific injury resulting from reduction of competition by curtailment of service now provided by the "protected roads" may be asserted in appropriate proceedings when such curtailment is proposed. P. 504. </s> (d) The City of Scranton and Shapp were parties to the New York proceedings and the Borough of Moosic had adequate opportunity to join in that litigation following the stay of proceedings in the Pennsylvania court, and accordingly the New York court's decision which, with certain exceptions, is affirmed, precludes further judicial review of the issues on which it passes. Pp. 505-506. </s> (e) Since the proceedings in the Pennsylvania court are not before this Court, except for the petitions challenging the stay order which have been dismissed as moot, it will be that court's task to determine the effect of the present decision upon the proceedings before it. P. 506. </s> 3. The decision of the District Court for the Middle District of Pennsylvania denying intervention to the City of Pottsville is vacated. Pp. 506-507. </s> 4. The appeals of bondholders of the New York, New Haven & Hartford Railroad Company (NH), which has been under reorganization since 1961, challenging the ICC's order of November 21, 1967, providing terms for NH's inclusion in the Penn-Central system and for a loan arrangement to keep NH operating, are rejected. Pp. 507-511. </s> (a) The merits of the provisions of that order are not before this Court; they have not been reviewed by the bankruptcy court or by a statutory district court under the applicable statute. P. 509. </s> (b) Continuation of NH's operations can be realistically assured only upon effectuation of the merger, and while the rights of bondholders are entitled to respect, they do not dictate that vital rail operations be jettisoned for this reason alone. Pp. 510-511. [389 U.S. 486, 489] </s> (c) The bondholders' objections may be adjudicated in the reorganization or upon proper judicial review; and the ICC has retained jurisdiction to make further necessary orders. P. 511. </s> 5. The New York court's conclusion that the interim provisions for the "protected roads" are adequate and conform to the purposes insisted on by the ICC and which this Court sought to ensure by its decision last Term, is affirmed. Pp. 511-518. </s> (a) The protective conditions do not constitute a pooling arrangement within the meaning of the applicable statute; and the ICC's holding may be sustained by the substantial evidence that even if these provisions established a pooling arrangement, "this record clearly supports findings . . . that to protect these carriers clearly is in the interest of better service to the public" and "will not unduly restrain competition." Pp. 513-514. </s> (b) The ICC has reserved jurisdiction under which it could modify these provisions should improper traffic diversions develop or if the conditions should otherwise prove inequitable. Pp. 514-515. </s> (c) This Court's decision last Term was based on the ICC's failure to decide the question of the ultimate home of the "protected roads," and does not forbid consummation of the merger until the three roads are actually included in a larger system. Pp. 516-518. </s> 6. The ICC's refusal to permit the Reading Company to reopen the merger record and submit evidence supporting its claim for protection similar to that given the "protected roads" is sustained, without prejudice to any proceeding by Reading, based on actual experience, for relief from undue prejudice caused by the merger. Pp. 519-520. </s> 7. The New York court's disallowance of the claims of those appellants who challenge the ICC's order for inclusion of the "protected roads" in the N & W system is affirmed. Pp. 520-526. </s> (a) If, after inclusion of Erie-Lackawanna (E-L) in the N & W system by stock acquisition, E-L bondholders feel that N & W has engaged in conduct invading their rights, they may apply to the ICC for relief under its reserved jurisdiction. P. 522. </s> (b) The financial terms and property valuations involved in the inclusion of the "protected roads" were established by the ICC within the area of fairness and equity, were reviewed in [389 U.S. 486, 490] detail by the District Court and sustained, and there is no basis for reversing the judgment of that court. Pp. 523-526. </s> (c) The inclusion order has no compulsive or coercive effect on the roads to be included, and unless and until modified by the ICC, it remains available to the protected lines upon the terms specified. P. 526. </s> (d) The conditions prescribed by the ICC to protect employees of the roads to be included in the N & W system are sustained. They are similar to those set by the ICC for N & W's employees at the time of the N & W-Nickel Plate merger. P. 526. </s> Nos. 778, 779, 830-836, 279 F. Supp. 316, affirmed, subject to modifications and conditions stated in the opinion, and remanded; Nos. 663, Misc., and 664, Misc., petitions for mandamus or certiorari denied; No. 433, jurisdiction noted, 272 F. Supp. 513, vacated and remanded. </s> Howard J. Trienens, Myron S. Isaacs, Edward A. McDermott, Ernest R. von Starck, Gordon P. MacDougall, Malcolm Fooshee and Lester C. Migdal argued the cause for appellants in Nos. 778, 779, 830-836. </s> Solicitor General Griswold argued the cause for the United States et al. in Nos. 778, 779, 830-836. </s> Thomas D. Barr, Harry G. Silleck, Jr., Joseph Auerbach and Hugh B. Cox argued the cause for the remaining appellees in Nos. 778, 779, 830-836. </s> With Mr. Trienens on the briefs for Baltimore & Ohio Railroad Co. et al. were Richard J. Flynn, George L. Saunders, Jr., Lloyd N. Cutler, Daniel K. Mayers and Edward K. Wheeler. With Mr. Trienens on the briefs for Norfolk & Western Railway Co. were Messrs. Flynn, Cutler, Mayers and Albert Ritchie. With Mr. Isaacs on the briefs for Oscar Gruss & Son was Homer Kripke. With Mr. Migdal on the briefs for New York, New Haven & Hartford Railroad Co. First Mortgage 4% Bondholders Committee was Lawrence W. Pollack. With Mr. McDermott on the briefs for Boston & Maine Corp. was [389 U.S. 486, 491] James A. Belson. With Mr. von Starck on the briefs for Reading Co. was H. Merle Mulloy. With Mr. MacDougall on the briefs for the City of Scranton et al. were Harvey Gelb, Israel Packel and Leon H. Keyserling. Mr. MacDougall was on the briefs for the City of Pottsville and the Borough of Moosic. With Mr. Fooshee on the briefs for John Hancock Mutual Life Insurance Co. et al. were Carl E. Newton, M. Lauck Walton and Ben Vinar. </s> With Solicitor General Griswold on the briefs for the United States et al. were former Solicitor General Marshall, Assistant Attorney General Turner, Ralph S. Spritzer, Louis F. Claiborne, Howard E. Shapiro, Robert W. Ginnane, Fritz R. Kahn, Leonard S. Goodman, Betty Jo Christian and Jerome Nelson. </s> With Mr. Barr on the briefs for Erie-Lackawanna Railroad Co. were Harry H. Voigt, Eldon Olson, John M. Linsenmeyer and J. Kenneth Campbell. Mr. Silleck was on the briefs for Delaware & Hudson Railroad Corp. With Mr. Auerbach on the briefs for Smith et al., trustees of the property of New York, New Haven & Hartford Railroad Co., were James Wm. Moore, Robert W. Blanchette, Arthur Blasberg, Jr., Robert G. Bleakney, Jr., Morris Raker and Robert M. Peet. With Mr. Cox on the briefs for Pennsylvania Railroad Co. and New York Central Railroad Co. were Henry P. Sailer, Windsor F. Cousins, Ulrich Schweitzer, Gerald E. Dwyer, James B. Gray, Edward F. Butler and David J. Mountan, Jr. Louis J. Lefkowitz, Attorney General, Dunton F. Tynan, Assistant Solicitor General, Mortimer Sattler, Assistant Attorney General, and Walter J. Myskowski filed briefs for the State of New York. Arthur J. Sills, Attorney General, and William Gural, Deputy Attorney General, filed a brief for the State of New Jersey. Robert K. Killian, Attorney General of Connecticut, Samuel Kanell, Special Assistant Attorney General, William J. Lynch, [389 U.S. 486, 492] Elliot L. Richardson, Attorney General of Massachusetts, Howard M. Miller, Assistant Attorney General, Herbert F. DeSimone, Attorney General of Rhode Island, and Robert M. Schacht, Assistant Attorney General, filed a brief for their respective States. William G. Mahoney and William J. Hickey filed a brief for the Railway Labor Executives' Association. </s> William C. Sennett, Attorney General, Edward Friedman, Counsel General, and Edward Munce and Robert M. Harris, Assistant Attorneys General, filed a brief for the Commonwealth of Pennsylvania, as amicus curiae. </s> MR. JUSTICE FORTAS delivered the opinion of the Court. </s> These cases again bring before us problems arising from the program to merge the Pennsylvania and New York Central railroads and related problems proceeding from an Interstate Commerce Commission order that certain railroads be included in the Norfolk & Western (N & W) system. The merger and the inclusion orders are part of a vast reorganization of rail transportation implementing the congressional policy of encouraging consolidation of the Nation's railroads into a "limited number of systems." Section 407 of the Transportation Act of 1920, amending 5 (4) of the Interstate Commerce Act, 41 Stat. 481. That policy has been with us, in one form or another, for more than 45 years. The original idea of the 1920 Act, that the ICC would formulate a national plan of consolidation, proved unworkable. It ran into heavy opposition from carriers and eventually had to be abandoned. The 1920 Act was replaced by the Transportation Act of 1940, 54 Stat. 898. Section 5 (2) (b) of the Interstate Commerce Act, as amended by the 1940 Act, 54 Stat. 906, 49 U.S.C. 5 (2) (b), governed the Commission's examination of the present transactions. Under the 1940 Act, the initiation of [389 U.S. 486, 493] merger and consolidation proceedings is left to the carriers themselves, and the Commission possesses no power to compel carriers to merge. However, the congressional directive for a limited number of railroad systems has not been changed. The only change has been in the means of achieving that goal. See generally St. Joe Paper Co. v. Atlantic Coast Line R. Co., 347 U.S. 298, 315 -321 (Appendix) (1954). </s> The Pennsylvania and the New York Central dominate rail transportation in the Northeast. Their freight operations extend over some 20,000 miles of road in 14 States and Canada. They are the two largest passenger carrying railroads in the United States. In 1965 their combined operating revenue surpassed $1,500,000,000 and their combined net income was more than $75,000,000. As independent lines, Pennsylvania and New York Central are, to some extent, in direct competition for rail traffic. There are 32 urban areas in which the two lines are in competition with each other and in which no other rail facilities are available. The two roads operate at 160 common points or junctions and have a substantial amount of parallel trackage and routes. The proposed merger which the ICC has approved contemplates the unification of these vast roads and, as time goes on, the rationalization and elimination of some of the dual facilities and services in various areas and in various respects. The merger will result in "enormous savings in transit time." It is estimated that in eight years, the savings in expense will amount to more than $80,000,000 annually. See Baltimore & Ohio R. Co. v. United States, 386 U.S. 372, 379 -381 (1967). </s> At the same time the combination of these two roads will directly and adversely affect various smaller railroads in the service area because of the more effective competitive service that the combined system will offer and [389 U.S. 486, 494] because of the tendency of the combined roads, unless restrained by law, to favor their own system rather than to share traffic by interchange with nonsystem roads. </s> In brief, the antecedents of the issues before us are as follows: the Penn-Central merger has been under consideration by the parties and the Commission for about 10 years. It was preceded by the vast N & W-Nickel Plate merger, which the Commission approved in 1964. That transaction, which, it is anticipated, will eventually produce savings for the N & W system of over $29,000,000 annually, resulted in a large rail network covering some 7,000 miles of track and extending in the north from Des Moines and Kansas City to Buffalo and Pittsburgh, and in the southern tier from Cincinnati to Norfolk. See Norfolk & Western Railway Co. and New York, Chicago & St. Louis Railroad Co. - Merger, etc., 324 I. C. C. 1 (1964). The transaction was not presented to this Court for review. </s> In 1962 the parties to the Penn-Central transaction signed an agreement of merger including 36 rail carriers. The merger agreement did not include the New York, New Haven & Hartford Railroad (NH), although that road requested inclusion. </s> Following the merger agreement, the parties submitted the proposal to the Commission for approval under 5 (2) of the Interstate Commerce Act. Exhaustive hearings were held in which States, municipalities, railroads, shippers, and public bodies - some 200 parties in all - took part. The Commission's own staff participated extensively as did the Department of Justice acting for affected interests of the United States other than the regulatory functions of the Commission. All participants, with relatively minor exceptions to which we shall later advert, agreed that the merger itself would be in the public interest. There were sharp differences, however, with respect to certain issues. These primarily concerned the [389 U.S. 486, 495] provisions to be made for three smaller lines affected by the proposed merger: the Erie-Lackawanna (E-L), Delaware & Hudson (D & H), and Boston & Maine (B & M) railroads. The Commission approved immediate consummation of the merger, subject to a reservation of jurisdiction to establish protective provisions for the three roads. Pennsylvania Railroad Co. - Merger - New York Central Railroad Co., 327 I. C. C. 475 (1966). Its order was approved by a three-judge court in the Southern District of New York. Erie-Lackawanna R. Co. v. United States, 259 F. Supp. 964 (1966). </s> At the last Term of Court, we reversed. We noted that the Commission itself had found that the survival of the E-L, D & H, and B & M was essential to the public interest and that these roads would be so seriously affected by the competition of the merged company that they might not be able to survive unless adequate protective arrangements were made. In these circumstances we concluded that the Commission should have determined the means to preserve the "protected roads," on both an interim and a permanent basis, before permitting consummation of the merger. We expressly stated that we were not passing upon the validity of the merger or the "peripheral points posed by the various parties." Baltimore & Ohio R. Co. v. United States, supra, at 378. </s> The Court noted that in 1965 each of the three "protected roads" had filed applications for inclusion in the N & W system, and that these were pending before the Commission in the N & W-Nickel Plate merger case pursuant to the Commission's continuing jurisdiction over those proceedings. We further noted that the Commission, pursuant to its power under 5 of the Act to require as a condition of approval of a merger that other railroads be included in the merger, had obligated the merged N & W system to include the E-L, D & H, [389 U.S. 486, 496] and B & M if the Commission should so direct, upon such equitable terms as the Commission might prescribe. We stated that if the three protected roads were ordered to be included in the N & W system, "such action would provide the solution to the problem of the necessary and indispensable protection to the three railroads that the Commission found prerequisite to the merger." 386 U.S., at 390 . </s> In accordance with our remand of the Penn-Central merger case, the Commission conducted further proceedings in the N & W case on the pending petitions of the three roads. On June 9, 1967, it issued its decision to the effect that "inclusion of the petitioners in the N & W system is preferable to their inclusion in the Penn-Central," and ordered N & W to acquire the stock of the three roads on prescribed terms. Norfolk & Western Railway Co. and New York, Chicago & St. Louis Railroad Co. - Merger, etc., 330 I. C. C. 780, 796 (1967). At the same time, in the remanded Penn-Central merger proceedings, the Commission reconsidered certain protective conditions it had previously devised to aid the three roads, imposed amended protective conditions to operate in the interim between consummation of the Penn-Central merger and the protected lines' inclusion in a major railroad system, 1 and again authorized the immediate consummation of the Penn-Central merger. Pennsylvania Railroad Company - Merger - New York Central Railroad Company, 330 I. C. C. 328 (1967). </s> On July 3, 1967, on application of parties opposing the Commission's merger order, the three-judge District Court for the Southern District of New York enjoined implementation of that order pending the decision of that court on review. Actions were also filed by several [389 U.S. 486, 497] parties in the same court to set aside the order of the Commission requiring the N & W to include the three protected roads in its system. Suits challenging both the merger and inclusion orders were instituted in other courts, but were stayed so as to permit orderly disposition of the basic issues in the Southern District of New York. 2 After expedited proceedings in that court, all complaints attacking the merger and the inclusion orders were dismissed 3 and the decisions of the Interstate Commerce Commission in both the merger and the inclusion proceedings were sustained. 279 F. Supp. 316. Various of the parties then sought relief in this Court. Because of the importance and urgency of the matter, we granted a further stay of the merger order, consolidated all proceedings that were before us relating to the merger and inclusion decisions, and expedited consideration thereof. See post, p. 946. </s> We have before us nine appeals, on behalf of 17 parties, from the decision of the District Court. Also docketed are two related petitions for mandamus or certiorari to the District Court for the Middle District of Pennsylvania, and one appeal from that court. [389 U.S. 486, 498] </s> The particular contentions urged upon us, in this multiplicity of proceedings, are many and varied. In general, however, the issues may be articulated as follows: Has the mandate of this Court been fulfilled, in that appropriate provision has now been made for the three smaller roads? Are the terms of the order providing for inclusion of the protected roads in the N & W system fair and equitable and in the public interest? Did the District Court err in refusing to enjoin consummation of the Penn-Central merger? Has adequate provision been made for resolution of the "peripheral" issues presented by the parties, which would not be foreclosed by a decision authorizing the consummation of the merger and inclusion of the protected roads in the N & W? </s> I. THE MERGER DECISION. </s> A. IN GENERAL. </s> Most of the parties before us are in accord that the merger is in the public interest and should be consummated as promptly as possible. Those urging immediate consummation before this Court include the Department of Justice and the Commission, the States of Pennsylvania, Connecticut, Rhode Island, New York, Massachusetts, and New Jersey; the Railway Labor Executives' Association; the trustees of the NH; the Pennsylvania and New York Central railroads; B & M; and, in substance, the E-L, D & H, and N & W and its allies. While this consensus has reduced the attacks upon the merits of the merger to a minimum, considering the vast size and implications of the transaction, we must nevertheless address ourselves to the basic merits of the merger as well as to the specific objections that are before us. </s> With respect to the merits of the merger, however, our task is limited. We do not inquire whether the merger satisfies our own conception of the public interest. [389 U.S. 486, 499] Determination of the factors relevant to the public interest is entrusted by the law primarily to the Commission, subject to the standards of the governing statute. The judicial task is to determine whether the Commission has proceeded in accordance with law and whether its findings and conclusions accord with the statutory standards and are supported by substantial evidence. See, e. g., Illinois C. R. Co. v. Norfolk & W. R. Co., 385 U.S. 57, 69 (1966). </s> Section 5 of the Interstate Commerce Act, as amended by the Transportation Act of 1940, 54 Stat. 905, 49 U.S.C. 5, sets forth the national transportation policy that is to guide the Commission in its scrutiny of mergers proposed by railroads. The Commission is to approve such proposals, pursuant to the terms of 5 (2) (b) of that Act, when they are made upon just and reasonable terms and are "consistent with the public interest." In reaching its decision, the Commission is to give weight to a number of factors, such as: "(1) The effect of the proposed transaction upon adequate transportation service to the public; (2) the effect upon the public interest of the inclusion, or failure to include, other railroads in the territory involved in the proposed transaction; (3) the total fixed charges resulting from the proposed transaction; and (4) the interest of the carrier employees affected." 49 U.S.C. 5 (2) (c). </s> We find no basis for reversing the decision of the District Court that the Commission's approval of the merger is in compliance with law and the statutory standards, and is based on adequate findings supported by substantial evidence. We shall first discuss considerations which are basic to the statutory standards, and we shall then turn to certain particular objections which have been made. </s> It is, of course, true that the policy of Congress, set forth in the Transportation Act, to consolidate the railroads [389 U.S. 486, 500] of this Nation into a "limited number of systems" is a variation from our traditional national policy, reflected in the antitrust laws, of insisting upon the primacy of competition as the touchstone of economic regulation. Competition is merely one consideration here. See Seaboard Air Line R. Co. v. United States, 382 U.S. 154 (1965). This departure from the general and familiar standard of industrial regulation emphasizes the need for insistence that, before a rail merger is approved, there must be convincing evidence that it will serve the national interest and that terms are prescribed so that the congressional objective of a rail system serving the public more effectively and efficiently will be carried out. Obviously, not every merger or consolidation that may be agreed upon by private interests can pass the statutory tests. </s> Examination of the record and of the findings in the present case, however, satisfies us that the Commission has properly and lawfully discharged its duties with respect to the merits of the merger. In these elaborate and lengthy proceedings the Commission has considered evidence tendered by others and compiled by its own staff. Upon the aggressive suit of parties representing conflicting interests, it has analyzed every pertinent aspect of the merger and the inclusion order. It has weighed conflicting viewpoints on all of the fundamental issues and many that are tangential. As the Commission concluded, the evidence before it, with negligible exceptions, attested to the probability of significant benefit from the merger, not only to the railroads and their investors, but also to shippers and the general public. </s> The Commission carefully considered the implications of the fact that the Pennsylvania and the New York Central, as individual systems, have operated at a profit, and that there are reasonably good prospects for a continuation of such operation. But it was impressed by the fact [389 U.S. 486, 501] that, as individual systems, these profits are not sufficient to put the roads in a position to make improvements important to the national interest, including the maintenance of services which, although essential to the public, are not self-supporting, and furnishing assistance to other roads serving public needs in their general territory. The Commission emphasized that the merger would enable the unified company to "accelerate investments in transportation property and continually modernize plant and equipment . . . and provide more and better service." 327 I. C. C. 475, 501-502. And it pointed out that only by permitting the merger would it be possible for the Commission to compel Penn-Central to come to the rescue of the New Haven, as we shall describe. </s> With respect to the lessening of competition where it now exists between the roads to be merged, the Commission pointed out that it will retain continuing power over reductions of service and facilities which are not specifically approved in the merger plans. Such consolidations and abandonments will have to be presented to the Commission for its approval and may be subjected to public criticism and hearings and to conditions or disapproval. It also noted that the rail service by the merged company will remain subject to vigorous competition from other roads, including the N & W and the C & O-B & O systems, and from motor, water, and air carriers. The Commission summarized some of the factors which would act as a restraint upon the merged company as follows: </s> "The power of shippers to direct the routing, the availability of numerous routes in a dense network of interline routes, the influence of connecting carriers in preventing a deterioration in service on the joint routes in which they participate, the growing strength of the N & W and C & O-B & O systems, [389 U.S. 486, 502] all stand to provide a check against any abuse of economic power by the merged applicants." 327 I. C. C., at 514. </s> Considering the record, and the findings and analysis of the Commission, we see no basis for reversal of the District Court's decision that the Commission's "public interest" conclusions are adequately supported and are in accordance with law. We find no basis, consonant with the principles governing judicial review, for setting aside the Commission's determination, approved by the District Court, that the "public interest" directives of the governing statute have been reasonably satisfied: that the transaction is likely to have a beneficial and not an adverse effect upon transportation service to the public; and that, as we shall discuss, appropriate provisions have been made with respect to other railroads that are directly affected by the merger. </s> B. OBJECTIONS OF CERTAIN PENNSYLVANIA INTERESTS. </s> The only objectors in this Court to the public interest findings with respect to the merger are certain interests in the State of Pennsylvania. Appeal No. 835 was taken by the City of Scranton and Milton J. Shapp, a stockholder in the Pennsylvania Railroad Company. These parties filed complaints in the Southern District of New York challenging the Commission's original merger decision. After this Court's remand last Term, they were ordered by the District Court to file supplemental complaints. They declined to comply because, having intervened as plaintiffs in a proceeding challenging the merger in the Middle District of Pennsylvania, they chose to rely upon their asserted right to challenge the Commission's merger and inclusion decisions in the Pennsylvania action. After several warnings, their complaints in the New York court were dismissed, with prejudice. </s> The action in the Middle District of Pennsylvania, in which Shapp and Scranton intervened, was filed by the [389 U.S. 486, 503] Borough of Moosic on June 26, 1967, to set aside the Commission's orders, entered after our remand, approving the Penn-Central merger and the inclusion of the three protected roads in the N & W system. The Pennsylvania court stayed the Moosic proceeding by order of July 11, 1967, on the request of the United States and the Commission, for the sound purpose of preventing a multiplicity of litigation regarding the Commission's merger and inclusion decisions. Cf. Kansas City Southern R. Co. v. United States, 282 U.S. 760 (1931). Petitions for mandamus or certiorari, on behalf of Moosic (No. 663, Misc.) and Scranton and Shapp (No. 664, Misc.), seeking to challenge the stay of proceedings entered by the Pennsylvania court, have been filed in this Court. Since it now appears that the Middle District of Pennsylvania has dissolved its stay and commenced hearings, it would be pointless for us to review the stay order. Accordingly, the petitions for mandamus or certiorari are dismissed as moot. </s> Scranton, Shapp, and Moosic attack the Commission's merger and inclusion decisions along a broad front and claim error in the Commission's basic findings that the Penn-Central merger and inclusion of the protected lines in N & W are in the public interest. The thrust of this argument is that the Commission failed to consider or properly to evaluate the adverse effect of the Penn-Central merger, considered in light of the order requiring inclusion of the three protected roads in the N & W system, upon certain affected communities in the State of Pennsylvania. We do not agree. In its April 6, 1966, opinion approving the Penn-Central merger, the Commission examined the arguments made by participating communities in great detail and stated that the "contentions regarding the adverse effect of the merger on Pennsylvania's economy are not substantiated by the evidence. On this record, the prospects clearly import that the [389 U.S. 486, 504] merger will benefit rather than harm the Commonwealth." 327 I. C. C. 475, 492. At the time it made this finding, the Commission was committed to the proposition enunciated in the April 6, 1966, opinion, that the three protected roads would be included in one of the larger systems because of their inability to survive as independent lines. This Court in its decision last Term emphasized the importance of such inclusion. The Commission's conclusion that the net result of the merger would be beneficial to the State of Pennsylvania is bolstered by the strong position taken by the State in this Court that the decision of the District Court for the Southern District of New York should be affirmed. </s> As we discuss, infra, apart from the general and theoretical argument that the Penn-Central merger and the inclusion of the three roads in the N & W system may harm some Pennsylvania interests, complainants' fears of specific injury resulting from reduction of competition by specific curtailments of service now provided by the three protected lines may be asserted in appropriate proceedings when such curtailment is specifically proposed. </s> All other complaints of these parties relate broadly and generally to the fundamental and underlying economic problems that are involved in the merger and inclusion decisions: for example, the anticompetitive consequences of these decisions and the financial situation and prospects of the Pennsylvania and New York Central as independent lines. They were all the subject of extensive evidence and were analyzed at length by the Commission. In dismissing the complaints of Scranton and Shapp for failure to go forward, Judge Friendly noted that "[w]hile we entertain no doubt of the sufficiency of this [procedural] ground, we think it well to add that . . . we find no merit in the complaints of Shapp and The City of Scranton." The court remarked that, for the most part, "the attacks [of Scranton and Shapp] simply [389 U.S. 486, 505] represent disagreement with procedural and policy determinations which Congress has committed to the Commission." 279 F. Supp., at 326, n. 6. We find no reason to reverse the judgment of the District Court for the Southern District of New York for dismissing the complaints of Scranton and Shapp for failure to prosecute, or to set aside its conclusions as to the lack of merit of their claims, particularly in light of the limited function of judicial review of decisions such as those now before us and the opportunity open to them to challenge proposals which may be made for specific curtailment of service. </s> Scranton and Shapp, like the Borough of Moosic, wish now to go forward with their complaints in the Middle District of Pennsylvania, in which they seek an injunction against consummation of the Penn-Central merger and the effectiveness of the inclusion order. But Shapp and Scranton were parties to the New York proceedings and the Borough of Moosic had an adequate opportunity to join in the litigation in that court following the stay of proceedings in the Middle District of Pennsylvania. As we noted, supra, n. 2, all district courts in which actions to review the Commission's findings or for injunctive relief were filed continued their proceedings in deference to the New York court. All parties with standing to challenge the Commission's action might have joined in the New York proceedings. 4 In these circumstances, it necessarily follows that the decision of the New York court which, with certain exceptions, [389 U.S. 486, 506] we have affirmed, precludes further judicial review or adjudication of the issues upon which it passes. While it is therefore no longer open to the parties to challenge the Commission's approval of the Penn-Central merger and inclusion of the three protected lines in N & W, or its order that immediate consummation of the merger should be permitted, any claims for specific relief, such as particularized objections which may arise from specific proposals for consolidation or reduction of facilities or services, are unaffected by the decision in the present cases. Claims not precluded by the present decision may be pursued before the Commission or in the courts or both, as may be appropriate. This applies to Shapp, to the City of Scranton, and to the Borough of Moosic as well as to any other affected interests. The proceedings in the Middle District of Pennsylvania are not before us, except as we have dismissed as moot the petitions challenging that court's stay of its proceedings, and it will be the task of that court to determine the effect of the present decision upon the proceedings before it. Scranton, Shapp, and Moosic may, of course, seek such relief, if any, in that court as may be available and appropriate in light of our decision herein. </s> Finally, we must mention the City of Pottsville, which has appealed to this Court (No. 433). Pottsville's request to intervene in the Moosic action, upon a complaint similar to that of Moosic, was denied by the Middle District of Pennsylvania. Like Moosic, Pottsville had the opportunity - which it failed to seize - to litigate in the Southern District of New York. It appears that a principal basis for denial of Pottsville's request to intervene was the objection interposed by the United States and that this objection will, after our decision in the instant cases, be withdrawn. Upon this representation by the United States, without reference to or any attempt to consider the scope or content of the [389 U.S. 486, 507] action in which intervention is sought, or the issues, if any, which may remain for adjudication in that proceeding, we vacate the decision of the District Court for the Middle District of Pennsylvania denying intervention and remand Pottsville's case to that court for further consideration in light of our decision today. </s> C. OBJECTIONS OF THE NEW HAVEN'S BONDHOLDERS. </s> Two appeals, Nos. 830 and 831, have been taken on behalf of bondholders of the New York, New Haven and Hartford Railroad Company (NH). Since 1961 the NH has been in reorganization proceedings under 77 of the Bankruptcy Act, 11 U.S.C. 205. Despite the shelter of the bankruptcy court, it has been on the verge of financial collapse with the attendant risk to continuance of its rail service. The Commission has found that passenger as well as freight service by the NH is a national necessity and that termination of either would lead to distress in Connecticut, Massachusetts, and Rhode Island, and would severely damage New York City and the Nation generally. See New York, New Haven & Hartford Railroad Co., Trustees, Discontinuance of All Interstate Passenger Trains, 327 I. C. C. 151 (1966). </s> The NH competes in a relatively small part of its service area with the New York Central; but in the NH's financial condition, diversion of even a small amount of the Pennsylvania's connecting traffic from the NH to the Central would inflict consequential injury. Even without reference to the hazard of such diversion, inclusion of the NH in the Penn-Central combination is the only possibility that has been advanced by any of the parties - including the complaining bondholders - for continued operation of NH, short of the sheer speculation that the States concerned or the Federal Government might take over the road and its operations. [389 U.S. 486, 508] </s> In June 1962, with permission of the bankruptcy court, the New Haven's trustees requested the ICC to make provision under 5 (2) (d) of the Act for its inclusion in the proposed Penn-Central merger. When the Commission first considered the merger, it stated that "we will require all the New Haven railroad [both passenger and freight operations] to be included in the applicants' transaction"; and in its initial report it provided that "our approval of the merger is conditioned upon such inclusion." 327 I. C. C., at 524, 527. It required that the parties to the merger irrevocably stipulate that they would consent to inclusion upon such terms as might be agreed between the NH and the merger parties or, failing this agreement, upon such terms as the Commission might prescribe with the approval of the bankruptcy court. 327 I. C. C., at 553. </s> The trustees of the NH and the two companies conducted lengthy negotiations and finally arrived at an agreement as to inclusion terms dated April 21, 1966, amended October 4, 1966. In July 1967 the NH bankruptcy court warned that New Haven's cash depletion was "so serious that, if the present rate of loss continues, there will be insufficient left by late September to meet the payroll." Subsequent improvement of cash position permitted amendment of this dire prediction so that it was expected that operation could be financed to January 1968. </s> The Commission on August 3, 1967, directed the negotiation of a lease between the New Haven trustees and Penn and Central, to be "immediately available upon consummation of the Penn-Central merger." The parties, however, reported that preparation of a lease in time to meet the New Haven's needs was not possible. Thereupon, the Commission ordered a hearing as to whether a lease, loan, or other arrangement should be made to [389 U.S. 486, 509] assure the NH's continued operation until its acquisition by Penn-Central. On November 21, 1967, the Commission issued an order, subject to the approval of the bankruptcy court, providing (a) terms for the inclusion of the New Haven in the Penn-Central system upon effectuation of the Penn-Central merger; (b) for the Penn-Central to lend $25,000,000 to the New Haven over a three-year period in return for trustees' certificates; and (c) for the Penn-Central to bear 100% of the operating losses of the New Haven during the first year after the merger, 50% in the second, and 25% in the third, subject to a ceiling of $5,500,000 in each year on the total amount that Penn-Central could be required to absorb and subject to termination upon transfer of the New Haven assets. Acceptance of these terms by Penn and Central is a required condition of approval of their merger. The Commission has retained jurisdiction "for the purpose of making such further order or orders in these proceedings as may be necessary or appropriate." </s> The merits of these provisions are not before us. They have not been reviewed by the bankruptcy court or by a statutory district court under the applicable statute. The New Haven trustees and the States of Connecticut, Massachusetts, Rhode Island, and New York, as well as the United States, have filed briefs urging this Court to affirm approval of the Penn-Central merger, citing the urgent need for this in order to salvage the New Haven's operations. The attack, so far as the New Haven is involved, has been launched by Oscar Gruss & Son, a holder of approximately 14% of the NH's first and refunding mortgage bonds and by the Protective Committee for that issue, which intervened in Gruss' action below. (Nos. 830 and 831.) The claim is that because continued operation of the New Haven at a loss involves progressive erosion of the bondholders' security and [389 U.S. 486, 510] because the interim arrangement does not assure that Penn-Central will absorb all of the operating losses, we should not permit the Penn-Central merger to be consummated without simultaneous inclusion of the NH. In view of the probable difficulties in reaching agreement for inclusion of the NH which will satisfy its bondholders, it is virtually certain that this would mean lengthy delay during which the NH would not have access to the interim Penn-Central financial aid, and might be faced with collapse of its operations. </s> The Commission, after hearing the bondholders' contention, pointed out that "[i]t is a fundamental aspect of our free enterprise economy that private persons assume the risks attached to their investments, and the NH creditors can expect no less because the NH's properties are devoted to a public use. Indeed, the assistance the creditors are receiving from the States and would receive from Penn-Central through the sharing of operating losses would raise some of that burden from their shoulders." Pennsylvania Railroad Company - Merger - New York Central Railroad Company, 331 I. C. C. 643, 704 (1967). The District Court, putting aside questions of the standing of the NH bondholders to attack the Penn-Central merger, affirmed the Commission's rejection of the attack. </s> Continuation of the operations of the NH, which the Commission has found to be essential, can be assured only upon and after effectuation of the merger of the Penn-Central. The bondholders agree that to delay the Penn-Central merger until all proceedings necessary to include the NH have taken place may well mean the end of NH operations. The only realistic way to avoid this is to permit prompt consummation of the Penn-Central merger subject to appropriate conditions respecting the New Haven which Penn-Central will perforce accept by its act of merger. While the rights of [389 U.S. 486, 511] the bondholders are entitled to respect, they do not command Procrustean measures. They certainly do not dictate that rail operations vital to the Nation be jettisoned despite the availability of a feasible alternative. The public interest is not merely a pawn to be sacrificed for the strategic purposes or protection of a class of security holders whose interests may or may not be served by the destructive move. </s> While we reject the appeals of the NH bondholders, acceptance or rejection of the terms and conditions on behalf of the NH remains to be determined. The bondholders' objections may be registered and adjudicated in the bankruptcy court or upon judicial review as provided by law. Furthermore, as noted above, the Commission has retained jurisdiction to make further appropriate orders, if necessary, and has provided both that inclusion of the NH in Penn-Central and the making of the loan arrangement on such terms as are prescribed by the Commission, are conditions of approval of the merger. </s> We affirm the District Court's dismissal of the appeals in No. 830 and No. 831. </s> D. OBJECTIONS BASED ON THE PROVISIONS MADE FOR THE PROTECTED ROADS. </s> The N & W and roads associated with its position (the Chesapeake & Ohio (C & O), Baltimore & Ohio (B & O), and Western Maryland) have filed an appeal (No. 778). In brief and upon argument they stated that they do not object to the Penn-Central merger itself. Their stated position is that they oppose "immediate consummation" - that is prior to the actual inclusion of E-L, D & H, and B & M in the N & W. They also assail the specific operation and effect of the protective conditions and urge modifications thereof, and attack the basic legality of the conditions as a revenue pool. </s> The assailed protective provisions appear as Appendix G to the Commission's order in the merger case. They [389 U.S. 486, 512] are essentially of two types: traffic conditions that require the merged Penn-Central not to change routes, rates, or service in such a way as to divert traffic from the protected lines; and revenue indemnity conditions establishing a formula whereby Penn-Central is to compensate the protected lines in the event of adverse revenue results following the merger. 5 At the time the case was before us last Term, the Commission had withdrawn the revenue indemnity conditions pending further consideration. After our remand, the Commission further considered all the conditions, amended them in some respects not here material, and restored the revenue indemnity conditions. None of the protected roads has lodged objections against these provisions, nor has Penn-Central, and we affirm the District Court's conclusion that they appear to provide adequate interim protection for the three roads in conformity with the purposes insisted upon by the Commission and which this Court sought to ensure by its decision last Term. 6 </s> [389 U.S. 486, 513] </s> The objectors, however, attack the protective provisions on three grounds: First, they claim that the revenue indemnity provisions create a pooling agreement proscribed by 5 (1) of the Interstate Commerce Act, 49 U.S.C. 5 (1). Second, they say that the conditions give each of the protected lines an incentive to divert traffic to Penn-Central and vice versa. Such traffic diversion, they argue, would be at the expense of the objecting, "unprotected," lines. Third, they also assert that the shield which these provisions give the protected lines dilutes their incentive to join the N & W, permits them or some of them unfairly to "shop around" for better terms of inclusion, and may delay or abort their inclusion in the N & W. </s> We first address ourselves to the argument assailing the indemnity provisions as an illegal pool. As the District Court pointed out, the legislative history of 5 (1) leads to the conclusion that the section was not intended to apply to cases such as this one, in which the putative revenue pool is not the creation of private parties but is imposed by the Commission itself as a condition to consummation of a merger. Additionally, even if we consider the section applicable in these circumstances, there is no merit to the contention that the protective conditions must be struck down. Section 5 (1) proscribes "any contract, agreement, or combination [among] . . . carriers for the pooling or division of traffic, or of service, or of gross or net earnings, or of any portion thereof," unless the Commission finds that such pooling or division "will be in the interest of better service to the public or of economy in operation, and will not unduly restrain competition." [389 U.S. 486, 514] The Commission has held that, even if the conditions it established were a pooling arrangement, "this record clearly supports findings . . . that to protect these carriers clearly is `in the interest of better service to the public'" and "`will not unduly restrain competition.'" 330 I. C. C. 328, 345, n. 8. We agree with the District Court that this finding is supported by substantial evidence in the record. The interim protection of the protected lines is, in the Commission's view and under the decision of this Court last Term, essential. These conditions have been adopted for that purpose and we see no reason on the present record to conclude that they are unlawful. In the event that actual experience reveals that the provisions operate inequitably, recourse may be had to the Commission for relief pursuant to its reserved jurisdiction, subject to judicial review. </s> With respect to the contention that, regardless of whether the indemnity provisions constitute a revenue pool, those provisions will induce the protected carriers and Penn-Central improperly to divert traffic to one another and thereby to injure the unprotected roads, the District Court correctly concluded that there is no basis for rejecting the Commission's findings that neither the protected roads nor Penn-Central "would have either the motive or the ability to engage in such diversion on any substantial scale." 279 F. Supp., at 328. This conclusion was reached largely because of the ability of the N & W to retaliate and the limitations imposed by economic conditions and geographic facts. The Commission included in its findings "a provision that would prohibit the protected carriers from engaging in manipulation, with sanctions if they do," 330 I. C. C., at 355, and it specifically reserved jurisdiction to reopen proceedings and modify the protective conditions "in the light of experience." The Commission has also included a general [389 U.S. 486, 515] reservation of jurisdiction, under which it could revise the protective conditions. 7 If, in light of experience, improper traffic diversions should develop or, as noted above, if these conditions should otherwise prove to be inequitable, recourse may be had to the Commission under these reservations, subject to judicial review as appropriate. 8 </s> N & W expresses the fear that the traffic and revenue indemnity provisions will be so attractive that the three lines or some of them will prefer to continue under their umbrella, and will not promptly accept the Commission's ticket of admission to the N & W system. The Commission's reserved power appears to be adequate to deter such conduct if and when it becomes abusive. Further, one of the protected lines, the largest of the three (E-L), already has accepted, by stockholder vote, its inclusion in N & W. The board of directors of [389 U.S. 486, 516] another (D & H) has recommended to stockholders that inclusion be accepted. 9 In view of these circumstances, the fears expressed by N & W and the other protestants as to the dangers which perpetuation of these provisions will pose must be regarded as speculative. Clearly, if one or more of the protected roads should decline to accept the terms for inclusion specified by the Commission's order, the Commission could be called upon to examine, pursuant to its reserved power, the appropriate action to be taken to terminate or modify the interim protective provisions or otherwise to ensure that the shield supplied to the roads is not converted into a sword. The fears expressed by the protestors fall far short of furnishing a reason for rejecting the District Court's approval of the Commission's order that the Penn-Central merger be immediately consummated. Nor is there merit to N & W's contention that it was error for the Commission to fail to rule, now and forever, that the protected roads may not be included in Penn-Central. Whether or not such permission appears likely, there is no occasion for such contingent foreclosure. </s> Finally, we reject the contention that this Court's prior opinion in this matter now precludes us from permitting consummation of the merger until actual inclusion of the three roads in a larger system. With respect to the inclusion problem, our criticism of the original Commission order ran to the ICC's failure to decide the question over which it had undoubted jurisdiction and which [389 U.S. 486, 517] the Commission itself had found to be important to the public interest: the determination, so far as the Commission was empowered, of the ultimate home of the three roads. As this Court said: "we can only conclude that it is necessary that the [Commission's] decision as to the future of the protected railroads and their inclusion in a major system be decided prior to consummation of the Penn-Central merger." 386 U.S., at 390 . Our decision was not intended to require an indeterminate delay in the consummation of the merger, pending the resolution of the jockeying, negotiating, and fighting among all of the parties concerned and completion of the multitudinous procedures necessarily involved. This would place the public interest as well as the vast majority of the affected private interests at the mercy of decisions not merely of certain corporations whose interests are, in fact, secondary or derivative, but of classes of security holders. It was our intention that the public interest should be served with fairness to all private parties concerned, not that it should be the captive of parties some of whom are understandably engaged in maneuvering solely for the purpose of improving their competitive, strategic, or negotiating positions. </s> There is no provision of law by which the Commission or the courts may compel the three protected roads to accept inclusion in the N & W, as ordered by the Commission, or in any other system: Section 5 (2) (d) of the Act provides: </s> "The Commission shall have authority in the case of a proposed transaction under this paragraph involving a railroad or railroads, as a prerequisite to its approval of the proposed transaction, to require, upon equitable terms, the inclusion of another railroad or other railroads in the territory involved, upon petition by such railroad or railroads requesting [389 U.S. 486, 518] such inclusion, and upon a finding that such inclusion is consistent with the public interest." </s> It does not make provision for compelling an unwilling railroad which is not itself a party to a merger agreement to accept inclusion under the terms the Commission prescribes. Our opinion on the first appeals commanded the Commission to specify the opportunity provided for the smaller roads to be included in a major system, before approving consummation of the Penn-Central merger. It was not intended to give the protected corporations or the creditors or stockholders of each of them, or the N & W relying on their position, a veto over the public interest which the Commission has found to inhere in this merger. </s> We need not pause to discuss in detail N & W's contention that the Commission's findings do not support a conclusion that N & W must proceed with inclusion of fewer than all three of the protected roads, if, for example, B & M does not accept the terms. The original decision in the N & W-Nickel Plate merger proceedings clearly contemplates action by the Commission upon a "petition or petitions" of one or more of the three roads. 324 I. C. C. 1, 148. Separate petitions were in fact filed by each of these roads. As the District Court concluded, in light of the favorable action already taken by E-L stockholders and the D & H Board of Directors, the possibility of noninclusion of B & M would not be cause for setting aside the Commission's order. 10 </s> [389 U.S. 486, 519] </s> E. THE POSITION OF READING CO. </s> No. 834 is an appeal on behalf of the Reading railroad. Reading does not ask that the consummation of the merger be stayed. Its complaint is directed to the District Court's affirmance of the Commission's refusal to permit Reading to reopen the record and submit evidence in support of its claim that it should receive protective conditions similar to those the three "protected roads" were given in Appendix G to the merger order. </s> Reading is controlled by the C & O-B & O system through stock ownership. It has been suggested under the so-called Dereco plan, that the proposed N & W-C & O merger should include the Reading, as well as certain other small roads. Reading did not and does not ask for inclusion in Penn-Central, or for inclusion at this time in N & W along with E-L, D & H, and B & M. It did not offer evidence in the Penn-Central proceedings as to possible traffic diversion, until its tender made after the record had been closed. It now claims, however, that since much of its trackage is paralleled by lines of the Pennsylvania, it will be injured by the merger and should have the benefit of the Appendix G provisions. </s> Reading requests that we remand its case to the Commission for a decision as to whether protective conditions should be established for it. The Commission found, in its original report, that Reading would not be harmed [389 U.S. 486, 520] by the merger and that protective conditions were therefore unnecessary. This finding was based in part on a letter submitted by Reading itself to the Commonwealth of Pennsylvania and introduced, without objection from Reading, in evidence before the Commission. Only after the Commission issued its report did Reading object to the finding of no adverse impact upon it as a result of the merger, and then Reading's fear appears to have been chiefly that a finding of no adverse impact might prejudice its eventual attempt to join in the N & W-C & O merger. The Commission held Reading to its "original concession that the effect of the merger transaction (without the indemnity conditions) upon them would be inconsequential." 330 I. C. C. 328, 357. In response to Reading's specific concern, the Commission modified its finding of no adverse impact to a finding that no adverse impact had been shown. The District Court upheld this decision and, in addition, concluded that Reading's claim of substantial adverse impact as a result of the Penn-Central merger was unpersuasive on the merits. </s> Ordinarily, we would, without more, concur with the District Court's view. Because of the vastness and complexity of this matter, however, and in order to ensure that whatever substance there may be to Reading's claim is not sacrificed, we sustain the Commission's denial of Reading's submission on condition that it is without prejudice to any proceeding which Reading may hereafter institute, based on actual experience, for relief from undue prejudice caused by the merger. </s> II. INCLUSION DECISION. </s> Three appeals, No. 779, No. 833, and No. 836, relate to the Commission's order, entered in the N & W-Nickel Plate merger proceedings, prescribing that N & W accept inclusion of the E-L, D & H, and B & M in the N & W system and specifying the terms thereof. Norfolk & [389 U.S. 486, 521] Western Railway Co. and New York, Chicago & St. Louis Railroad Co. - Merger, etc., 324 I. C. C. 1 (1964), supplemented, 330 I. C. C. 780, reconsidered, 331 I. C. C. 22 (1967). In 1964 the Commission approved the N & W-Nickel Plate merger subject, among other conditions, to the Commission's retention of jurisdiction for five years to permit the filing of petitions by E-L, D & H, and B & M for inclusion in the N & W system. The Commission's approval was also subject to the condition that N & W give its irrevocable consent to inclusion of the three roads on terms that the ICC would itself prescribe in the absence of agreement among the affected parties. 324 I. C. C. 1, 148. The three lines in due course filed petitions for inclusion. Hearings were held, and, on June 9, 1967, following our remand in the Penn-Central merger case, the Commission made findings and entered its order requiring N & W to include the three roads in its system under terms it prescribed. </s> Appellants are the N & W, the B & M, and a number of E-L bondholders. As we shall discuss, only the N & W appeal raises issues which go broadly to the merits of the Commission's order implementing N & W's duty to accept inclusion of the three roads. B & M seeks remand on the grounds that the terms fixed by the Commission for N & W's offer to acquire the stock of the B & M are inadequate to reflect B & M's value as part of the N & W system. The third appeal, brought by E-L bondholders, turns on the question whether the Commission should have specifically retained jurisdiction to protect the E-L bondholders in the event that N & W attempts after inclusion improperly to divert E-L traffic to itself. We affirm the District Court's action in disallowing the claims of all of these appellants. Reference is made to preceding sections of this opinion for discussion of the bearing of claims respecting the inclusion order upon the Penn-Central proceeding. [389 U.S. 486, 522] </s> We first address ourselves to the demands of E-L bondholders for assurance that the reservation of jurisdiction by the Commission would enable them to obtain consideration of unwarranted traffic diversion by N & W, if that should develop. Since N & W will be acquiring stock control of E-L and E-L's bondholders will look to E-L's fortunes for payment and security, the bondholders fear that N & W may not be entirely solicitous of E-L's welfare. Appellants themselves note that the Commission, in adopting the report and order of the officer presiding over the original hearing, has reserved jurisdiction "to receive such petitions, institute such investigations, and make such orders to accomplish the objectives and purposes of the plan for inclusion and other terms and conditions prescribed herein . . . ." The Commission has also retained jurisdiction "for the purpose of making such further order or orders in these proceedings as may be necessary or appropriate, in addition to those orders under jurisdiction expressly retained in the prior reports and orders of the Commission and to those orders which may be issued under section 5 (9) of the Interstate Commerce Act." 11 Supplemental Order issued June 9, 1967. We have no doubt that if, after inclusion of E-L, N & W should engage in a course of conduct which invades the rights of E-L bondholders, the bondholders may apply to the Commission for relief and the Commission's reservation of jurisdiction will enable it to rule upon this complaint and to grant relief, if warranted, subject to judicial review. </s> The other two appeals require somewhat more extended comment. We first note that our opinion at the [389 U.S. 486, 523] last Term found adequate support for the Commission's conclusion that the public interest requires inclusion of the three roads in a larger system. As we have previously noted, see supra, at 503-505, the Commission's findings and order with respect to the "public interest considerations" involved in the inclusion of these lines in the N & W system are in conformity with the statute and are supported by substantial evidence. </s> The attack of N & W and B & M upon the Commission's order centers, not upon the fundamental issues, but upon the particular terms of that order. In brief, the Commission has provided that N & W will purchase stock control of E-L and B & M through wholly owned subsidiaries. It has fixed the basis for such purchase in relation to the experienced income of the lines, their earnings having been adjusted for various factors including savings and gains which the Commission found would result from inclusion in the N & W system. The Commission has satisfied itself that traffic losses to the merged Penn-Central would be offset by benefits to N & W not otherwise taken into account. The shareholders of these roads are to receive stock of a newly created subsidiary of N & W, which will eventually be convertible into N & W common stock. In the case of D & H, the means of valuation was the same as for the other protected lines, but N & W is to pay for D & H assets either in cash or with a note and N & W stock. </s> This is the first time in the Commission's history that it has undertaken to "replace the bargaining session." It did so here pursuant to the N & W stipulation, which was accepted by N & W as a condition to the N & W-Nickel Plate merger, and in response to the exigencies of the situation emphasized by this Court's decision at our last Term. </s> As we have noted above, the E-L stockholders have voted approval of the inclusion terms. The D & H Board [389 U.S. 486, 524] of Directors has recommended approval to its stockholders. N & W complains that the price set for inclusion of the three lines is too high and that some other aspects of inclusion are arbitrary. B & M, on the other hand, complains that the price set for its inclusion is too low. The District Court affirmed the Commission's findings and conclusions, and in the exercise of our reviewing function we find no basis for reversing that court's decision. </s> The method for determining the value and exchange ratio which the Commission adopted, and which we have briefly described, is not attacked. It is a method that is reasonably conventional and generally accepted, always subject to the modifications and adaptations required by individual cases, and we see no basis for holding it erroneous as a matter of law. The attack that is launched is upon factors of particularized judgment and the weight to be ascribed to various values. These are matters as to which reasonable men may reasonably differ in detail, and we see no basis for setting aside the Commission's conclusions as sustained by the District Court. In setting inclusion terms, the Commission was dealing with complicated and elusive predictions about probable traffic patterns following the Penn-Central merger and the inclusion decision. We are no more competent than the Commission and the District Court to ascertain the accuracy of those predictions. We deem it our function, in the complexities of cases such as these, to review the judgment of the District Court with respect to agency actions to make certain that those actions are based upon substantial evidence and to guard against the possibility of gross error or unfairness. If we find those conclusions to be equitable and rational, it is not for us to second-guess each step in the Commission's process of deliberation. [389 U.S. 486, 525] </s> N & W's attack upon the inclusion order centers upon its disagreement with the Commission's findings as to prospective earnings of the three roads as part of the N & W system. It argues that the Commission had no basis for concluding that the earnings of E-L, D & H, and B & M, as subsidiaries of N & W, would be adequate to assure their "viability." 12 It asserts that the Commission has made various invalid adjustments of actual earnings and failed to make others. This, N & W says, is "the principal area of dispute in these proceedings." </s> On the other hand, the B & M contends that the Commission's findings substantially underestimate the savings which should be credited to it as an earnings adjustment, and that, therefore, the terms for its inclusion are unjust. Specifically, it urges that the Commission underestimated the probable amount of savings resulting from N & W control and the coordination of operations and equipment repair facilities and reduction of administrative expenses. The Commission, however, accepted and relied on figures submitted by B & M's own witness. B & M now assails these figures, but obviously the Commission was entitled to rely upon them. </s> The District Court examined in some detail the contentions of the parties attacking the financial terms of the inclusion order. We have reviewed the findings of [389 U.S. 486, 526] the Commission in light of the evidence of record and the District Court's analysis, and we find no basis for reversing the District Court's judgment. The terms fixed by the Commission are clearly within the area of fairness and equity. Although B & M argues forcefully that the Commission underestimated the savings that should redound to its credit, we cannot say in the circumstances that the order should be reversed and remanded in this respect. It must be noted, as we have discussed in connection with appeals relating to the Penn-Central merger decision, that the inclusion order has no compulsive or coercive effect upon the roads to be included. Unless and until modified by the Commission, it remains available to the protected lines upon the terms which it specifies and which the District Court found to be fair and equitable. 13 </s> Only one other point of the N & W attack upon the inclusion order requires comment. N & W objects to the conditions prescribed by the Commission to protect the interests of the employees affected by the order. We note that those conditions, protecting employees of the protected lines, are the same as the conditions set by the Commission for N & W's employees at the time of the N & W-Nickel Plate merger. As the District Court held, "[t]he Commission acted within its powers in requiring N & W to protect employees of the three roads as thoroughly as those of the roads it was permitted to absorb only on the condition that it would accept these lines if the Commission so directed." 279 F. Supp., at 337. 14 </s> [389 U.S. 486, 527] </s> III. CONCLUSION. </s> The judgment of the District Court for the Southern District of New York is affirmed, subject to the modifications and conditions stated in this opinion. Nos. 778, 779, 830-836 are remanded to that court for the entry of such orders and for such further action as may be consistent with our opinion and judgment herein and as may be appropriate with respect to the exercise of that court's jurisdiction in the premises. </s> The applications of Scranton, Shapp, and Moosic for mandamus or certiorari (Nos. 663, Misc. and 664, Misc.) are denied without prejudice to further proceedings in the District Court for the Middle District of Pennsylvania, consistent with this opinion. </s> In No. 433, jurisdiction is noted, the judgment of the Middle District of Pennsylvania with respect to Pottsville [389 U.S. 486, 528] is vacated, and the cause is remanded to that court for further proceedings in light of our decision today. </s> MR. JUSTICE MARSHALL took no part in the consideration or decision of these cases. </s> Footnotes [Footnote 1 See infra, at 511-512. </s> [Footnote 2 See Memorandum Order of the District Court, issued July 3, 1967. Circuit Judge Friendly, for the District Court, noted that "litigation in six or more different district courts has seemingly been averted and all issues concentrated in a single court of first instance." We agree that this is commendable. If review of the inclusion decision and of the merger decision were in different courts, the difficulties presented by these cases would be multiplied. </s> [Footnote 3 The Central Railroad of New Jersey (CNJ) asked and was granted a dispensation from the District Court's schedule for briefs and argument. The CNJ has reserved the right to assert that the Commission's order should contain certain protective conditions for it. It has waived the right to argue that the Penn-Central merger should be delayed. The complaint of the CNJ was not dismissed with the others and the Southern District of New York has yet to consider the position of this line. </s> [Footnote 4 The process of the New York court ran throughout the Nation. 28 U.S.C. 2321. In addition, the United States waived possible objections on venue grounds to appearances by any party in the New York litigation. In these circumstances, it would be senseless to permit parties seeking to challenge the merger and the inclusion orders to bring numerous suits in many different district courts. See, for the provision governing review of orders of administrative agencies in the courts of appeals, 28 U.S.C. 2112. </s> [Footnote 5 The formula is directed to compensation for an approximation of the revenues which may be lost by the protected lines to Penn-Central. Revenue ratios are determined by dividing the combined 1965 freight revenues of Penn and Central into the 1965 freight revenues of each of the protected lines. For any given subsequent year, the total freight revenue of the merged Penn-Central and of the protected line in question is then multiplied by that line's revenue ratio. The actual earned freight revenue of the protected line for the given year is then subtracted from the figure obtained by this multiplication. If the result is a positive figure, it is multiplied by an indemnification ratio of 50%, which yields the total amount of indemnity owed. The Commission has indicated that the indemnity conditions are to supplement the traffic conditions, not to replace them; Penn-Central is not given a choice of obeying the traffic conditions or paying liquidated damages, in the form of indemnity. </s> [Footnote 6 E-L and D & H unsuccessfully sought from the Commission a provision for "capital loss indemnification" to be paid them by Penn-Central in the event that the price for their inclusion in N & W was reduced because of the effect of the Penn-Central merger on their [389 U.S. 486, 513] traffic. Although E-L and D & H have presented an appeal (No. 832) on this issue to this Court, the appeal is contingent on our reversal of the Commission's inclusion terms or our upsetting of the protective conditions. Because we today make neither of these decisions, the appeal of E-L and D & H is dismissed. </s> [Footnote 7 In establishing the protective conditions, the Commission has ordered "[t]hat the jurisdiction of this Commission be, and it is hereby, retained for the purpose of making such further order or orders in these proceedings as may be necessary or appropriate, in addition to those orders under jurisdiction expressly retained in the prior reports and orders of the Commission and to those orders which may be issued under section 5 (9) of the Interstate Commerce Act." See n. 11, infra. </s> [Footnote 8 The "protected period" during which the conditions are to be in effect will run from the date of consummation of the merger until the date of actual "inclusion of [the] protected carrier in a Railway System which includes Norfolk & Western Railway Company or any successor thereto, or in the Railway System to be operated by the merged company . . .; provided, however, that if, as to any such protected carrier, no such inclusion shall have been effected within 1 year [of] the final determination of (i) the petitions which such protected carrier now has pending for inclusion in such Railway Systems, and (ii) any new or supplemental petition or petitions which such protected carrier may seasonably file for inclusion in any such Railway System then, as to that protected carrier, the protective period shall end when this Commission shall so order." 330 I. C. C., at 362. </s> [Footnote 9 N & W places emphasis on a letter written to stockholders by the President of D & H, who is a director and a large stockholder, to the effect that he is formulating an alternative proposal to inclusion in the N & W. But at oral argument counsel for D & H reiterated that road's desire that this Court affirm the inclusion order and the merger judgment, and there is no basis in the record before us for concluding that the D & H Board of Directors has changed its position. </s> [Footnote 10 The remaining arguments by appellants in No. 778 may be briefly noted and answered. There is no substance to appellants' contention that the Commission failed to find that the consummation of the merger under the protective conditions would be in the public interest. As the District Court concluded, this finding is "implicit in the very concept of devising conditions permitting consummation prior to actual inclusion of the protected roads in a major system [389 U.S. 486, 519] and was made explicit when the Commission said that only `some of the merger benefits' would be prevented and that the conditions would not work `an undue hardship upon applicants either in their operations or merger implementation.' 327 I. C. C., at 532; see also 330 I. C. C., at 361. To deny evidentiary basis for this finding would defy common sense." 279 F. Supp., at 329. And appellants' attack upon the District Court's opinion on the basis of SEC v. Chenery Corp., 332 U.S. 194 (1947), totally misconceives the limited office of that decision. See n. 14, infra. </s> [Footnote 11 Section 5 (9) provides that "the Commission may from time to time, for good cause shown, make such orders, supplemental to any order made (under its power to authorize railroad consolidations) . . . as it may deem necessary or appropriate." </s> [Footnote 12 N & W contends that, for this reason, the Commission should have considered alternatives to inclusion as possible means of saving the service of the protected lines. We believe N & W is considerably embarrassed, in making these arguments, by the fact that the Commission has contemplated inclusion of the protected lines in N & W ever since 1964, when N & W was permitted to consummate its highly successful merger with the Nickel Plate, and when N & W consented in principle to the inclusion of the three roads in N & W. The protected lines were scarcely faring better in 1964 than they are now. Despite the Commission's recognition that these lines are "weak," it has found their inclusion in N & W to be in the public interest. </s> [Footnote 13 There is no substance to N & W's argument that the Commission failed to consider the possibility that one or more of the protected lines would not join N & W. The Commission plainly did consider this possibility. It was not required to set a scale of terms for inclusion depending on the various hypothetical consequences of its order. </s> [Footnote 14 We reject N & W's argument that the District Court was guilty of a violation of the rule of SEC v. Chenery Corp., 332 U.S. 194 </s> [389 U.S. 486, 527] (1947). N & W attempts to extend the principle of that case far beyond its limits. But even if we were to accept N & W's construction of the case, N & W's conclusion would not follow. N & W relies on a statement by the District Court to the effect that "our discussion has revealed many ways by which, in our view, the Commission could support terms as favorable as it has established even if the Court should have held some of its subsidiary findings to be insufficient." 279 F. Supp., at 355. But that statement does not indicate that the court was basing its affirmance of the Commission on grounds other than those relied on by the Commission itself. On the contrary, the District Court appears to have agreed in substance with all the major findings of the Commission. To the Commission's analysis it added several points that it believed would also support the Commission's conclusions. The ultimate terms for inclusion were, of necessity, approximations based on the probable value of the protected lines to N & W. The District Court found that these values had been properly computed but that, even if they were not, N & W was protected by several adjustments that had been made by the Commission in order to ensure that inclusion was fair to N & W. </s> MR. JUSTICE DOUGLAS, dissenting in part in Nos. 433, 663, Misc., and 664, Misc. </s> In my opinion, these cases present important questions concerning the "public interest" which I feel the Commission should be required to answer before judicial review can be feasible. </s> The Pennsylvania District Court proceedings were initiated by the Borough of Moosic (petitioner in No. 663, Misc.), located in Lackawanna County, Pennsylvania. The Borough brought its action on June 26, 1967, to annul and set aside the orders of the Commission authorizing the Penn-Central merger and requiring the inclusion of E-L, D & H, and B & M in the N & W system. 1 Those orders by the Commission had been issued on June 9, 1967, following our remand last Term on March 27, 1967. Baltimore & Ohio R. Co. v. United States, 386 U.S. 372 . Moosic, whose complaint is dated June 26, 1967, was joined by intervenors City of Scranton and Milton J. Shapp (petitioners in No. 664, Misc.) 2 and [389 U.S. 486, 529] the City of Pottsville (appellant in No. 433). 3 On July 11, the Court granted the applications of Shapp and the City of Scranton to intervene, but denied that of the City of Pottsville. </s> Before the Pennsylvania action was initiated, the District Court for the Southern District of New York, in which the original action to set aside the Commission's order allowing consummation of the Penn-Central merger had been filed (i. e., the action reviewed by this Court [389 U.S. 486, 530] last Term), was asked to enjoin consummation of the merger authorized by the Commission's June 9 order until the validity of the inclusion order had been finally determined. On July 3 the New York court temporarily enjoined the merger, and ordered all plaintiffs and intervening plaintiffs in the original action to file supplemental complaints by July 17, attacking the June 9, 1967, order of the Commission in the Penn-Central Merger Case, or their complaints would be dismissed with prejudice. </s> Also before the Pennsylvania action was filed, N & W (on June 13) filed an action in a federal district court in Virginia to set aside the inclusion order; and on June 23, D & H filed a similar action in the Southern District of New York. Other interested parties had apparently indicated that they were contemplating filing additional actions in still other district courts, and the Government and the Commission urged all parties to present their challenges to the original District Court in New York. In a hearing before that court on June 28, two days after the filing of Moosic's complaint in Pennsylvania, it was stated that no objections to venue would be interposed by the Government against any party choosing to litigate in the New York forum. Thereafter, the United States and the Commission moved in the Virginia and Pennsylvania courts to stay proceedings pending the final determination of the New York actions. The Virginia court continued its proceedings until after the decision of the New York court should become available to it. The Pennsylvania court issued a stay until October 1, 1967. </s> Upon failing twice to have the stay order dissolved by the Pennsylvania court, the Borough of Moosic and Shapp and the City of Scranton petitioned this Court to vacate the stay order and command the District Court [389 U.S. 486, 531] to proceed with their complaints. The Court today dismisses those two petitions. 4 </s> The three communities involved - the Borough of Moosic and the cities of Scranton and Pottsville, make a broadside attack on many aspects of the merger in their actions in the Pennsylvania court. Among those many issues tendered is at least one that has never been considered by any court, namely, whether the inclusion of E-L, D & H, and B & M into N & W would have such a serious detrimental impact on their communities - in terms of services, employment, and business - as to make their inclusion against the "public interest" within the meaning of the Interstate Commerce Act. The communities also contend that they have not been afforded an adequate opportunity to present their arguments to the Commission. </s> This Court quotes the conclusion of the Commission that the "contentions regarding the adverse effect of the merger on Pennsylvania's economy are not substantiated by the evidence. On this record, the prospects clearly import that the merger will benefit rather than harm the Commonwealth." This statement, however, is taken from an earlier (April 6, 1966) opinion by [389 U.S. 486, 532] the Commission in the merger case. Pennsylvania Railroad Co. - Merger - New York Central Railroad Co., Finance Docket No. 21989, 327 I. C. C. 475, 492. In other words, the Commission was there directing its attention to the effects which the merger of the Penn and Central railroads itself would have on various Pennsylvania communities. It was not concerned with the community impact of the inclusion of E-L, D & H, and B & M into the N & W system. That issue was not then even before the Commission, but was presented only at a later date in the separately docketed N & W Inclusion case, in which the Commission issued its order on June 9, 1967. Norfolk & Western Railway Co. and New York, Chicago & St. Louis Railroad Co. - Merger, etc., Finance Docket No. 21510, 330 I. C. C. 780. </s> The Court seems to suggest that because the Commission in its April 6, 1966, order also contemplated that E-L, D & H, and B & M would eventually be included in some major system, it must have been taking into account the impact of such inclusion on the communities served by those roads when it made the statement quoted above. But this assumption flies in the face of the Commission's case-by-case approach. It ignores the fact that the evidence before the Commission in Finance Docket No. 21989 (the Penn-Central Merger Case) relating to the community impact of the Penn-Central merger was not addressed to the impact which the eventual inclusion of E-L, D & H, and B & M into N & W would have on communities served by those roads. See Recommended Report, Finance Docket No. 21989, at 229-286; 327 I. C. C. 475, 489-493. And if the Court were correct in divining the Commission's hidden intent, I would have no doubt that the Commission did not provide adequate opportunity to the communities which would be affected by the inclusion of the three roads in any major system to participate in the proceedings. Infra, at 535-536. [389 U.S. 486, 533] </s> Congress has, of course, committed all questions of policy under 5 to the Commission; but on judicial review, we must be able to say that the Commission has made the necessary findings in determining policy - in this instance, that the inclusion will be in the "public interest." I do not find in the opinion of the District Court, or in the Court's opinion, a searching inquiry into the Commission's conclusions regarding the community impact of its orders in the Inclusion Case to ascertain whether they are adequately supported by "basic or essential findings." Florida v. United States, 282 U.S. 194, 215 ; United States v. Carolina Carriers Corp., 315 U.S. 475, 489 . A few words about the community impact of this case - the Inclusion Case - will point up what I mean. </s> In the Recommended Report of Commissioner Webb, served on December 22, 1966, in the Inclusion Case, scant attention was paid to the issues tendered by the community interests. Commissioner Webb noted that many representatives of various shipper and community interests testified concerning the vital need for the services of the three roads. He then disposed of the assertions of Milton J. Shapp and certain Pennsylvania interests in one sentence: </s> "Contrary to the assertions of Shapp and other Pennsylvania interests, intramodal competition would not be significantly lessened." </s> An accompanying footnote reads: </s> "Shapp's contentions that competition would be substantially curtailed and that rail facilities in the eastern and western portions of Pennsylvania would be contracted are predicated on the merger of both E-L and D & H into N & W. However, the merger of E-L into N & W is not authorized herein [only control was authorized]. Moosic submitted testimony [389 U.S. 486, 534] through its Mayor and Northampton through the Chairman of its Board of Commissioners, in which opinions were expressed that inclusion of E-L and D & H in the N & W system would be injurious to shippers and receivers and the economies of their areas. No evidence was offered to support these opinions and they are not sustained by any other evidence in the record." </s> This cursory treatment of the allegations of Shapp and other Pennsylvania interests is not an analysis of the merits of their assertions sufficient for judicial review. This is hardly a considered treatment of the effects which inclusion would have on communities presently served by more than one of the roads to be included in the N & W system. 5 </s> The parties in the Pennsylvania court argue that the Hearing Examiner and Commission failed to relate the various pieces of evidence which were available concerning the community impact of any reduction in services or facilities likely to result from the inclusion order in the communities involved. In particular, the parties note that Moosic would be a prime candidate for the pruning of facilities since it has a substantial amount of E-L and D & H track, and that Scranton would be reduced to a two-railroad town with E-L and D & H also having duplicating facilities in the area. It was noted that even though the Commission stated that its inclusion order did not authorize the abandonment of facilities, the evidence introduced by E-L in support of inclusion demonstrated clearly that the avowed purpose underlying the entire transaction was substantially to reduce facilities in the Wilkes Barre-Scranton-Binghamton [389 U.S. 486, 535] area, and thereby effect economies. It was further alleged that according to E-L's own plan presented to the Commission, inclusion of E-L and D & H into N & W would lead to the tearing up of the main line double track between Binghamton and Scranton, and would thus take Scranton off the main line between Chicago and New York. </s> The communities also contend that their opportunity to participate meaningfully in the Inclusion proceedings was seriously limited: the Commission and its Hearing Examiner denied all requests by Moosic to hold hearings in the Scranton area so that its citizens, businessmen, and civic leaders could be heard concerning the railroad proposals. And the City of Scranton describes the difficulty of meaningful participation by community interests in the following manner: </s> "The April 6, 1966 report of the Commission in the PRR-NYC Merger Case stated that its decision is related to the `inclusion' proceeding, F. D. 21510, whereby E-L, D & H and B & M seek to be absorbed by N & W. The Commission stated that it took official notice of F. D. 21510 and that it had a bearing on its decision. [327 I. C. C. 475, 487-489.] Yet the fact was that the Commission, on April 6, 1966, did not and could not have considered the evidence of the nonrailroad parties to F. D. 21510, because such evidence from the nonrailroad parties was not circulated until April 13, 1966, and was not received in evidence prior to June 16, 1966. The Commission could not in its April 6, 1966 report have considered the public interest aspects of the inclusion case, but could only have based its PRR-NYC decision in this regard strictly upon consideration of railroad evidence, railroad positions, and railroad arguments." [389 U.S. 486, 536] </s> It is not at all clear to me that the Commission offered a meaningful opportunity in the Inclusion Case to local and regional interests to present their arguments. That is a matter for the Pennsylvania court to determine in this Inclusion Case. </s> As respects the question of "public interest" in the N & W Inclusion Case, the Commission concluded: </s> "On the positive side, inclusion of the petitioners in N & W will strengthen railroad competition, enhance the adequacy of the transportation service provided by N & W as well as the three petitioners by opening new routes and instituting new service, produce the economies and efficiencies inherent in single-line operation, and permit the joint use where possible, of facilities, equipment and routes. . . . </s> "Our order herein does not authorize the abandonment of lines, operations or facilities by N & W or the petitioners. Applications for such abandonments are to be filed in appropriate proceedings. We expect N & W to maintain proper divisions with the petitioners." 330 I. C. C. 780, 827. </s> Despite the Commission's disclaimer that the inclusion order "does not authorize the abandonment of lines, operations or facilities," it appears that some abandonment will almost certainly result given the geographical location of the lines of the four roads involved and the companies' desire for efficiency. In addition, the Commission itself, in the first paragraph quoted above, indicates that it contemplates "economies and efficiencies inherent in single-line operation," and "the joint use where possible, of facilities, equipment and routes" - all of which portend significant effects on the local communities stretched along the routes of the roads. Deferral of the question of community interests until a subsequent hearing on abandonments will not ensure [389 U.S. 486, 537] adequate protection of those interests; for at the subsequent hearing the Penn-Central merger would be a fact, and the pressures would be great for increased economies on the part of the N & W system to make it a more efficient competitor of Penn-Central. </s> Communities which depend heavily on the railroad industry for employment, such as the City of Scranton, would be affected significantly by any loss of jobs. In its opinion in the N & W Inclusion Case, the Commission noted that in the earlier phase of this proceeding, N & W had entered into agreements with certain labor unions which provided that elimination of jobs resulting from the N & W-Nickel Plate unification would be accomplished only through normal attrition (i. e., "principally by death, retirement, discharge for cause, or resignation." 330 I. C. C. 780, 822, n. 26); the agreements were apparently modified at a later date to prohibit transfer of employees to other jobs beyond their general locality. For those employees not covered by the agreements, the Commission imposed certain protective conditions prescribed in Southern Ry. Co. - Control - Central of Georgia Ry. Co., 317 I. C. C. 557, as supplemented and clarified in 317 I. C. C. 729 and 320 I. C. C. 377. The Commission concluded that the employees of E-L, D & H, and B & M should be protected in the same manner as their counterparts involved in the N & W-Nickel Plate proceedings. For all employees not covered by attrition agreements, the protection would consist of the following: either N & W's existing agreements had to be modified to cover employees of the included roads or similar new agreements were to be drafted; and, if no agreement was concluded within 60 days, the Commission would impose appropriate conditions. The Commission denied the requests of D & H and B & M to extend this employee protection to their supervisory, professional, and executive personnel. [389 U.S. 486, 538] </s> Whether the use of attrition agreements to eliminate jobs has a substantial adverse impact simply because jobs are eliminated is a question not free of doubt. </s> The Commission outlined the importance of the service of the three protected roads to the public, but limited this to a showing that, as a geographical matter, the lines of all three roads supplied needed services. 330 I. C. C. 780, 793-794. As far as appears from its decision, the Commission did not consider the unfavorable impact on the communities now served by more than one of the protected roads when the three roads are put into a single system. </s> Under a heading in its opinion entitled "Advantages to petitioners and to the public," the Commission noted that, under N & W control, the three protected roads could achieve substantial savings; and it observed further that: </s> "The petitioners as well as the public will benefit from the unified management of what is now several separate companies operating independently. Among others, such benefits will include joint routes of affiliated lines, the prospect of single-line service, elimination of interchanges, improved schedules, and a more flexible distribution of equipment. Such benefits will increase the petitioners' ability to preserve and improve their present services and meet the needs of the shipping public. Through expanded piggyback operations, petitioners will be in a better position to meet the competition of motor carriers. Because many industries prefer to locate plants where a single-line through-route service will be available, more opportunities for industrial development will be created. As part of the large N & W system, the use of more modern equipment and facilities will be justified, resulting in greater efficiency, improved operations and better service to the public." 330 I. C. C. 780, 795. [389 U.S. 486, 539] </s> These general conclusions are not addressed to the objections made by the communities affected. Moreover, the Commission's references to "joint routes," "elimination of interchanges," and a "more flexible distribution of equipment," suggest that community fears of eventual abandonment or scaling down of facilities are well founded. </s> The issues tendered by the parties in the Pennsylvania court, touching on the questions just described, are substantial and are not now before this Court for review. They have not been briefed or argued; and I fail to understand how the Court can presume to decide them. </s> The Court suggests that the community interests involved can obtain adequate protection from possible curtailment of service by asserting their challenges "in appropriate proceedings when such curtailment is specifically proposed." Yet it seems clear that postponing review of this question until a subsequent proceeding on proposed abandonments will not protect the communities adequately. The inclusion of the three protected roads into the N & W system surely portends significant curtailment and rerouting of the facilities of one or more of the four roads involved. Once the Penn-Central merger is consummated, N & W and its three included roads will face competitive injury unless their operations are streamlined and economized. The interests of the communities stretched along the routes of E-L, D & H, B & M, and N & W might well weigh less against the threat of Penn-Central competition once the merger has been consummated than those interests would if they were considered and evaluated before actual competition from a merged Penn-Central system is felt. </s> I do not suggest that we can now decide whether the impact on community interests justifies disapproval by the Commission of the inclusion of the three protected roads into N & W. The question of the adequacy of the Commission's [389 U.S. 486, 540] findings on this point has not been presented either to this Court or to the New York District Court; and as pointed out previously, I have grave doubts that the Commission's opinion in the Inclusion Case contains adequate findings on the issue to permit responsible judicial review. </s> The cases presently pending in Pennsylvania present, inter alia, the question whether the Commission failed to evaluate the adverse impact of the inclusion of the E-L, D & H, and B & M into the N & W system upon the communities served by the carriers involved. </s> In the action before the New York District Court, here for review in Nos. 778 and 779, that court dismissed the complaints of Shapp and the City of Scranton, with prejudice, for failing to file supplemental complaints attacking the Commission's June 9, 1967, order in the Penn-Central Merger Case. But the complaints of Shapp and Scranton that were dismissed with prejudice dealt only with the merits of the Commission's approval of the Penn-Central merger in its April 1966 decision in Finance Docket No. 21989. They did not attack the Commission's later (June 9, 1967) order in the separately docketed Inclusion proceedings. Thus, there is no question of res judicata present with regard to those parts of Shapp's and Scranton's complaints in the Pennsylvania court which attack the Commission's June 9 order in the Inclusion Case. And, of course, no question of res judicata arises with respect to the complaints of Moosic and Pottsville. Even if the Penn-Central Merger and N & W Inclusion Cases are regarded as inseparable, it is clear that the community impact aspect of the Inclusion Case was not considered by the New York court. It is evident from the record and that court's opinion that the primary concern of the court related to various aspects of the merger and inclusion orders tendered by the railroad parties which were unrelated to at least some of the [389 U.S. 486, 541] attacks leveled by the parties in the Middle District of Pennsylvania, including the question of community impact. 6 </s> The Court seemingly declares, however, a new rule of res judicata in its effort to prevent the parties in Pennsylvania from proceeding with their actions challenging the basic validity of the Commission's inclusion order on the ground, inter alia, that the Commission has not made adequate findings on the issue of the community impact of that order. Because the Borough of Moosic, [389 U.S. 486, 542] which had properly filed a suit in the Middle District of Pennsylvania but saw its action stayed, refused to accept the invitation of the New York District Court (a court in which Moosic was never a party, and which neither assumed jurisdiction over Moosic nor attempted to do so by making it an involuntary plaintiff) to come to New York and litigate, the Court holds that Moosic is bound by the decision of the New York court in the Inclusion Case. The New York court itself did not attempt to hold that its orders in the Inclusion Case would bind Moosic if it did not join in the New York proceedings. And I am at a loss to discover any such principle in the law of res judicata. </s> A party is entitled to its day in court; 7 and I cannot fathom how a party can be deprived of that right or waive it by refusing an invitation - not even an order - to litigate in another court located in another State. 8 The Court could reach its conclusion under the doctrine of res judicata only if Moosic could be termed in "privity" with one of the parties litigating in the New York action. See, e. g., Lawlor v. National Screen Service Corp., 349 U.S. 322 ; Bank of Kentucky v. Kentucky, 207 U.S. 258 ; Mutual Benefit Life Ins. Co. v. Tisdale, 91 U.S. 238 ; In re Howard, 9 Wall. 175. But Scranton and Shapp were the only community interests in the New York court who challenged the Commission's basic finding that the Penn-Central merger was in the public interest; [389 U.S. 486, 543] and, as pointed out, their allegations were not directed to the Commission's order in the N & W Inclusion Case. The Borough of Moosic is a separate community, with distinct interests based on the facilities and lines of the various roads located within the Borough, or serving the Borough. Under such conditions, Moosic cannot properly be called in privity with Scranton or Shapp. 9 </s> The Court states that "further judicial review or adjudication of the issues upon which [the New York District Court] passes" is precluded by its decision. But, [389 U.S. 486, 544] as I have already pointed out, the New York court did not pass on at least some of the contentions, including the question of the community impact of the inclusion order, which are raised by the parties in Pennsylvania; nor were those questions even presented to the New York Court for review. </s> Congress might, of course, channel all complaints against an administrative agency order to a particular court. It has indeed done so in many instances through provisions that a person aggrieved by a certain type of order should seek review in a designated court of appeals. 28 U.S.C. 2341 et seq. (1964 ed., Supp. II). Where review of an agency order is lodged in a court of appeals and review of the same agency order is also sought in other such courts, the court of appeals where review was first sought is the one to which all other courts are directed to transfer all proceedings with respect to the agency order. 28 U.S.C. 2112 (a) (1964 ed., Supp. II). That has the obvious advantage of centralizing and consolidating judicial review and avoiding conflicts which might obtain if the parties could go to any court that had venue. Congress, however, has made no such provision respecting ICC orders. Section 2112, on which the Court relies, provides in subsection (d) that its provisions are not applicable to review of agency orders in the district courts. ICC orders are reviewable by three-judge district courts. 28 U.S.C. 1336 (a), 2325. The general provision for transfer of actions from one district court to another is 28 U.S.C. 1404 (a). But 28 U.S.C. 1398 provides, with exceptions not relevant here, that actions challenging ICC orders "shall be brought only in the judicial district wherein is the residence or principal office of any of the parties bringing such action." And where the jurisdiction of more than one three-judge district court has been invoked and a motion to transfer the proceedings from one to another has been made, the motion [389 U.S. 486, 545] is denied if venue would not have been proper for an original action in the district court to which transfer is sought. 10 When a three-judge district court in New York was asked to transfer proceedings challenging an ICC order to the district court in Maryland, where another like challenge was being made, it declined, saying, "None of the plaintiffs in the actions in the Southern District of New York has its residence or principal office in the District of Maryland." New York Central R. Co. v. United States, 200 F. Supp. 944, 947 (D.C. S. D. N. Y. 1961). The New York District Court, speaking through Judge Friendly, refused to invoke the procedure provided for in 28 U.S.C. 2112 (a), since that section applies, as already noted, only to review of agency orders in the courts of appeal. Id., at 949-950. That court was much more faithful to the system of review, which Congress has provided, than we are today. Moosic and Scranton by no stretch of the imagination have their "residence" in New York. By 28 U.S.C. 1398 venue plainly lies in Pennsylvania; and Congress has provided no method of transferring those suits to New York. 11 </s> [389 U.S. 486, 546] </s> It is not only hard cases which make bad law. Cases surcharged with the pressure for instant and immediate decision do the same 12 and create precedents which plague us. </s> It seems clear to me that we must permit the parties to litigate in the Pennsylvania court whether E-L, D & H and B & M should be included in the N & W system. By no stretch of the imagination can it be argued that the question of the adverse impact on the Pennsylvania communities of the inclusion of the three roads in the N & W system, as now posed by the parties in Pennsylvania, was here for review or was before the New York District Court. See Erie-Lackawanna R. Co. v. United States, 279 F. Supp., at 325-326. </s> Last Term we held that the ultimate fate of the three protected roads must be determined before the Penn-Central merger could be consummated. This surely means that judicial review must first be had at least [389 U.S. 486, 547] with respect to the contentions which bear on the basic validity of the inclusion order - that is, whether the order is in the "public interest," as required by 49 U.S.C. 5 (2) (d) - as distinguished from collateral questions about the order which need not delay the Penn-Central merger. The basic validity of the inclusion order certainly involves the impact of the inclusion on the communities served by the three lines in question. Whether other questions of like character have survived need not now be determined. It is certain that at least the community-impact issue has not been resolved. And its intimate connection with our holding last Term is evident. For what if it were found that by reason of the impact on the communities the inclusion order was not in the public interest? Our "protected" roads would then have no home. </s> The stay order of the Pennsylvania court has expired, and that court is now proceeding with these cases. For purposes of review by this Court, the petitions in Nos. 663, Misc. and 664, Misc., seeking review of the stay order or mandamus to compel the Pennsylvania court to proceed with the cases, can be dismissed. But those petitions did not present to this Court any question concerning the merits of the parties' actions in Pennsylvania; rather they attacked the validity of the order staying their actions in deference to proceedings then being conducted in the New York District Court. And, as already pointed out, at least the question of the community impact of the inclusion order, which is raised in Pennsylvania, has not been presented either to this Court or the New York District Court for review. I therefore dissent from the Court's holding that all of the parties now litigating in Pennsylvania are precluded from challenging "the Commission's basic findings that the . . . inclusion of the protected lines in N & W [is] in the public interest." If the Pennsylvania court believes [389 U.S. 486, 548] that the allegations of the plaintiffs are substantial, it should be free to enjoin the merger until questions concerning the basic validity of the inclusion order, at least so far as impact on the Pennsylvania communities is concerned have been resolved. </s> [Footnote 1 The Borough of Moosic was a party to the N & W Inclusion Case before the Commission, in which it offered testimony and submitted exceptions. It was not, however, a party before the Commission in the Penn-Central Merger Case, reviewed by this Court last Term. Moosic, however, seeks to challenge the merger order in the Pennsylvania action. Since Moosic is served only by E-L and D & H, the Borough notes that it became concerned with the proposed Penn-Central merger only after it learned that the merger was in part responsible for the petitions of E-L and D & H for inclusion into N & W. </s> [Footnote 2 The City of Scranton and Milton J. Shapp were parties to both proceedings before the Commission, and were intervenors in the [389 U.S. 486, 529] previous action commenced in the Southern District of New York, which was reviewed by this Court last Term. They were the only parties before the New York court last Term that challenged the basic validity of the Penn-Central merger. (See Baltimore & Ohio R. Co. v. United States, 386 U.S. 372, 462 (dissenting opinion of MR. JUSTICE FORTAS).) Their original complaint in the New York court was dismissed with prejudice by that court on October 19, 1967, pursuant to Rule 41 (b), Fed. Rules Civ. Proc., for failure to file a supplemental complaint attacking the Commission's order of June 9, 1967, in the Penn-Central Merger Case. Scranton and Shapp were never parties to the N & W Inclusion Case in the New York court. </s> Milton J. Shapp is a stockholder of the Pennsylvania Railroad Company, and a citizen of Pennsylvania. The City of Scranton is served by E-L, D & H and the Central Railroad of New Jersey. The city's interest stems both from the fact that the Penn-Central merger has necessitated the inclusion of E-L and D & H into N & W, thus making Scranton a two-railroad town, and from its fears that the proposed N & W-C & O merger will be approved along with the inclusion of CNJ therein, which would reduce Scranton to a one-railroad town. Since Scranton is a part of the Scranton-Wilkes Barre industrial and distribution complex of northeastern Pennsylvania, it also has an interest in the other railroads serving that economic area - the Reading Company, Lehigh Valley, and the Pennsylvania Railroad, together with their switching lines. The city and its surrounding area constitute one of the most important centers of railroad activity in the Eastern District. </s> [Footnote 3 City of Pottsville was a party to the Commission proceedings involving the Penn-Central merger. The city is a municipal corporation located in Schuylkill County, Pennsylvania, and is served by the Reading Company and the Pennsylvania Railroad Company. </s> [Footnote 4 Pottsville (No. 433) seeks review of the order of the Pennsylvania court denying its application for intervention in the Moosic case on the ground that the city was not located in the Middle District of Pennsylvania and "the defendant has objected to parties raising their objections to these I. C. C. Orders other than in the Southern District of New York . . . ." The Government, however, has no objection to the intervention of Pottsville below, and concedes that the court was in error in assuming that the Government's desire to have all actions challenging the Commission's orders brought in the New York court constituted an objection to Pottsville's formally becoming a party in the Moosic case. I therefore concur with the Court and agree to vacate the order denying Pottsville's application for leave to intervene and to remand to the District Court where Pottsville may renew its application. </s> [Footnote 5 This brusque treatment of the community allegations contrasts sharply with the lengthy discussion of certain community interest aspects of the Penn-Central merger found in the Recommended Report in Finance Docket No. 21989, at 229-286. </s> [Footnote 6 With respect to the N & W Inclusion action, the court below noted that only "two points come even close to the larger public interest in the transaction . . . ." Those points were: first, N & W's complaint that the Commission should have considered the desirability of including the three protected roads along with the Reading Co. and the Central of New Jersey as wholly owned subsidiaries, not in the N & W system, but in the proposed N & W-B & O-C & O system; and second, N & W's assertion that the Commission erred in failing to find that inclusion of any of the three protected roads in the Penn-Central system rather than the N & W system would not be in the public interest. N & W has pursued the latter argument in this Court, asserting that by failing to make the suggested finding the Commission has left open the possibility that one or more of the three protected roads can eventually obtain inclusion in the merged Penn-Central system if inclusion in the N & W system is not voted by shareholders. The court rejected both of these contentions, holding that the Commission was not required to inject the N & W-B & O-C & O proposal into the instant proceeding or to make the negative finding requested by N & W to preclude the possibility of eventual inclusion of one or more of the three roads in the Penn-Central system. The court directed the remainder of its opinion dealing with the N & W Inclusion Case to examining the financial terms of the inclusion order, the employee protective conditions imposed by the Commission, the Commission's general standard for, and method of, valuation, certain attacks by E-L, D & H and B & M on matters of valuation peculiar to each road, and the possibility of non-inclusion of D & H and/or B & M in the N & W system - none of which involved the community impact problem. Erie-Lackawanna R. Co. v. United States, 279 F. Supp., at 336-352 (D.C. S. D. N. Y. 1967). </s> [Footnote 7 Hansberry v. Lee, 311 U.S. 32 . </s> [Footnote 8 Moosic states in its petition (No. 663, Misc.) that it did not wish to litigate in New York because that court had decided to treat the Penn-Central Merger Case and the N & W Inclusion Case as "separate proceedings for judicial review purposes," and such an approach would prejudice Moosic "since the adverse impact of N & W Inclusion must be considered as an integral part of any judicial review of PRR-NYC, and vice versa." Moosic also notes that "the community public interest issues inherent in [its] case . . . are clearly outside the scope of the litigation in the other forums." </s> [Footnote 9 In Hansberry v. Lee, 311 U.S. 32, 43 , we stated that even "when the only circumstance defining the class is that the determination of the rights of its members turns upon a single issue of fact or law," it might be possible for a State constitutionally to adopt a procedure whereby the judgment could be made binding on all members of the class; but only if "the procedure were so devised and applied as to insure that those present are of the same class as those absent and that the litigation is so conducted as to insure the full and fair consideration of the common issue." This Court in the instant case makes no inquiry, however, whether Moosic can be termed a member of the "same class" as one or more of the parties in the New York court; or whether the issues are "common," and if they are, whether the proceedings have been conducted to ensure their "full and fair consideration." </s> The Court does not appear to argue that the action in the New York court was a "class action" within Rule 23, Fed. Rules Civ. Proc. Indeed, the court below did not treat it as such, nor make the findings (Rule 23 (a) and (b)) or give the type of notice (Rule 23 (c)) required by that Rule for class actions. </s> I can find no authority for a rule which would require a party not under the jurisdiction of the inviting court to respond affirmatively to an invitation to intervene or else be bound by an adverse decision. Indeed, Chase National Bank v. Norwalk, 291 U.S. 431 , would suggest that the rule is to the contrary. The Court stated in that case that "[t]he law does not impose upon any person absolutely entitled to a hearing the burden of voluntary intervention in a suit to which he is a stranger. . . . Unless duly summoned to appear in a legal proceeding, a person not a privy may rest assured that a judgment recovered therein will not affect his legal rights." Id., at 441. </s> [Footnote 10 Our decisions in Hoffman v. Blaski, 363 U.S. 335 , and Van Dusen v. Barrack, 376 U.S. 612 , indicate that 1404 (a) permits transfer only to a district court in which the plaintiff would have been entitled, without regard to consent by the defendant, to bring his action originally. Moosic and Scranton could not have brought an original action in New York. </s> [Footnote 11 If statutory provisions provide that a person aggrieved must litigate his contentions in a specific federal court, fair notice has been given that if he does not appear and present his claims in the designated court, he will forfeit his right to be heard. But when there is no such statutory provision and when indeed the applicable statute provides for review in the Pennsylvania District Court, the place of residence, is due process satisfied when an aggrieved person, who was never a party in the New York court or in privity with any party there, is deprived of a right to be heard on an issue not litigated in that court, simply because he was invited to participate [389 U.S. 486, 546] and the United States waived objections? That, I submit, is not a wholly frivolous question. </s> Nationwide service of process was available to the New York court. 28 U.S.C. 2321. The United States and the ICC had waived all objections to venue against any party seeking to litigate in New York. But although the United States and the Commission moved successfully in the New York court under Rule 19, Fed. Rules Civ. Proc., to join N & W as an involuntary plaintiff in D & H's action challenging the inclusion order, they made no effort to join Moosic pursuant to that Rule. </s> [Footnote 12 "Great cases like hard cases make bad law. For great cases are called great, not by reason of their real importance in shaping the law of the future, but because of some accident of immediate overwhelming interest which appeals to the feelings and distorts the judgment. These immediate interests exercise a kind of hydraulic pressure which makes what previously was clear seem doubtful, and before which even well settled principles of law will bend." Holmes, J., dissenting, in Northern Securities Co. v. United States, 193 U.S. 197, 400 -401. </s> MR. JUSTICE DOUGLAS, dissenting in part in Nos. 778, 779, 830-836. </s> These cases present at least one serious problem under 49 U.S.C. 5 (2). Section 5 (2) (a) authorizes two or more carriers to consolidate provided that the Commission finds under subdivision (b) that the "terms and conditions" are "just and reasonable" and "will be consistent with the public interest." Moreover, under subdivision (d) of 5 (2), the Commission "as a prerequisite to its approval" of the merger may require the inclusion of another railroad in the territory "upon equitable terms." </s> I do not think the Commission has made those necessary findings under 5 (2). </s> The majority opinion adopts a piecemeal approach to judicial review of the Commission's orders, which, as I view it, does not conform with our duty of judicial review in one respect. </s> In the majority opinion last Term, Mr. Justice Clark noted that "[o]ur experience with other mergers, and common sense as well, indicate that the `scrambling' goes fast but the unscrambling is interminable and seldom effectively accomplished." Baltimore & Ohio R. Co. v. United States, 386 U.S. 372, 392 . Because of this, we refused to allow the Penn-Central merger to be consummated before the fate of the three protected roads (the Erie-Lackawanna, Delaware & Hudson, and Boston & Maine) had been determined. Some aspects of the Commission's merger and inclusion orders - those which do not go to the heart of the Commission's decision (that is, its determination that the merger or inclusion is in [389 U.S. 486, 549] the "public interest") - can await later judicial review. Examples would be the contentions of Reading and the E-L bondholders. But I fail to see how we can affirm the Commission's decision that this entire transaction is in the "public interest" without considering those points raised by the parties which do go to the heart of the controversy. I refer specifically to the contentions of the parties in the Middle District of Pennsylvania (see my partial dissent in Nos. 433, 663, Misc., and 664, Misc.), and to Nos. 830 and 831 which involve claims of the New Haven creditor interests, to which I now turn. </s> Certain bondholder interests of the New York, New Haven & Hartford Railroad Company (New Haven) attack the Commission's failure to provide for actual inclusion of the New Haven in the Penn-Central system as a condition simultaneous with, or precedent to, consummation of the merger. Following the filing of these appeals, the Commission, on November 16, 1967, issued a decision concerning the treatment of the New Haven in the merger plan, styling the opinion as a supplemental order in the Penn-Central Merger Case. Pennsylvania Railroad Co. - Merger - New York Central Railroad Co., Finance Docket No. 21989, 331 I. C. C. 643. On that date the Commission approved as a first step in the New Haven's reorganization a conveyance of its assets to Penn-Central; it fixed terms for interim financing on the basis of a $25,000,000 loan commitment from Penn-Central; and it provided for the sharing of New Haven's operating losses by Penn-Central, on a sliding scale, pending New Haven's inclusion in the merged system. The Commission also specifically provided that consummation of the merger would constitute irrevocable assent by Penn-Central to enter into the interim financing arrangement. </s> The sale agreement proposed by the New Haven trustees provided for New Haven's physical assets and investments to be purchased by Penn-Central free and [389 U.S. 486, 550] clear of liens and other encumbrances. The lien of the New Haven creditors' interests would shift from New Haven's present assets to the assets held by the trustees as the proceeds of the sale. Provision for the preservation of priorities and rights of claimants was made in the plan. The trustees originally submitted, pursuant to 77 of the Bankruptcy Act, 1 a plan of reorganization to be accomplished in two steps. Initially, only the first step, providing for the sale of the New Haven to the merged Penn-Central system, was presented to the Commission for approval. After that part of the plan had been completed, the trustees intended to implement the second step, relating to distributing the assets of the New Haven estate or issuing new New Haven securities. </s> Certain bondholder interests contested the legality of the two-step plan. But in a decision rendered in May 1967 the Court of Appeals held that a decision on the legality of such a plan would be premature. In the Matter of the New York, New Haven & Hartford R. Co., 378 F.2d 635 (C. A. 2d Cir. 1967). In September 1967 the New Haven trustees filed the second part of their plan, but requested the Commission to make immediate findings required under 5 (2) (d) of the Interstate Commerce Act with respect to the first part of the plan, rather than await completion of the reorganization proceedings. Creditor interests opposed this request by arguing that creditor claims, in the order of priority, would have to be considered by the Commission before it could arrive at "equitable terms" within the meaning of 5 (2) (d). The Commission chose to adopt the procedure suggested by the trustees, and approved the plan for the sale of assets independently of a complete reorganization plan. </s> In short, the Commission concluded that an immediate decision on the question under 5 (2) (d) of "equitable [389 U.S. 486, 551] terms" for the sale of assets would satisfy "a legal preliminary to NH inclusion without delay once the Penn-Central merger is consummated." 2 On the other hand, it said, delay of such a decision until completion of New Haven's reorganization would prevent a timely rescue of the New Haven as an operating common carrier. Thus, the Commission opted in favor of "improved service through a consummated Penn-Central merger including an operational NH, while the NH creditors are freed to litigate at will the distribution of their estate." 3 </s> The bondholder interests before this Court contend that under either the majority or dissenting opinions in St. Joe Paper Co. v. Atlantic Coast Line R. Co., 347 U.S. 298 , any sale of the New Haven to the merged Penn-Central system would require at least its submission to a vote of bondholders. See also Reconstruction Finance Corp. v. Denver & Rio Grande Western R. Co., 328 U.S. 495 . The bondholders also argue that the Commission ignored the admonition of this Court in Palmer v. Massachusetts, 308 U.S. 79, 88 , that the powers of the Commission and courts under 77 of the Bankruptcy Act can properly be exercised only in the context of "a complete plan of reorganization for an insolvent road." </s> In justifying its action, the Commission noted that except for subsections (b) (1), (4), and (5), of 77, there is no provision in 77 that deals specifically with the form or content of a reorganization plan. Therefore, no language of 77 was believed to prohibit evaluation of the New Haven properties and the approval of their sale before approval of a plan for restructuring the New Haven. The Commission noted the doctrine [389 U.S. 486, 552] of "wasting assets" employed under Chapter X of the Bankruptcy Act to permit two-step plans of reorganization, and analogized that doctrine to the instant case - since in the view of the Commission, the New Haven could properly be classified as a "wasting asset." 4 </s> With respect to interim financing of the New Haven, the Commission approved a loan proposal under which Penn-Central would make available to the New Haven a total of $25,000,000 over three years to enable the New Haven to continue its operations until its assets were conveyed to Penn-Central. The Commission noted that the loan authorization did not impair the jurisdiction of the reorganization court since that court would still have to approve issuance of trustees' certificates to evidence those advances. 5 </s> The loan provisions approved by the Commission provided further that any time the cash balance of the New Haven fell below $5,000,000, the trustees could borrow [389 U.S. 486, 553] from the $25,000,000 commitment enough money to equal a $5,000,000 cash balance plus $2,500,000. The Commission set an interval of at least three months between loan takedowns, and provided that any reduction in the aid which New Haven was receiving from the New England States would reduce correspondingly the amount that could be borrowed from Penn-Central. The interest rate on the loans was declared to be the prime rate of the Morgan Guaranty Trust Company of New York City prevailing at the time the loan is taken down. December 13, 1971, was designated as the maturity date for the trustees' certificates. Finally, the loan provisions would be terminated upon the occurrence of any of the following events: (1) acquisition of the New Haven by Penn-Central; (2) a final and effective order by a regulatory authority or court granting permission to liquidate the New Haven or to dispose of it to someone other than Penn-Central; (3) cessation of the New Haven operation as a going railroad; (4) a determination that Penn-Central shall not acquire the New Haven; (5) the expiration of three years from the date of the Penn-Central merger. </s> Although the New Haven creditors argued before the Commission that their interests would be reduced by the issuance of the trustees' certificates, which would acquire precedence over their claims against the New Haven estate, the Commission reasoned that: </s> "We consider such a result part of the process of distributing the burdens of the NH's operations. It is a fundamental aspect of our free enterprise economy that private persons assume the risks attached to their investments, and the NH creditors can expect no less because the NH's properties are devoted to a public use. Indeed, the assistance the creditors are receiving from the States and would [389 U.S. 486, 554] receive from Penn-Central through the sharing of operating losses would raise some of that burden from their shoulders." 6 </s> The Commission did not place all of New Haven's operating losses on Penn-Central during the period of the loan agreement. The amount to be absorbed by Penn-Central is governed by a specific formula approved by the Commission. 7 With respect to deciding how much of the loss was to be assumed by Penn-Central under the formula, the Commission noted two main factors: (1) the admonition of the reorganization court that safeguards against endless litigation by New Haven creditors should be established; and (2) in the interim period before conveyance of New Haven's assets to Penn-Central, the opportunities to integrate New Haven's operations into the Penn-Central system would be restricted, so that many operating economies and efficiencies could not be realized until complete inclusion of the New Haven. The Commission felt that the existence of these factors tended to limit the portion of New Haven losses which Penn-Central should have to absorb under the formula. The final amount decided upon was 100% of the loss during the first year, 50% during the second, and 25% during the third. Further, the Commission set $5,500,000 as the maximum Penn-Central share of operating losses in any one year. </s> Finally, the Commission provided that under the purchase agreement, the trustees' certificates evidencing the loans were to be offset in an amount equal to the operating loss absorbed by Penn-Central. The Commission asserted that the burdens on the New Haven creditors caused by the loan-loss absorption agreement would be relatively small - and not significantly different from the [389 U.S. 486, 555] burdens under a lease agreement. The Commission expected that the total amount loaned by Penn-Central over three years would probably be "substantially less than $25 million." 8 It noted that the requirements for loans would increase in relation to the operating losses of the New Haven; but as the operating losses increased, Penn-Central would absorb a part of the increase. At the same time, the Commission pointed out that since the amount of losses to be assumed by Penn-Central would decline each year (from 100% to 50% to 25%), the creditors would have much to gain by speedily completing the reorganization proceedings. </s> The bondholder interests attack the operating loss provisions of the Commission's order - contending that Penn-Central should be required to absorb all the operating losses of the New Haven. They also assert that the purchase price approved by the Commission for the sale of New Haven assets to Penn-Central ($125,000,000, being the value of the consideration to be received by the New Haven) is too low. Further, as indicated above, they contend that the Commission is without authority to adopt a two-step reorganization plan which prevents the bondholders from voting on the first aspect of the plan - the sale of assets. </s> The New Haven trustees argue that the bondholders will have the opportunity to object to these actions of the Commission in the reorganization court and to seek judicial review of its action. Indeed, Oscar Gruss & Son (appellant in No. 830) and the Bondholders' Committee (appellant in No. 831) have indicated that they intend to seek judicial review of the November 16 order. The trustees also suggest that the questions presented involve only the quantum of consideration to be paid by Penn-Central in implementation of its eventual [389 U.S. 486, 556] take-over of the New Haven, and do not merit postponing consummation of the Penn-Central merger. </s> On the other hand, the bondholders contend that their objections to the Commission's November 16 order are so substantial that even if they have only partial success on judicial review, the feasibility of inclusion would be open to serious question. If inclusion of the New Haven in the Penn-Central system could not be accomplished, a major underpinning in the Commission's finding that the merger was in the public interest would be removed. 9 The New Haven might then have to be liquidated in the reorganization court. Perhaps eventual operation by the Federal Government, or by the States concerned, would be the outcome. In fact, appellant in No. 831 has pending before the reorganization court a petition for immediate liquidation of the New Haven. The bondholders, of course, seek to recover as much of their investment as possible. To the extent that any loans from Penn-Central to the New Haven would not be offset by Penn-Central's obligation to absorb a portion of the New Haven operating losses, the bondholders' equity would be diluted. </s> The Commission is commanded by 5 (2) (d) of the Act to authorize inclusion of a road only on "equitable terms." 10 Are the operating loss provisions, as they [389 U.S. 486, 557] now stand, "equitable terms"? The provisions may well constitute a prelude to the slow bleeding or squeezing out of creditor interests, as their equity is diminished by loans. </s> High finance has a great inventive genius; and one does not have to be sophisticated to see how Penn-Central with the use of this loan device can pick up New Haven for a song. </s> The Commission has itself stated that the Penn-Central merger would not be in the public interest without the complete inclusion of the New Haven. 11 Clearly we should not approve this merger and decide that the mandate of 5 (2) (b) has been fulfilled without at the same time concluding that the loan agreement and the sharing of the New Haven deficit are "equitable." </s> On its face the requirement that Penn-Central share the operating losses of the New Haven on a decreasing scale each year - from 100% to 50% to 25% - seems inequitable. Why a 100-50-25 formula? Why not 100-10-1 or 50-25-10 or 25-50-100? The Commission does not clearly indicate how it arrived at its 100-50-25 formula. Of the two factors mentioned by it in making its determination (preventing endless litigation by New Haven creditors, and the inability to realize many economies during the interim period before the sale of New Haven's assets to Penn-Central), only the first would appear to have any relation to the adoption of a sliding-scale formula. </s> On its face this formula for sharing of losses seems inherently coercive. It would indeed appear that the [389 U.S. 486, 558] Commission sought to force the creditors to accede to its proposal within a year. The pressure would indeed be great; for once the merger between Penn and Central is consummated, the New Haven creditors would have to absorb the losses of the New Haven at an increasing rate if they did not accept the Commission's proposal. </s> If that is the purpose and effect of this provision concerning Penn-Central's sharing of the operating losses of the New Haven, the issue may well have spent itself, unless we grant judicial review prior to the consummation of the merger. Of course, if the merger is approved, one way in which the coercive effect of this provision of the plan could be eliminated would be to undo the merger. But that gets back to the problem of unscrambling mergers of this kind and intricacy, once they are consummated - the difficulty emphasized by Mr. Justice Clark when the case was here before. 386 U.S. 372, 392 . </s> The Court, while not presuming to approve the November 16, 1967, order of the Commission as prescribing "equitable terms" for inclusion, takes the position that the Commission has done all that is required at this point with respect to the inclusion of the New Haven. But I am unable to reconcile this position with the requirements of the statute, which directs in 5 (2) (d) that a road may be included in another only upon "equitable terms." </s> The coercive nature of the operating loss provision may well frustrate effective judicial review once the Penn-Central merger is a fact. </s> On the other hand, if the creditor interests do challenge the Commission's order in the courts, and are successful, inclusion in the Penn-Central system on "equitable terms" at the time of that decision might well be impossible. The Commission itself seemed to recognize the possibility that the New Haven might not be included [389 U.S. 486, 559] in the Penn-Central system in its November 16 report, 12 although it evidently believed that the possibility of noninclusion did not justify delaying consummation of the Penn-Central merger. Such an approach is not permissible under the statutory scheme, when the Commission has stated that the Penn-Central merger would not be in the public interest unless the New Haven were included in that merged system. And, as the bondholders have noted, there exists a substantial doubt whether the inclusion of the New Haven on equitable terms as required by 5 (2) (d) has been provided. </s> Is such a coercive provision an "equitable" term within the meaning of 5 (2) (d)? Is "equitable" to be taken to mean what is a "fair" distribution of losses, risks, and burdens between the old creditor interests and the acquiring company? These are old and perennial problems in the reorganization and merger field. They involve a delicate weighing of legal rights and practical realities. How we can approve the merger under the statutory system without determining whether the loan provision and the provision for sharing of losses are "equitable" remains a mystery. </s> [Footnote 1 11 U.S.C. 205. See also 49 U.S.C. 20b. </s> [Footnote 2 Pennsylvania Railroad Co. - Merger - New York Central Railroad Co., Finance Docket No. 21989, 331 I. C. C. 643, 653. </s> [Footnote 3 Id., at 653-654. </s> [Footnote 4 Id., at 112. With respect to the "wasting asset" doctrine in Chapter X proceedings, see, e. g., In re The Sire Plan, Inc., 332 F.2d 497 (C. A. 2d Cir. 1964); In re V. Loewer's Gambrinus Brewery Co., Inc., 141 F.2d 747 (C. A. 2d Cir. 1944). </s> [Footnote 5 By an order dated December 19, 1967, the reorganization court (D.C. Conn.) authorized the New Haven Trustees to issue up to $25,000,000 in trustees' certificates to evidence any loans from Penn-Central obtained pursuant to the Commission's November 16, 1967 order. The court ordered that each certificate issued was to constitute an expense of administration equal in priority to other expenses of administration; and that the proceeds derived by the Trustees from the issuance of the certificates could be expended by them for purposes deemed necessary within their discretion (including current maintenance and operation expenses), subject to the supervision of the court. The court provided that the Trustees would not be required to seek any further authorization to make borrowings under the Penn-Central loan agreement; but it directed them to notify the court and the other parties concerned when they intended to take down a loan, and reserved jurisdiction to modify its order with respect to any of these future borrowings. </s> [Footnote 6 331 I. C. C. 643, 704. </s> [Footnote 7 See id., at 717-720. </s> [Footnote 8 Id., at 719. </s> [Footnote 9 The Commission authorized the Penn-Central merger, subject to the express condition (Condition No. 8, in Appendix A to its Report and Order dated April 6, 1966, Pennsylvania Railroad Co. - Merger - New York Central Railroad Co., 327 I. C. C. 475, as modified in 328 I. C. C. 304 and 330 I. C. C. 328), that the merged system include the properties and operations of the New Haven. The Commission found that the merger would effectively destroy the ability of the New Haven to survive, and would not be in the public interest without the complete inclusion of the New Haven. </s> [Footnote 10 49 U.S.C. 5 (2) (d). Section 5 (2) (b) authorizes acquisition of one carrier by another on terms which are "just and reasonable." [389 U.S. 486, 557] See, e. g., Schwabacher v. United States, 334 U.S. 182 ; Cleveland, C., C. & St. L. R. Co. v. Jackson, 22 F.2d 509 (C. A. 6th Cir. 1927); Stott v. United States, 166 F. Supp. 851 (D.C. S. D. N. Y. 1958). </s> [Footnote 11 Pennsylvania Railroad Co. - Merger - New York Central Railroad Co., 327 I. C. C. 475, 524. </s> [Footnote 12 In its summary of the contingencies upon which the obligation of Penn-Central to loan $25,000,000 to the New Haven would be terminated, the Commission included: "If a regulatory authority or court by a final and effective order grants permission to liquidate the NH or to dispose of it to someone other than Penn-Central"; and "If it should be determined that Penn-Central shall not acquire the NH." </s> [389 U.S. 486, 560]

United States Supreme Court KATZENBACH v. McCLUNG(1964) No. 543 Argued: October 5, 1964Decided: December 14, 1964 </s> Appellees, whose restaurant in Birmingham, Alabama, caters to local white customers with take-out service for Negroes, serving food a substantial portion of which has moved in interstate commerce, sued to enjoin appellants from enforcing against their restaurant and others Title II of the Civil Rights Act of 1964 which they claimed was unconstitutional. A three-judge District Court granted an injunction, holding that there was no demonstrable connection between food purchased in interstate commerce and sold in a restaurant and Congress' conclusion that discrimination in the restaurant would affect commerce so as to warrant regulation of local activities to protect interstate commerce. Held: </s> 1. Since interference with governmental action has occurred and the constitutionality of Title II is before the Court in a companion case, the Court reaches the merits of this case by considering the complaint as an application for declaratory judgment, instead of denying relief for want of equity jurisdiction as it would ordinarily do on the ground that appellees should have waited to pursue the statutory procedures for adjudication of their rights. Pp. 295-296. </s> 2. Congress acted within its power to protect and foster commerce in extending coverage of Title II to restaurants serving food a substantial portion of which has moved in interstate commerce, since it had ample basis to conclude that racial discrimination by such restaurants burdened interstate trade. Pp. 300-305. </s> 233 F. Supp. 815, reversed. </s> Solicitor General Cox argued the cause for appellants. With him on the brief were Assistant Attorney General Marshall, Ralph S. Spritzer, Philip B. Heymann, Harold H. Greene and Gerald P. Choppin. </s> Robert McDavid Smith argued the cause for appellees. With him on the briefs was William G. Somerville. [379 U.S. 294, 295] </s> Jack Greenberg, Constance Baker Motley, James M. Nabrit III and Charles L. Black, Jr., filed a brief for the NAACP Legal Defense and Educational Fund, Inc., as amicus curiae, urging reversal. </s> T. W. Bruton, Attorney General of North Carolina, and Ralph Moody, Deputy Attorney General, filed a brief for the State of North Carolina, as amicus curiae, urging affirmance. </s> MR. JUSTICE CLARK delivered the opinion of the Court. </s> This case was argued with No. 515, Heart of Atlanta Motel v. United States, decided this date, ante, p. 241, in which we upheld the constitutional validity of Title II of the Civil Rights Act of 1964 against an attack by hotels, motels, and like establishments. This complaint for injunctive relief against appellants attacks the constitutionality of the Act as applied to a restaurant. The case was heard by a three-judge United States District Court and an injunction was issued restraining appellants from enforcing the Act against the restaurant. 233 F. Supp. 815. On direct appeal, 28 U.S.C. 1252, 1253 (1958 ed.), we noted probable jurisdiction. 379 U.S. 802 . We now reverse the judgment. </s> 1. The Motion to Dismiss. </s> The appellants moved in the District Court to dismiss the complaint for want of equity jurisdiction and that claim is pressed here. The grounds are that the Act authorizes only preventive relief; that there has been no threat of enforcement against the appellees and that they have alleged no irreparable injury. It is true that ordinarily equity will not interfere in such cases. However, we may and do consider this complaint as an application for a declaratory judgment under 28 U.S.C. 2201 and 2202 (1958 ed.). In this case, of course, direct appeal to this Court would still lie under 28 U.S.C. 1252 (1958 [379 U.S. 294, 296] ed.). But even though Rule 57 of the Federal Rules of Civil Procedure permits declaratory relief although another adequate remedy exists, it should not be granted where a special statutory proceeding has been provided. See Notes on Rule 57 of Advisory Committee on Rules, 28 U.S.C. App. 5178 (1958 ed.). Title II provides for such a statutory proceeding for the determination of rights and duties arising thereunder, 204-207, and courts should, therefore, ordinarily refrain from exercising their jurisdiction in such cases. </s> The present case, however, is in a unique position. The interference with governmental action has occurred and the constitutional question is before us in the companion case of Heart of Atlanta Motel as well as in this case. It is important that a decision on the constitutionality of the Act as applied in these cases be announced as quickly as possible. For these reasons, we have concluded, with the above caveat, that the denial of discretionary declaratory relief is not required here. </s> 2. The Facts. </s> Ollie's Barbecue is a family-owned restaurant in Birmingham, Alabama, specializing in barbecued meats and homemade pies, with a seating capacity of 220 customers. It is located on a state highway 11 blocks from an interstate one and a somewhat greater distance from railroad and bus stations. The restaurant caters to a family and white-collar trade with a take-out service for Negroes. It employs 36 persons, two-thirds of whom are Negroes. </s> In the 12 months preceding the passage of the Act, the restaurant purchased locally approximately $150,000 worth of food, $69,683 or 46% of which was meat that it bought from a local supplier who had procured it from outside the State. The District Court expressly found that a substantial portion of the food served in the restaurant [379 U.S. 294, 297] had moved in interstate commerce. The restaurant has refused to serve Negroes in its dining accommodations since its original opening in 1927, and since July 2, 1964, it has been operating in violation of the Act. The court below concluded that if it were required to serve Negroes it would lose a substantial amount of business. </s> On the merits, the District Court held that the Act could not be applied under the Fourteenth Amendment because it was conceded that the State of Alabama was not involved in the refusal of the restaurant to serve Negroes. It was also admitted that the Thirteenth Amendment was authority neither for validating nor for invalidating the Act. As to the Commerce Clause, the court found that it was "an express grant of power to Congress to regulate interstate commerce, which consists of the movement of persons, goods or information from one state to another"; and it found that the clause was also a grant of power "to regulate intrastate activities, but only to the extent that action on its part is necessary or appropriate to the effective execution of its expressly granted power to regulate interstate commerce." There must be, it said, a close and substantial relation between local activities and interstate commerce which requires control of the former in the protection of the latter. The court concluded, however, that the Congress, rather than finding facts sufficient to meet this rule, had legislated a conclusive presumption that a restaurant affects interstate commerce if it serves or offers to serve interstate travelers or if a substantial portion of the food which it serves has moved in commerce. This, the court held, it could not do because there was no demonstrable connection between food purchased in interstate commerce and sold in a restaurant and the conclusion of Congress that discrimination in the restaurant would affect that commerce. [379 U.S. 294, 298] </s> The basic holding in Heart of Atlanta Motel, answers many of the contentions made by the appellees. 1 There we outlined the overall purpose and operational plan of Title II and found it a valid exercise of the power to regulate interstate commerce insofar as it requires hotels and motels to serve transients without regard to their race or color. In this case we consider its application to restaurants which serve food a substantial portion of which has moved in commerce. </s> 3. The Act As Applied. </s> Section 201 (a) of Title II commands that all persons shall be entitled to the full and equal enjoyment of the goods and services of any place of public accommodation without discrimination or segregation on the ground of race, color, religion, or national origin; and 201 (b) defines establishments as places of public accommodation if their operations affect commerce or segregation by them is supported by state action. Sections 201 (b) (2) and (c) place any "restaurant . . . principally engaged in selling food for consumption on the premises" under the Act "if . . . it serves or offers to serve interstate travelers or a substantial portion of the food which it serves . . . has moved in commerce." </s> Ollie's Barbecue admits that it is covered by these provisions of the Act. The Government makes no contention that the discrimination at the restaurant was supported by the State of Alabama. There is no claim that interstate travelers frequented the restaurant. The sole question, therefore, narrows down to whether Title II, as applied to a restaurant annually receiving about $70,000 worth of food which has moved in commerce, is a valid exercise of the power of Congress. The Government [379 U.S. 294, 299] has contended that Congress had ample basis upon which to find that racial discrimination at restaurants which receive from out of state a substantial portion of the food served does, in fact, impose commercial burdens of national magnitude upon interstate commerce. The appellees' major argument is directed to this premise. They urge that no such basis existed. It is to that question that we now turn. </s> 4. The Congressional Hearings. </s> As we noted in Heart of Atlanta Motel both Houses of Congress conducted prolonged hearings on the Act. And, as we said there, while no formal findings were made, which of course are not necessary, it is well that we make mention of the testimony at these hearings the better to understand the problem before Congress and determine whether the Act is a reasonable and appropriate means toward its solution. The record is replete with testimony of the burdens placed on interstate commerce by racial discrimination in restaurants. A comparison of per capita spending by Negroes in restaurants, theaters, and like establishments indicated less spending, after discounting income differences, in areas where discrimination is widely practiced. This condition, which was especially aggravated in the South, was attributed in the testimony of the Under Secretary of Commerce to racial segregation. See Hearings before the Senate Committee on Commerce on S. 1732, 88th Cong., 1st Sess., 695. This diminutive spending springing from a refusal to serve Negroes and their total loss as customers has, regardless of the absence of direct evidence, a close connection to interstate commerce. The fewer customers a restaurant enjoys the less food it sells and consequently the less it buys. S. Rep. No. 872, 88th Cong., 2d Sess., at 19; Senate Commerce Committee Hearings, at 207. In addition, the Attorney General testified that this type of discrimination imposed "an artificial restriction on the market" and interfered [379 U.S. 294, 300] with the flow of merchandise. Id., at 18-19; also, on this point, see testimony of Senator Magnuson, 110 Cong. Rec. 7402-7403. In addition, there were many references to discriminatory situations causing wide unrest and having a depressant effect on general business conditions in the respective communities. See, e. g., Senate Commerce Committee Hearings, at 623-630, 695-700, 1384-1385. </s> Moreover there was an impressive array of testimony that discrimination in restaurants had a direct and highly restrictive effect upon interstate travel by Negroes. This resulted, it was said, because discriminatory practices prevent Negroes from buying prepared food served on the premises while on a trip, except in isolated and unkempt restaurants and under most unsatisfactory and often unpleasant conditions. This obviously discourages travel and obstructs interstate commerce for one can hardly travel without eating. Likewise, it was said, that discrimination deterred professional, as well as skilled, people from moving into areas where such practices occurred and thereby caused industry to be reluctant to establish there. S. Rep. No. 872, supra, at 18-19. </s> We believe that this testimony afforded ample basis for the conclusion that established restaurants in such areas sold less interstate goods because of the discrimination, that interstate travel was obstructed directly by it, that business in general suffered and that many new businesses refrained from establishing there as a result of it. Hence the District Court was in error in concluding that there was no connection between discrimination and the movement of interstate commerce. The court's conclusion that such a connection is outside "common experience" flies in the face of stubborn fact. </s> It goes without saying that, viewed in isolation, the volume of food purchased by Ollie's Barbecue from sources supplied from out of state was insignificant when [379 U.S. 294, 301] compared with the total foodstuffs moving in commerce. But, as our late Brother Jackson said for the Court in Wickard v. Filburn, 317 U.S. 111 (1942): </s> "That appellee's own contribution to the demand for wheat may be trivial by itself is not enough to remove him from the scope of federal regulation where, as here, his contribution, taken together with that of many others similarly situated, is far from trivial." At 127-128. </s> We noted in Heart of Atlanta Motel that a number of witnesses attested to the fact that racial discrimination was not merely a state or regional problem but was one of nationwide scope. Against this background, we must conclude that while the focus of the legislation was on the individual restaurant's relation to interstate commerce, Congress appropriately considered the importance of that connection with the knowledge that the discrimination was but "representative of many others throughout the country, the total incidence of which if left unchecked may well become far-reaching in its harm to commerce." Polish Alliance v. Labor Board, 322 U.S. 643, 648 (1944). </s> With this situation spreading as the record shows, Congress was not required to await the total dislocation of commerce. As was said in Consolidated Edison Co. v. Labor Board, 305 U.S. 197 (1938): </s> "But it cannot be maintained that the exertion of federal power must await the disruption of that commerce. Congress was entitled to provide reasonable preventive measures and that was the object of the National Labor Relations Act." At 222. </s> 5. The Power of Congress to Regulate Local Activities. </s> Article I, 8, cl. 3, confers upon Congress the power "[t]o regulate Commerce . . . among the several States" and Clause 18 of the same Article grants it the power [379 U.S. 294, 302] "[t]o make all Laws which shall be necessary and proper for carrying into Execution the foregoing Powers . . . ." This grant, as we have pointed out in Heart of Atlanta Motel "extends to those activities intrastate which so affect interstate commerce, or the exertion of the power of Congress over it, as to make regulation of them appropriate means to the attainment of a legitimate end, the effective execution of the granted power to regulate interstate commerce." United States v. Wrightwood Dairy Co., 315 U.S. 110, 119 (1942). Much is said about a restaurant business being local but "even if appellee's activity be local and though it may not be regarded as commerce, it may still, whatever its nature, be reached by Congress if it exerts a substantial economic effect on interstate commerce . . . ." Wickard v. Filburn, supra, at 125. The activities that are beyond the reach of Congress are "those which are completely within a particular State, which do not affect other States, and with which it is not necessary to interfere, for the purpose of executing some of the general powers of the government." Gibbons v. Ogden, 9 Wheat. 1, 195 (1824). This rule is as good today as it was when Chief Justice Marshall laid it down almost a century and a half ago. </s> This Court has held time and again that this power extends to activities of retail establishments, including restaurants, which directly or indirectly burden or obstruct interstate commerce. We have detailed the cases in Heart of Atlanta Motel, and will not repeat them here. </s> Nor are the cases holding that interstate commerce ends when goods come to rest in the State of destination apposite here. That line of cases has been applied with reference to state taxation or regulation but not in the field of federal regulation. </s> The appellees contend that Congress has arbitrarily created a conclusive presumption that all restaurants [379 U.S. 294, 303] meeting the criteria set out in the Act "affect commerce." Stated another way, they object to the omission of a provision for a case-by-case determination - judicial or administrative - that racial discrimination in a particular restaurant affects commerce. </s> But Congress' action in framing this Act was not unprecedented. In United States v. Darby, 312 U.S. 100 (1941), this Court held constitutional the Fair Labor Standards Act of 1938. 2 There Congress determined that the payment of substandard wages to employees engaged in the production of goods for commerce, while not itself commerce, so inhibited it as to be subject to federal regulation. The appellees in that case argued, as do the appellees here, that the Act was invalid because it included no provision for an independent inquiry regarding the effect on commerce of substandard wages in a particular business. (Brief for appellees, pp. 76-77, United States v. Darby, 312 U.S. 100 .) But the Court rejected the argument, observing that: </s> "[S]ometimes Congress itself has said that a particular activity affects the commerce, as it did in the present Act, the Safety Appliance Act and the Railway Labor Act. In passing on the validity of legislation of the class last mentioned the only function of courts is to determine whether the particular activity regulated or prohibited is within the reach of the federal power." At 120-121. </s> Here, as there, Congress has determined for itself that refusals of service to Negroes have imposed burdens both upon the interstate flow of food and upon the movement of products generally. Of course, the mere fact that Congress has said when particular activity shall be deemed to affect commerce does not preclude further examination by this Court. But where we find that the legislators, in [379 U.S. 294, 304] light of the facts and testimony before them, have a rational basis for finding a chosen regulatory scheme necessary to the protection of commerce, our investigation is at an end. The only remaining question - one answered in the affirmative by the court below - is whether the particular restaurant either serves or offers to serve interstate travelers or serves food a substantial portion of which has moved in interstate commerce. </s> The appellees urge that Congress, in passing the Fair Labor Standards Act and the National Labor Relations Act, 3 made specific findings which were embodied in those statutes. Here, of course, Congress has included no formal findings. But their absence is not fatal to the validity of the statute, see United States v. Carolene Products Co., 304 U.S. 144, 152 (1938), for the evidence presented at the hearings fully indicated the nature and effect of the burdens on commerce which Congress meant to alleviate. </s> Confronted as we are with the facts laid before Congress, we must conclude that it had a rational basis for finding that racial discrimination in restaurants had a direct and adverse effect on the free flow of interstate commerce. Insofar as the sections of the Act here relevant are concerned, 201 (b) (2) and (c), Congress prohibited discrimination only in those establishments having a close tie to interstate commerce, i. e., those, like the McClungs', serving food that has come from out of the State. We think in so doing that Congress acted well within its power to protect and foster commerce in extending the coverage of Title II only to those restaurants offering to serve interstate travelers or serving food, a substantial portion of which has moved in interstate commerce. </s> The absence of direct evidence connecting discriminatory restaurant service with the flow of interstate food, [379 U.S. 294, 305] a factor on which the appellees place much reliance, is not, given the evidence as to the effect of such practices on other aspects of commerce, a crucial matter. </s> The power of Congress in this field is broad and sweeping; where it keeps within its sphere and violates no express constitutional limitation it has been the rule of this Court, going back almost to the founding days of the Republic, not to interfere. The Civil Rights Act of 1964, as here applied, we find to be plainly appropriate in the resolution of what the Congress found to be a national commercial problem of the first magnitude. We find it in no violation of any express limitations of the Constitution and we therefore declare it valid. </s> The judgment is therefore </s> Reversed. </s> [For concurring opinion of MR. JUSTICE BLACK, see ante, p. 268.] </s> [For concurring opinion of MR. JUSTICE DOUGLAS, see ante, p. 279.] </s> [For concurring opinion of MR. JUSTICE GOLDBERG, see ante, p. 291.] </s> Footnotes [Footnote 1 That decision disposes of the challenges that the appellees base on the Fifth, Ninth, Tenth, and Thirteenth Amendments, and on the Civil Rights Cases, 109 U.S. 3 (1883). </s> [Footnote 2 52 Stat. 1060, 29 U.S.C. 201 et seq. (1958 ed.). </s> [Footnote 3 49 Stat. 449, as amended, 29 U.S.C. 151 et seq. (1958 ed.). </s> [379 U.S. 294, 306]

United States Supreme Court ERNST & ERNST v. HOCHFELDER(1976) No. 74-1042 Argued: December 3, 1975Decided: March 30, 1976 </s> Petitioner accounting firm was retained to audit periodically a brokerage firm's books and records. Respondents, who were </s> customers of the brokerage firm, invested in a securities scheme ultimately revealed as fraudulent and perpetrated by the firm's president and principal stockholder. After the fraud came to light, respondents filed an action for damages against petitioner under 10 (b) of the Securities Exchange Act of 1934 (1934 Act), which makes it unlawful to use or employ "any manipulative or deceptive device or contrivance" in contravention of Securities and Exchange Commission (SEC) rules. It was alleged that the brokerage firm president's scheme violated 10 (b) and SEC Rule 10b-5, and that petitioner had "aided and abetted" the violations by its "failure" to conduct proper audits of the firm, thereby failing to discover internal practices that prevented an effective audit. The District Court granted petitioner's motion for summary judgment and dismissed the action, holding that whether or not a cause of action could be based merely on allegations of negligence, there was no genuine issue of material fact as to whether petitioner had conducted its audits in accordance with generally accepted standards. The Court of Appeals reversed and remanded, holding that one who breaches a duty of inquiry and disclosure owed another is liable in damages for aiding and abetting a third party's violation of Rule 10b-5 if the fraud would have been discovered or prevented but for the breach, and that there were genuine issues of fact as to whether petitioner committed such a breach and whether inquiry and disclosure would have led to discovery or prevention of the president's fraud. </s> Held: </s> 1. A private cause of action for damages will not lie under 10 (b) and Rule 10b-5 in the absence of any allegation of "scienter," i. e., intent to deceive, manipulate, or defraud on the defendant's part. Pp. 194-214. </s> (a) The use of the words "manipulative," "device," and "contrivance" in 10 (b) clearly shows that it was intended to [425 U.S. 185, 186] proscribe a type of conduct quite different from negligence, and more particularly the use of the word "manipulative," virtually a term of art used in connection with securities markets, connotes intentional or willful conduct designed to deceive or defraud investors by controlling or artificially affecting the price of securities. Pp. 197-201. </s> (b) The 1934 Act's legislative history also indicates that 10 (b) was addressed to practices involving some element of scienter and cannot be read to impose liability for negligent conduct alone. Pp. 201-206. </s> (c) The structure of the 1934 Act and the interrelated Securities Act of 1933 (1933 Act) does not support the contention that since 10 (b), in contrast to certain other sections of these Acts, is not by its terms explicitly restricted to willful, knowing, or purposeful conduct, it should not be construed to require more than negligent action or inaction as a precondition for civil liability. In each instance that Congress in these Acts created express civil liability in favor of purchasers or sellers of securities it clearly specified whether recovery was to be premised on knowing or intentional conduct, negligence, or entirely innocent mistake. The express recognition of a cause of action premised on negligent behavior in 11, for example, stands in sharp contrast to the language of 10 (b). Moreover, each of the express civil remedies in the 1933 Act allowing recovery for negligent conduct is subject to significant procedural restrictions indicating that the judicially created private damages remedy under 10 (b) - which has no comparable restrictions - cannot be extended, consistently with Congress' intent, to actions premised on negligence, since to do so would allow causes of action under these express 1933 Act remedies to be brought instead under 10 (b), thereby nullifying the effectiveness of such restrictions on those remedies. Pp. 206-211. </s> (d) While there is language in Rule 10b-5 that could arguably be read as proscribing any type of material misstatement or omission and any course of conduct that has the effect of defrauding investors, whether the wrongdoing was intentional or not, such a reading does not comport with the Rule's administrative history which makes it clear that it was intended to apply only to activities involving scienter. More importantly, the scope of Rule 10b-5 cannot exceed the power granted the SEC under 10 (b), whose language and history compel interpreting the Rule to apply only to intentional wrongdoing. Pp. 212-214. [425 U.S. 185, 187] </s> 2. The case will not be remanded for further proceedings to require proof of more than negligent misfeasance by petitioner, since throughout the history of the case respondents have proceeded on a theory of liability premised on negligence, in fact specifically disclaiming that petitioner had engaged in fraud or intentional misconduct. P. 215. </s> 503 F.2d 1100, reversed. </s> POWELL, J., delivered the opinion of the Court, in which BURGER, C. J., and STEWART, WHITE, MARSHALL, and REHNQUIST, JJ., joined. BLACKMUN, J., filed a dissenting opinion, in which BRENNAN, J., joined, post, p. 215. STEVENS, J., took no part in the consideration or decision of the case. </s> Robert L. Berner, Jr., argued the cause for petitioner. With him on the briefs were Francis D. Morrissey, Michael J. Madda, and Kenneth H. Lang. </s> Willard L. King argued the cause and filed a brief for respondents Hochfelder et al. Willard J. Lassers argued the cause for respondents Allison et al. With him on the brief were Donald L. Vetter, Leon M. Despres, and Alex Elson. </s> Paul Gonson argued the cause for the Securities and Exchange Commission as amicus curiae urging affirmance. With him on the brief were Solicitor General Bork, Deputy Solicitor General Friedman, Lawrence E. Nerheim, and Charles E. H. Luedde. * </s> [Footnote * Kenneth J. Bialkin and Louis A. Craco filed a brief for the American Institute of Certified Public Accountants as amicus curiae urging reversal. </s> MR. JUSTICE POWELL delivered the opinion of the Court. </s> The issue in this case is whether an action for civil damages may lie under 10 (b) of the Securities Exchange Act of 1934 (1934 Act), 48 Stat. 891, 15 U.S.C. 78j [425 U.S. 185, 188] (b), and Securities and Exchange Commission Rule 10b-5, 17 CFR 240.10b-5 (1975), in the absence of an allegation of intent to deceive, manipulate, or defraud on the part of the defendant. </s> I </s> Petitioner, Ernst & Ernst, is an accounting firm. From 1946 through 1967 it was retained by First Securities Company of Chicago (First Securities), a small brokerage firm and member of the Midwest Stock Exchange and of the National Association of Securities Dealers, to perform periodic audits of the firm's books and records. In connection with these audits Ernst & Ernst prepared for filing with the Securities and Exchange Commission (Commission) the annual reports required of First Securities under 17 (a) of the 1934 Act, 15 U.S.C. 78q (a). 1 It also prepared for First Securities responses to the financial questionnaires of the Midwest Stock Exchange (Exchange). [425 U.S. 185, 189] </s> Respondents were customers of First Securities who invested in a fraudulent securities scheme perpetrated by Leston B. Nay, president of the firm and owner of 92% of its stock. Nay induced the respondents to invest funds in "escrow" accounts that he represented would yield a high rate of return. Respondents did so from 1942 through 1966, with the majority of the transactions occurring in the 1950's. In fact, there were no escrow accounts as Nay converted respondents' funds to his own use immediately upon receipt. These transactions were not in the customary form of dealings between First Securities and its customers. The respondents drew their personal checks payable to Nay or a designated bank for his account. No such escrow accounts were reflected on the books and records of First Securities, and none was shown on its periodic accounting to respondents in connection with their other investments. Nor were they included in First Securities' filings with the Commission or the Exchange. </s> This fraud came to light in 1968 when Nay committed suicide, leaving a note that described First Securities as bankrupt and the escrow accounts as "spurious." Respondents subsequently filed this action 2 for damages against Ernst & Ernst 3 in the United States District Court for the Northern District of Illinois under [425 U.S. 185, 190] 10 (b) of the 1934 Act. The complaint charged that Nay's escrow scheme violated 10 (b) and Commission Rule 10b-5, 4 and that Ernst & Ernst had "aided and abetted" Nay's violations by its "failure" to conduct proper audits of First Securities. As revealed through discovery, respondents' cause of action rested on a theory of negligent nonfeasance. The premise was that Ernst & Ernst had failed to utilize "appropriate auditing procedures" in its audits of First Securities, thereby failing to discover internal practices of the firm said to prevent an effective audit. The practice principally relied on was Nay's rule that only he could open mail addressed to him at First Securities or addressed to First Securities to his attention, even if it arrived in his absence. Respondents contended that if Ernst & Ernst had conducted a proper audit, it would have discovered this "mail rule." The existence of the rule then would have been disclosed in reports to the Exchange and to the Commission by Ernst & Ernst as an irregular procedure that prevented an effective audit. This would have led to an investigation of Nay that would have revealed the fraudulent scheme. Respondents specifically disclaimed the existence of fraud or intentional misconduct on the part of Ernst & Ernst. 5 </s> [425 U.S. 185, 191] </s> After extensive discovery the District Court granted Ernst & Ernst's motion for summary judgment and dismissed the action. The court rejected Ernst & Ernst's contention that a cause of action for aiding and abetting a securities fraud could not be maintained under 10 (b) and Rule 10b-5 merely on allegations of negligence. It concluded, however, that there was no genuine issue of material fact with respect to whether Ernst & Ernst had conducted its audits in accordance with generally accepted auditing standards. 6 </s> The Court of Appeals for the Seventh Circuit reversed and remanded, holding that one who breaches a duty of inquiry and disclosure owed another is liable in damages for aiding and abetting a third party's violation of Rule 10b-5 if the fraud would have been discovered or prevented but for the breach. 503 F.2d 1100 (1974). 7 </s> [425 U.S. 185, 192] The court reasoned that Ernst & Ernst had a common-law and statutory duty of inquiry into the adequacy of First Securities' internal control system because it had contracted to audit First Securities and to prepare for filing with the Commission the annual report of First Securities' financial condition required under 17 of the 1934 Act and Rule 17a-5. 8 The court further reasoned that respondents were beneficiaries of the statutory duty to inquire 9 and the related duty to disclose any material [425 U.S. 185, 193] irregularities that were discovered. 503 F.2d, at 1105-1111. The court concluded that there were genuine issues of fact as to whether Ernst & Ernst's failure to discover and comment upon Nay's mail rule 10 constituted a breach of its duties of inquiry and disclosure, id., at 1111, and whether inquiry and disclosure would have led to the discovery or prevention of Nay's fraud. Id., at 1115. 11 </s> We granted certiorari to resolve the question whether a private cause of action for damages will lie under 10 (b) and Rule 10b-5 in the absence of any allegation of "scienter" - intent to deceive, manipulate, or defraud. 12 </s> 421 U.S. 909 (1975). We conclude that it will not and therefore we reverse. 13 </s> [425 U.S. 185, 194] </s> II </s> Federal regulation of transactions in securities emerged as part of the aftermath of the market crash in 1929. [425 U.S. 185, 195] The Securities Act of 1933 (1933 Act), 48 Stat. 74, as amended, 15 U.S.C. 77a et seq., was designed to provide investors with full disclosure of material information concerning public offerings of securities in commerce, to protect investors against fraud and, through the imposition of specified civil liabilities, to promote ethical standards of honesty and fair dealing. See H. R. Rep. No. 85, 73d Cong., 1st Sess., 1-5 (1933). The 1934 Act was intended principally to protect investors against manipulation of stock prices through regulation of transactions upon securities exchanges and in over-the-counter markets, and to impose regular reporting requirements on companies whose stock is listed on national securities exchanges. See S. Rep. No. 792, 73d Cong., 2d Sess., 1-5 (1934). Although the Acts contain numerous carefully drawn express civil remedies and criminal penalties, Congress recognized that efficient regulation of securities trading could not be accomplished under a rigid statutory program. As part of the 1934 Act Congress created the Commission, which is provided with an arsenal of flexible enforcement powers. See, e. g., 1933 Act 8, 19, 20, 15 U.S.C. 77h, 77s, 77t; 1934 Act 9, 19, 21, 15 U.S.C. 78i, 78s, 78u. </s> Section 10 of the 1934 Act makes it "unlawful for any person . . . (b) [t]o use or employ, in connection with the purchase or sale of any security . . . any manipulative or deceptive device or contrivance in contravention of such rules and regulations as the Commission may prescribe as necessary or appropriate in the public interest or for the protection of investors." 15 U.S.C. 78j. In 1942, acting pursuant to the power conferred by 10 (b), the Commission promulgated Rule 10b-5, which now provides: </s> "Employment of manipulative and deceptive devices. [425 U.S. 185, 196] </s> "It shall be unlawful for any person, directly or indirectly, by the use of any means or instrumentality of interstate commerce, or of the mails or of any facility of any national securities exchange, </s> "(a) To employ any device, scheme, or artifice to defraud. </s> "(b) To make any untrue statement of a material fact or to omit to state a material fact necessary in order to make the statements made, in the light of the circumstances under which they were made, not misleading, or </s> "(c) To engage in any act, practice, or course of business which operates or would operate as a fraud or deceit upon any person. </s> "in connection with the purchase or sale of any security." </s> Although 10 (b) does not by its terms create an express civil remedy for its violation, and there is no indication that Congress. 14 or the Commission when adopting Rule 10b-5, 15 contemplated such a remedy, the existence of a private cause of action for violations of the statute and the Rule is now well established. Blue Chip Stamps v. Manor Drug Stores, 421 U.S. 723, 730 (1975); Affiliated Ute Citizens v. United States, 406 U.S. 128, 150 -154 (1972); Superintendent of Insurance v. Bankers Life & Cas. Co., 404 U.S. 6, 13 n. 9 (1971). During the 30-year period since a private cause of action was first implied under 10 (b) and Rule 10b-5, 16 </s> [425 U.S. 185, 197] a substantial body of case law and commentary has developed as to its elements. Courts and commentators long have differed with regard to whether scienter is a necessary element of such a cause of action, or whether negligent conduct alone is sufficient. 17 In addressing this question, we turn first to the language of 10 (b), for "[t]he starting point in every case involving construction of a statute is the language itself." Blue Chip Stamps, supra, at 756 (POWELL, J., concurring); see FTC v. Bunte Bros., Inc., 312 U.S. 349, 350 (1941). </s> A </s> Section 10 (b) makes unlawful the use or employment of "any manipulative or deceptive device or contrivance" in contravention of Commission rules. The words "manipulative or deceptive" used in conjunction with "device or contrivance" strongly suggest that 10 (b) was intended to proscribe knowing or intentional misconduct. See SEC v. Texas Gulf Sulphur Co., 401 F.2d 833, 868 (CA2 1968) (Friendly, J., concurring), cert. denied sub nom. Coates v. SEC, 394 U.S. 976 (1969); Loss, Summary Remarks, 30 Bus. Law. 163, 165 (Special Issue 1975). See also Kohn v. American Metal Climax, Inc., 458 F.2d 255, 280 (CA3 1972) (Adams, J., concurring and dissenting). </s> In its amicus curiae brief, however, the Commission contends that nothing in the language "manipulative or deceptive device or contrivance" limits its operation to [425 U.S. 185, 198] knowing or intentional practices. 18 In support of its view, the Commission cites the overall congressional purpose in the 1933 and 1934 Acts to protect investors against false and deceptive practices that might injure them. See Affiliated Ute Citizens v. United States, supra, at 151; Superintendent of Insurance v. Bankers Life & Cas. Co., supra, at 11-12; J. I. Case Co. v. Borak, 377 U.S. 426, 432 -433 (1964). See also SEC v. Capital Gains Res. Bur., 375 U.S. 180, 195 (1963). The Commission then reasons that since the "effect" upon investors of given conduct is the same regardless of whether the conduct is negligent or intentional, Congress must have intended to bar all such practices and not just those done knowingly or intentionally. The logic of this effect-oriented approach would impose liability for wholly faultless conduct where such conduct results in harm to investors, a result the Commission would be unlikely to support. But apart from where its logic might [425 U.S. 185, 199] lead, the Commission would add a gloss to the operative language of the statute quite different from its commonly accepted meaning. See, e. g., Addison v. Holly Hill Fruit Products, Inc., 322 U.S. 607, 617 -618 (1944). 19 The argument simply ignores the use of the words "manipulative," "device," and "contrivance" - terms that make unmistakable a congressional intent to proscribe a type of conduct quite different from negligence. 20 Use of the word "manipulative" is especially significant. It is and was virtually a term of art when used in connection with securities markets. It connotes intentional or willful conduct designed to deceive or defraud investors by controlling or artificially affecting the price of securities. 21 </s> In addition to relying upon the Commission's argument with respect to the operative language of the statute, [425 U.S. 185, 200] respondents contend that since we are dealing with "remedial legislation," Tcherepnin v. Knight, 389 U.S. 332, 336 (1967), it must be construed "`not technically and restrictively, but flexibly to effectuate its remedial purposes.'" Affiliated Ute Citizens v. United States, 406 U.S., at 151 , quoting SEC v. Capital Gains Research Bureau, supra, at 195. They argue that the "remedial purposes" of the Acts demand a construction of 10 (b) that embraces negligence as a standard of liability. But in seeking to accomplish its broad remedial goals, Congress did not adopt uniformly a negligence standard even as to express civil remedies. In some circumstances and with respect to certain classes of defendants, Congress did create express liability predicated upon a failure to exercise reasonable care. E. g., 1933 Act 11 (b) (3) (B), 48 Stat. 82, as amended, 15 U.S.C. 77k (b) (3) (B) (liability of "experts," such as accountants, for misleading statements in portions of registration statements for which they are responsible). 22 But in other situations good faith is an absolute defense. 1934 Act 18, 48 Stat. 897, as amended, 15 U.S.C. 78r (misleading statements in any document filed pursuant to the 1934 Act). And in still other circumstances Congress created express liability regardless of the defendant's fault, 1933 Act 11 (a), 15 U.S.C. 77k (a) (issuer liability for misleading statements in the registration statement). </s> It is thus evident that Congress fashioned standards of fault in the express civil remedies in the 1933 and 1934 Acts on a particularized basis. Ascertainment of congressional intent with respect to the standard of liability created by a particular section of the Acts must therefore rest primarily on the language of that section. Where, as here, we deal with a judicially implied liability, the statutory language certainly [425 U.S. 185, 201] is no less important. In view of the language of 10 (b), which so clearly connotes intentional misconduct, and mindful that the language of a statute controls when sufficiently clear in its context, United States v. Oregon, 366 U.S. 643, 648 (1961); Packard Motor Car Co. v. NLRB, 330 U.S. 485, 492 (1947), further inquiry may be unnecessary. We turn now, nevertheless, to the legislative history of the 1934 Act to ascertain whether there is support for the meaning attributed to 10 (b) by the Commission and respondents. </s> B </s> Although the extensive legislative history of the 1934 Act is bereft of any explicit explanation of Congress' intent, we think the relevant portions of that history support our conclusion that 10 (b) was addressed to practices that involve some element of scienter and cannot be read to impose liability for negligent conduct alone. </s> The original version of what would develop into the 1934 Act was contained in identical bills introduced by Senator Fletcher and Representative Rayburn. S. 2693, 73d Cong., 2d Sess. (1934); H. R. 7852, 73d Cong., 2d Sess. (1934). Section 9 (c) of the bills, from which present 10 (b) evolved, proscribed as unlawful the use of "any device or contrivance which, or any device or contrivance in a way or manner which the Commission may by its rules and regulations find detrimental to the public interest or to the proper protection of investors." The other subsections of proposed 9 listed specific practices that Congress empowered the Commission to regulate through its rulemaking power. See 9 (a) (short sale), (b) ("stop-loss order"). Soon after the hearings on the House bill were held, a substitute bill was introduced in both Houses which abbreviated and modified [425 U.S. 185, 202] 9 (c)'s operative language to read "any manipulative device or contrivance." H. R. 8720, 73d Cong., 2d Sess., 9 (c) (1934); see S. 3420, 73d Cong., 2d Sess., 10 (b) (1934). Still a third bill, retaining the Commission's power to regulate the specific practices enumerated in the prior bills, and omitting all reference to the Commission's authority to prescribe rules concerning manipulative or deceptive devices in general, was introduced and passed in the House. H. R. 9323, 73d Cong., 2d Sess., 9 (1934). The final language of 10 is a modified version of a Senate amendment to this last House bill. See H. R. Conf. Rep. No. 1838, 73d Cong., 2d Sess., 32-33 (1934). </s> Neither the intended scope of 10 (b) nor the reasons for the changes in its operative language are revealed explicitly in the legislative history of the 1934 Act, which deals primarily with other aspects of the legislation. There is no indication, however, that 10 (b) was intended to proscribe conduct not involving scienter. The extensive hearings that preceded passage of the 1934 Act touched only briefly on 10, and most of the discussion was devoted to the enumerated devices that the Commission is empowered to proscribe under 10 (a). The most relevant exposition of the provision that was to become 10 (b) was by Thomas G. Corcoran, a spokesman for the drafters. Corcoran indicated: </s> "Subsection (c) [ 9 (c) of H. R. 7852 - later 10 (b)] says, `Thou shalt not devise any other cunning devices.' </s> . . . . . </s> "Of course subsection (c) is a catch-all clause to prevent manipulative devices. I do not think there is any objection to that kind of clause. The Commission should have the authority to deal with new manipulative devices." Hearings on H. R. 7852 [425 U.S. 185, 203] and H. R. 8720 before the House Committee on Interstate and Foreign Commerce, 73d Cong., 2d Sess., 115 (1934). </s> This brief explanation of 10 (b) by a spokesman for its drafters is significant. The section was described rightly as a "catchall" clause to enable the Commission "to deal with new manipulative [or cunning] devices." It is difficult to believe that any lawyer, legislative draftsman, or legislator would use these words if the intent was to create liability for merely negligent acts or omissions. 23 Neither the legislative history nor the briefs supporting respondents identify any usage or authority for construing "manipulative [or cunning] devices" to include negligence. 24 </s> [425 U.S. 185, 204] </s> The legislative reports do not address the scope of 10 (b) or its catchall function directly. In considering specific manipulative practices left to Commission regulation, however, the reports indicate that liability would not attach absent scienter, supporting the conclusion that Congress intended no lesser standard under 10 (b). The Senate Report of S. 3420 discusses generally the various abuses that precipitated the need for the legislation and the inadequacy of self-regulation by the stock exchanges. The Report then analyzes the component provisions of the statute, but does not parse 10. The only specific reference to 10 is the following: </s> "In addition to the discretionary and elastic powers conferred on the administrative authority, effective regulation must include several clear statutory provisions reinforced by penal and civil sanctions, aimed at those manipulative and deceptive practices which have been demonstrated to fulfill no useful [425 U.S. 185, 205] function. These sanctions are found in sections 9, 10 and 16." S. Rep. No. 792, 73d Cong., 2d Sess., 6 (1934). </s> In the portion of the general-analysis section of the Report entitled Manipulative Practices, however, there is a discussion of specific practices that were considered so inimical to the public interest as to require express prohibition, such as "wash" sales and "matched" orders, 25 and of other practices that might in some cases serve legitimate purposes, such as stabilization of security prices and grants of options. Id., at 7-9. These latter practices were left to regulation by the Commission. 1934 Act 9 (a) (6), (c), 48 Stat. 890, 15 U.S.C. 78i (a) (6), (c). Significantly, we think, in the discussion of the need to regulate even the latter category of practices when they are manipulative, there is no indication that any type of criminal or civil liability is to attach in the absence of scienter. Furthermore, in commenting on the express civil liabilities provided in the 1934 Act, the Report explains: </s> "[I]f an investor has suffered loss by reason of illicit practices, it is equitable that he should be allowed to recover damages from the guilty party. . . . [T]he bill provides that any person who unlawfully [425 U.S. 185, 206] manipulates the price of a security, or who induces transactions in a security by means of false or misleading statements, or who makes a false or misleading statement in the report of a corporation, shall be liable in damages to those who have bought or sold the security at prices affected by such violation or statement. In such case the burden is on the plaintiff to show the violation or the fact that the statement was false or misleading, and that he relied thereon to his damage. The defendant may escape liability by showing that the statement was made in good faith." S. Rep. No. 792, supra, at 12-13 (emphasis supplied). </s> The Report therefore reveals with respect to the specified practices, an overall congressional intent to prevent "manipulative and deceptive practices which . . . fulfill no useful function" and to create private actions for damages stemming from "illicit practices," where the defendant has not acted in good faith. The views expressed in the House Report are consistent with this interpretation. H. R. Rep. No. 1383, 73d Cong., 2d Sess., 10-11, 20-21 (1934) (H. R. 9323). There is no indication that Congress intended anyone to be made liable for such practices unless he acted other than in good faith. The catchall provision of 10 (b) should be interpreted no more broadly. </s> C </s> The 1933 and 1934 Acts constitute interrelated components of the federal regulatory scheme governing transactions in securities. See Blue Chip Stamps, 421 U.S., at 727 -730. As the Court indicated in SEC v. National Securities, Inc., 393 U.S. 453, 466 (1969), "the interdependence of the various sections of the securities laws is certainly a relevant factor in any interpretation of the language Congress has chosen . . . ." Recognizing this, [425 U.S. 185, 207] respondents and the Commission contrast 10 (b) with other sections of the Acts to support their contention that civil liability may be imposed upon proof of negligent conduct. We think they misconceive the significance of the other provisions of the Acts. </s> The Commission argues that Congress has been explicit in requiring willful conduct when that was the standard of fault intended, citing 9 of the 1934 Act, 48 Stat. 889, 15 U.S.C. 78i, which generally proscribes manipulation of securities prices. Sections 9 (a) (1) and (a) (2), for example, respectively prohibit manipulation of security prices "[f]or the purpose of creating a false or misleading appearance of active trading in any security . . . or . . . with respect to the market for any such security," and "for the purpose of inducing the purchase or sale of such security by others." See also 9 (a) (4). Section 9 (e) then imposes upon "[a]ny person who willfully participates in any act or transaction in violation of" other provisions of 9 civil liability to anyone who purchased or sold a security at a price affected by the manipulative activities. From this the Commission concludes that since 10 (b) is not by its terms explicitly restricted to willful, knowing, or purposeful conduct, it should not be construed in all cases to require more than negligent action or inaction as a precondition for civil liability. </s> The structure of the Acts does not support the Commission's argument. In each instance that Congress created express civil liability in favor of purchasers or sellers of securities it clearly specified whether recovery was to be premised on knowing or intentional conduct, negligence, or entirely innocent mistake. See 1933 Act, 11, 12, 15, 48 Stat. 82, 84, as amended, 15 U.S.C. 77k, 77l, 77o; 1934 Act 9, 18, 20, 48 Stat. 889, 897, 899, as amended, 15 U.S.C. 78i, 78r, 78t. For example, 11 of the 1933 Act unambiguously [425 U.S. 185, 208] creates a private action for damages when a registration statement includes untrue statements of material facts or fails to state material facts necessary to make the statements therein not misleading. Within the limits specified by 11 (e), the issuer of the securities is held absolutely liable for any damages resulting from such misstatement or omission. But experts such as accountants who have prepared portions of the registration statement are accorded a "due diligence" defense. In effect, this is a negligence standard. An expert may avoid civil liability with respect to the portions of the registration statement for which he was responsible by showing that "after reasonable investigation" he had "reasonable ground[s] to believe" that the statements for which he was responsible were true and there was no omission of a material fact. 26 11 (b) (3) (B) (i). See, e. g., Escott v. Barchris Constr. Corp., 283 F. Supp. 643, 697-703 (SDNY 1968). The express recognition of a cause of action premised on negligent behavior in 11 stands in sharp contrast to the language of 10 (b), and significantly undercuts the Commission's argument. </s> We also consider it significant that each of the express civil remedies in the 1933 Act allowing recovery for negligent conduct, see 11, 12 (2), 15, 15 U.S.C. 77k, 77l [425 U.S. 185, 209] (2), 77o, 27 is subject to significant procedural restrictions not applicable under 10 (b). 28 Section 11 (e) of the 1933 Act, for example, authorizes the court to require a [425 U.S. 185, 210] plaintiff bringing a suit under 11, 12 (2), or 15 thereof to post a bond for costs, including attorney's fees, and in specified circumstances to assess costs at the conclusion of the litigation. Section 13 specifies a statute of limitations of one year from the time the violation was or should have been discovered, in no event to exceed three years from the time of offer or sale, applicable to actions brought under 11, 12 (2), or 15. These restrictions, significantly, were imposed by amendments to the 1933 Act adopted as part of the 1934 Act. Prior to amendment 11 (e) contained no provision for payment of costs. Act of May 27, 1933, c. 38, 11 (e), 48 Stat. 83. See Act of June 6, 1934, c. 404, 206 (e), 48 Stat. 907. The amendments also substantially shortened the statute of limitations provided by 13. Compare 13, 48 Stat. 84, with 15 U.S.C. 77m. See 1934 Act, 207, 48 Stat. 908. We think these procedural limitations indicate that the judicially created private damages remedy under 10 (b) - which has no comparable restrictions 29 - cannot be extended, consistently with the intent of Congress, to actions premised on negligent wrongdoing. Such extension would allow causes of action covered by 11, 12 (2), and 15 to be brought instead under 10 (b) and thereby nullify the effectiveness of the carefully drawn procedural restrictions on these express actions. 30 See, e. g., Fischman [425 U.S. 185, 211] v. Raytheon Mfg. Co., 188 F.2d 783, 786-787 (CA2 1951); SEC v. Texas Gulf Sulphur Co., 401 F.2d, at 867-868 (Friendly, J., concurring); Rosenberg v. Globe Aircraft Corp., 80 F. Supp. 123, 124 (ED Pa. 1948); 3 Loss, supra, n. 17, at 1787-1788; R. Jennings & H. Marsh, Securities Regulation 1070-1074 (3d ed. 1972). We would be unwilling to bring about this result absent substantial support in the legislative history, and there is none. 31 </s> [425 U.S. 185, 212] </s> D </s> We have addressed, to this point, primarily the language and history of 10 (b). The Commission contends, however, that subsections (b) and (c) of Rule 10b-5 are cast in language which - if standing alone - could encompass both intentional and negligent behavior. These subsections respectively provide that it is unlawful "[t]o make any untrue statement of a material fact or to omit to state a material fact necessary in order to make the statements made, in the light of the circumstances under which they were made, not misleading . . ." and "[t]o engage in any act, practice, or course of business which operates or would operate as a fraud or deceit upon any person . . . ." Viewed in isolation the language of subsection (b), and arguably that of subsection (c), could be read as proscribing, respectively, any type of material misstatement or omission, and any course of conduct, that has the effect of defrauding investors, whether the wrongdoing was intentional or not. </s> We note first that such a reading cannot be harmonized with the administrative history of the Rule, a history making clear that when the Commission adopted the Rule it was intended to apply only to activities that involved scienter. 32 More importantly, Rule 10b-5 was [425 U.S. 185, 213] adopted pursuant to authority granted the Commission under 10 (b). The rulemaking power granted to an administrative agency charged with the administration of a federal statute is not the power to make law. Rather, [425 U.S. 185, 214] it is "`the power to adopt regulations to carry into effect the will of Congress as expressed by the statute.'" Dixon v. United States, 381 U.S. 68, 74 (1965), quoting Manhattan General Equipment Co. v. Commissioner, 297 U.S. 129, 134 (1936). Thus, despite the broad view of the Rule advanced by the Commission in this case, its scope cannot exceed the power granted the Commission by Congress under 10 (b). For the reasons stated above, we think the Commission's original interpretation of Rule 10b-5 was compelled by the language and history of 10 (b) and related sections of the Acts. See, e. g., Gerstle v. Gamble-Skogmo, Inc., 478 F.2d 1281, 1299 (CA2 1973); Lanza v. Drexel & Co., 479 F.2d 1277, 1304-1305 (CA2 1973); SEC v. Texas Gulf Sulphur Co., 401 F.2d, at 868 (Friendly, J., concurring); 3 Loss, supra, n. 17, at 1766; 6 id., at 3883-3885. When a statute speaks so specifically in terms of manipulation and deception, and of implementing devices and contrivances - the commonly understood terminology of intentional wrongdoing - and when its history reflects no more expansive intent, we are quite unwilling to extend the scope of the statute to negligent conduct. 33 </s> [425 U.S. 185, 215] </s> III </s> Recognizing that 10 (b) and Rule 10b-5 might be held to require proof of more than negligent nonfeasance by Ernst & Ernst as a precondition to the imposition of civil liability, respondents further contend that the case should be remanded for trial under whatever standard is adopted. Throughout the lengthy history of this case respondents have proceeded on a theory of liability premised on negligence, specifically disclaiming that Ernst & Ernst had engaged in fraud or intentional misconduct. 34 In these circumstances, we think it inappropriate to remand the action for further proceedings. </s> The judgment of the Court of Appeals is </s> Reversed. </s> MR. JUSTICE STEVENS took no part in the consideration or decision of this case. </s> Footnotes [Footnote 1 Section 17 (a) requires that securities brokers or dealers "make . . . and preserve . . . such accounts . . . books, and other records, and make such reports, as the Commission by its rules and regulations may prescribe as necessary or appropriate in the public interest or for the protection of investors." During the period relevant here, Commission Rule 17a-5, 17 CFR 240. 17a-5 (1975), required that First Securities file an annual report of its financial condition that included a certificate stating "clearly the opinion of the accountant with respect to the financial statement covered by the certificate and the accounting principles and practices reflected therein." See SEC Release No. 3338 (Nov. 28, 1942), X-17A-5 (h). The Rule required Ernst & Ernst to state in its certificate, inter alia, "whether the audit was made in accordance with generally accepted auditing standards applicable in the circumstances" and provided that nothing in the Rule should "be construed to imply authority for the omission of any procedure which independent accountants would ordinarily employ in the course of an audit for the purpose of expressing the opinions required" by the Rule. </s> [Footnote 2 Two separate, but substantially identical, complaints initially were filed by different members of the present group of respondents. Subsequently the respondents jointly filed a First Amended Complaint. The two cases were treated by the District Court as if they were consolidated, and they were consolidated formally on appeal. </s> [Footnote 3 The first count of the complaint was directed against the Exchange, charging that through its acts and omissions it had aided and abetted Nay's fraud. Summary judgment in favor of the Exchange was affirmed on appeal. Hochfelder v. Midwest Stock Exchange, 503 F.2d 364 (CA7), cert. denied, 419 U.S. 875 (1974). </s> [Footnote 4 Immediately after Nay's suicide the Commission commenced receivership proceedings against First Securities. In those proceedings all of the respondents except two asserted claims based on the fraudulent escrow accounts. These claims ultimately were allowed in SEC v. First Securities Co., 463 F.2d 981, 986 (CA7), cert. denied, 409 U.S. 880 (1972), where the court held that Nay's conduct violated 10 (b) and Rule 10b-5, and that First Securities was liable for Nay's fraud as an aider and abettor. The question of Ernst & Ernst's liability was not considered in that case. </s> [Footnote 5 In their response to interrogatories in the District Court respondents conceded that they did "not accuse Ernst & Ernst of deliberate, intentional fraud," merely with "inexcusable negligence." App. 81. </s> [Footnote 6 The District Court also held that respondents' action was barred by the doctrine of equitable estoppel and the applicable Illinois statute of limitations of three years. See n. 29, infra. As customers of First Securities respondents were sent confirmation forms as required under 17 (a) and Rule 17a-5 requesting that they verify the accuracy of the statements and notify Ernst & Ernst as to any exceptions. Although the confirmation forms contained no reference to the escrow accounts, Ernst & Ernst was not notified of this fact. The last audit of First Securities by Ernst & Ernst was completed in December 1967 and the first complaint in this action was not filed until February 1971. </s> [Footnote 7 In support of this holding, the Court of Appeals cited its decision in Hochfelder v. Midwest Stock Exchange, supra, where it detailed the elements necessary to establish a claim under Rule 10b-5 based on a defendant's aiding and abetting a securities fraud solely by inaction. See n. 3 supra. In such a case the plaintiff must show "that the party charged with aiding and abetting had knowledge of or, but for a breach of a duty of inquiry, should have had knowledge of the fraud, and that possessing such knowledge the party failed to act due to an improper motive or breach of a duty of disclosure." 503 F.2d, at 374. The court explained in the instant case that these "elements comprise a flexible standard of liability [425 U.S. 185, 192] which should be amplified according to the peculiarities of each case." Id., at 1104. In view of our holding that an intent to deceive, manipulate, or defraud is required for civil liability under 10 (b) and Rule 10b-5, we need not consider whether civil liability for aiding and abetting is appropriate under the section and the Rule, nor the elements necessary to establish such a cause of action. See, e. g., Brennan v. Midwestern United Life Ins. Co., 259 F. Supp. 673 (1966) and 286 F. Supp. 702 (ND Ind. 1968), aff'd, 417 F.2d 147 (CA7 1969), cert. denied, 397 U.S. 989 (1970) (defendant held liable for giving active and knowing assistance to a third party engaged in violations of the securities laws). See generally Ruder, Multiple Defendants in Securities Law Fraud Cases: Aiding and Abetting, Conspiracy, In Pari Delicto, Indemnification and Contribution, 120 U. Pa. L. Rev. 597, 620-645 (1972). </s> [Footnote 8 See n. 1, supra. </s> [Footnote 9 The court concluded that the duty of inquiry imposed on Ernst & Ernst under 17 (a) was "grounded on a concern for the protection of investors such as [respondents]," without reaching the question whether the statute imposed a "direct duty" to the respondents. 503 F.2d, at 1105. The court held that Ernst & Ernst owed no common-law duty of inquiry to respondents arising from its contract with First Securities since Ernst & Ernst did not specifically foresee that respondents' limited class might suffer from a negligent audit, compare Glanzer v. Shepard, 233 N. Y. 236, 135 N. E. 275 (1922), with Ultramares Corp. v. Touche, 255 N. Y. 170, 174 N. E. 441 (1931); see, e. g., Rhode Island Hospital Trust Nat. Bank v. Swartz, 455 F.2d 847, 851 (CA4 1972). Moreover, respondents conceded that they did not rely on the financial statements and reports prepared by Ernst & Ernst or on its certificate of opinion. 503 F.2d, at 1107. </s> [Footnote 10 In their briefs respondents allude to several other alleged failings by Ernst & Ernst in its audit of First Securities, principally its failure to inquire into the collectibility of certain loans by First Securities to Nay and and its failure to follow up on a 1965 memorandum that characterized First Securities' overall system of internal control as weak because of the centralization of functions in the cashier. The Court of Appeals mentioned none of these alleged deficiencies in its opinion in this case, although it did discuss the loans to Nay and certain other related matters in its opinion in Hochfelder v. Midwest Stock Exchange, 503 F.2d, at 370-371, holding that the existence of these facts was insufficient to put the Exchange on notice that further inquiry into First Securities' financial affairs was required. </s> [Footnote 11 The Court of Appeals also reversed the District Court's holding with respect to equitable estoppel and the statute of limitations. See n. 6, supra. In view of our disposition of the case we need not address these issues. </s> [Footnote 12 Although the verbal formulations of the standard to be applied have varied, several Courts of Appeals have held in substance that negligence alone is sufficient for civil liability under 10 (b) and Rule 10b-5. See, e. g., White v. Abrams, 495 F.2d 724, 730 (CA9 1974) ("flexible duty" standard); Myzel v. Fields, 386 F.2d 718, 735 (CA8 1967), cert. denied, 390 U.S. 951 (1968) (negligence sufficient); [425 U.S. 185, 194] Kohler v. Kohler Co., 319 F.2d 634, 637 (CA7 1963) (knowledge not required). Other Courts of Appeals have held that some type of scienter - i. e., intent to defraud, reckless disregard for the truth, or knowing use of some practice to defraud - is necessary in such an action. See, e. g., Clegg v. Conk, 507 F.2d 1351, 1361-1362 (CA10 1974), cert, denied, 422 U.S. 1007 (1975) (an element of "scienter or conscious fault"); Lanza v. Drexel & Co., 479 F.2d 1277, 1306 (CA2 1973) ("willful or reckless disregard" of the truth). But few of the decisions announcing that some form of negligence suffices for civil liability under 10 (b) and Rule 10b-5 actually have involved only negligent conduct. Smallwood v. Pearl Brewing Co., 489 F.2d 579, 606 (CA5), cert. denied, 419 U.S. 873 (1974); Kohn v. American Metal Climax, Inc., 458 F.2d 255, 286 (CA3 1972) (Adams, J., concurring and dissenting); Bucklo, Scienter and Rule 10b-5, 67 Nw. U. L. Rev. 562, 568-570 (1972). </s> In this opinion the term "scienter" refers to a mental state embracing intent to deceive, manipulate, or defraud. In certain areas of the law recklessness is considered to be a form of intentional conduct for purposes of imposing liability for some act. We need not address here the question whether, in some circumstances, reckless behavior is sufficient for civil liability under 10 (b) and Rule 10b-5. </s> Since this case concerns an action for damages we also need not consider the question whether scienter is a necessary element in an action for injunctive relief under 10 (b) and Rule 10b-5. Cf. SEC v. Capital Gains Research Bureau, 375 U.S. 180 (1963). </s> [Footnote 13 Respondents further contend that Ernst & Ernst owed them a direct duty under 17 (a) of the 1934 Act and Rule 17a-5 to conduct a proper audit of First Securities and that they may base a private cause of action against Ernst & Ernst for violation of that duty. Respondents' cause of action, however, was premised solely on the alleged violation of 10 (b) and Rule 10b-5. During the lengthy history of this litigation they have not amended their original complaint to aver a cause of action under 17 (a) and Rule 17a-5. We therefore do not consider that a claim of liability under 17 (a) is properly before us even assuming respondents could assert such a claim independently of 10 (b). </s> [Footnote 14 See, e. g., S. Rep. No. 792, 73d Cong., 2d Sess., 5-6 (1934); Note, Implied Liability Under the Securities Exchange Act, 61 Harv. L. Rev. 858, 860 (1948). </s> [Footnote 15 SEC Release No. 3230 (May 21, 1942); Birnbaum v. Newport Steel Corp., 193 F.2d 461, 463 (CA2), cert. denied, 343 U.S. 956 (1952). </s> [Footnote 16 Kardon v. National Gypsum Co., 69 F. Supp. 512 (ED Pa. 1946). </s> [Footnote 17 See cases cited in n. 12, supra. Compare, e. g., Comment, Scienter and Rule 10b-5, 69 Col. L. Rev. 1057, 1080-1081 (1969); Note, Negligent Misrepresentations under Rule 10b-5, 32 U. Chi. L. Rev. 824, 839-844 (1965); Note, Securities Acts, 82 Harv. L. Rev. 938, 947 (1969); Note, Civil Liability Under Section 10B and Rule 10B-5: A Suggestion for Replacing the Doctrine of Privity, 74 Yale L. J. 658, 682-689 (1965), with, e. g., 3 L. Loss, Securities Regulation 1766 (2d ed. 1961); 6 id., at 3883-3885 (1969). </s> [Footnote 18 The Commission would not permit recovery upon proof of negligence in all cases. In order to harmonize civil liability under 10 (b) with the express civil remedies contained in the 1933 and 1934 Acts, the Commission would limit the circumstances in which civil liability could be imposed for negligent violation of Rule 10b-5 to situations in which (i) the defendant knew or reasonably could foresee that the plaintiff would rely on his conduct, (ii) the plaintiff did in fact so rely, and (iii) the amount of the plaintiff's damages caused by the defendant's conduct was definite and ascertainable. Brief for SEC as Amicus Curiae 23-33. The Commission concludes that the present record does not establish these conditions since Ernst & Ernst could not reasonably have foreseen that the financial statements of First Securities would induce respondents to invest in the escrow accounts, respondents in fact did not rely on Ernst & Ernst's audits, and the amount of respondents' damages was unascertainable. Id., at 33-36. Respondents accept the Commission's basic analysis of the operative language of the statute and Rule, but reject these additional requirements for recovery for negligent violations. </s> [Footnote 19 "To let general words draw nourishment from their purpose is one thing. To draw on some unexpressed spirit outside the bounds of the normal meaning of words is quite another. . . . After all, legislation when not expressed in technical terms is addressed to the common run of men and is therefore to be understood according to the sense of the thing, as the ordinary man has a right to rely on ordinary words addressed to him." Addison v. Holly Hill Fruit Products, Inc., 322 U.S., at 617 -618. See Frankfurter, Some Reflections on the Reading of Statutes, 47 Col. L. Rev. 527, 536-537 (1947). </s> [Footnote 20 Webster's International Dictionary (2d ed. 1934) defines "device" as "[t]hat which is devised, or formed by design; a contrivance; an invention; project; scheme; often, a scheme to deceive; a stratagem; an artifice," and "contrivance" in pertinent part as "[a] thing contrived or used in contriving; a scheme, plan, or artifice." In turn, "contrive" in pertinent part is defined as "[t]o devise; to plan; to plot . . . [t]o fabricate . . . design; invent . . . to scheme . . . ." The Commission also ignores the use of the terms "[t]o use or employ," language that is supportive of the view that Congress did not intend 10 (b) to embrace negligent conduct. </s> [Footnote 21 Webster's International Dictionary, supra, defines "manipulate" as "to manage or treat artfully or fraudulently; as to manipulate accounts . . . . 4. Exchanges. To force (prices) up or down, as by matched orders, wash sales, fictitious reports . . .; to rig." </s> [Footnote 22 See infra, at 208, and n. 26. </s> [Footnote 23 See n. 21, supra. </s> [Footnote 24 In support of its position the Commission cites statements by Corcoran in the Senate hearings that "in modern society there are many things you have to make crimes which are sheer matters of negligence" and "intent is not necessary for every crime." Hearings before the Subcommittee on Stock Exchange Practices before the Senate Committee on Banking and Currency, 73d Cong., 2d Sess., 6509-6510 (1934). The comments, taken in context, shed no light on the meaning of 10 (b). Corcoran's remarks were made during a discussion of whether criminal violations could arise under 8 (a) (3) of S. 2693, 73d Cong., 2d Sess., which in material part was incorporated in 9 of the 1934 Act, 15 U.S.C. 78i, in the absence of specific intent to influence security prices for personal gain. The remarks, moreover, were not addressed to the scope of 8, but were general observations concerning activity society might proscribe under criminal law. Ferdinand Pecora, counsel to the committee and a draftsman of S. 2693, Foremost-McKesson, Inc. v. Provident Securities Co., 423 U.S. 232, 249 -250, n. 24 (1976), described the language as "[e]xcluding from its scope an act that is not done with any ulterior motives or purposes, as set forth in the act." Hearings before the Subcommittee on Stock Exchange Practices, supra, at 6510. Further, prior to the passage of the 1934 Act, proposed 8 was amended to require willful behavior as a prerequisite to civil liability [425 U.S. 185, 204] for violations. Compare 9 (e) of the 1934 Act with 8 (c) of S. 2693. See H. R. Rep. No. 1383, 73d Cong., 2d Sess., 21 (1934). </s> The Commission also relies on objections to a draft version of 10 (b) - 9 (c) of S. 2693 and H. R. 7852, see supra, at 201-202 - raised by representatives of the securities industry in the House and Senate hearings. They warned that the language was so vague that the Commission might outlaw anything. E. g., Hearings before the Subcommittee on Stock Exchange Practices, supra, at 6988; Hearings on H. R. 7852 and H. R. 8720 before the House Committee on Interstate and Foreign Commerce, 73d Cong., 2d Sess., 258 (1934). Remarks of this kind made in the course of legislative debate or hearings other than by persons responsible for the preparation or the drafting of a bill are entitled to little weight. See, e. g., United States v. United Mine Workers, 330 U.S. 258, 276 -277 (1947); United States v. Wrightwood Dairy Co., 315 U.S. 110, 125 (1942). This is especially so with regard to the statements of legislative opponents who "[i]n their zeal to defeat a bill . . . understandably tend to overstate its reach." NLRB v. Fruit Packers, 377 U.S. 58, 66 (1964). See Schwegmann Bros. v. Calvert Distillers Corp., 341 U.S. 384, 394 -395 (1951). </s> [Footnote 25 "Wash" sales are transactions involving no change in beneficial ownership. "Matched" orders are orders for the purchase/sale of a security that are entered with the knowledge that orders of substantially the same size, at substantially the same time and price, have been or will be entered by the same or different persons for the sale/purchase of such security. Section 9 (a) (1) of the 1934 Act, 15 U.S.C. 78i (a) (1), proscribes wash sales and matched orders when effectuated "[f]or the purpose of creating a false or misleading appearance of active trading in any security registered on a national securities exchange, or . . . with respect to the market for any such security." See In re J. A. Latimer & Co., 38 S. E. C. 790 (1958); In re Thornton & Co., 28 S. E. C. 208 (1948). </s> [Footnote 26 Other individuals who sign the registration statement, directors of the issuer, and the underwriter of the securities similarly are accorded a complete defense against civil liability based on the exercise of reasonable investigation and a reasonable belief that the registration statement was not misleading. 11 (b) (3) (A), (C), (D), (c). See, e. g., Feit v. Leasco Data Processing Equipment Corp., 332 F. Supp. 544, 575-583 (EDNY 1971) (underwriters, but not officer-directors, established their due-diligence defense). See generally R. Jennings & H. Marsh, Securities Regulation 1018-1027 (3d ed. 1972), and sources cited therein; Folk, Civil Liabilities Under the Federal Securities Acts: The Barchris Case, 55 Va. L. Rev. 199 (1969). </s> [Footnote 27 Section 12 (2) creates potential civil liability for a seller of securities in favor of the purchaser for misleading statements or omissions in connection with the transaction. The seller is exculpated if he proves that he did not know, or, in the exercise of reasonable care, could not have known of the untruth or omission. Section 15 of the 1933 Act, as amended by 208 of Title II of the 1934 Act, makes persons who "control" any person liable under 11 or 12 liable jointly and severally to the same extent as the controlled person, unless he "had no knowledge of or reasonable ground to believe in the existence of the facts by reason of which the liability of the controlled person is alleged to exist." 15 U.S.C. 77o. See Act of June 6, 1934, c. 404, 208, 48 Stat. 908. </s> [Footnote 28 Each of the provisions of the 1934 Act that expressly create civil liability, except those directed to specific classes of individuals such as directors, officers, or 10% beneficial holders of securities, see 16 (b), 15 U.S.C. 78p (b), Foremost-McKesson, Inc. v. Provident Securities Co., 423 U.S. 232 (1976); Kern County Land Co. v. Occidental Petroleum Corp., 411 U.S. 582 (1973), contains a state-of-mind condition requiring something more than negligence. Section 9 (e) creates potential civil liability for any person who "willfully participates" in the manipulation of securities on a national exchange. 15 U.S.C. 78i (e). Section 18 creates potential civil liability for misleading statements filed with the Commission, but provides the defendant with the defense that "he acted in good faith and had no knowledge that such statement was false or misleading." 15 U.S.C. 78r. And 20, which imposes liability upon "controlling person[s]" for violations of the Act by those they control, exculpates a defendant who "acted in good faith and did not . . . induce the act . . . constituting the violation . . . ." 15 U.S.C. 78t. Emphasizing the important difference between the operative language and purpose of 14 (a) of the 1934 Act, 15 U.S.C. 78n (a), as contrasted with 10 (b), however, some courts have concluded that proof of scienter is unnecessary in an action for damages by the shareholder recipients of a materially misleading proxy statement against the issuer corporation. Gerstle v. Gamble-Skogmo, Inc., 478 F.2d 1281, 1299 (CA2 1973). See also Kohn v. American Metal Climax, Inc., 458 F.2d, at 289-290 (Adams, J., concurring and dissenting). </s> [Footnote 29 Since no statute of limitations is provided for civil actions under 10 (b), the law of limitations of the forum State is followed as in other cases of judicially implied remedies. See Holmberg v. Armbrecht, 327 U.S. 392, 395 (1946), and cases cited therein. Although it is not always certain which state statute of limitations should be followed, such statutes of limitations usually are longer than the period provided under 13. 3 Loss, supra, n. 17, at 1773-1774. As to costs see n. 30, infra. </s> [Footnote 30 Congress regarded these restrictions on private damages actions as significant. In introducing Title II of the 1934 Act, Senator [425 U.S. 185, 211] Fletcher indicated that the amendment of 11 (c) of the 1933 Act, providing for potential payment of costs, including attorneys' fees, "is the most important [amendment] of all." 78 Cong. Rec. 8669 (1934). One of its purposes was to deter actions brought solely for their potential settlement value. See ibid.; H. R. Conf. Rep. No. 1838, 73d Cong., 2d Sess., 42 (1934); Blue Chip Stamps v. Manor Drug Stores, 421 U.S. 723, 740 -741 (1975). This deterrent is lacking in the 10 (b) context, in which a district court's power to award attorneys' fees is sharply circumscribed. See Alyeska Pipeline Service Co. v. Wilderness Society, 421 U.S. 240 (1975) ("bad faith" requirement); F. D. Rich Co. v. United States ex rel. Industrial Lumber Co., 417 U.S. 116, 129 (1974). </s> [Footnote 31 Section 18 of the 1934 Act creates a private cause of action against persons, such as accountants, who "make or cause to be made" materially misleading statements in reports or other documents filed with the Commission. 15 U.S.C. 78r. We need not consider the question whether a cause of action may be maintained under 10 (b) on the basis of actions that would constitute a violation of 18. Under 18 liability extends to persons who, in reliance on such statements, purchased or sold a security whose price was affected by the statements. Liability is limited, however, in the important respect that the defendant is accorded the defense that he acted in "good faith and had no knowledge that such statement was false or misleading." Consistent with this language the legislative history of the section suggests something more than negligence on the part of the defendant is required for recovery. The original version of 18 (a), 17 (a) of S. 2693, H. R. 7852 and H. R. 7855, see supra, at 201-202, provided that the defendant would not be liable if "he acted in good faith and in the exercise of reasonable care had no ground to believe that such statement was false [425 U.S. 185, 212] or misleading." The accounting profession objected to this provision on the ground that liability would be created for honest errors in judgment. See Senate Hearings on Stock Exchange Practices, supra, n. 24, at 7175-7183; House Hearings on H. R. 7852 and H. R. 8720, supra, n. 24, at 653. In subsequent drafts the current formulation was adopted. It is also significant that actions under 18 are limited by a relatively short statute of limitations similar to that provided in 13 of the 1933 Act. 18 (c). Moreover, as under 11 (e) of the 1933 Act a district court is authorized to require the plaintiff to post a bond for costs, including attorneys' fees, and to assess such costs at the conclusion of the litigation. 18 (a). </s> [Footnote 32 Apparently the Rule was a hastily drafted response to a situation clearly involving intentional misconduct. The Commission's [425 U.S. 185, 213] Regional Administrator in Boston had reported to the Director of the Trading and Exchange Division that the president of a corporation was telling the other shareholders that the corporation was doing poorly and purchasing their shares at the resultant depressed prices, when in fact the business was doing exceptionally well. The Rule was drafted and approved on the day this report was received. See Conference on Codification of the Federal Securities Laws, 22 Bus. Law. 793, 922 (1967) (remarks of Milton Freeman, one of the Rule's codrafters); Blue Chip Stamps, supra, at 767 (BLACKMUN, J., dissenting). Although adopted pursuant to 10 (b), the language of the Rule appears to have been derived in significant part from 17 of the 1933 Act, 15 U.S.C. 77q. E. g., Blue Chip Stamps, supra, at 767 (BLACKMUN, J., dissenting); SEC v. Texas Gulf Sulphur Co., 401 F.2d 833, 867 (CA2 1968) (Friendly, J., concurring), cert. denied sub nom. Coates v. SEC, 394 U.S. 976 (1969). There is no indication in the administrative history of the Rule that any of the subsections was intended to proscribe conduct not involving scienter. Indeed the Commission's release issued contemporaneously with the Rule explained: </s> "The Securities and Exchange Commission today announced the adoption of a rule prohibiting fraud by any person in connection with the purchase of securities. The previously existing rules against fraud in the purchase of securities applied only to brokers and dealers. The new rule closes a loophole in the protections against fraud administered by the Commission by prohibiting individuals or companies from buying securities if they engage in fraud in their purchase." SEC Release No. 3230 (May 21, 1942). </s> That same year, in its Annual Report, the Commission again stated that the purpose of the Rule was to protect investors against "fraud": </s> "During the fiscal year the Commission adopted Rule X-10B-5 as an additional protection to investors. The new rule prohibits fraud by any person in connection with the purchase of securities, while the previously existing rules against fraud in the purchase of securities applied only to brokers and dealers." 1942 Annual Report of the Securities Exchange Commission 10. </s> [Footnote 33 As we find the language and history of 10 (b) dispositive of the appropriate standard of liability, there is no occasion to examine the additional considerations of "policy," set forth by the parties, that may have influenced the lawmakers in their formulation of the statute. We do note that the standard urged by respondents would significantly broaden the class of plaintiffs who may seek to impose liability upon accountants and other experts who perform services or express opinions with respect to matters under the Acts. Last Term, in Blue Chip Stamps, 421 U.S., at 747 -748, the Court pertinently observed: </s> "While much of the development of the law of deceit has been the elimination of artificial barriers to recovery on just claims, we are not the first court to express concern that the inexorable broadening of the class of plaintiff who may sue in this area of the law will ultimately [425 U.S. 185, 215] result in more harm than good. In Ultramares Corp. v. Touche, 255 N. Y. 170, 174 N. E. 441 (1931), Chief Judge Cardozo observed with respect to `a liability in an indeterminate amount for an indeterminate time to an indeterminate class: </s> "`The hazards of a business conducted on these terms are so extreme as to enkindle doubt whether a flaw may not exist in the implication of a duty that exposes to these consequences.' Id., at 179-180, 174 N. E., at 444." </s> This case, on its facts, illustrates the extreme reach of the standard urged by respondents. As investors in transactions initiated by Nay, not First Securities, they were not foreseeable users of the financial statements prepared by Ernst & Ernst. Respondents conceded that they did not rely on either these financial statements or Ernst & Ernst's certificates of opinion. See n. 9, supra. The class [425 U.S. 185, 216] of persons eligible to benefit from such a standard, though small in this case, could be numbered in the thousands in other cases. Acceptance of respondents' view would extend to new frontiers the "hazards" of rendering expert advice under the Acts, raising serious policy questions not yet addressed by Congress. </s> [Footnote 34 See 503 F.2d, at 1104, 1119; n. 5, supra. </s> MR. JUSTICE BLACKMUN, with whom MR. JUSTICE BRENNAN joins, dissenting. </s> Once again - see Blue Chip Stamps v. Manor Drug Stores, 421 U.S. 723, 730 (1975) - the Court interprets [425 U.S. 185, 216] 10 (b) of the Securities Exchange Act of 1934, 15 U.S.C. 78j (b), and the Securities and Exchange Commission's Rule 10b-5, 17 CFR 240.10b-5 (1975), restrictively and narrowly and thereby stultifies recovery for the victim. This time the Court does so by confining the statute and the Rule to situations where the defendant has "scienter," that is, the "intent to deceive, manipulate, or defraud." Sheer negligence, the Court says, is not within the reach of the statute and the Rule, and was not contemplated when the great reforms of 1933, 1934, and 1942 were effectuated by Congress and the Commission. </s> Perhaps the Court is right, but I doubt it. The Government and the Commission doubt it too, as is evidenced by the thrust of the brief filed by the Solicitor General on behalf of the Commission as amicus curiae. The Court's opinion, to be sure, has a certain technical consistency about it. It seems to me, however, that an investor can be victimized just as much by negligent conduct as by positive deception, and that it is not logical to drive a wedge between the two, saying that Congress clearly intended the one but certainly not the other. </s> No one questions the fact that the respondents here were the victims of an intentional securities fraud practiced by Leston B. Nay. What is at issue, of course, is the petitioner accountant firm's involvement and that firm's responsibility under Rule 10b-5. The language of the Rule, making it unlawful for any person "in connection with the purchase or sale of any security" </s> "(b) To make any untrue statement of a material [425 U.S. 185, 217] fact or to omit to state a material fact necessary in order to make the statements made, in the light of the circumstances under which they were made, not misleading, or </s> "(c) To engage in any act, practice, or course of business which operates or would operate as a fraud or deceit upon any person," </s> seems to me, clearly and succinctly, to prohibit negligent as well as intentional conduct of the kind proscribed, to extend beyond common-law fraud, and to apply to negligent omission and commission. This is consistent with Congress' intent, repeatedly recognized by the Court, that securities legislation enacted for the purpose of avoiding frauds be construed "not technically and restrictively, but flexibly to effectuate its remedial purposes." SEC v. Capital Gains Research Bureau, 375 U.S. 180, 195 (1963); Superintendent of Insurance v. Bankers Life & Cas. Co., 404 U.S. 6, 12 (1971); Affiliated Ute Citizens v. United States, 406 U.S. 128, 151 (1972). </s> On motion for summary judgment, therefore, the respondents' allegations, in my view, were sufficient, and the District Court's dismissal of the action was improper to the extent that the dismissal rested on the proposition that suit could not be maintained under 10 (b) and Rule 10b-5 for mere negligence. The opposite appears to be true, at least in the Second Circuit, with respect to suits by the SEC to enjoin a violation of the Rule. SEC v. Management Dynamics, Inc., 515 F.2d 801 (1975); SEC v. Spectrum Ltd., 489 F.2d 535, 541 (1973); SEC v. Texas Gulf Sulphur Co., 401 F.2d 833, 854-855 (1968), cert. denied sub nom. Coates v. SEC, 394 U.S. 976 (1969). I see no real distinction between that situation and this one, for surely the question whether negligent conduct violates the Rule should not depend upon the plaintiff's identity. If negligence is a violation factor [425 U.S. 185, 218] when the SEC sues, it must be a violation factor when a private party sues. And, in its present posture, this case is concerned with the issue of violation, not with the secondary issue of a private party's judicially created entitlement to damages or other specific relief. See Rondeau v. Mosinee Paper Corp., 422 U.S. 49 (1975). </s> The critical importance of the auditing accountant's role in insuring full disclosure cannot be overestimated. The SEC has emphasized that in certifying statements the accountant's duty "is to safeguard the public interest, not that of his client." In re Touche, Niven, Bailey & Smart, 37 S. E. C. 629, 670-671 (1957). "In our complex society the accountant's certificate and the lawyer's opinion can be instruments for inflicting pecuniary loss more potent than the chisel or the crowbar." United States v. Benjamin, 328 F.2d 854, 863 (CA2), cert. denied sub nom. Howard v. United States, 377 U.S. 953 (1964). In this light, the initial inquiry into whether Ernst & Ernst's preparation and certification of the financial statements of First Securities Company of Chicago were negligent, because of the failure to perceive Nay's extraordinary mail rule, and in other alleged respects, and thus whether Rule 10b-5 was violated, should not be thwarted. </s> But the Court today decides that it is to be thwarted, and so once again it rests with Congress to rephrase and to re-enact, if investor victims, such as these, are ever to have relief under the federal securities laws that I thought had been enacted for their broad, needed, and deserving benefit. * </s> [Footnote * The Court, understandably, does not resolve a number of other issues suggested by the briefs. See ante, at 191-192, n. 7; 193 n. 11; 194 n. 12; 194 n. 13; and 214-216, n. 33. In view of the result reached by the Court, no purpose would be served by my considering those issues in dissent. </s> [425 U.S. 185, 219]

United States Supreme Court COMMUNIST PARTY v. CONTROL BOARD(1956) No. 48 Argued: November 17, 1955Decided: April 30, 1956 </s> An order of the Subversive Activities Control Board that petitioner register with the Attorney General as a "Communist-action" organization, as required by the Subversive Activities Control Act of 1950, was appealed by petitioner to the Court of Appeals for the District of Columbia. While the appeal was pending, petitioner filed a motion for leave to adduce additional evidence pursuant to 14 (a) of the Act, alleging inter alia that evidence which became available to petitioner subsequent to the administrative proceeding would establish that the testimony of three of the Attorney General's witnesses on which the Board relied was perjurious. The Government did not deny petitioner's allegations. The Court of Appeals denied the motion, upheld the constitutionality of the Act, and affirmed the Board's order. Both the Government and the Court of Appeals deemed the innocent testimony sufficient to sustain the Board's conclusion. Held: The Court of Appeals erred in refusing to return the case to the Board for consideration of the new evidence proffered by petitioner's motion and affidavit. Pp. 116-125. </s> (a) The case must be decided on the nonconstitutional issue, if the record calls for it, without reaching constitutional problems. P. 122. </s> (b) The testimony of the three allegedly perjurious witnesses was not inconsequential in relation to the issues on which the Board had to pass. Pp. 122-124. </s> (c) When uncontested challenge is made that a finding of subversive design by petitioner was in part the product of three perjurious witnesses, it does not remove the taint for a reviewing court to find that there is ample innocent testimony to support the Board's findings. Pp. 124-125. </s> (d) Since the basis for challenging the testimony was not in existence when the proceedings were concluded before the Board, petitioner should be given leave to make its allegations before the Board in a proceeding under 14 (a) of the Act. P. 125. [351 U.S. 115, 116] </s> (e) The Board must reconsider its original determination in the light of the record freed from the challenge that now beclouds it, and must base its findings upon untainted evidence. P. 125. </s> 96 U.S. App. D.C. 66, 223 F.2d 531, reversed and remanded. </s> John J. Abt and Joseph Forer argued the cause and filed a brief for petitioner. </s> Solicitor General Sobeloff argued the cause for respondent. With him on the brief were Assistant Attorney General Tompkins, Harold D. Koffsky, Philip R. Monahan and George R. Gallagher. </s> Briefs of amici curiae urging reversal were filed by Osmond K. Fraenkel, Thomas I. Emerson, David L. Weissman and Murray A. Gordon for the National Lawyers Guild; Edward J. Ennis for the American Civil Liberties Union; and Royal W. France for Aydelotte et al. </s> Herbert R. O'Conor, Julius Applebaum, William N. Bonner, Tracy E. Griffin, Clarence Manion, Paul W. Updegraff and Robert W. Upton filed a brief for the American Bar Association, as amicus curiae, urging affirmance. </s> MR. JUSTICE FRANKFURTER delivered the opinion of the Court. </s> This case is here to review the judgment of the Court of Appeals for the District of Columbia affirming an order of the Subversive Activities Control Board that petitioner register with the Attorney General as a "Communist-action" organization, as required by the Subversive Activities Control Act of 1950, Title I of the Internal Security Act of 1950, 64 Stat. 987. That Act sets forth a comprehensive plan for regulation of "Communist-action" organizations. 1 Section 2 of the Act describes a [351 U.S. 115, 117] world Communist movement directed from abroad and designed to overthrow the Government of the United States by any means available, including violence. Section 7 requires all Communist-action organizations to register as such with the Attorney General. If the Attorney General has reason to believe that an organization, which has not registered, is a Communist-action organization, he is required by 13 (a) to bring a proceeding to determine that fact before the Subversive Activities Control Board, a five-man board appointed by the President with the advice and consent of the Senate and created for the purpose of holding hearings and making such determinations. Section 13 (e) lays down certain standards for judgment by the Board. </s> If the Board finds that an organization is a Communist-action organization, it enters an order requiring the organization to register with the Attorney General. 13 (g). Section 14 provides the right to file a petition for review of Board action in the Court of Appeals for the District of Columbia, with opportunity for review by this Court upon certiorari. Once an organization registers or there is outstanding a final order of the Board requiring it to register, several consequences follow with respect to the [351 U.S. 115, 118] organization and its members, but these need not now be detailed. See 4, 5, 6, 7, 8, 10, 11, 15, 22, 25. </s> Proceeding under 13 (a) of this statute, the Attorney General, on November 22, 1950, petitioned the Board for an order directing petitioner to register pursuant to 7 of the Act. Petitioner sought unsuccessfully by numerous motions before the Board and by proceedings in the United States District Court for the District of Columbia - one case is reported at 96 F. Supp. 47 - to attack the validity of, and to abort, the hearing. The hearing began on April 23, 1951, before three members of the Board, later reduced to two, sitting as a hearing panel, and it terminated on July 1, 1952. Proposed findings of fact and briefs were filed by both parties, and oral argument was held before the hearing panel in August 1952. In October 1952 the hearing panel issued a recommended decision that the Board order petitioner to register as a Communist-action organization. Exceptions to the panel's findings were filed by both parties, and oral argument was held before the Board in January 1953. The Board filed its report, which occupies 251 pages of the record in this case, on April 20, 1953. </s> In its report the Board found that there existed a world Communist movement, substantially as described in 2 of the Act, organized and directed by a foreign government. The Board detailed the history of the Communist Party of the United States and its close relation to the world Communist movement. It then set forth illustrative evidence and made findings with respect to the statutory criteria of 13 (e) of the Act, which required the Board to consider "the extent to which" the organization met them. 2 The Board found that the conditions [351 U.S. 115, 119] set forth in each of the paragraphs were applicable to petitioner. On the basis of these findings the Board concluded that petitioner was a Communist-action organization, as defined by 3, and ordered it to register as such with the Attorney General. </s> Petitioner brought this order to the Court of Appeals for the District of Columbia for review. While the case was pending, it filed a motion, supported by affidavit, [351 U.S. 115, 120] for leave to adduce additional evidence pursuant to 14 (a) of the Act. 3 The basis of the motion was that the additional material evidence became available to the petitioner subsequent to the administrative proceeding and that this evidence would </s> "establish that the testimony of three of the witnesses for the Attorney General, on which [the Board] relied extensively and heavily in making findings which are of key importance to the order now under review, was false. . . . In summary, this evidence will establish that Crouch, Johnson and Matusow, all professional informers heretofore employed by the Department of Justice as witnesses in numerous proceedings, have committed perjury, are completely untrustworthy and should be accorded no credence; that at least two of them are now being investigated for perjury by the Department of Justice, and that because their character as professional perjurors [sic] has now been conclusively and publicly demonstrated, the Attorney General has ceased to employ any of them as witnesses." </s> Petitioner listed a number of witnesses whom it proposed to call to substantiate its claim and also set forth a detailed affidavit in support of its allegations. [351 U.S. 115, 121] </s> The Government did not deny these allegations. It filed a "Memorandum in Opposition to Motion for Leave to Adduce Additional Evidence," signed by the General Counsel to the Board and by officials of the Department of Justice. The memorandum asserted that the hearing should not be reopened for the receipt of evidence merely questioning, as it claimed, the credibility of some witnesses, but not any fact at issue, and it maintained that the findings of the Board were amply supported by evidence apart from the testimony of the three witnesses sought to be discredited. On December 23, 1954, this motion was formally denied by the Court of Appeals without opinion. In its full opinion on the merits, filed the same day, however, the Court of Appeals supported its rejection of petitioner's motion: </s> "The Party attacks the credibility of the witnesses presented by the Government. In this connection it stresses that some of these witnesses . . . were under charges of false swearing. Full opportunity for cross examination of these witnesses was afforded at the hearing before the Board, and full opportunity was also afforded for the presentation of rebuttal testimony. The evaluation of credibility is primarily a matter for the trier of the facts, and a reviewing court cannot disturb that evaluation unless a manifest error has been made. Moreover the testimony of the witnesses against whom charges are said to have been made was consistent with and supported by masses of other evidence. . . ." 96 U.S. App. D.C. 66, 100, 223 F.2d 531, 565. </s> The Court of Appeals affirmed the order of the Board. It sustained 13 (e) against the contention that its standards were vague and irrational. It held that the findings of the Board had been established by a preponderance of the evidence, except that it struck, as not being [351 U.S. 115, 122] supported by a preponderance of the evidence, the finding that the secret practices were undertaken for the purpose of promoting the objectives, and concealing the true nature, of petitioner; and it also struck the finding in connection with reporting to a foreign government because the record supported only a finding of reporting by Party leaders "upon occasion," not a finding which implied a constant, systematic reporting. The court, however, found that the Board's conclusion was supported by the basic findings which it had affirmed. With respect to petitioner's other attacks on the constitutional validity of the statute, the court found it necessary to consider some of the so-called "sanction" sections, 5, 6, 10, 11, 22, and 25, as well as 7, the registration section. It held that they were all constitutional and therefore affirmed the order of the Board. 4 </s> The challenge to the Act on which the order was based plainly raises constitutional questions appropriate for this Court's consideration, and so we brought the case here. 349 U.S. 943 . At the threshold we are, however, confronted by a particular claim that the Court of Appeals erred in refusing to return the case to the Board for consideration of the new evidence proffered by petitioner's motion and affidavit. This non-constitutional issue must be met at the outset, because the case must be decided on a non-constitutional issue, if the record calls for it, without reaching constitutional problems. Peters v. Hobby, 349 U.S. 331 . </s> In considering this non-constitutional issue raised by denial of petitioner's motion, we must avoid any intimation [351 U.S. 115, 123] with respect to the other issues raised by petitioner. We do not so intimate by concluding that the testimony of the three witnesses, against whom the uncontested challenge of perjury was made, was not inconsequential in relation to the issues on which the Board had to pass. No doubt a large part of the record consisted of documentary evidence. However, not only was the human testimony significant but the documentary evidence was also linked to the activities of the petitioner and to the ultimate finding of the Board by human testimony, and such testimony was in part that of these three witnesses. The facts bearing on the issue are not in controversy. The direct testimony of witness Crouch occupied 387 pages of the typewritten transcript; that of Johnson, 163 pages; and that of Matusow, 118 pages. The annotated report of the Board, in which citations to the evidence were made to illustrate the support for its findings, contained 36 references to the testimony of Crouch, 25 references to the testimony of Johnson, and 24 references to the testimony of Matusow. These references were made in support of every finding under the eight criteria of 13 (e) and it is also not to be assumed that the evidence given by these three witnesses played no role in the Board's findings of fact even when not specifically cited. 5 Testimony, for example, directed toward proving [351 U.S. 115, 124] that the Communist Party of the United States was an agency utilized by a foreign government to undermine the loyalty of the armed forces, and to be in a position to paralyze shipping and prevent transportation of soldiers and war supplies through the Panama Canal, Hawaii, and the ports of San Francisco and New York in time of war, cannot be deemed insignificant in such a determination as that which the Board made in this proceeding. </s> This is a proceeding under an Act which Congress conceived necessary for "the security of the United States and to the existence of free American institutions . . . ." 64 Stat., at 989. The untainted administration of justice is certainly one of the most cherished aspects of our institutions. Its observance is one of our proudest boasts. This Court is charged with supervisory functions in relation to proceedings in the federal courts. See McNabb v. United States, 318 U.S. 332 . Therefore, fastidious regard for the honor of the administration of justice requires the Court to make certain that the doing of justice be made so manifest that only irrational or perverse claims of its disregard can be asserted. </s> When uncontested challenge is made that a finding of subversive design by petitioner was in part the product of three perjurious witnesses, it does not remove the taint for a reviewing court to find that there is ample innocent testimony to support the Board's findings. If these witnesses in fact committed perjury in testifying in other cases on subject matter substantially like that of their testimony in the present proceedings, their testimony in this proceeding is inevitably discredited and the Board's determination must duly take this fact into account. We [351 U.S. 115, 125] cannot pass upon a record containing such challenged testimony. We find it necessary to dispose of the case on the grounds we do, not in order to avoid a constitutional adjudication but because the fair administration of justice requires it. Since reversal is thus demanded, however, we do not reach the constitutional issues. </s> The basis for challenging the testimony was not in existence when the proceedings were concluded before the Board. Petitioner should therefore be given leave to make its allegations before the Board in a proceeding under 14 (a) of the Act. The issue on which the case must be returned to the Board lies within a narrow compass and the Board has ample scope of discretion in passing upon petitioner's motion. The purpose of this remand, as is its reason, is to make certain that the Board bases its findings upon untainted evidence. To that end it may hold a hearing to ascertain the truth of petitioner's allegations, and if the testimony of the three witnesses is discredited, it must not leave that testimony part of the record. Alternatively, the Board may choose to assume the truth of petitioner's allegations and, without further hearing, expunge the testimony of these witnesses from the record. In either event, the Board must then reconsider its original determination in the light of the record as freed from the challenge that now beclouds it. </s> The case is reversed and remanded for proceedings in conformity with this opinion. </s> Reversed and remanded. </s> Footnotes [Footnote 1 A "Communist-action" organization is defined in 3 of the Act as: "(a) any organization in the United States (other than a diplomatic representative or mission of a foreign government accredited [351 U.S. 115, 117] as such by the Department of State) which (i) is substantially directed, dominated, or controlled by the foreign government or foreign organization controlling the world Communist movement referred to in section 2 of this title, and (ii) operates primarily to advance the objectives of such world Communist movement as referred to in section 2 of this title; and "(b) any section, branch, fraction, or cell of any organization defined in subparagraph (a) of this paragraph which has not complied with the registration requirements of this title." 64 Stat., at 989. The Act also defines and regulates "Communist-front" organizations, but these sections of the Act are not involved in the present proceeding. </s> [Footnote 2 "In determining whether any organization is a `Communist-action organization,' the Board shall take into consideration - "(1) the extent to which its policies are formulated and carried out and its activities performed, pursuant to directives or to effectuate [351 U.S. 115, 119] the policies of the foreign government or foreign organization in which is vested, or under the domination or control of which is exercised, the direction and control of the world Communist movement referred to in section 2 of this title; and "(2) the extent to which its views and policies do not deviate from those of such foreign government or foreign organization; and "(3) the extent to which it receives financial or other aid, directly or indirectly, from or at the direction of such foreign government or foreign organization; and "(4) the extent to which it sends members or representatives to any foreign country for instruction or training in the principles, policies, strategy, or tactics of such world Communist movement; and "(5) the extent to which it reports to such foreign government or foreign organization or to its representatives; and "(6) the extent to which its principal leaders or a substantial number of its members are subject to or recognize the disciplinary power of such foreign government or foreign organization or its representatives; and "(7) the extent to which, for the purpose of concealing foreign direction, domination, or control, or of expediting or promoting its objectives, (i) it fails to disclose, or resists efforts to obtain information as to, its membership (by keeping membership lists in code, by instructing members to refuse to acknowledge membership, or by any other method); (ii) its members refuse to acknowledge membership therein; (iii) it fails to disclose, or resists efforts to obtain information as to, records other than membership lists; (iv) its meetings are secret; and (v) it otherwise operates on a secret basis; and "(8) the extent to which its principal leaders or a substantial number of its members consider the allegiance they owe to the United States as subordinate to their obligations to such foreign government or foreign organization." 64 Stat., at 999-1000. </s> [Footnote 3 Section 14 (a) of the Act provides: ". . . If either party shall apply to the court for leave to adduce additional evidence, and shall show to the satisfaction of the court that such additional evidence is material, the court may order such additional evidence to be taken before the Board and to be adduced upon the proceeding in such manner and upon such terms and conditions as to the court may seem proper. The Board may modify its findings as to the facts, by reason of the additional evidence so taken, and it shall file such modified or new findings, which, if supported by the preponderance of the evidence shall be conclusive, and its recommendations, if any, with respect to action in the matter under consideration. . . ." 64 Stat., at 1001-1002. </s> [Footnote 4 Judge Bazelon dissented on the ground that the registration provision violated the Fifth Amendment's privilege against self-incrimination because it compelled the person signing it to identify himself as a Communist Party functionary and because it compelled a listing of officers and members. 96 U.S. App. D.C., at 111, 223 F.2d, at 576. </s> [Footnote 5 In this connection the following statement of the Board in its report should be noted: "In making our findings herein, we have considered and weighed all the evidence of record. In weighing [the Attorney General's] evidence, we have considered that certain of [his] witnesses fall into the category of `informers' and we have scrutinized their testimony accordingly; we have considered and resolved the inconsistencies in the testimony of certain of [the Attorney General's] witnesses; we have considered the testimony of [the Attorney General's] witnesses against the background of their various organizational positions and activities in the CPUSA which afforded the [351 U.S. 115, 124] sources of their knowledge; and we have had the benefit of the Panel's observation of their demeanor while testifying. Viewing these considerations in the light of the whole record, we find no basis for disregarding the substance of their testimony." </s> MR. JUSTICE CLARK, with whom MR. JUSTICE REED and MR. JUSTICE MINTON join, dissenting. </s> On November 22, 1950, the Attorney General petitioned the Subversive Activities Control Board for an order directing the Communist Party to register as a Communist-action organization, pursuant to the provisions of [351 U.S. 115, 126] the Internal Security Act of 1950. On April 20, 1953, the Board unanimously directed the Communist Party to register, finding "upon the overwhelming weight of the evidence . . . [the Communist Party] is substantially directed, dominated, and controlled by the Soviet Union . . . and . . . operates primarily to advance the objectives of such world Communist movement." </s> Nearly two years later, while the matter was before the Court of Appeals, the Communist Party filed a motion for leave to adduce additional evidence under 14 (a) of the Internal Security Act. The "new evidence" attacked the credibility of witnesses Crouch, Johnson, and Matusow, 3 of the 22 witnesses for the Government. The motion charged that Crouch and Johnson had perjured themselves in their testimony in such other cases as United States v. Kuzma, United States v. Bridges, In re Burck, and United States v. Weinberg. It also charged that Matusow had recanted his testimony in Communist cases and was writing a book entitled "Blacklisting (or Blackmailing) Was My Business." </s> The Board opposed the motion, stating that the testimony of the three witnesses could "be ignored in toto and the ultimate determination . . . will remain amply supported by evidence both testimonial and documentary in character. . . . The [Communist Party] would still be found a Communist-action organization by overwhelming evidence." </s> The Court of Appeals denied the motion without opinion. However, in its opinion on the merits, the court pointed out that similar attacks had been made on the credibility of these as well as other witnesses before the Board. For example, in 194 pages of cross-examination before the Board, the Party charged that witness Johnson had committed perjury in Pennsylvania v. Nelson, In re Yanish, In re Dmytryshyn, United States v. Eisler, and in testimony before the Un-American Activities Committee. [351 U.S. 115, 127] The 112-page cross-examination of Matusow likewise was largely devoted to charges of perjury before various boards and committees. Crouch was cross-examined for 810 pages, practically all of which was devoted to an attack on his credibility through his testimony in other proceedings. As the Court of Appeals concluded, "Full opportunity for cross examination of these witnesses was afforded at the hearing before the Board, and full opportunity was also afforded for the presentation of rebuttal testimony. . . . Moreover the testimony of the witnesses against whom charges are said to have been made was consistent with and supported by masses of other evidence." 96 U.S. App. D.C., at 100, 223 F.2d, at 565. Not only did little of the cross-examination relate to the evidence offered on direct, but the Party introduced only three witnesses in rebuttal and none refuted any specific testimony of the witnesses now challenged. The Court of Appeals affirmed the issuance of the order by the Board. </s> The Communist Party brought the case here on April 13, 1955, by petition for certiorari. The relative unimportance of this motion in the eyes of the Party is shown by the fact that its 131-page petition devotes but 2 pages to a discussion of this point. The Party's brief devotes only 4 1/2 of its 270 pages to the motion. Still the Court now says the Court of Appeals "erred" in its denial of the motion and remands the case directly to the Board for it to determine again the credibility of these three witnesses. It refuses to pass on the important questions relating to the constitutionality of the Internal Security Act of 1950, a bulwark of the congressional program to combat the menace of world Communism. Believing that the Court here disregards its plain responsibility and duty to decide these important constitutional questions, I cannot join in its action. [351 U.S. 115, 128] </s> I have not found any case in the history of the Court where important constitutional issues have been avoided on such a pretext. Certainly Peters v. Hobby, 349 U.S. 331 , is no authority for this action, since that case could be and was finally disposed of without reaching the constitutional issues. Here the case will be finally decided only after our decision on the constitutional questions. The action today is taken merely for delay and can result only in the Board reaffirming the action. In fact it so advised the Court of Appeals and that court found that all of the testimony of the questionable witnesses was supported by "masses of other evidence." </s> The allegations of the motion itself are entirely inadequate in that they point to no particular testimony before the Board as being false. There is no offer to disprove any testimony given, and no fact at issue in the proceeding is controverted. As to Crouch and Johnson, the motion merely cites additional cases in which it is alleged that their testimony was conflicting. These allegations are purely cumulative of the witnesses' cross-examination before the Board. With regard to Matusow, the motion mentions only newspaper reports and a press release referring to the statements of certain persons that Matusow had told them that he had lied. Ignoring the obvious inadequacy of this allegation, we may take judicial notice of the two cases where Matusow submitted affidavits stating that he had lied during the trial, United States v. Jencks and United States v. Flynn. In the Jencks case, the trial judge concluded that Matusow had been paid by a Communist source to recant and that his original testimony was true. The motion based entirely on Matusow's recantation was denied. This was affirmed by the Court of Appeals, Jencks v. United States, 226 F.2d 540, cert. granted, 350 U.S. 980 . In the Flynn case, 130 F. Supp. 412, the trial judge denied a similar motion as to 11 of the [351 U.S. 115, 129] 13 defendants. Two of the defendants in Flynn were granted a new trial only because Matusow had testified specifically to private conversations with these defendants which demonstrated their advocacy of the forcible overthrow of the Government. Matusow's general testimony against other defendants was not disturbed. These cases make it clear that, except for the special circumstances of two defendants in the Flynn case, the lower courts have not granted new trials in criminal proceedings despite the retraction by Matusow of specific sworn testimony given at the trials. See also United States v. Parker, 103 F.2d 857. 1 But these were criminal cases where proof of guilt must be beyond a reasonable doubt. Here, only a preponderance of the evidence is required. </s> Motions to adduce additional evidence under 14 (a) are similar to motions to adduce evidence under 10 (e) of the NLRA and the scope of our review is the same. Such motions are addressed to the sound discretion of the Courts of Appeals. In order to reverse we must find more than that the court below erred, because it "must not only have been in error but must also have abused its judicial discretion." Labor Board v. Indiana & M. Electric Co., 318 U.S. 9, 16 . In this case the motion itself was wholly inadequate and even if the testimony of all three challenged witnesses were omitted from the record the result could not have been different. There is no reasonable basis on which we could say that the Court of Appeals has abused its discretion. </s> I abhor the use of perjured testimony as much as anyone, but we must recognize that never before have mere allegations of perjury, so flimsily supported, been considered grounds for reopening a proceeding or granting [351 U.S. 115, 130] a new trial. 2 The Communist Party makes no claim that the Government knowingly used false testimony, and it is far too realistic to contend that the Board's action will be any different on remand. The only purpose of this procedural maneuver is to gain additional time before the order to register can become effective. This proceeding has dragged out for many years now, and the function of the Board remains suspended and the congressional purpose frustrated at a most critical time in world history. </s> Ironically enough, we are returning the case to a Board whose very existence is challenged on constitutional grounds. We are asking the Board to pass on the credibility of witnesses after we have refused to say whether it has the power to do so. The constitutional questions are fairly presented here for our decision. If all or any part of the Act is unconstitutional, it should be declared so on the record before us. If not, the Nation is entitled to effective operation of the statute deemed to be of vital importance to its well-being at the time it was passed by the Congress. I would decide the questions presented by this record. </s> [Footnote 1 Despite the direct allegations of perjury in this case, this Court refused to review the denial of the motion for a new trial. 307 U.S. 642 . </s> [Footnote 2 In at least three cases this Term we declined to review state criminal convictions in which much stronger allegations of perjury were made. See Reynolds v. Texas, 350 U.S. 863 ; Whitener v. South Carolina, 350 U.S. 861 ; and Coco v. Florida, 350 U.S. 828 . </s> [351 U.S. 115, 131]

United States Supreme Court STANFORD v. KENTUCKY(1989) No. 87-5765 Argued: March 27, 1989Decided: June 26, 1989 </s> Petitioner in No. 87-5765 was approximately 17 years and 4 months old at the time he committed murder in Kentucky. A juvenile court, after conducting hearings, transferred him for trial as an adult under a state statute permitting such action as to offenders who are either charged with a Class A felony or capital crime or who are over the age of 16 and charged with a felony. Petitioner was convicted and sentenced to death. The State Supreme Court affirmed the death sentence, rejecting petitioner's contention that he had a constitutional right to treatment in the juvenile justice system, and declaring that his age and the possibility that he might be rehabilitated were mitigating factors properly left to the jury. Petitioner in No. 87-6026, who was approximately 16 years and 6 months old when he committed murder in Missouri, was certified for trial as an adult under a state statute permitting such action against individuals between 14 and 17 years old who have committed felonies. He pleaded guilty and was sentenced to death. The State Supreme Court affirmed, rejecting his contention that the sentence violated the Eighth Amendment. </s> Held: </s> The judgments are affirmed. </s> No. 87-5765, 734 S. W. 2d 781, affirmed; No. 87-6026, 736 S. W. 2d 409, affirmed. </s> JUSTICE SCALIA delivered the opinion of the Court with respect to Parts I, II, III, and IV-A, concluding that the imposition of capital punishment on an individual for a crime committed at 16 or 17 years of age does not constitute cruel and unusual punishment under the Eighth Amendment. Pp. 365-374. </s> (a) Whether a particular punishment violates the Eighth Amendment depends on whether it constitutes one of "those modes or acts of punishment . . . considered cruel and unusual at the time that the Bill of Rights was adopted," Ford v. Wainwright, 477 U.S. 399, 405 , or is contrary to the "evolving standards of decency that mark the progress of a maturing society," Trop v. Dulles, 356 U.S. 86, 101 . Petitioners have not alleged that their sentences would have been considered cruel and unusual in the 18th century, and could not support such a contention, since, at that [492 U.S. 361, 362] time, the common law set the rebuttable presumption of incapacity to commit felonies (which were punishable by death) at the age of 14. In accordance with this common-law tradition, at least 281 offenders under 18, and 126 under 17, have been executed in this country. Pp. 368-370. </s> (b) In determining whether a punishment violates evolving standards of decency, this Court looks not to its own subjective conceptions, but, rather, to the conceptions of modern American society as reflected by objective evidence. E. g., Coker v. Georgia, 433 U.S. 584, 592 . The primary and most reliable evidence of national consensus - the pattern of federal and state laws - fails to meet petitioners' heavy burden of proving a settled consensus against the execution of 16- and 17-year-old offenders. Of the 37 States that permit capital punishment, 15 decline to impose it on 16-year-olds and 12 on 17-year-olds. This does not establish the degree of national agreement this Court has previously thought sufficient to label a punishment cruel and unusual. See Tison v. Arizona, 481 U.S. 137, 154 . Pp. 370-373. </s> (c) Nor is there support for petitioners' argument that a demonstrable reluctance of juries to impose, and prosecutors to seek, capital sentences for 16- and 17-year-olds establishes a societal consensus that such sentences are inappropriate. Statistics showing that a far smaller number of offenders under 18 than over 18 have been sentenced to death reflect in part the fact that a far smaller percentage of capital crimes is committed by persons in the younger age group. Beyond that, it is likely that the very considerations that induce petitioners to believe death should never be imposed on such young offenders cause prosecutors and juries to believe it should rarely be imposed, so that the statistics are no proof of a categorical aversion. Pp. 373-374. </s> JUSTICE SCALIA, joined by THE CHIEF JUSTICE, JUSTICE WHITE, and JUSTICE KENNEDY, concluded in Parts IV-B and V that: </s> 1. There is no relevance to the state laws cited by petitioners which set 18 or more as the legal age for engaging in various activities, ranging from driving to drinking alcoholic beverages to voting. Those laws operate in gross, and do not conduct individualized maturity tests for each driver, drinker, or voter; an age appropriate in the vast majority of cases must therefore be selected. In the realm of capital punishment, however, individualized consideration is a constitutional requirement. Twenty-nine States, including Kentucky and Missouri, have codified this requirement in laws specifically designating age as a mitigating factor that capital sentencers must be permitted to consider. Moreover, the determinations required by transfer statutes such as Kentucky's and Missouri's to certify a juvenile for trial as an adult ensure individualized consideration of the maturity and moral responsibility of 16- and 17-year-olds before they are even held to stand trial as adults. It is those particularized laws, rather than the generalized driving, drinking, and voting [492 U.S. 361, 363] laws, that display society's views on the age at which no youthful offender should be held responsible. Pp. 374-377. </s> 2. The indicia of national consensus offered by petitioners other than state and federal statutes and the behavior of prosecutors and juries cannot establish constitutional standards. Public opinion polls, the views of interest groups, and the positions of professional associations are too uncertain a foundation for constitutional law. Also insufficient is socioscientific or ethicoscientific evidence tending to show that capital punishment fails to deter 16- and 17-year-olds because they have a less highly developed fear of death, and fails to exact just retribution because juveniles, being less mature and responsible, are less morally blameworthy. The audience for such arguments is not this Court but the citizenry. Although several of the Court's cases have engaged in so-called "proportionality" analysis - which examines whether there is a disproportion between the punishment imposed and the defendant's blameworthiness, and whether a punishment makes any measurable contribution to acceptable goals of punishment - those decisions have never invalidated a punishment on that basis alone, but have done so only when there was also objective evidence of state laws or jury determinations establishing a societal consensus against the penalty. Pp. 377-380. </s> JUSTICE O'CONNOR, although agreeing that no national consensus presently forbids the imposition of capital punishment on 16- or 17-year-old murderers, concluded that this Court has a constitutional obligation to conduct proportionality analysis, see, e. g., Penry v. Lynaugh, ante, at 335-340, and should consider age-based statutory classifications that are relevant to that analysis. Pp. 380-382. </s> SCALIA, J., announced the judgment of the Court and delivered the opinion of the Court with respect to Parts I, II, III, and IV-A, in which REHNQUIST, C. J., and WHITE, O'CONNOR, and KENNEDY, JJ., joined, and an opinion with respect to Parts IV-B and V, in which REHNQUIST, C. J., and WHITE and KENNEDY, JJ., joined. O'CONNOR, J., filed an opinion concurring in part and concurring in the judgment, post, p. 380. BRENNAN, J., filed a dissenting opinion, in which MARSHALL, BLACKMUN, and STEVENS, JJ., joined, post, p. 382. </s> [Footnote * Together with No. 87-6026, Wilkins v. Missouri, on certiorari to the Supreme Court of Missouri. </s> Frank W. Heft, Jr., argued the cause for petitioner in No. 87-5765. With him on the briefs were J. David Niehaus and Daniel T. Goyette. Nancy A. McKerrow argued the cause and filed briefs for petitioner in No. 87-6026. </s> Frederic J. Cowan, Attorney General of Kentucky, argued the cause for respondent in No. 87-5765. With him on the brief were Elizabeth Ann Myerscough and David A. Smith, Assistant Attorneys General. John M. Morris III, Assistant [492 U.S. 361, 364] Attorney General of Missouri, argued the cause for respondent in No. 87-6026. With him on the brief was William L. Webster, Attorney General.Fn </s> Fn [492 U.S. 361, 364] Briefs of amici curiae urging reversal in both cases were filed for the American Baptist Churches et al. by Mark Evan Olive; for the Child Welfare League of America et al. by Randy Hertz and Martin Guggenheim; and for the West Virginia Council of Churches by Paul R. Stone. </s> A brief of amici curiae urging affirmance in No. 87-6026 was filed for the State of Kentucky et al. by Frederic J. Cowan, Attorney General of Kentucky, Elizabeth Ann Myerscough and David A. Smith, Assistant Attorneys General, Don Siegelman, Attorney General of Alabama, Robert K. Corbin, Attorney General of Arizona, John Steven Clark, Attorney General of Arkansas, John J. Kelly, Chief State's Attorney of Connecticut, Robert A. Butterworth, Attorney General of Florida, Linley E. Pearson, Attorney General of Indiana, Michael C. Moore, Attorney General of Mississippi, Michael T. Greely, Attorney General of Montana, Brian McKay, Attorney General of Nevada, Robert H. Henry, Attorney General of Oklahoma, LeRoy S. Zimmerman, Attorney General of Pennsylvania, T. Travis Medlock, Attorney General of South Carolina, Roger A. Tellinghuisen, Attorney General of South Dakota, Mary Sue Terry, Attorney General of Virginia, and Joseph B. Meyer, Attorney General of Wyoming. </s> Briefs of amici curiae were filed in both cases for the American Bar Association by Robert D. Raven and Andrew J. Shookhoff; for the American Society for Adolescent Psychiatry et al. by Joseph T. McLaughlin, Jeremy G. Epstein, and Henry Weisburg; for Amnesty International by Paul L. Hoffman, Joan W. Howarth, Mary E. McClymont, David Weissbrodt, and John E. Osborn; for Defense for Children International-USA by Anna Mamalakis Pappas; for the International Human Rights Law Group by Robert H. Kapp; and for the National Legal Aid and Defender Association et al. by Charles Ogletree and John H. Blume. Susan Apel and Michael Mello filed a brief for the Office of the Capital Collateral Representative for the State of Florida as amicus curiae in No. 87-5765. </s> JUSTICE SCALIA announced the judgment of the Court and delivered the opinion of the Court with respect to Parts I, II, III, and IV-A, and an opinion with respect to Parts IV-B and V, in which THE CHIEF JUSTICE, JUSTICE WHITE, and JUSTICE KENNEDY join. </s> These two consolidated cases require us to decide whether the imposition of capital punishment on an individual for a [492 U.S. 361, 365] crime committed at 16 or 17 years of age constitutes cruel and unusual punishment under the Eighth Amendment. </s> I </s> The first case, No. 87-5765, involves the shooting death of 20-year-old Barbel Poore in Jefferson County, Kentucky. Petitioner Kevin Stanford committed the murder on January 7, 1981, when he was approximately 17 years and 4 months of age. Stanford and his accomplice repeatedly raped and sodomized Poore during and after their commission of a robbery at a gas station where she worked as an attendant. They then drove her to a secluded area near the station, where Stanford shot her pointblank in the face and then in the back of her head. The proceeds from the robbery were roughly 300 cartons of cigarettes, two gallons of fuel, and a small amount of cash. A corrections officer testified that petitioner explained the murder as follows: "`[H]e said, I had to shoot her, [she] lived next door to me and she would recognize me. . . . I guess we could have tied her up or something or beat [her up] . . . and tell her if she tells, we would kill her. . . . Then after he said that he started laughing.'" 734 S. W. 2d 781, 788 (Ky. 1987). </s> After Stanford's arrest, a Kentucky juvenile court conducted hearings to determine whether he should be transferred for trial as an adult under Ky. Rev. Stat. Ann. 208.170 (Michie 1982). That statute provided that juvenile court jurisdiction could be waived and an offender tried as an adult if he was either charged with a Class A felony or capital crime, or was over 16 years of age and charged with a felony. Stressing the seriousness of petitioner's offenses and the unsuccessful attempts of the juvenile system to treat him for numerous instances of past delinquency, the juvenile court found certification for trial as an adult to be in the best interest of petitioner and the community. [492 U.S. 361, 366] </s> Stanford was convicted of murder, first-degree sodomy, first-degree robbery, and receiving stolen property, and was sentenced to death and 45 years in prison. The Kentucky Supreme Court affirmed the death sentence, rejecting Stanford's "deman[d] that he has a constitutional right to treatment." 734 S. W. 2d, at 792. Finding that the record clearly demonstrated that "there was no program or treatment appropriate for the appellant in the juvenile justice system," the court held that the juvenile court did not err in certifying petitioner for trial as an adult. The court also stated that petitioner's "age and the possibility that he might be rehabilitated were mitigating factors appropriately left to the consideration of the jury that tried him." Ibid. </s> The second case before us today, No. 87-6026, involves the stabbing death of Nancy Allen, a 26-year-old mother of two who was working behind the sales counter of the convenience store she and David Allen owned and operated in Avondale, Missouri. Petitioner Heath Wilkins committed the murder on July 27, 1985, when he was approximately 16 years and 6 months of age. The record reflects that Wilkins' plan was to rob the store and murder "whoever was behind the counter" because "a dead person can't talk." While Wilkins' accomplice, Patrick Stevens, held Allen, Wilkins stabbed her, causing her to fall to the floor. When Stevens had trouble operating the cash register, Allen spoke up to assist him, leading Wilkins to stab her three more times in her chest. Two of these wounds penetrated the victim's heart. When Allen began to beg for her life, Wilkins stabbed her four more times in the neck, opening her carotid artery. After helping themselves to liquor, cigarettes, rolling papers, and approximately $450 in cash and checks, Wilkins and Stevens left Allen to die on the floor. </s> Because he was roughly six months short of the age of majority for purposes of criminal prosecution, Mo. Rev. Stat. 211.021(1) (1986), Wilkins could not automatically be [492 U.S. 361, 367] tried as an adult under Missouri law. Before that could happen, the juvenile court was required to terminate juvenile court jurisdiction and certify Wilkins for trial as an adult under 211.071, which permits individuals between 14 and 17 years of age who have committed felonies to be tried as adults. Relying on the "viciousness, force and violence" of the alleged crime, petitioner's maturity, and the failure of the juvenile justice system to rehabilitate him after previous delinquent acts, the juvenile court made the necessary certification. </s> Wilkins was charged with first-degree murder, armed criminal action, and carrying a concealed weapon. After the court found him competent, petitioner entered guilty pleas to all charges. A punishment hearing was held, at which both the State and petitioner himself urged imposition of the death sentence. Evidence at the hearing revealed that petitioner had been in and out of juvenile facilities since the age of eight for various acts of burglary, theft, and arson, had attempted to kill his mother by putting insecticide into Tylenol capsules, and had killed several animals in his neighborhood. Although psychiatric testimony indicated that Wilkins had "personality disorders," the witnesses agreed that Wilkins was aware of his actions and could distinguish right from wrong. </s> Determining that the death penalty was appropriate, the trial court entered the following order: </s> "[T]he court finds beyond reasonable doubt that the following aggravating circumstances exist: </s> "1. The murder in the first degree was committed while the defendant was engaged in the perpetration of the felony of robbery, and </s> "2. The murder in the first degree involved depravity of mind and that as a result thereof, it was outrageously or wantonly vile, horrible or inhuman." App. in No. 87-6026, p. 77. [492 U.S. 361, 368] </s> On mandatory review of Wilkins' death sentence, the Supreme Court of Missouri affirmed, rejecting the argument that the punishment violated the Eighth Amendment. 736 S. W. 2d 409 (1987). </s> We granted certiorari in these cases, 488 U.S. 887 (1988) and 487 U.S. 1233 (1988), to decide whether the Eighth Amendment precludes the death penalty for individuals who commit crimes at 16 or 17 years of age. </s> II </s> The thrust of both Wilkins' and Stanford's arguments is that imposition of the death penalty on those who were juveniles when they committed their crimes falls within the Eighth Amendment's prohibition against "cruel and unusual punishments." Wilkins would have us define juveniles as individuals 16 years of age and under; Stanford would draw the line at 17. </s> Neither petitioner asserts that his sentence constitutes one of "those modes or acts of punishment that had been considered cruel and unusual at the time that the Bill of Rights was adopted." Ford v. Wainwright, 477 U.S. 399, 405 (1986). Nor could they support such a contention. At that time, the common law set the rebuttable presumption of incapacity to commit any felony at the age of 14, and theoretically permitted capital punishment to be imposed on anyone over the age of 7. See 4 W. Blackstone, Commentaries *23-*24; 1 M. Hale, Pleas of the Crown 24-29 (1800). See also In re Gault, 387 U.S. 1, 16 (1967); Streib, Death Penalty for Children: The American Experience with Capital Punishment for Crimes Committed While Under Age Eighteen, 36 Okla. L. Rev. 613, 614-615 (1983); Kean, The History of the Criminal Liability of Children, 53 L. Q. Rev. 364, 369-370 (1937). In accordance with the standards of this common-law tradition, at least 281 offenders under the age of 18 have been executed in this country, and at least 126 under the age of 17. See V. Streib, Death Penalty for Juveniles 57 (1987). [492 U.S. 361, 369] </s> Thus petitioners are left to argue that their punishment is contrary to the "evolving standards of decency that mark the progress of a maturing society," Trop v. Dulles, 356 U.S. 86, 101 (1958) (plurality opinion). They are correct in asserting that this Court has "not confined the prohibition embodied in the Eighth Amendment to `barbarous' methods that were generally outlawed in the 18th century," but instead has interpreted the Amendment "in a flexible and dynamic manner." Gregg v. Georgia, 428 U.S. 153, 171 (1976) (opinion of Stewart, Powell, and STEVENS, JJ.). In determining what standards have "evolved," however, we have looked not to our own conceptions of decency, but to those of modern American society as a whole. 1 As we have said, "Eighth Amendment judgments should not be, or appear to be, merely the subjective views of individual Justices; judgment should be informed by objective factors to the maximum possible extent." Coker v. Georgia, 433 U.S. 584, 592 (1977) (plurality opinion). See also Penry v. Lynaugh, ante, at 331; Ford v. Wainwright, supra, at 406; Enmund v. Florida, 458 U.S. 782, 788 -789 (1982); Furman v. Georgia, 408 U.S. 238, 277 -279 (1972) (BRENNAN, J., concurring). This approach is dictated both by the language of the Amendment - which proscribes only those punishments that are both "cruel and unusual" - and by the "deference we owe to the decisions [492 U.S. 361, 370] of the state legislatures under our federal system," Gregg v. Georgia, supra, at 176. </s> III </s> "[F]irst" among the "`objective indicia that reflect the public attitude toward a given sanction'" are statutes passed by society's elected representatives. McCleskey v. Kemp, 481 U.S. 279, 300 (1987), quoting Gregg v. Georgia, supra, at 173. Of the 37 States whose laws permit capital punishment, 15 decline to impose it upon 16-year-old offenders and 12 decline to impose it on 17-year-old offenders. 2 This does [492 U.S. 361, 371] not establish the degree of national consensus this Court has previously thought sufficient to label a particular punishment cruel and unusual. In invalidating the death penalty for rape of an adult woman, we stressed that Georgia was the sole jurisdiction that authorized such a punishment. See Coker v. Georgia, supra, at 595-596. In striking down capital punishment for participation in a robbery in which an accomplice takes a life, we emphasized that only eight jurisdictions authorized similar punishment. Enmund v. Florida, supra, at 792. In finding that the Eighth Amendment precludes execution of the insane and thus requires an adequate hearing on the issue of sanity, we relied upon (in addition to the common-law rule) the fact that "no State in the Union" permitted such punishment. Ford v. Wainwright, 477 U.S., at 408 . And in striking down a life sentence without parole under a recidivist statute, we stressed that "[i]t appears that [petitioner] was treated more severely than he would have been in any other State." Solem v. Helm, 463 U.S. 277, 300 (1983). </s> Since a majority of the States that permit capital punishment authorize it for crimes committed at age 16 or above, 3 petitioners' cases are more analogous to Tison v. Arizona, 481 U.S. 137 (1987), than Coker, Enmund, Ford, and Solem. In Tison, which upheld Arizona's imposition of the death penalty for major participation in a felony with reckless indifference to human life, we noted that only 11 of those jurisdictions [492 U.S. 361, 372] imposing capital punishment rejected its use in such circumstances. Id., at 154. As we noted earlier, here the number is 15 for offenders under 17, and 12 for offenders under 18. We think the same conclusion as in Tison is required in these cases. </s> Petitioners make much of the recently enacted federal statute providing capital punishment for certain drug-related offenses, but limiting that punishment to offenders 18 and over. The Anti-Drug Abuse Act of 1988, Pub. L. 100-690, 102 Stat. 4390, 7001(l), 21 U.S.C. 848(l) (1988 ed.). That reliance is entirely misplaced. To begin with, the statute in question does not embody a judgment by the Federal Legislature that no murder is heinous enough to warrant the execution of such a youthful offender, but merely that the narrow class of offense it defines is not. The congressional judgment on the broader question, if apparent at all, is to be found in the law that permits 16- and 17-year-olds (after appropriate findings) to be tried and punished as adults for all federal offenses, including those bearing a capital penalty that is not limited to 18-year-olds. 4 See 18 U.S.C. 5032 (1982 ed., Supp. V). Moreover, even if it were true that no [492 U.S. 361, 373] federal statute permitted the execution of persons under 18, that would not remotely establish - in the face of a substantial number of state statutes to the contrary - a national consensus that such punishment is inhumane, any more than the absence of a federal lottery establishes a national consensus that lotteries are socially harmful. To be sure, the absence of a federal death penalty for 16- or 17-year-olds (if it existed) might be evidence that there is no national consensus in favor of such punishment. It is not the burden of Kentucky and Missouri, however, to establish a national consensus approving what their citizens have voted to do; rather, it is the "heavy burden" of petitioners, Gregg v. Georgia, 428 U.S., at 175 , to establish a national consensus against it. As far as the primary and most reliable indication of consensus is concerned - the pattern of enacted laws - petitioners have failed to carry that burden. </s> IV </s> A </s> Wilkins and Stanford argue, however, that even if the laws themselves do not establish a settled consensus, the application of the laws does. That contemporary society views capital punishment of 16- and 17-year-old offenders as inappropriate is demonstrated, they say, by the reluctance of juries to impose, and prosecutors to seek, such sentences. Petitioners are quite correct that a far smaller number of offenders under 18 than over 18 have been sentenced to death in this country. From 1982 through 1988, for example, out of 2,106 total death sentences, only 15 were imposed on individuals who were 16 or under when they committed their crimes, and only 30 on individuals who were 17 at the time of the crime. See Streib, Imposition of Death Sentences For Juvenile Offenses, January 1, 1982, Through April 1, 1989, p. 2 (paper for Cleveland-Marshall College of Law, April 5, 1989). And it appears that actual executions for crimes committed under age 18 accounted for only about two percent of the total number of executions that occurred between 1642 [492 U.S. 361, 374] and 1986. See Streib, Death Penalty for Juveniles, at 55, 57. As Wilkins points out, the last execution of a person who committed a crime under 17 years of age occurred in 1959. These statistics, however, carry little significance. Given the undisputed fact that a far smaller percentage of capital crimes are committed by persons under 18 than over 18, the discrepancy in treatment is much less than might seem. Granted, however, that a substantial discrepancy exists, that does not establish the requisite proposition that the death sentence for offenders under 18 is categorically unacceptable to prosecutors and juries. To the contrary, it is not only possible, but overwhelmingly probable, that the very considerations which induce petitioners and their supporters to believe that death should never be imposed on offenders under 18 cause prosecutors and juries to believe that it should rarely be imposed. </s> B </s> This last point suggests why there is also no relevance to the laws cited by petitioners and their amici which set 18 or more as the legal age for engaging in various activities, ranging from driving to drinking alcoholic beverages to voting. It is, to begin with, absurd to think that one must be mature enough to drive carefully, to drink responsibly, or to vote intelligently, in order to be mature enough to understand that murdering another human being is profoundly wrong, and to conform one's conduct to that most minimal of all civilized standards. But even if the requisite degrees of maturity were comparable, the age statutes in question would still not be relevant. They do not represent a social judgment that all persons under the designated ages are not responsible enough to drive, to drink, or to vote, but at most a judgment that the vast majority are not. These laws set the appropriate ages for the operation of a system that makes its determinations in gross, and that does not conduct individualized maturity tests for each driver, drinker, or voter. The [492 U.S. 361, 375] criminal justice system, however, does provide individualized testing. In the realm of capital punishment in particular, "individualized consideration [is] a constitutional requirement," Lockett v. Ohio, 438 U.S. 586, 605 (1978) (opinion of Burger, C. J.) (footnote omitted); see also Zant v. Stephens, 462 U.S. 862, 879 (1983) (collecting cases), and one of the individualized mitigating factors that sentencers must be permitted to consider is the defendant's age, see Eddings v. Oklahoma, 455 U.S. 104, 115 -116 (1982). Twenty-nine States, including both Kentucky and Missouri, have codified this constitutional requirement in laws specifically designating the defendant's age as a mitigating factor in capital cases. 5 Moreover, the determinations required by juvenile transfer statutes to certify a juvenile for trial as an adult ensure individualized consideration of the maturity and moral responsibility of 16- and 17-year-old offenders before they are even held to stand trial as adults. 6 The application of this [492 U.S. 361, 376] particularized system to the petitioners can be declared constitutionally inadequate only if there is a consensus, not that 17 or 18 is the age at which most persons, or even almost all persons, achieve sufficient maturity to be held fully responsible for murder; but that 17 or 18 is the age before which no one can reasonably be held fully responsible. What displays society's views on this latter point are not the ages set forth in the generalized system of driving, drinking, and voting laws cited by petitioners and their amici, but the ages at [492 U.S. 361, 377] which the States permit their particularized capital punishment systems to be applied. 7 </s> V </s> Having failed to establish a consensus against capital punishment for 16- and 17-year-old offenders through state and federal statutes and the behavior of prosecutors and juries, petitioners seek to demonstrate it through other indicia, including public opinion polls, the views of interest groups, and the positions adopted by various professional associations. We decline the invitation to rest constitutional law upon such uncertain foundations. A revised national consensus so broad, so clear, and so enduring as to justify a permanent prohibition upon all units of democratic government must appear in the operative acts (laws and the application of laws) that the people have approved. </s> We also reject petitioners' argument that we should invalidate capital punishment of 16- and 17-year-old offenders on the ground that it fails to serve the legitimate goals of penology. According to petitioners, it fails to deter because juveniles, possessing less developed cognitive skills than adults, are less likely to fear death; and it fails to exact just retribution because juveniles, being less mature and responsible, are also less morally blameworthy. In support of these claims, petitioners and their supporting amici marshal an array of [492 U.S. 361, 378] socioscientific evidence concerning the psychological and emotional development of 16- and 17-year-olds. </s> If such evidence could conclusively establish the entire lack of deterrent effect and moral responsibility, resort to the Cruel and Unusual Punishments Clause would be unnecessary; the Equal Protection Clause of the Fourteenth Amendment would invalidate these laws for lack of rational basis. See Dallas v. Stanglin, 490 U.S. 19 (1989). But as the adjective "socioscientific" suggests (and insofar as evaluation of moral responsibility is concerned perhaps the adjective "ethicoscientific" would be more apt), it is not demonstrable that no 16-year-old is "adequately responsible" or significantly deterred. It is rational, even if mistaken, to think the contrary. The battle must be fought, then, on the field of the Eighth Amendment; and in that struggle socioscientific, ethicoscientific, or even purely scientific evidence is not an available weapon. The punishment is either "cruel and unusual" (i. e., society has set its face against it) or it is not. The audience for these arguments, in other words, is not this Court but the citizenry of the United States. It is they, not we, who must be persuaded. For as we stated earlier, our job is to identify the "evolving standards of decency"; to determine, not what they should be, but what they are. We have no power under the Eighth Amendment to substitute our belief in the scientific evidence for the society's apparent skepticism. In short, we emphatically reject petitioner's suggestion that the issues in this case permit us to apply our "own informed judgment," Brief for Petitioner in No. 87-6026, p. 23, regarding the desirability of permitting the death penalty for crimes by 16- and 17-year-olds. </s> We reject the dissent's contention that our approach, by "largely return[ing] the task of defining the contours of Eighth Amendment protection to political majorities," leaves "`[c]onstitutional doctrine [to] be formulated by the acts of those institutions which the Constitution is supposed to limit,'" post, at 391, 392 (citation omitted). When this Court [492 U.S. 361, 379] cast loose from the historical moorings consisting of the original application of the Eighth Amendment, it did not embark rudderless upon a wide-open sea. Rather, it limited the Amendment's extension to those practices contrary to the "evolving standards of decency that mark the progress of a maturing society." Trop v. Dulles, 356 U.S., at 101 (plurality opinion) (emphasis added). It has never been thought that this was a shorthand reference to the preferences of a majority of this Court. By reaching a decision supported neither by constitutional text nor by the demonstrable current standards of our citizens, the dissent displays a failure to appreciate that "those institutions which the Constitution is supposed to limit" include the Court itself. To say, as the dissent says, that "`it is for us ultimately to judge whether the Eighth Amendment permits imposition of the death penalty,'" post, at 391 (emphasis added), quoting Enmund v. Florida, 458 U.S., at 797 - and to mean that as the dissent means it, i. e., that it is for us to judge, not on the basis of what we perceive the Eighth Amendment originally prohibited, or on the basis of what we perceive the society through its democratic processes now overwhelmingly disapproves, but on the basis of what we think "proportionate" and "measurably contributory to acceptable goals of punishment" - to say and mean that, is to replace judges of the law with a committee of philosopher-kings. </s> While the dissent is correct that several of our cases have engaged in so-called "proportionality" analysis, examining whether "there is a disproportion `between the punishment imposed and the defendant's blameworthiness,'" and whether a punishment makes any "measurable contribution to acceptable goals of punishment," see post, at 393, we have never invalidated a punishment on this basis alone. All of our cases condemning a punishment under this mode of analysis also found that the objective indicators of state laws or jury determinations evidenced a societal consensus against that penalty. See Solem v. Helm, 463 U.S., at 299 -300; [492 U.S. 361, 380] Enmund v. Florida, supra, at 789-796; Coker v. Georgia, 433 U.S., at 593 -597 (plurality opinion). In fact, the two methodologies blend into one another, since "proportionality" analysis itself can only be conducted on the basis of the standards set by our own society; the only alternative, once again, would be our personal preferences. </s> * * * </s> We discern neither a historical nor a modern societal consensus forbidding the imposition of capital punishment on any person who murders at 16 or 17 years of age. Accordingly, we conclude that such punishment does not offend the Eighth Amendment's prohibition against cruel and unusual punishment. </s> The judgments of the Supreme Court of Kentucky and the Supreme Court of Missouri are therefore </s> Affirmed. </s> Footnotes [Footnote 1 We emphasize that it is American conceptions of decency that are dispositive, rejecting the contention of petitioners and their various amici (accepted by the dissent, see post, at 389-390) that the sentencing practices of other countries are relevant. While "[t]he practices of other nations, particularly other democracies, can be relevant to determining whether a practice uniform among our people is not merely a historical accident, but rather so `implicit in the concept of ordered liberty' that it occupies a place not merely in our mores, but, text permitting, in our Constitution as well," Thompson v. Oklahoma, 487 U.S. 815, 868 -869, n. 4 (1988) (SCALIA, J., dissenting), quoting Palko v. Connecticut, 302 U.S. 319, 325 (1937) (Cardozo, J.), they cannot serve to establish the first Eighth Amendment prerequisite, that the practice is accepted among our people. </s> [Footnote 2 The following States preclude capital punishment of offenders under 18: California (Cal. Penal Code Ann. 190.5 (West 1988)); Colorado (Colo. Rev. Stat. 16-11-103(1)(a) (1986)); Connecticut (Conn. Gen. Stat. 53a-46a(g)(1) (1989)); Illinois (Ill. Rev. Stat., ch. 38, § 9-1(b) (1987)); Maryland (Md. Ann. Code, Art. 27, 412(f) (Supp. 1988)); Nebraska (Neb. Rev. Stat. 28-105.01 (1985)); New Hampshire (N. H. Rev. Stat. Ann. 630:5 (XIII) (Supp. 1988)); New Jersey (N. J. Stat. Ann. 2A:4A-22(a) (West 1987) and 2C:11-3(g) (West Supp. 1988)); New Mexico (N. M. Stat. Ann. 28-6-1(A), 31-18-14(A) (1987)); Ohio (Ohio Rev. Code Ann. 2929.02(A) (1987)); Oregon (Ore. Rev. Stat. 161.620 and 419.476(1) (1987)); Tennessee (Tenn. Code Ann. 37-1-102(3), 37-1-102(4), 37-1-103, 37-1-134(a)(1) (1984 and Supp. 1988)). Three more States preclude the death penalty for offenders under 17: Georgia (Ga. Code Ann. 17-9-3 (1982)); North Carolina (N.C. Gen. Stat. 14-17 (Supp. 1988)); Texas (Tex. Penal Code Ann. 8.07(d) (Supp. 1989)). </s> The dissent takes issue with our failure to include, among those States evidencing a consensus against executing 16- and 17-year-old offenders, the District of Columbia and the 14 States that do not authorize capital punishment. Post, at 384-385. It seems to us, however, that while the number of those jurisdictions bears upon the question whether there is a consensus against capital punishment altogether, it is quite irrelevant to the specific inquiry in this case: whether there is a settled consensus in favor of punishing offenders under 18 differently from those over 18 insofar as capital punishment is concerned. The dissent's position is rather like discerning a national consensus that wagering on cockfights is inhumane by counting within that consensus those States that bar all wagering. The issue in the present case is not whether capital punishment is thought to be desirable but whether persons under 18 are thought to be specially exempt from it. With respect to that inquiry, it is no more logical to say that the capital-punishment [492 U.S. 361, 371] laws of those States which prohibit capital punishment (and thus do not address age) support the dissent's position, than it would be to say that the age-of-adult-criminal-responsibility laws of those same States (which do not address capital punishment) support our position. </s> [Footnote 3 The dissent again works its statistical magic by refusing to count among the States that authorize capital punishment of 16- and 17-year-old offenders those 19 States that set no minimum age in their death penalty statute, and specifically permit 16- and 17-year-olds to be sentenced as adults. Post, at 385. We think that describing this position is adequate response. </s> [Footnote 4 See 10 U.S.C. 906a (1982 ed., Supp. V) (peacetime espionage); 918 (murder by persons subject to Uniform Code of Military Justice); 18 U.S.C. 32, 33, and 34 (1982 ed. and Supp. V) (destruction of aircraft, motor vehicles, or related facilities resulting in death); 115(b)(3) (1982 ed., Supp. V) (retaliatory murder of member of immediate family of law enforcement officials) (by cross reference to 1111 (1982 ed. and Supp. V)); 351 (1982 ed. and Supp. V) (murder of Member of Congress, high-ranking executive official, or Supreme Court Justice) (by cross reference to 1111); 794 (1982 ed. and Supp. V) (espionage); 844(f) (1982 ed., Supp. V) (destruction of Government property resulting in death); 1111 (first-degree murder within federal jurisdiction); 1716 (1982 ed. and Supp. V) (mailing of injurious articles resulting in death); 1751 (assassination or kidnaping resulting in death of President or Vice President); 1992 (willful wrecking of train resulting in death); 2113 (1982 ed. and Supp. V) (bank robbery-related murder or kidnaping); 2381 (treason); 49 U.S.C. App. 1472 and 1473 (1982 ed. and Supp. V) (death resulting from aircraft hijacking). </s> [Footnote 5 See Ala. Code 13A-5-51(7) (1982); Ariz. Rev. Stat. Ann. 13-703(G)(5) (Supp. 1988); Ark. Code Ann. 5-4-605(4) (1987); Cal. Penal Code Ann. 190.3(i) (West 1988); Colo. Rev. Stat. 16-11-103(5)(a) (1986); Conn. Gen. Stat. 53a-46a(g)(1) (1989); Fla. Stat. 921.141(6)(g) (1987); Ind. Code 35-50-2-9(c)(7) (1988); Ky. Rev. Stat. Ann. 532.025(2)(b)(8) (Baldwin 1988); La. Code Crim. Proc. Ann., Art. 905.5(f) (West 1984); Md. Ann. Code, Art. 27, 413(g)(5) (1988); Miss. Code Ann. 99-19-101(6)(g) (Supp. 1988); Mo. Rev. Stat. 565.032(3)(7) (1986); Mont. Code Ann. 46-18-304(7) (1987); Neb. Rev. Stat. 29-2523(2)(d) (1985); Nev. Rev. Stat. 200.035(6) (1987); N. H. Rev. Stat. Ann. 630:5(II)(b)(5) (1986); N. J. Stat. Ann. 2C:11-3(c)(5)(c) (West Supp. 1988); N. M. Stat. Ann. 31-20A-6(I) (1987); N.C. Gen. Stat. 15A-2000(f)(7) (1988); Ohio Rev. Code Ann. 2929.04(B)(4) (1987); Ore. Rev. Stat. 163.150(1)(b)(B) (1987); 42 Pa. Cons. Stat. 9711(e)(4) (1982); S. C. Code 16-3-20(C)(b)(9) (Supp. 1988); Tenn. Code Ann. 39-2-203(j)(7) (1982); Utah Code Ann. 76-3-207 (2)(e) (Supp. 1988); Va. Code 19.2-264.4(B)(v) (1983); Wash. Rev. Code 10.95.070(7) (Supp. 1989); Wyo. Stat. 6-2-102(j)(vii) (1988). </s> [Footnote 6 The Kentucky statute under which Stanford was certified to be tried as an adult provides in relevant part: </s> "(3) If the court determines that probable cause exists [to believe that a person 16 years old or older committed a felony or that a person under 16 years of age committed a Class A felony or a capital offense], it shall then [492 U.S. 361, 376] determine if it is in the best interest of the child and the community to order such a transfer based upon the seriousness of the alleged offense; whether the offense was against person or property, with greater weight being given to offenses against persons; the maturity of the child as determined by his environment; the child's prior record; and the prospects for adequate protection of the public and the likelihood of reasonable rehabilitation of the child by the use of procedures, services, and facilities currently available to the juvenile justice system." Ky. Rev. Stat. Ann. 208.170 (Michie 1982) (repealed effective July 15, 1984). </s> The Missouri statute under which Wilkins was certified provides that in determining whether to transfer a juvenile the court must consider: </s> "(1) The seriousness of the offense alleged and whether the protection of the community requires transfer to the court of general jurisdiction; </s> "(2) Whether the offense alleged involved viciousness, force and violence; </s> "(3) Whether the offense alleged was against persons or property with greater weight being given to the offense against persons, especially if personal injury resulted; </s> "(4) Whether the offense alleged is a part of a repetitive pattern of offenses which indicates that the child may be beyond rehabilitation under the juvenile code; </s> "(5) The record and history of the child, including experience with the juvenile justice system, other courts, supervision, commitments to juvenile institutions and other placements; </s> "(6) The sophistication and maturity of the child as determined by consideration of his home and environmental situation, emotional condition and pattern of living; </s> "(7) The program and facilities available to the juvenile court in considering disposition; and </s> "(8) Whether or not the child can benefit from the treatment or rehabilitative programs available to the juvenile court." Mo. Rev. Stat. 211.071(6) (1986). </s> [Footnote 7 The dissent believes that individualized consideration is no solution, because "the Eighth Amendment requires that a person who lacks that full degree of responsibility for his or her actions associated with adulthood not be sentenced to death," and this absolute cannot be assured if "a juvenile offender's level of responsibility [is] taken into account only along with a host of other factors that the court or jury may decide outweigh that want of responsibility." Post, at 397. But it is equally true that individualized consideration will not absolutely assure immunity from the death penalty to the nonjuvenile who happens to be immature. If individualized consideration is constitutionally inadequate, then, the only logical conclusion is that everyone is exempt from the death penalty. </s> JUSTICE O'CONNOR, concurring in part and concurring in the judgment. </s> Last Term, in Thompson v. Oklahoma, 487 U.S. 815, 857 -858 (1988) (opinion concurring in judgment), I expressed the view that a criminal defendant who would have been tried as a juvenile under state law, but for the granting of a petition waiving juvenile court jurisdiction, may only be executed for a capital offense if the State's capital punishment statute specifies a minimum age at which the commission of a capital crime can lead to an offender's execution and the defendant had reached that minimum age at the time the crime was committed. As a threshold matter, I indicated that such specificity is not necessary to avoid constitutional problems if it is clear that no national consensus forbids the imposition of capital punishment for crimes committed at such an age. Id., at 857. Applying this two-part standard in Thompson, I concluded that Oklahoma's imposition of a death sentence on an individual who was 15 years old at the time he committed a capital offense should be set aside. Applying the same [492 U.S. 361, 381] standard today, I conclude that the death sentences for capital murder imposed by Missouri and Kentucky on petitioners Wilkins and Stanford respectively should not be set aside because it is sufficiently clear that no national consensus forbids the imposition of capital punishment on 16- or 17-year-old capital murderers. </s> In Thompson I noted that "[t]he most salient statistic that bears on this case is that every single American legislature that has expressly set a minimum age for capital punishment has set that age at 16 or above." Id., at 849. It is this difference between Thompson and these cases, more than any other, that convinces me there is no national consensus forbidding the imposition of capital punishment for crimes committed at the age of 16 and older. See ante, at 370-372. As the Court indicates, "a majority of the States that permit capital punishment authorize it for crimes committed at age 16 or above . . . ." Ante, at 371. Three States, including Kentucky, have specifically set the minimum age for capital punishment at 16, see Ind. Code 35-50-2-3(b) (1988); Ky. Rev. Stat. Ann. 640.040(1) (Baldwin 1987); Nev. Rev. Stat. 176.025 (1987), and a fourth, Florida, clearly contemplates the imposition of capital punishment on 16-year-olds in its juvenile transfer statute, see Fla. Stat. 39.02(5)(c) (1987). Under these circumstances, unlike the "peculiar circumstances" at work in Thompson, I do not think it necessary to require a state legislature to specify that the commission of a capital crime can lead to the execution of a 16- or 17-year-old offender. Because it is sufficiently clear that today no national consensus forbids the imposition of capital punishment in these circumstances, "the implicit nature of the [Missouri] Legislature's decision [is] not . . . constitutionally problematic." 487 U.S., at 857 . This is true, a fortiori, in the case of Kentucky, which has specified 16 as the minimum age for the imposition of the death penalty. The day may come when there is such general legislative rejection of the execution of 16- or 17-year-old capital murderers that a clear national [492 U.S. 361, 382] consensus can be said to have developed. Because I do not believe that day has yet arrived, I concur in Parts I, II, III, and IV-A of the Court's opinion, and I concur in its judgment. </s> I am unable, however, to join the remainder of the plurality's opinion for reasons I stated in Thompson. Part V of the plurality's opinion "emphatically reject[s]," ante, at 378, the suggestion that, beyond an assessment of the specific enactments of American legislatures, there remains a constitutional obligation imposed upon this Court to judge whether the "`nexus between the punishment imposed and the defendant's blameworthiness'" is proportional. Thompson, supra, at 853, quoting Enmund v. Florida, 458 U.S. 782, 825 (1982) (O'CONNOR, J., dissenting). Part IV-B of the plurality's opinion specifically rejects as irrelevant to Eighth Amendment considerations state statutes that distinguish juveniles from adults for a variety of other purposes. In my view, this Court does have a constitutional obligation to conduct proportionality analysis. See Penry v. Lynaugh, ante, at 335-340; Tison v. Arizona, 481 U.S. 137, 155 -158 (1987); Enmund, 458 U.S., at 797 -801; id., at 825-826 (O'CONNOR, J., dissenting). In Thompson I specifically identified age-based statutory classifications as "relevant to Eighth Amendment proportionality analysis." 487 U.S., at 854 (opinion concurring in judgment). Thus, although I do not believe that these particular cases can be resolved through proportionality analysis, see Thompson, supra, at 853-854, I reject the suggestion that the use of such analysis is improper as a matter of Eighth Amendment jurisprudence. Accordingly, I join all but Parts IV-B and V of JUSTICE SCALIA's opinion. </s> JUSTICE BRENNAN, with whom JUSTICE MARSHALL, JUSTICE BLACKMUN, and JUSTICE STEVENS join, dissenting. </s> I believe that to take the life of a person as punishment for a crime committed when below the age of 18 is cruel and unusual and hence is prohibited by the Eighth Amendment. [492 U.S. 361, 383] </s> The method by which this Court assesses a claim that a punishment is unconstitutional because it is cruel and unusual is established by our precedents, and it bears little resemblance to the method four Members of the Court apply in this case. To be sure, we begin the task of deciding whether a punishment is unconstitutional by reviewing legislative enactments and the work of sentencing juries relating to the punishment in question to determine whether our Nation has set its face against a punishment to an extent that it can be concluded that the punishment offends our "evolving standards of decency." Trop v. Dulles, 356 U.S. 86, 101 (1958) (plurality opinion). The Court undertakes such an analysis in this case. Ante, at 370-373. But JUSTICE SCALIA, in his plurality opinion on this point, ante, at 374-380, would treat the Eighth Amendment inquiry as complete with this investigation. I agree with JUSTICE O'CONNOR, ante, at 382, that a more searching inquiry is mandated by our precedents interpreting the Cruel and Unusual Punishments Clause. In my view, that inquiry must in these cases go beyond age-based statutory classifications relating to matters other than capital punishment, cf. ibid. (O'CONNOR, J., concurring in part and concurring in judgment), and must also encompass what JUSTICE SCALIA calls, with evident but misplaced disdain, "ethicoscientific" evidence. Only then can we be in a position to judge, as our cases require, whether a punishment is unconstitutionally excessive, either because it is disproportionate given the culpability of the offender, or because it serves no legitimate penal goal. </s> I </s> Our judgment about the constitutionality of a punishment under the Eighth Amendment is informed, though not determined, see infra, at 391, by an examination of contemporary attitudes toward the punishment, as evidenced in the actions of legislatures and of juries. McCleskey v. Kemp, 481 U.S. 279, 300 (1987); Coker v. Georgia, 433 U.S. 584, 592 (1977) [492 U.S. 361, 384] (plurality opinion). The views of organizations with expertise in relevant fields and the choices of governments elsewhere in the world also merit our attention as indicators whether a punishment is acceptable in a civilized society. </s> A </s> The Court's discussion of state laws concerning capital sentencing, ante, at 370-372, gives a distorted view of the evidence of contemporary standards that these legislative determinations provide. Currently, 12 of the States whose statutes permit capital punishment specifically mandate that offenders under age 18 not be sentenced to death. Ante, at 370-371, n. 2. When one adds to these 12 States the 15 (including the District of Columbia) in which capital punishment is not authorized at all, 1 it appears that the governments in fully 27 of the States have concluded that no one under 18 should face the death penalty. A further three States explicitly refuse to authorize sentences of death for those who committed their offense when under 17, ante, at 370, n. 2, making a total of 30 States that would not tolerate the execution of petitioner Wilkins. Congress' most recent enactment of a death penalty statute also excludes those under 18. [492 U.S. 361, 385] Pub. L. 100-690, 7001(1), 102 Stat. 4390, 21 U.S.C. 848(l) (1988 ed.). </s> In 19 States that have a death penalty, no minimum age for capital sentences is set in the death penalty statute. See Thompson v. Oklahoma, 487 U.S. 815, 826 -827, and n. 26 (1988), and n. 1, supra. The notion that these States have consciously authorized the execution of juveniles derives from the congruence in those jurisdictions of laws permitting state courts to hand down death sentences, on the one hand, and, on the other, statutes permitting the transfer of offenders under 18 from the juvenile to state court systems for trial in certain circumstances. See Thompson, supra, at 867-868, and n. 3 (SCALIA, J., dissenting). I would not assume, however, in considering how the States stand on the moral issue that underlies the constitutional question with which we are presented, that a legislature that has never specifically considered the issue has made a conscious moral choice to permit the execution of juveniles. See 487 U.S., at 826 -827, n. 24 (plurality opinion). On a matter of such moment that most States have expressed an explicit and contrary judgment, the decisions of legislatures that are only implicit, and that lack the "earmarks of careful consideration that we have required for other kinds of decisions leading to the death penalty," id., at 857 (O'CONNOR, J., concurring in judgment), must count for little. I do not suggest, of course, that laws of these States cut against the constitutionality of the juvenile death penalty - only that accuracy demands that the baseline for our deliberations should be that 27 States refuse to authorize a sentence of death in the circumstances of petitioner Stanford's case, and 30 would not permit Wilkins' execution; that 19 States have not squarely faced the question; and that only the few remaining jurisdictions have explicitly set an age below 18 at which a person may be sentenced to death. </s> B </s> The application of these laws is another indicator the Court agrees to be relevant. The fact that juries have on occasion [492 U.S. 361, 386] sentenced a minor to death shows, the Court says, that the death penalty for adolescents is not categorically unacceptable to juries. Ante, at 374. This, of course, is true; but it is not a conclusion that takes Eighth Amendment analysis very far. Just as we have never insisted that a punishment have been rejected unanimously by the States before we may judge it cruel and unusual, so we have never adopted the extraordinary view that a punishment is beyond Eighth Amendment challenge if it is sometimes handed down by a jury. See, e. g., Enmund v. Florida, 458 U.S. 782, 792 (1982) (holding the death penalty cruel and unusual punishment for participation in a felony in which an accomplice commits murder, though about a third of American jurisdictions authorized such punishment, and at least six non-triggerman felony murderers had been executed, and three others were on death rows); Coker v. Georgia, 433 U.S., at 596 -597 (holding capital punishment unconstitutional for the rape of an adult woman, though 72 persons had been executed for rape in this country since 1955, see Enmund, supra, at 795, and though Georgia juries handed down six death sentences for rape between 1973 and 1977). Enmund and Coker amply demonstrate that it is no "requisite" of finding an Eighth Amendment violation that the punishment in issue be "categorically unacceptable to prosecutors and juries," ante, at 374 - and, evidently, resort to the Cruel and Unusual Punishments Clause would not be necessary to test a sentence never imposed because categorically unacceptable to juries. </s> Both in absolute and in relative terms, imposition of the death penalty on adolescents is distinctly unusual. Adolescent offenders make up only a small proportion of the current death-row population: 30 out of a total of 2,186 inmates, or 1.37 percent. NAACP Legal Defense and Educational Fund, Inc. (LDF), Death Row, U.S. A. (Mar. 1, 1989). 2 </s> [492 U.S. 361, 387] Eleven minors were sentenced to die in 1982; nine in 1983; six in 1984; five in 1985; seven in 1986; and two in 1987. App. N to Brief for the Office of the Capital Collateral Representative for the State of Florida as Amicus Curiae (hereafter OCCR Brief). Forty-one, or 2.3 percent, of the 1,813 death sentences imposed between January 1, 1982, and June 30, 1988, were for juvenile crimes. Id., at 15, and App. R. And juvenile offenders are significantly less likely to receive the death penalty than adults. During the same period, there were 97,086 arrests of adults for homicide, and 1,772 adult death sentences, or 1.8 percent; and 8,911 arrests of minors for homicide, compared to 41 juvenile death sentences, or 0.5 percent. Ibid., and Apps. Q and R. 3 </s> The Court speculates that this very small number of capital sentences imposed on adolescents indicates that juries have considered the youth of the offender when determining sentence, and have reserved the punishment for rare cases in which it is nevertheless appropriate. Ante, at 374. The State of Georgia made a very similar and equally conjectural argument in Coker - that "as a practical matter juries simply reserve the extreme sanction for extreme cases of rape, and that recent experience . . . does not prove that jurors consider the death penalty to be a disproportionate punishment for every conceivable instance of rape." 433 U.S., at 597 . This Court, however, summarily rejected this claim, noting simply that in the vast majority of cases, Georgia juries had not imposed the death sentence for rape. It is certainly true that in the vast majority of cases, juries have not sentenced juveniles to death, and it seems to me perfectly proper to conclude that a sentence so rarely imposed is "unusual." [492 U.S. 361, 388] </s> C </s> Further indicators of contemporary standards of decency that should inform our consideration of the Eighth Amendment question are the opinions of respected organizations. Thompson, 487 U.S., at 830 (plurality opinion). Where organizations with expertise in a relevant area have given careful consideration to the question of a punishment's appropriateness, there is no reason why that judgment should not be entitled to attention as an indicator of contemporary standards. There is no dearth of opinion from such groups that the state-sanctioned killing of minors is unjustified. A number, indeed, have filed briefs amicus curiae in these cases, in support of petitioners. 4 The American Bar Association has adopted a resolution opposing the imposition of capital punishment upon any person for an offense committed while under age 18, 5 as has the National Council of Juvenile [492 U.S. 361, 389] and Family Court Judges. 6 The American Law Institute's Model Penal Code similarly includes a lower age limit of 18 for the death sentence. 7 And the National Commission on Reform of the Federal Criminal Laws also recommended that 18 be the minimum age. 8 </s> Our cases recognize that objective indicators of contemporary standards of decency in the form of legislation in other countries is also of relevance to Eighth Amendment analysis. Thompson, supra, at 830-831; Enmund, 458 U.S., at 796 , n. 22; Coker, supra, at 596, n. 10; Trop v. Dulles, 356 U.S., at 102 , and n. 35. Many countries, of course - over 50, including nearly all in Western Europe - have formally abolished the death penalty, or have limited its use to exceptional crimes such as treason. App. to Brief for Amnesty International as Amicus Curiae. Twenty-seven others do not in practice impose the penalty. Ibid. Of the nations that retain capital punishment, a majority - 65 - prohibit the execution of juveniles. Ibid. Sixty-one countries retain capital punishment and have no statutory provision exempting juveniles, though some of these nations are ratifiers of international treaties that do prohibit the execution of juveniles. Ibid. Since 1979, Amnesty International has recorded only eight executions of offenders under 18 throughout the world, three of these in the United States. The other five executions were carried out in Pakistan, Bangladesh, Rwanda, and Barbados. 9 In addition to national laws, three leading human rights treaties ratified or signed by the United States [492 U.S. 361, 390] explicitly prohibit juvenile death penalties. 10 Within the world community, the imposition of the death penalty for juvenile crimes appears to be overwhelmingly disapproved. </s> D </s> Together, the rejection of the death penalty for juveniles by a majority of the States, the rarity of the sentence for juveniles, both as an absolute and a comparative matter, the decisions of respected organizations in relevant fields that this punishment is unacceptable, and its rejection generally throughout the world, provide to my mind a strong grounding for the view that it is not constitutionally tolerable that certain States persist in authorizing the execution of adolescent offenders. It is unnecessary, however, to rest a view that the Eighth Amendment prohibits the execution of minors solely upon a judgment as to the meaning to be attached to the evidence of contemporary values outlined above, for the execution of juveniles fails to satisfy two well-established and independent Eighth Amendment requirements - that a [492 U.S. 361, 391] punishment not be disproportionate, and that it make a contribution to acceptable goals of punishment. </s> II </s> JUSTICE SCALIA forthrightly states in his plurality opinion that Eighth Amendment analysis is at an end once legislation and jury verdicts relating to the punishment in question are analyzed as indicators of contemporary values. A majority of the Court rejected this revisionist view as recently as last Term, see Thompson, 487 U.S., at 833 -838 (plurality opinion); id., at 853-854 (opinion of O'CONNOR, J.), and does so again in this case and in Penry v. Lynaugh, ante, p. 302. We need not and should not treat this narrow range of factors as determinative of our decision whether a punishment violates the Constitution because it is excessive. </s> The Court has explicitly stated that "the attitude of state legislatures and sentencing juries do not wholly determine" a controversy arising under the Eighth Amendment, Coker, 433 U.S., at 597 (plurality opinion) (emphasis added), because "the Constitution contemplates that in the end our own judgment will be brought to bear on the question of the [constitutional] acceptability of" a punishment, ibid. See also id., at 603-604, n. 2 (Powell, J., concurring in judgment) ("[T]he ultimate decision as to the appropriateness of the death penalty under the Eighth Amendment . . . must be decided on the basis of our own judgment in light of the precedents of this Court"); Enmund, supra, at 797 ("Although the judgments of legislatures, juries, and prosecutors weigh heavily in the balance, it is for us ultimately to judge whether the Eighth Amendment permits imposition of the death penalty" in a particular class of cases). </s> JUSTICE SCALIA's approach would largely return the task of defining the contours of Eighth Amendment protection to political majorities. But </s> "[t]he very purpose of a Bill of Rights was to withdraw certain subjects from the vicissitudes of political controversy, to place them beyond the reach of majorities and [492 U.S. 361, 392] officials and to establish them as legal principles to be applied by the courts. One's right to life, liberty, and property, to free speech, a free press, freedom of worship and assembly, and other fundamental rights may not be submitted to vote; they depend on the outcome of no elections." West Virginia Board of Education v. Barnette, 319 U.S. 624, 638 (1943). </s> Compare ante, at 375-377, with Whitley v. Albers, 475 U.S. 312, 318 (1986) ("The language of the Eighth Amendment . . . manifests `an intention to limit the power of those entrusted with the criminal-law function of government'"). The promise of the Bill of Rights goes unfulfilled when we leave "[c]onstitutional doctrine [to] be formulated by the acts of those institutions which the Constitution is supposed to limit," Radin, The Jurisprudence of Death, 126 U. Pa. L. Rev. 989, 1036 (1978), as is the case under JUSTICE SCALIA'S positivist approach to the definition of citizens' rights. This Court abandons its proven and proper role in our constitutional system when it hands back to the very majorities the Framers distrusted the power to define the precise scope of protection afforded by the Bill of Rights, rather than bringing its own judgment to bear on that question, after complete analysis. </s> Despite JUSTICE SCALIA'S view to the contrary, however, </s> "our cases . . . make clear that public perceptions of standards of decency with respect to criminal sanctions are not conclusive. A penalty also must accord with `the dignity of man,' which is the `basic concept underlying the Eighth Amendment.' . . . This means, at least, that the punishment not be `excessive.' . . . [T]he inquiry into `excessiveness' has two aspects. First, the punishment must not involve the unnecessary and wanton infliction of pain. . . . Second, the punishment must not be grossly out of proportion to the severity of the crime." Gregg v. Georgia, 428 U.S. 153, 173 (1976) (opinion of Stewart, Powell, and STEVENS, JJ.). [492 U.S. 361, 393] </s> Thus, in addition to asking whether legislative or jury rejection of a penalty shows that "society has set its face against it," ante, at 378, the Court asks whether "a punishment is `excessive' and unconstitutional" because there is disproportion "between the punishment imposed and the defendant's blameworthiness," ante, at 382 (opinion of O'CONNOR, J.), or because it "makes no measurable contribution to acceptable goals of punishment and hence is nothing more than the purposeless and needless imposition of pain and suffering," Coker, supra, at 592 (plurality opinion). See, e. g., Penry, ante, at 335 (opinion of O'CONNOR, J.); ante, at 342-343 (BRENNAN, J., concurring in part and dissenting in part). </s> III </s> There can be no doubt at this point in our constitutional history that the Eighth Amendment forbids punishment that is wholly disproportionate to the blameworthiness of the offender. "The constitutional principle of proportionality has been recognized explicitly in this Court for almost a century." Solem v. Helm, 463 U.S. 277, 286 (1983). Usually formulated as a requirement that sentences not be "disproportionate to the crime committed," id., at 284; see, e. g., Weems v. United States, 217 U.S. 349 (1910); O'Neil v. Vermont, 144 U.S. 323, 339 -340 (1892) (Field, J., dissenting), the proportionality principle takes account not only of the "injury to the person and to the public" caused by a crime, but also of the "moral depravity" of the offender. Coker, supra, at 598. The offender's culpability for his criminal acts - "the degree of the defendant's blameworthiness," Enmund, 458 U.S., at 815 (O'CONNOR, J., dissenting); see also id., at 798 (opinion of the Court) - is thus of central importance to the constitutionality of the sentence imposed. Indeed, this focus on a defendant's blameworthiness runs throughout our constitutional jurisprudence relating to capital sentencing. See, e. g., Booth v. Maryland, 482 U.S. 496, 502 (1987) (striking down state statute requiring consideration by sentencer of evidence other than defendant's record and characteristics and the circumstances [492 U.S. 361, 394] of the crime, which had no "bearing on the defendant's `personal responsibility and moral guilt'"); California v. Brown, 479 U.S. 538, 545 (1987) (an "emphasis on culpability in sentencing decisions has long been reflected in Anglo-American jurisprudence. . . . Lockett and Eddings reflect the belief that punishment should be directly related to the personal culpability of the criminal defendant") (O'CONNOR, J., concurring). </s> Proportionality analysis requires that we compare "the gravity of the offense," understood to include not only the injury caused, but also the defendant's culpability, with "the harshness of the penalty." Solem, supra, at 292. In my view, juveniles so generally lack the degree of responsibility for their crimes that is a predicate for the constitutional imposition of the death penalty that the Eighth Amendment forbids that they receive that punishment. </s> A </s> Legislative determinations distinguishing juveniles from adults abound. These age-based classifications reveal much about how our society regards juveniles as a class, and about societal beliefs regarding adolescent levels of responsibility. See Thompson, 487 U.S., at 823 -825 (plurality opinion). </s> The participation of juveniles in a substantial number of activities open to adults is either barred completely or significantly restricted by legislation. All States but two have a uniform age of majority, and have set that age at 18 or above. OCCR Brief, App. A. No State has lowered its voting age below 18. Id., App. C; see Thompson, supra, at 839, App. A. Nor does any State permit a person under 18 to serve on a jury. OCCR Brief, App. B; see Thompson, supra, at 840, App. B. Only four States ever permit persons below 18 to marry without parental consent. OCCR Brief, App. D; see Thompson, supra, at 843, App. D. Thirty-seven States have specific enactments requiring that a patient have attained 18 before she may validly consent to medical treatment. OCCR Brief, App. E. Thirty-four [492 U.S. 361, 395] States require parental consent before a person below 18 may drive a motor car. Id., App. F; see Thompson, supra, at 842, App. C. Legislation in 42 States prohibits those under 18 from purchasing pornographic materials. OCCR Brief, App. G; see Thompson, supra, at 845, App. E. Where gambling is legal, adolescents under 18 are generally not permitted to participate in it, in some or all of its forms. OCCR Brief, App. H; see Thompson, supra, at 847, App. F. In these and a host of other ways, minors are treated differently from adults in our laws, which reflects the simple truth derived from communal experience that juveniles as a class have not the level of maturation and responsibility that we presume in adults and consider desirable for full participation in the rights and duties of modern life. </s> "The reasons why juveniles are not trusted with the privileges and responsibilities of an adult also explain why their irresponsible conduct is not as morally reprehensible as that of an adult." Thompson, supra, at 835 (plurality opinion). Adolescents "are more vulnerable, more impulsive, and less self-disciplined than adults," and are without the same "capacity to control their conduct and to think in long-range terms." Twentieth Century Fund Task Force on Sentencing Policy Toward Young Offenders, Confronting Youth Crime 7 (1978) (hereafter Task Force). They are particularly impressionable and subject to peer pressure, see Eddings v. Oklahoma, 455 U.S. 104, 115 (1982), and prone to "experiment, risk-taking and bravado," Task Force 3. They lack "experience, perspective, and judgment." Bellotti v. Baird, 443 U.S. 622, 635 (1979). See generally Thompson, supra, at 43-44, n. 43; Brief for American Society for Adolescent Psychiatry et al. as Amici Curiae (reviewing scientific evidence). Moreover, the very paternalism that our society shows toward youths and the dependency it forces upon them mean that society bears a responsibility for the actions of juveniles that it does not for the actions of adults who are at least theoretically free to make their own choices: "youth crime . . . is not exclusively the offender's fault; offenses by [492 U.S. 361, 396] the young represent a failure of family, school, and the social system, which share responsibility for the development of America's youth." Task Force 7. </s> To be sure, the development of cognitive and reasoning abilities and of empathy, the acquisition of experience upon which these abilities operate and upon which the capacity to make sound value judgments depends, and in general the process of maturation into a self-directed individual fully responsible for his or her actions, occur by degrees. See, e. g., G. Manaster, Adolescent Development and the Life Tasks (1977). But the factors discussed above indicate that 18 is the dividing line that society has generally drawn, the point at which it is thought reasonable to assume that persons have an ability to make, and a duty to bear responsibility for their, judgments. Insofar as age 18 is a necessarily arbitrary social choice as a point at which to acknowledge a person's maturity and responsibility, given the different developmental rates of individuals, it is in fact "a conservative estimate of the dividing line between adolescence and adulthood. Many of the psychological and emotional changes that an adolescent experiences in maturing do not actually occur until the early 20s." Brief for American Society for Adolescent Psychiatry et al. as Amici Curiae 4 (citing social scientific studies). </s> B </s> There may be exceptional individuals who mature more quickly than their peers, and who might be considered fully responsible for their actions prior to the age of 18, despite their lack of the experience upon which judgment depends. 11 In my view, however, it is not sufficient to accommodate the [492 U.S. 361, 397] facts about juveniles that an individual youth's culpability may be taken into account in the decision to transfer him or her from the juvenile to the adult court system for trial, or that a capital sentencing jury is instructed to consider youth and other mitigating factors. I believe that the Eighth Amendment requires that a person who lacks that full degree of responsibility for his or her actions associated with adulthood not be sentenced to death. Hence it is constitutionally inadequate that a juvenile offender's level of responsibility be taken into account only along with a host of other factors that the court or jury may decide outweigh that want of responsibility. </s> Immaturity that constitutionally should operate as a bar to a disproportionate death sentence does not guarantee that a minor will not be transferred for trial to the adult court system. Rather, the most important considerations in the decision to transfer a juvenile offender are the seriousness of the offense, the extent of prior delinquency, and the response to prior treatment within the juvenile justice system. National Institute for Juvenile Justice and Delinquency, United States Dept. of Justice, Major Issues in Juvenile Justice Information and Training, Youth in Adult Courts: Between Two Worlds 211 (1982). Psychological, intellectual, and other personal characteristics of juvenile offenders receive little attention at the transfer stage, and cannot account for differences between those transferred and those who remain in the juvenile court system. See Solway, Hays, Schreiner, & Cansler, Clinical Study of Youths Petitioned for Certification as Adults, 46 Psychological Rep. 1067 (1980). Nor is an adolescent's lack of full culpability isolated at the sentencing stage as a factor that determinatively bars a death sentence. A jury is free to weigh a juvenile offender's youth and lack of full responsibility against the heinousness of the crime and other aggravating factors - and, finding the aggravating factors weightier, to sentence even the most immature of 16- or 17-year olds to be killed. By no stretch of the imagination, [492 U.S. 361, 398] then, are the transfer and sentencing decisions designed to isolate those juvenile offenders who are exceptionally mature and responsible, and who thus stand out from their peers as a class. </s> It is thus unsurprising that individualized consideration at transfer and sentencing has not in fact ensured that juvenile offenders lacking an adult's culpability are not sentenced to die. Quite the contrary. Adolescents on death row appear typically to have a battery of psychological, emotional, and other problems going to their likely capacity for judgment and level of blameworthiness. A recent diagnostic evaluation of all 14 juveniles on death rows in four States is instructive. Lewis et al., Neuropsychiatric, Psychoeducational, and Family Characteristics of 14 Juveniles Condemned to Death in the United States, 145 Am. J. Psychiatry 584 (1988). Seven of the adolescents sentenced to die were psychotic when evaluated, or had been so diagnosed in earlier childhood; four others had histories consistent with diagnoses of severe mood disorders; and the remaining three experienced periodic paranoid episodes, during which they would assault perceived enemies. Id., at 585, and Table 3. Eight had suffered severe head injuries during childhood, id., at 585, and Table 1, and nine suffered from neurological abnormalities, id., at 585, and Table 2. Psychoeducational testing showed that only 2 of these death-row inmates had IQ scores above 90 (that is, in the normal range) - and both individuals suffered from psychiatric disorders - while 10 offenders showed impaired abstract reasoning on at least some tests. Id., at 585-586, and Tables 3 and 4. All but two of the adolescents had been physically abused, and five sexually abused. Id., at 586-587, and Table 5. Within the families of these children, violence, alcoholism, drug abuse, and psychiatric disorders were commonplace. Id., at 587, and Table 5. </s> The cases under consideration today certainly do not suggest that individualized consideration at transfer and sentencing [492 U.S. 361, 399] ensure that only exceptionally mature juveniles, as blameworthy for their crimes as an adult, are sentenced to death. Transferring jurisdiction over Kevin Stanford to Circuit Court, the Juvenile Division of the Jefferson, Kentucky, District Court nevertheless found that Stanford, who was 17 at the time of his crime, </s> "has a low internalization of the values and morals of society and lacks social skills. That he does possess an institutionalized personality and has, in effect, because of his chaotic family life and lack of treatment, become socialized in delinquent behavior. That he is emotionally immature and could be amenable to treatment if properly done on a long term basis of psychotherap[eu]tic intervention and reality based therapy for socialization and drug therapy in a residential facility." App. in No. 87-5765, p. 9. </s> At the penalty phase of Stanford's trial, witnesses testified that Stanford, who lived with various relatives, had used drugs from the age of about 13, and that his drug use had caused changes in his personality and behavior. 10 Record in No. 87-5765, pp. 1383-1392, 1432. Stanford had been placed at times in juvenile treatment facilities, and a witness who had assessed him upon his admission to an employment skills project found that he lacked age-appropriate social interaction skills; had a history of drug abuse; and wanted for family support or supervision. Id., at 1408; see also id., at 1440-1442. </s> Health Wilkins was 16 when he committed the crime for which Missouri intends to kill him. The juvenile court, in ordering him transferred for trial to adult court, focused upon the viciousness of Wilkins' crime, the juvenile system's inability to rehabilitate him in the 17 months of juvenile confinement available, and the need to protect the public, though it also mentioned that Wilkins was, in its view, "an experienced person, and mature in his appearance and habits." App. in No. 87-6026, p. 5. The Circuit Court found Wilkins [492 U.S. 361, 400] competent to stand trial. 12 Record in No. 87-6026, p. 42. Wilkins then waived counsel, with the avowed intention of pleading guilty and seeking the death penalty, id., at 42, 55, and the Circuit Court accepted the waiver, id., at 84, and later Wilkins' guilty plea, id., at 144-145. Wilkins was not represented by counsel at sentencing. See id., at 188-190. Presenting no mitigating evidence, he told the court he would prefer the death penalty to life in prison, id., at 186-187 - "[o]ne I fear, the other one I don't," id., at 295 - and after hearing evidence from the State, the Court sentenced Wilkins to die. Wilkins took no steps to appeal and objected to an amicus' efforts on his behalf. The Missouri Supreme Court, however, ordered an evaluation to determine whether Wilkins was competent to waive his right to appellate counsel. Concluding that Wilkins was incompetent to waive his rights, 13 the state-appointed forensic psychiatrist found that [492 U.S. 361, 401] Wilkins "suffers from a mental disorder" that affects his "reasoning and impairs his behavior." App. in No. 87-6026, p. 74. It would be incredible to suppose, given this psychiatrist's conclusion and his summary of Wilkins' past, set out in the margin, 14 that Missouri's transfer and sentencing schemes [492 U.S. 361, 402] had operated to identify in Wilkins a 16-year old mature and culpable beyond his years. </s> C </s> Juveniles very generally lack that degree of blameworthiness that is, in my view, a constitutional prerequisite for the [492 U.S. 361, 403] imposition of capital punishment under our precedents concerning the Eighth Amendment proportionality principle. The individualized consideration of an offender's youth and culpability at the transfer stage and at sentencing has not operated to ensure that the only offenders under 18 singled out for the ultimate penalty are exceptional individuals whose level of responsibility is more developed than that of their peers. In that circumstance, I believe that the same categorical assumption that juveniles as a class are insufficiently mature to be regarded as fully responsible that we make in so many other areas is appropriately made in determining whether minors may be subjected to the death penalty. As we noted in Thompson, 487 U.S., at 825 -826, n. 23, it would be ironic if the assumptions we so readily make about minors as a class were suddenly unavailable in conducting proportionality analysis. I would hold that the Eighth Amendment prohibits the execution of any person for a crime committed below the age of 18. </s> IV </s> Under a second strand of Eighth Amendment inquiry into whether a particular sentence is excessive and hence unconstitutional, we ask whether the sentence makes a measurable contribution to acceptable goals of punishment. Thompson, supra, at 833; Enmund v. Florida, 458 U.S., at 798 ; Coker v. Georgia, 433 U.S., at 592 ; Gregg v. Georgia, 428 U.S., at 173 . The two "principal social purposes" of capital punishment are said to be "retribution and the deterrence of capital crimes by prospective offenders." Gregg, supra, at 183; see Enmund, 458 U.S., at 798 . Unless the death penalty applied to persons for offenses committed under 18 measurably contributes to one of these goals, the Eighth Amendment prohibits it. See ibid. </s> "[R]etribution as a justification for executing [offenders] very much depends on the degree of [their] culpability." Id., at 800. I have explained in Part III, supra, why I believe juveniles lack the culpability that makes a crime so extreme [492 U.S. 361, 404] that it may warrant, according to this Court's cases, the death penalty; and why we should treat juveniles as a class as exempt from the ultimate penalty. These same considerations persuade me that executing juveniles "does not measurably contribute to the retributive end of ensuring that the criminal gets his just deserts." Id., at 801. See Thompson, supra, at 836-837. A punishment that fails the Eighth Amendment test of proportionality because disproportionate to the offender's blameworthiness by definition is not justly deserved. </s> Nor does the execution of juvenile offenders measurably contribute to the goal of deterrence. Excluding juveniles from the class of persons eligible to receive the death penalty will have little effect on any deterrent value capital punishment may have for potential offenders who are over 18: these adult offenders may of course remain eligible for a death sentence. The potential deterrent effect of juvenile executions on adolescent offenders is also insignificant. The deterrent value of capital punishment rests "on the assumption that we are rational beings who always think before we act, and then base our actions on a careful calculation of the gains and losses involved." Gardiner, The Purposes of Criminal Punishment, 21 Mod. L. Rev. 117, 122 (1958). As the plurality noted in Thompson, supra, at 837, "[t]he likelihood that the teenage offender has made the kind of cost-benefit analysis that attaches any weight to the possibility of execution is so remote as to be virtually nonexistent." First, juveniles "have less capacity . . . to think in long-range terms than adults," Task Force 7, and their careful weighing of a distant, uncertain, and indeed highly unlikely consequence prior to action is most improbable. 15 In addition, juveniles have little [492 U.S. 361, 405] fear of death, because they have "a profound conviction of their own omnipotence and immortality." Miller, Adolescent Suicide: Etiology and Treatment, in 9 Adolescent Psychiatry 327, 329 (S. Feinstein, J. Looney, A. Schwartzberg, & A. Sorosky eds. 1981). See also, e. g., Gordon, The Tattered Cloak of Immortality, in Adolescence and Death 16, 27 (C. Corr & J. McNeil eds. 1986) (noting prevalence of adolescent risk taking); Brief for American Society for Adolescent Psychiatry et al. as Amici Curiae 5-6 (citing research). Because imposition of the death penalty on persons for offenses committed under the age of 18 makes no measurable contribution to the goals of either retribution or deterrence, it is "nothing more than the purposeless and needless imposition of pain and suffering," Coker, supra, at 592, and is thus excessive and unconstitutional. </s> V </s> There are strong indications that the execution of juvenile offenders violates contemporary standards of decency: a majority of States decline to permit juveniles to be sentenced to death; imposition of the sentence upon minors is very unusual even in those States that permit it; and respected organizations with expertise in relevant areas regard the execution of juveniles as unacceptable, as does international opinion. These indicators serve to confirm in my view my conclusion that the Eighth Amendment prohibits the execution of persons for offenses they committed while below the age of 18, because the death penalty is disproportionate when applied to such young offenders and fails measurably to serve the goals of capital punishment. I dissent. </s> [Footnote 1 See Thompson v. Oklahoma, 487 U.S. 815, 826 , and n. 25 (1988), listing 14 States. The 15th State to have rejected capital punishment altogether is Vermont. Vermont repealed a statute that had allowed capital punishment for some murders. See Vt. Stat. Ann., Tit. 13, 2303 (1974 and Supp. 1988). The State now provides for the death penalty only for kidnaping with intent to extort money. 2403. Insofar as it permits a sentence of death, 2403 was rendered unconstitutional by our decision in Furman v. Georgia, 408 U.S. 238 (1972), because Vermont's sentencing scheme does not guide jury discretion, see Vt. Stat. Ann., Tit. 13, 7101-7107 (1974). Vermont's decision not to amend its only law allowing the death penalty in light of Furman and its progeny, in combination with its repeal of its statute permitting capital punishment for murder, leads to the conclusion that the State rejects capital punishment. </s> In addition, South Dakota, though it statutorily provides for a death penalty, has sentenced no one to death since Furman, arguably making a 28th State that has abandoned the death penalty. </s> [Footnote 2 One person currently on death row for juvenile crimes was sentenced in Maryland, which has since set 18 as the minimum age for its death penalty. </s> [Footnote 3 Capital sentences for juveniles would presumably be more unusual still were capital juries drawn from a cross section of our society, rather than excluding many who oppose capital punishment, see Lockhart v. McCree, 476 U.S. 162 (1986) - a fact that renders capital jury sentences a distinctly weighted measure of contemporary standards. </s> [Footnote 4 Briefs for American Bar Association; Child Welfare League of America, National Parents and Teachers Association, National Council on Crime and Delinquency, Children's Defense Fund, National Association of Social Workers, National Black Child Development Institute, National Network of Runaway and Youth Services, National Youth Advocate Program, and American Youth Work Center; American Society for Adolescent Psychiatry and American Orthopsychiatric Association; Defense for Children International-USA; National Legal Aid and Defender Association, and National Association of Criminal Defense Lawyers; Office of Capital Collateral Representative for the State of Florida; and International Human Rights Law Group, as Amici Curiae. See also Briefs for American Baptist Churches, American Friends Service Committee, American Jewish Committee, American Jewish Congress, Christian Church (Disciples of Christ), Mennonite Central Committee, General Conference Mennonite Church, National Council of Churches, General Assembly of the Presbyterian Church, Southern Christian Leadership Conference, Union of American Hebrew Congregations, United Church of Christ Commission for Racial Justice, United Methodist Church General Board of Church and Society, and United States Catholic Conference; West Virginia Council of Churches; and Amnesty International as Amici Curiae. </s> [Footnote 5 American Bar Association, Summary of Action of the House of Delegates 17 (1983 Annual Meeting). </s> [Footnote 6 National Council of Juvenile and Family Court Judges, Juvenile and Family Court Newsletter, Vol. 19, No. 1, p. 4 (Oct. 1988). </s> [Footnote 7 American Law Institute, Model Penal Code 210.6(1)(d) (Proposed Official Draft 1962); American Law Institute, Model Penal Code and Commentaries 210.6, Commentary, p. 133 (1980) ("[C]ivilized societies will not tolerate the spectacle of execution of children"). </s> [Footnote 8 National Commission on Reform of Federal Criminal Laws, Final Report of the Proposed New Federal Criminal Code 3603 (1971). </s> [Footnote 9 Brief for Amnesty International as Amicus Curiae in Thompson v. Oklahoma, O. T. 1987, No. 86-6169, p. 6. </s> [Footnote 10 Article 6(5) of the International Covenant on Civil and Political Rights, Annex to G. A. Res. 2200, 21 U. N. GAOR Res. Supp. (No. 16) 53, U. N. Doc. A/6316 (1966) (signed but not ratified by the United States), reprinted in 6 International Legal Material 368, 370 (1967); Article 4(5) of the American Convention on Human Rights, O. A. S. Official Records, OEA/Ser. K/XVI/1.1, Doc. 65, Rev. 1, Corr. 2 (1970) (same), reprinted in 9 International Legal Material 673, 676 (1970); Article 68 of the Geneva Convention Relative to the Protection of Civilian Persons in Time of War, August 12, 1949, 6 U.S. T. 3516, T. I. A. S. No. 3365 (ratified by the United States). See also Resolutions and Decisions of the United Nations Economic and Social Council, Res. 1984/50, U. N. ESCOR Supp. (No. 1), p. 33, U. N. Doc. E/1984/84 (1984) (adopting "safeguards guaranteeing protection of the rights of those facing the death penalty," including the safeguard that "[p]ersons below 18 years of age at the time of the commission of the crime shall not be sentenced to death"), endorsed by the United Nations General Assembly, U. N. GAOR Res. 39/118, U. N. Doc. A/39/51, p. 211, §§ 2, 5 (1985), and adopted by the Seventh United Nations Congress on the Prevention of Crime and the Treatment of Offenders, p. 83, U. N. Doc. A/Conf. 121/22, U. N. Sales No. E.86.IV.1 (1986). </s> [Footnote 11 Delinquent juveniles are unlikely to be among these few. Instead, they will typically be among those persons for whom society's presumption of a capacity for mature judgment at 18 is much too generous. See, e. g., Scharf, Law and the Child's Evolving Legal Conscience, in 1 Advances in Law and Child Development 1, 16 (R. Sprague ed. 1982) (discussing study of delinquents aged 15 to 17, suggesting that the group's mean moral maturity level was below that of average middle-class 10- to 12-year-olds). </s> [Footnote 12 Two psychological reports were prepared concerning Wilkins when the issue of his competency to stand trial arose. Neither suggests that Wilkins was exceptionally mature for his age. One found his intellectual functioning "within the average range," App. in No. 87-6026, p. 10, and his "[h]igher order processes," such as reasoning and judgment, to be "within the approximate normal range," id., at 11. The other concluded: </s> "[Wilkins'] capacity to manage and control affect is tenuous and inconsistent, leaving him a subject to impulsive actions as well as arbitrary and capricious thinking which is prone to skirt over details, and considerations for logical systematic thought. He is intolerant of intense affects such as anxiety, depression, or anger, in that such feelings are overwhelming, interfere with his ability to think clearly, and gives rise to impulsive action. He is vulnerable to massive infusions of intense rage which leads to spasms of destructive action. His rage co-mingles with a profound depressive experience generated by an excruciating sense of lonely alienation whereby he experiences both himself and other people as being lifeless and empty. . . . </s> "He barely experiences ties to others or emp[athe]tic attunement . . . ." Id., at 22. </s> [Footnote 13 Wilkins was diagnosed as being of a "Conduct Disorder, Undersocialized-Aggressive Type," with a borderline personality disorder that left him with "difficulty in establishing a pattern of predictable response to stressful situations vacillating between aggression towards others or self-destructive [492 U.S. 361, 401] activity." Id., at 67-68. He had been "exhibiting bizarre behavior, paranoid ideation, and idiosyncratic thinking" since 1982. Id., at 68. </s> [Footnote 14 The state-appointed psychiatrist summarized Wilkins' past in his report: </s> "Mr. Wilkins . . . was raised in a rather poor socioeconomic environment [and] reportedly had extremely chaotic upbringing during his childhood. He was physically abused by his mother, sometimes the beatings would last for two hours. . . . As a child, he started robbing houses for knives and money and loved to set fires. Mr. Wilkins' mother worked at night and slept during the day, thus the children were left alone at night by themselves. He claims that he was started on drugs by his uncle [at age six; see id., at 67]. Apparently he used to shoot BB guns at passing cars. Mr. Wilkins indicated that his mother's boyfriend had a quick temper and that he hated him. He also started disliking his mother, not only because she punished [him], but also because she stood up for her boyfriend who was unkind towards [him]. He then decided to poison his mother and boyfriend by placing rat poison in Tylenol capsules. They were informed by his brother about the situation. They secretly emptied the capsules and made him eat them. He was afraid of death and attempted vomiting by placing [his] fingers in his throat. Then he ended up getting a beating from his mother and boyfriend. At the age of ten, Mr. Wilkins was evaluated at Tri-County Mental Health Center and Western Missouri Mental Health Center. He stayed there for a period of six months. He was then sent to Butterfield Youth's Home and then to East Range, a residential facility for boys. He started using drugs quite heavily. . . . He also started drinking hard liquor . . . . </s> "At Butterfield, he was very angry at the teachers because they considered him to be `dumb.' He showed rather strange behavior there. When he became depressed he would dance with a net over his head. On another occasion he cut his wrist and claimed to have had frequent thoughts of suicide. Prior to going to Butterfield, he had jumped off a bridge but the car swerved before he was hit. At Butterfield, he attempted to overdose with alcohol and drugs and another time with antipsychotic medication, Mellaril. Mr. Wilkins was placed on Mellaril because he was `too active.' He stayed at . . . Butterfield . . . for three and one half years [492 U.S. 361, 402] between the ages of 10 through 13 1/2. After that, he was transferred to Crittenton Center since it was closer to his mother's residence. He stayed there only for four or five months and was then kicked out. The court gave him permission to go home on probation. At this time his mother had started seeing another boyfriend and Mr. Wilkins apparently liked him. He continued the usage of alcohol and drugs while at school, continued to break into houses stealing money, jewelry, and knives, and generally stole money to spend at the arcade. On one occasion he ran away to Southern California. He was introduced to amphetamines there and spent all his money. . . . After his return [home, he] was charged with a stolen knife and was sent to [a] Detention Center . . . . At age 15, he was sent to the Northwest Regional Youth Services in Kansas City. There, an attempt at prescribing Thorazine (major tranquilizer) was made. After this, Mr. Wilkins was placed in a foster home. He ran away from the foster home . . . . Beginning in May of 1985 he lived on the streets . . . . </s> . . . . . </s> "Records from Butterfield . . . indicated that Mr. Wilkins' natural father was committed to a mental institution in Arkansas, and there was considerable amount of physical abuse that existed in the family. . . . In the educational testing, he gave rather unusual responses. For example, when asked the reasons why we need policemen, he replied, `To get rid of people like me.' He also revealed plans to blow up a large building in Kansas City [and] made bizarre derogatory sexual comments towards women prior to visits with his mother. He had episodes of hyperventilation and passed out by fainting or chest squeezing. . . . On one occasion in September of 1981, he put gasoline into a toilet and set fire to it, causing an explosion. Mr. Wilkins' brother was diagnosed to be suffering from schizophrenia when he was admitted along with Mr. Wilkins in 1982 at Crittenton Center. Mr. Wilkins was often noticed to be fantasizing about outer space and supernatural powers. In the fall of 1982, [the Crittenton psychiatrist] recommended placement on Mellaril because of a `disoriented thinking pattern and high anxiety.' In 1983, his condition started deteriorating. . . . His final diagnoses in November of 1983 when he was discharged from Crittenton were Borderline Personality and Passive-Aggressive Personality. Psychological testing at Crittenton indicated isolated episodes of paranoid functioning." Id., at 57-61. </s> [Footnote 15 See, e. g., Kastenbaum, Time and Death in Adolescence, in The Meaning of Death 99, 104 (H. Feifel ed. 1959). Among the conclusions Kastenbaum drew from his study were that "[t]he adolescent lives in an intense present; `now' is so real to him that both past and future seem pallid by [492 U.S. 361, 405] comparison. Everything that is important and valuable in life lies either in the immediate life situation or in the rather close future." Ibid. </s> [492 U.S. 361, 406]

United States Supreme Court WHITMAN, ADMINISTRATOR OF ENVIRONMENTAL PROTECTION AGENCY, et al. v. AMERICAN TRUCKING ASSOCIATIONS, INC., et al.(2001) No. 99-1257 Argued: November 7, 2000Decided: February 27, 2001 </s> Section 109(a) of the Clean Air Act (CAA) requires the Environmental Protection Agency (EPA) Administrator to promulgate national ambient air quality standards (NAAQS) for each air pollutant for which "air quality criteria" have been issued under §108. Pursuant to §109(d)(1), the Administrator in 1997 revised the ozone and particulate matter NAAQS. Respondents in No. 99-1257, private parties and several States (hereinafter respondents), challenged the revised NAAQS on several grounds. The District of Columbia Circuit found that, under the Administrator's interpretation, §109(b)(1)--which instructs the EPA to set standards "the attainment and maintenance of which ... are requisite to protect the public health" with "an adequate margin of safety"--delegated legislative power to the Administrator in contravention of the Federal Constitution, and it remanded the NAAQS to the EPA. The Court of Appeals also declined to depart from its rule that the EPA may not consider implementation costs in setting the NAAQS. And it held that, although certain implementation provisions for the ozone NAAQS contained in Part D, Subpart 2, of Title I of the CAA did not prevent the EPA from revising the ozone standard and designating certain areas as "nonattainment areas," those provisions, rather than more general provisions contained in Subpart 1, constrained the implementation of the new ozone NAAQS. The court rejected the EPA's argument that it lacked jurisdiction to reach the implementation question because there had been no "final" implementation action. </s> Held: </s> 1.Section 109(b) does not permit the Administrator to consider implementation costs in setting NAAQS. Because the CAA often expressly grants the EPA the authority to consider implementation costs, a provision for costs will not be inferred from its ambiguous provisions. Union Elec. Co. v. EPA, 427 U.S. 246, 257, and n.5. And since §109(b)(1) is the engine that drives nearly all of Title I of the CAA, the textual commitment of costs must be clear; Congress does not alter a regulatory scheme's fundamental details in vague terms or ancillary provisions, see MCI Telecommunications Corp. v. American Telephone & Telegraph Co., 512 U.S. 218, 231. Respondents' arguments founder upon this principle. It is implausible that §109(b)(1)'s modest words "adequate margin" and "requisite" give the EPA the power to determine whether implementation costs should moderate national air quality standards. Cf. ibid. And the cost factor is both so indirectly related to public health and so full of potential for canceling the conclusions drawn from direct health effects that it would have been expressly mentioned in §§108 and 109 had Congress meant it to be considered. Other CAA provisions, which do require cost data, have no bearing upon whether costs are to be taken into account in setting the NAAQS. Because the text of §109(b)(1) in its context is clear, the canon of construing texts to avoid serious constitutional problems is not applicable. See, e.g., Miller v. French, 530 U.S. 327, 341. Pp. 4-11. </s> 2.Section 109(b)(1) does not delegate legislative power to the EPA. When conferring decisionmaking authority upon agencies, Congress must lay down an intelligible principle to which the person or body authorized to act is directed to conform. J. W. Hampton, Jr., & Co. v. United States, 276 U.S. 394, 409. An agency cannot cure an unlawful delegation of legislative power by adopting in its discretion a limiting construction of the statute. The limits that §109(b)(1) imposes on the EPA's discretion are strikingly similar to the ones approved in, e.g., Touby v. United States, 500 U.S. 160, and the scope of discretion that §109(b)(1) allows is well within the outer limits of the Court's nondelegation precedents, see, e.g., Panama Refining Co. v. Ryan, 293 U.S. 388. Statutes need not provide a determinate criterion for saying how much of a regulated harm is too much to avoid delegating legislative power. Pp. 11-15. </s> 3.The Court of Appeals had jurisdiction to consider the implementation issue under §307 of the CAA. The implementation policy constitutes final agency action under §307 of the CAA because it marked the consummation of the EPA's decisionmaking process, see Bennett v. Spear, 520 U.S. 154. The decision is also ripe for review. The question is purely one of statutory interpretation that would not benefit from further factual development, see Ohio Forestry Assn., Inc. v. Sierra Club, 523 U.S. 726, 733; review will not interfere with further administrative development; and the hardship on respondent States in developing state implementation plans satisfies the CAA's special judicial-review provision permitting preenforcement review, see id., at 737. The implementation issue was also fairly included within the challenges to the final ozone rule that were before the Court of Appeals, which all parties agree is final agency action ripe for review. Pp. 16-20. </s> 4.The implementation policy is unlawful. Under Chevron U.S.A. Inc. v. Natural Resources Defense Council, Inc., 467 U.S. 837, if the statute resolves the question whether Subpart 1 or Subpart 2 applies to revised ozone NAAQS, that ends the matter; but if the statute is ambiguous, the Court must defer to a reasonable agency interpretation. Here, the statute is ambiguous concerning the interaction between Subpart 1 and Subpart 2, but the Court cannot defer to the EPA's interpretation, which would render Subpart 2's carefully designed restrictions on EPA discretion nugatory once a new ozone NAAQS has been promulgated. The principal distinction between the subparts is that Subpart 2 eliminates regulatory discretion allowed by Subpart 1. The EPA may not construe the statute in a way that completely nullifies textually applicable provisions meant to limit its discretion. In addition, although Subpart 2 was obviously written to govern implementation for some time into the future, nothing in the EPA's interpretation would have prevented the agency from aborting the subpart the day after it was enacted. It is left to the EPA to develop a reasonable interpretation of the nonattainment implementation provisions insofar as they apply to revised ozone NAAQS. Pp. 20-25. </s> 175 F.3d 1027 and 195 F.3d 4, affirmed in part, reversed in part, and remanded. </s> Scalia, J., delivered the opinion of the Court, Parts I and IV of which were unanimous, Part II of which was joined by Rehnquist, C.J., and Stevens, O'Connor, Kennedy, Souter, Thomas, and Ginsburg, JJ., and Part III of which was joined by Rehnquist, C.J., and O'Connor, Kennedy, Thomas, Ginsburg, and Breyer, JJ. Thomas, J., filed a concurring opinion. Stevens, J., filed an opinion concurring in part and concurring in the judgment, in which Souter, J., joined. Breyer, J., filed an opinion concurring in part and concurring in the judgment. </s> CHRISTINE TODD WHITMAN, ADMINISTRATOROF ENVIRONMENTAL PROTECTIONAGENCY, etal., PETITIONERS </s> 99-1257v. </s> AMERICAN TRUCKING ASSOCIATIONS,INC., etal. </s> AMERICAN TRUCKING ASSOCIATIONS,INC., etal., PETITIONERS </s> 99-1426v. </s> CHRISTINE TODD WHITMAN, ADMINISTRATOROF ENVIRONMENTAL PROTECTIONAGENCY, etal. </s> on writs of certiorari to the united states court ofappeals for the district of columbia circuit </s> [February 27, 2001] </s> Justice Scalia delivered the opinion of the Court. </s> These cases present the following questions: (1) Whether §109(b)(1) of the Clean Air Act (CAA) delegates legislative power to the Administrator of the Environmental Protection Agency (EPA). (2) Whether the Administrator may consider the costs of implementation in setting national ambient air quality standards (NAAQS) under §109(b)(1). (3) Whether the Court of Appeals had jurisdiction to review the EPA's interpretation of Part D of </s> Title I of the CAA, 42 U.S.C. §§7501-7515, with respect to implementing the revised ozone NAAQS. (4) Ifso, whether the EPA's interpretation of that part was permissible. </s> I </s> Section 109(a) of the CAA, as added, 84 Stat. 1679, and amended, 42 U.S.C. §7409(a), requires the Administrator of the EPA to promulgate NAAQS for each air pollutant for which "air quality criteria" have been issued under §108, 42 U.S.C. §7408. Once a NAAQS has been promulgated, the Administrator must review the standard (and the criteria on which it is based) "at five-year intervals" and make "such revisions ... as may be appropriate." CAA §109(d)(1), 42 U.S.C. §7409(d)(1). These cases arose when, on July 18, 1997, the Administrator revised the NAAQS for particulate matter (PM) and ozone. See NAAQS for Particulate Matter, 62 Fed. Reg. 38652 (codified in 40 CFR §50.7 (1999)); NAAQS for Ozone, id., at 38856 (codified in 40 CFR §§50.9, 50.10 (1999)). American Trucking Associations, Inc., and its co-respondents in No. 99-1257--which include, in addition to other private companies, the States of Michigan, Ohio, and West Virginia--challenged the new standards in the Court of Appeals for the District of Columbia Circuit, pursuant to 42 U.S.C. §7607(b)(1). </s> The District of Columbia Circuit accepted some of the challenges and rejected others. It agreed with the No. 99-1257 respondents (hereinafter respondents) that §109(b)(1) delegated legislative power to the Administrator in contravention of the United States Constitution, Art.I, §1, because it found that the EPA had interpreted the statute to provide no "intelligible principle" to guide the agency's exercise of authority. American Trucking Assns., Inc. v. EPA, 175 F.3d 1027, 1034 (1999). The court thought, however, that the EPA could perhaps avoid the unconstitutional delegation by adopting a restrictive construction of §109(b)(1), so instead of declaring the section unconstitutional the court remanded the NAAQS to the agency. Id., at 1038. (On this delegation point, Judge Tatel dissented, finding the statute constitutional as written. Id., at 1057.) On the second issue that the Court of Appeals addressed, it unanimously rejected respondents' argument that the court should depart from the rule of Lead Industries Assn., Inc. v. EPA, 647 F.2d 1130, 1148 (CADC 1980), that the EPA may not consider the cost of implementing a NAAQS in setting the initial standard. It also rejected respondents' argument that the implementation provisions for ozone found in Part D, Subpart 2, of Title I of the CAA, 42 U.S.C. §§7511-7511f, were so tied to the existing ozone standard that the EPA lacked the power to revise the standard. The court held that although Subpart 2 constrained the agency's method of implementing the new standard, 175 F.3d, at 1050, it did not prevent the EPA from revising the standard and designating areas of the country as "nonattainment areas," see 42 U.S.C. §7407(d)(1), by reference to it, 175 F.3d, at 1047-1048. On the EPA's petition for rehearing, the panel adhered to its position on these points, and unanimously rejected the EPA's new argument that the court lacked jurisdiction to reach the implementation question because there had been no "final" implementation action. American Trucking Assns., Inc. v. EPA, 195 F.3d 4 (CADC 1999). The Court of Appeals denied the EPA's suggestion for rehearing en banc, with five judges dissenting. Id., at 13. </s> The Administrator and the EPA petitioned this Court for review of the first, third, and fourth questions described in the first paragraph of this opinion. Respondents conditionally cross-petitioned for review of the second question. We granted certiorari on both petitions, 529 U.S. 1129 (2000); 530 U.S. 1202 (2000), and scheduled the cases for argument in tandem. We have now consolidated the cases for purposes of decision. </s> II </s> In Lead Industries Assn., Inc. v. EPA, supra, at 1148, the District of Columbia Circuit held that "economic considerations [may] play no part in the promulgation of ambient air quality standards under Section 109" of the CAA. In the present cases, the court adhered to that holding, 175 F.3d, at 1040-1041, as it had done on many other occasions. See, e.g., American Lung Assn. v. EPA, 134 F.3d 388, 389 (1998); NRDC v. Administrator, EPA, 902 F.2d 962, 973 (1990), vacated in part on other grounds, NRDC v. EPA, 921 F. 2d 326 (CADC 1991); American Petroleum Institute v. Costle, 665 F.2d 1176, 1185 (1981). Respondents argue that these decisions are incorrect. We disagree; and since the first step in assessing whether a statute delegates legislative power is to determine what authority the statute confers, we address that issue of interpretation first and reach respondents' constitutional arguments in Part III, infra. </s> Section 109(b)(1) instructs the EPA to set primary ambient air quality standards "the attainment and maintenance of which ... are requisite to protect the public health" with "an adequate margin of safety." 42 U.S.C. §7409(b)(1). Were it not for the hundreds of pages of briefing respondents have submitted on the issue, one would have thought it fairly clear that this text does not permit the EPA to consider costs in setting the standards. The language, as one scholar has noted, "is absolute." D. Currie, Air Pollution: Federal Law and Analysis 4-15 (1981). The EPA, "based on" the information about health effects contained in the technical "criteria" documents compiled under §108(a)(2), 42 U.S.C. §7408(a)(2), is to identify the maximum airborne concentration of a pollutant that the public health can tolerate, decrease the concentration to provide an "adequate" margin of safety, and set the standard at that level. Nowhere are the costsof achieving such a standard made part of that initial calculation. </s> Against this most natural of readings, respondents make a lengthy, spirited, but ultimately unsuccessful attack. They begin with the object of §109(b)(1)'s focus, the "public health." When the term first appeared in federal clean air legislation--in the Act of July 14, 1955 (1955 Act), 69 Stat. 322, which expressed "recognition of the dangers to the public health" from air pollution--its ordinary meaning was "[t]he health of the community." Webster's New International Dictionary 2005 (2d ed. 1950). Respondents argue, however, that §109(b)(1), as added by the Clean Air Amendments of 1970 (1970 Act), 84 Stat. 1676, meant to use the term's secondary meaning: "[t]he ways and means of conserving the health of the members of a community, as by preventive medicine, organized care of the sick, etc." Ibid. Words that can have more than one meaning are given content, however, by their surroundings, FDA v. Brown & Williamson Tobacco Corp., 529 U.S. 120, 132-133 (2000); Jones v. United States, 527 U.S. 373, 389 (1999), and in the context of §109(b)(1) this second definition makes no sense. Congress could not have meant to instruct the Administrator to set NAAQS at a level "requisite to protect" "the art and science dealing with the protection and improvement of community health." Webster's Third New International Dictionary 1836 (1981). We therefore revert to the primary definition of the term: the health of the public. </s> Even so, respondents argue, many more factors than air pollution affect public health. In particular, the economic cost of implementing a very stringent standard might produce health losses sufficient to offset the health gains achieved in cleaning the air--for example, by closing down whole industries and thereby impoverishing the workers and consumers dependent upon those industries. That is unquestionably true, and Congress was unquestionably aware of it. Thus, Congress had commissioned in the Air Quality Act of 1967 (1967 Act) "a detailed estimate of the cost of carrying out the provisions of this Act; a comprehensive study of the cost of program implementation by affected units of government; and a comprehensive study of the economic impact of air quality standards on the Nation's industries, communities, and other contributing sources of pollution." §2, 81 Stat. 505. The 1970 Congress, armed with the results of this study, see The Cost of Clean Air, S. Doc. No. 91-40 (1969) (publishing the results of the study), not only anticipated that compliance costs could injure the public health, but provided for that precise exigency. Section 110(f)(1) of the CAA permitted the Administrator to waive the compliance deadline for stationary sources if, inter alia, sufficient control measures were simply unavailable and "the continued operation of such sources is essential ... to the public health or welfare." 84 Stat. 1683 (emphasis added). Other provisions explicitly permitted or required economic costs to be taken into account in implementing the air quality standards. Section 111(b)(1)(B), for example, commanded the Administrator to set "standards of performance" for certain new sources of emissions that as specified in §111(a)(1) were to "reflec[t] the degree of emission limitation achievable through the application of the best system of emission reduction which (taking into account the cost of achieving such reduction) the Administrator determines has been adequately demonstrated." Section 202(a)(2) prescribed that emissions standards for automobiles could take effect only "after such period as the Administrator finds necessary to permit the development and application of the requisite technology, giving appropriate consideration to the cost of compliance within such period." 84 Stat. 1690. See also §202(b)(5)(C) (similar limitation for interim standards); §211(c)(2) (similar limitation for fuel additives); §231(b) (similar limitation for implementation of aircraft emission standards). Subsequent amendments to the CAA have added many more provisions directing, in explicit language, that the Administrator consider costs in performing various duties. See, e.g., 42 U.S.C. §7545(k)(1) (reformulate gasoline to "require the greatest reduction in emissions ... taking into consideration the cost of achieving such emissions reductions"); §7547(a)(3) (emission reduction for nonroad vehicles to be set "giving appropriate consideration to the cost" of the standards). We have therefore refused to find implicit in ambiguous sections of the CAA an authorization to consider costs that has elsewhere, and so often, been expressly granted. See Union Elec. Co. v. EPA, 427 U.S. 246, 257, and n.5 (1976). Cf. General Motors Corp. v. United States, 496 U.S. 530, 538, 541 (1990) (refusing to infer in certain provisions of the CAA deadlines and enforcement limitations that had been expressly imposed elsewhere). </s> Accordingly, to prevail in their present challenge, respondents must show a textual commitment of authority to the EPA to consider costs in setting NAAQS under §109(b)(1). And because §109(b)(1) and the NAAQS for which it provides are the engine that drives nearly all of Title I of the CAA, 42 U.S.C. §§7401-7515, that textual commitment must be a clear one. Congress, we have held, does not alter the fundamental details of a regulatory scheme in vague terms or ancillary provisions--it does not, one might say, hide elephants in mouseholes. See MCI Telecommunications Corp. v. American Telephone & Telegraph Co., 512 U.S. 218, 231 (1994); FDA v. Brown & Williamson Tobacco Corp., supra, at 159-160. Respondents' textual arguments ultimately founder upon this principle. </s> Their first claim is that §109(b)(1)'s terms "adequate margin" and "requisite" leave room to pad health effects with cost concerns. Just as we found it "highly unlikely that Congress would leave the determination of whether an industry will be entirely, or even substantially, rate-regulated to agency discretion--and even more unlikely that it would achieve that through such a subtle device as permission to `modify' rate-filing requirements," MCI Telecommunications Corp. v. American Telephone & Telegraph Co., supra, at 231, so also we find it implausible that Congress would give to the EPA through these modest words the power to determine whether implementation costs should moderate national air quality standards. Accord Christensen v. Harris County, 529 U.S. 576, 590, n. (2000) (Scalia, J., concurring in part and concurring in judgment) ("The implausibility of Congress's leaving a highly significant issue unaddressed (and thus `delegating' its resolution to the administering agency) is assuredly one of the factors to be considered in determining whether there is ambiguity" (emphasis deleted)).1 </s> The same defect inheres in respondents' next two arguments: that while the Administrator's judgment about what is requisite to protect the public health must be "based on [the] criteria" documents developed under §108(a)(2), see §109(b)(1), it need not be based solely on those criteria; and that those criteria themselves, while they must include "effects on public health or welfare which may be expected from the presence of such pollutant in the ambient air," are not necessarily limited to those effects. Even if we were to concede those premises, we still would not conclude that one of the unenumerated factors that the agency can consider in developing and applying the criteria is cost of implementation. That factor is both so indirectly related to public health and so full of potential for canceling the conclusions drawn from direct health effects that it would surely have been expressly mentioned in §§108 and 109 had Congress meant it to be considered. Yet while those provisions describe in detail how the health effects of pollutants in the ambient air are to be calculated and given effect, see §108(a)(2), they say not a word about costs. </s> Respondents point, finally, to a number of provisions in the CAA that do require attainment cost data to be generated. Section 108(b)(1), for example, instructs the Administrator to "issue to the States," simultaneously with the criteria documents, "information on air pollution control techniques, which information shall include data relating to the cost of installation and operation." 42 U.S.C. §7408(b)(l). And §109(d)(2)(C)(iv) requires the Clean Air Scientific Advisory Committee to "advise the Administrator of any adverse public health, welfare, social, economic, or energy effects which may result from various strategies for attainment and maintenance" of NAAQS.2 42 U.S.C. §7409(d)(2)(C)(iv). Respondents argue that these provisions make no sense unless costs are to be considered in setting the NAAQS. That is not so. These provisions enable the Administrator to assist the States in carrying out their statutory role as primary implementers of the NAAQS. It is to the States that the Act assigns initial and primary responsibility for deciding what emissions reductions will be required from which sources. See 42 U.S.C. §§7407(a), 7410 (giving States the duty of developing implementation plans). It would be impossible to perform that task intelligently without considering which abatement technologies are most efficient, and most economically feasible--which is why we have said that "the most important forum for consideration of claims of economic and technological infeasibility is before the state agency formulating the implementation plan," Union Elec. Co. v. EPA, 427 U.S., at 266. Thus, federal clean air legislation has, from the very beginning, directed federal agencies to develop and transmit implementation data, including cost data, to the States. See 1955 Act, §2(b), 69 Stat. 322; Clean Air Act of 1963, amending §§3(a), (b) of the CAA, 77 Stat. 394; 1967 Act, §§103(a)-(d), 104, 107(c), 81 Stat. 486-488. That Congress chose to carry forward this research program to assist States in choosing the means through which they would implement the standards is perfectly sensible, and has no bearing upon whether cost considerations are to be taken into account in formulating the standards.3 </s> It should be clear from what we have said that the canon requiring texts to be so construed as to avoid serious constitutional problems has no application here. No matter how severe the constitutional doubt, courts may choose only between reasonably available interpretations of a text. See, e.g., Miller v. French, 530 U.S. 327, 341 (2000); Pennsylvania Dept. of Corrections v. Yeskey, 524 U.S. 206, 212 (1998). The text of §109(b), interpreted in its statutory and historical context and with appreciation for its importance to the CAA as a whole, unambiguously bars cost considerations from the NAAQS-setting process, and thus ends the matter for us as well as the EPA.4 We therefore affirm the judgment of the Court of Appeals on this point. </s> III </s> Section 109(b)(1) of the CAA instructs the EPA to set "ambient air quality standards the attainment and maintenance of which in the judgment of the Administrator, based on [the] criteria [documents of §108] and allowing an adequate margin of safety, are requisite to protect the public health." 42 U.S.C. §7409(b)(1). The Court of Appeals held that this section as interpreted by the Administrator did not provide an "intelligible principle" to guide the EPA's exercise of authority in setting NAAQS. "[The] EPA," it said, "lack[ed] any determinate criteria for drawing lines. It has failed to state intelligibly how much is too much." 175 F.3d, at 1034. The court hence found that the EPA's interpretation (but not the statute itself) violated the nondelegation doctrine. Id., at 1038. We disagree. </s> In a delegation challenge, the constitutional question is whether the statute has delegated legislative power to the agency. Article I, §1, of the Constitution vests "[a]ll legislative Powers herein granted ... in a Congress of the United States." This text permits no delegation of those powers, Loving v. United States, 517 U.S. 748, 771 (1996); see id., at 776-777 (Scalia, J., concurring in part and concurring in judgment), and so we repeatedly have said that when Congress confers decisionmaking authority upon agencies Congress must "lay down by legislative act an intelligible principle to which the person or body authorized to [act] is directed to conform." J. W. Hampton, Jr., & Co. v. United States, 276 U.S. 394, 409 (1928). We have never suggested that an agency can cure an unlawful delegation of legislative power by adopting in its discretion a limiting construction of the statute. Both Fahey v. Mallonee, 332 U.S. 245, 252-253 (1947), and Lichter v. United States, 334 U.S. 742, 783 (1948), mention agency regulations in the course of their nondelegation discussions, but Lichter did so because a subsequent Congress had incorporated the regulations into a revised version of the statute, ibid., and Fahey because the customary practices in the area, implicitly incorporated into the statute, were reflected in the regulations. 332 U.S., at 250. The idea that an agency can cure an unconstitutionally standardless delegation of power by declining to exercise some of that power seems to us internally contradictory. The very choice of which portion of the power to exercise--that is to say, the prescription of the standard that Congress had omitted--would itself be an exercise of the forbidden legislative authority. Whether the statute delegates legislative power is a question for the courts, and an agency's voluntary self-denial has no bearing upon the answer. </s> We agree with the Solicitor General that the text of §109(b)(1) of the CAA at a minimum requires that "[f]or a discrete set of pollutants and based on published air quality criteria that reflect the latest scientific knowledge, [the] EPA must establish uniform national standards at a level that is requisite to protect public health from the adverse effects of the pollutant in the ambient air." Tr. of Oral Arg. in No. 99-1257, p.5. Requisite, in turn, "mean[s] sufficient, but not more than necessary." Id., at 7. These limits on the EPA's discretion are strikingly similar to the ones we approved in Touby v. United States, 500 U.S. 160 (1991), which permitted the Attorney General to designate a drug as a controlled substance for purposes of criminal drug enforcement if doing so was "`necessary to avoid an imminent hazard to the public safety.'" Id., at 163. They also resemble the Occupational Safety and Health Act provision requiring the agency to "`set the standard which most adequately assures, to the extent feasible, on the basis of the best available evidence, that no employee will suffer any impairment of health'"--which the Court upheld in Industrial Union Dept., AFL-CIO v. American Petroleum Institute, 448 U.S. 607, 646 (1980), and which even then-Justice Rehnquist, who alone in that case thought the statute violated the nondelegation doctrine, see id., at 671 (opinion concurring in judgment), would have upheld if, like the statute here, it did not permit economic costs to be considered. See American Textile Mfrs. Institute, Inc. v. Donovan, 452 U.S. 490, 545 (1981) (Rehnquist, J., dissenting). </s> The scope of discretion §109(b)(1) allows is in fact well within the outer limits of our nondelegation precedents. In the history of the Court we have found the requisite "intelligible principle" lacking in only two statutes, one of which provided literally no guidance for the exercise of discretion, and the other of which conferred authority to regulate the entire economy on the basis of no more precise a standard than stimulating the economy by assuring "fair competition." See Panama Refining Co. v. Ryan, 293 U.S. 388 (1935); A. L. A. Schechter Poultry Corp. v. United States, 295 U.S. 495 (1935). We have, on the other hand, upheld the validity of §11(b)(2) of the Public Utility Holding Company Act of 1935, 49 Stat. 821, which gave the Securities and Exchange Commission authority to modify the structure of holding company systems so as to ensure that they are not "unduly or unnecessarily complicate[d]" and do not "unfairly or inequitably distribute voting power among security holders." American Power & Light Co. v. SEC, 329 U.S. 90, 104 (1946). We have approved the wartime conferral of agency power to fix the prices of commodities at a level that "`will be generally fair and equitable and will effectuate the [in some respects conflicting] purposes of th[e] Act.'" Yakus v. United States, 321 U.S. 414, 420, 423-426 (1944). And we have found an "intelligible principle" in various statutes authorizing regulation in the "public interest." See, e.g., National Broadcasting Co. v. United States, 319 U.S. 190, 225-226 (1943) (FCC's power to regulate airwaves); New York Central Securities Corp. v. United States, 287 U.S. 12, 24-25 (1932) (ICC's power to approve railroad consolidations). In short, we have "almost never felt qualified to second-guess Congress regarding the permissible degree of policy judgment that can be left to those executing or applying the law." Mistretta v. United States, 488 U.S. 361, 416 (1989) (Scalia, J., dissenting); see id., at 373 (majority opinion). </s> It is true enough that the degree of agency discretion that is acceptable varies according to the scope of the power congressionally conferred. See Loving v. United States, supra, at 772-773; United States v. Mazurie, 419 U.S. 544, 556-557 (1975). While Congress need not provide any direction to the EPA regarding the manner in which it is to define "country elevators," which are to be exempt from new-stationary-source regulations governing grain elevators, see §7411(i), it must provide substantial guidance on setting air standards that affect the entire national economy. But even in sweeping regulatory schemes we have never demanded, as the Court of Appeals did here, that statutes provide a "determinate criterion" for saying "how much [of the regulated harm] is too much." 175 F.3d, at 1034. In Touby, for example, we did not require the statute to decree how "imminent" was too imminent, or how "necessary" was necessary enough, or even--most relevant here--how "hazardous" was too hazardous. 500 U.S., at 165-167. Similarly, the statute at issue in Lichter authorized agencies to recoup "excess profits" paid under wartime Government contracts, yet we did not insist that Congress specify how much profit was too much. 334 U.S., at 783-786. It is therefore not conclusive for delegation purposes that, as respondents argue, ozone and particulate matter are "nonthreshold" pollutants that inflict a continuum of adverse health effects at any airborne concentration greater than zero, and hence require the EPA to make judgments of degree. "[A] certain degree of discretion, and thus of lawmaking, inheres in most executive or judicial action." Mistretta v. United States, supra, at 417 (Scalia, J., dissenting) (emphasis deleted); see 488 U.S., at 378-379 (majority opinion). Section 109(b)(1) of the CAA, which to repeat we interpret as requiring the EPA to set air quality standards at the level that is "requisite"--that is, not lower or higher than is necessary--to protect the public health with an adequate margin of safety, fits comfortably within the scope of discretion permitted by our precedent. </s> We therefore reverse the judgment of the Court of Appeals remanding for reinterpretation that would avoid a supposed delegation of legislative power. It will remain for the Court of Appeals--on the remand that we direct for other reasons--to dispose of any other preserved challenge to the NAAQS under the judicial-review provisions contained in 42 U.S.C. §7607(d)(9). </s> IV </s> The final two issues on which we granted certiorari concern the EPA's authority to implement the revised ozone NAAQS in areas whose ozone levels currently exceed the maximum level permitted by that standard. The CAA designates such areas "nonattainment," §107(d)(1), 42 U.S.C. §7407(d)(1); see also Pub. L. 105-178, §6103, 112 Stat. 465 (setting timeline for new ozone designations), and it exposes them to additional restrictions over and above the implementation requirements imposed generally by §110 of the CAA. These additional restrictions are found in the five substantive subparts of Part D of Title I, 42 U.S.C. §§7501-7515. Subpart 1, §§7501-7509a, contains general nonattainment regulations that pertain to every pollutant for which a NAAQS exists. Subparts 2 through 5, §§7511-7514a, contain rules tailored to specific individual pollutants. Subpart 2, added by the Clean Air Act Amendments of 1990, §103, 104 Stat. 2423, addresses ozone. 42 U.S.C. §§7511-7511f. The dispute before us here, in a nutshell, is whether Subpart 1 alone (as the agency determined), or rather Subpart 2 or some combination of Subparts 1 and 2, controls the implementation of the revised ozone NAAQS in nonattainment areas. </s> A </s> The Administrator first urges, however, that we vacate the judgment of the Court of Appeals on this issue because it lacked jurisdiction to review the EPA's implementation policy. Section 307(b)(1) of the CAA, 42 U.S.C. §7607(b)(1), gives the court jurisdiction over "any ... nationally applicable regulations promulgated, or final action taken, by the Administrator," but the EPA argues that its implementation policy was not agency "action," was not "final" action, and is not ripe for review. We reject each of these three contentions. </s> At the same time the EPA proposed the revised ozone NAAQS in 1996, it also proposed an "interim implementation policy" for the NAAQS, see 61 Fed. Reg. 65752 (1996), that was to govern until the details of implementation could be put in final form through specific "rulemaking actions." The preamble to this proposed policy declared that "the interim implementation policy ... represent[s] EPA's preliminary views on these issues and, while it may include various statements that States must take certain actions, these statements are made pursuant to EPA's preliminary interpretations, and thus do not bind the States and public as a matter of law." Ibid. If the EPA had done no more, we perhaps could accept its current claim that its action was not final. However, after the agency had accepted comments on its proposed policy, and on the same day that the final ozone NAAQS was promulgated, the White House published in the Federal Register what it titled a "Memorandum for the Administrator of the Environmental Protection Agency" that prescribed implementation procedures for the EPA to follow. 62 Fed. Reg. 38421 (1997). (For purposes of our analysis we shall assume that this memorandum was not itself action by the EPA.) The EPA supplemented this memorandum with an explanation of the implementation procedures, which it published in the explanatory preamble to its final ozone NAAQS under the heading, "Final decision on the primary standard." Id., at 38873. "In light of comments received regarding the interpretation proposed in the Interim Implementation Policy," the EPA announced, it had "reconsidered that interpretation" and settled on a new one. Ibid. The provisions of "subpart 1 of part D of Title I of the Act" will immediately "apply to the implementation of the new 8-hour [ozone] standards." Ibid.; see also id., at 38885 (new standard to be implemented "simultaneously [with the old standard] ... under the provisions of ... subpart 1"). Moreover, the provisions of subpart 2 "will [also] continue to apply as a matter of law for so long as an area is not attaining the [old] 1-hour standard." Id., at 38873. Once the area reaches attainment for the old standard, however, "the provisions of subpart 2 will have been achieved and those provisions will no longer apply." Ibid.; see also id., at 38884-38885. </s> We have little trouble concluding that this constitutes final agency action subject to review under §307. The bite in the phrase "final action" (which bears the same meaning in §307(b)(1) that it does under the Administrative Procedure Act (APA) 5 U.S.C. §704, see Harrison v. PPG Industries, Inc., 446 U.S. 578, 586 (1980)) is not in the word "action," which is meant to cover comprehensively every manner in which an agency may exercise its power. See FTC v. Standard Oil Co. of Cal., 449 U.S. 232, 238, n.7 (1980). It is rather in the word "final," which requires that the action under review "mark the consummation of the agency's decisionmaking process." Bennett v. Spear, 520 U.S. 154, 177-178 (1997). Only if the "EPA has rendered its last word on the matter" in question, Harrison v. PPG Industries, Inc., supra, at 586, is its action "final" and thus reviewable. That standard is satisfied here. The EPA's "decisionmaking process," which began with the 1996 proposal and continued with the reception of public comments, concluded when the agency, "in light of [these comments]," and in conjunction with a corresponding directive from the White House, adopted the interpretation of Part D at issue here. Since that interpretation issued, the EPA has refused in subsequent rulemakings to reconsider it, explaining to disappointed commenters that its earlier decision was conclusive. See 63 Fed. Reg. 31014, 31018-31019 (1998). Though the agency has not dressed its decision with the conventional procedural accoutrements of finality, its own behavior thus belies the claim that its interpretation is not final. </s> The decision is also ripe for our review. "Ripeness `requir[es] us to evaluate both the fitness of the issues for judicial decision and the hardship to the parties of withholding court consideration.'" Texas v. United States, 523 U.S. 296, 300-301 (1998) (quoting Abbott Laboratories v. Gardner, 387 U.S. 136, 149 (1967)). The question before us here is purely one of statutory interpretation that would not "benefit from further factual development of the issues presented." Ohio Forestry Assn., Inc. v. Sierra Club, 523 U.S. 726, 733 (1998). Nor will our review "inappropriately interfere with further administrative action," ibid., since the EPA has concluded its consideration of the implementation issue. Finally, as for hardship to the parties: The respondent States must--on pain of forfeiting to the EPA control over implementation of the NAAQS--promptly undertake the lengthy and expensive task of developing state implementation plans (SIP's) that will attain the new, more stringent standard within five years. See 42 U.S.C. §§7410, 7502. Whether or not this would suffice in an ordinary case brought under the review provisions of the APA, see 5 U.S.C. §704, we have characterized the special judicial-review provision of the CAA, 42 U.S.C. §7607(b), as one of those statutes that specifically provides for "preenforcement" review, see Ohio Forestry Assn., Inc. v. Sierra Club, supra, at 737. Such statutes, we have said, permit "judicial review directly, even before the concrete effects normally required for APA review are felt." Lujan v. National Wildlife Federation, 497 U.S. 871, 891 (1990). The effects at issue here surely meet that lower standard. </s> Beyond all this, the implementation issue was fairly included within the challenges to the final ozone rule that were properly before the Court of Appeals. Respondents argued below that the EPA could not revise the ozone standard, because to do so would trigger the use of Subpart 1, which had been supplanted (for ozone) by the specific rules of Subpart 2. Brief for Industry Petitioners and Intervenors in No. 97-1441 (and consolidated cases) (CADC), pp. 32-34. The EPA responded that Subpart 2 did not supplant but simply supplemented Subpart 1, so that the latter section still "applies to all nonattainment areas for all NAAQS, ... including nonattainment areas for any revised ozone standard." Final Brief for EPA in No. 97-1441 (and consolidated cases) (CADC), pp. 67-68. The agency later reiterated that Subpart 2 "does not supplant implementation provisions for revised ozone standards. This interpretation fully harmonizes Subpart 2 with EPA's clear authority to revise any NAAQS." Id., at 71. In other words, the EPA was arguing that the revised standard could be issued, despite its apparent incompatibility with portions of Subpart 2, because it would be implemented under Subpart 1 rather than Subpart 2. The District of Columbia Circuit ultimately agreed that Subpart 2 could be harmonized with the EPA's authority to promulgate revised NAAQS, but not because Subpart 2 is entirely inapplicable--which is one of EPA's assignments of error. It is unreasonable to contend, as the EPA now does, that the Court of Appeals was obligated to reach the agency's preferred result, but forbidden to assess the reasons the EPA had given for reaching that result. The implementation issue was fairly included within respondents' challenge to the ozone rule, which all parties agree is final agency action ripe for review. </s> B </s> Our approach to the merits of the parties' dispute is the familiar one of Chevron U.S.A. Inc. v. Natural Resources Defense Council, Inc., 467 U.S. 837 (1984). If the statute resolves the question whether Subpart 1 or Subpart 2 (or some combination of the two) shall apply to revised ozone NAAQS, then "that is the end of the matter." Id., at 842-843. But if the statute is "silent or ambiguous" with respect to the issue, then we must defer to a "reasonable interpretation made by the administrator of an agency." Id., at 844. We cannot agree with the Court of Appeals that Subpart 2 clearly controls the implementation of revised ozone NAAQS, see 175 F.3d, at 1048-1050, because we find the statute to some extent ambiguous. We conclude, however, that the agency's interpretation goes beyond the limits of what is ambiguous and contradicts what in our view is quite clear. We therefore hold the implementation policy unlawful. See AT&T Corp. v. Iowa Utilities Bd., 525 U.S. 366, 392 (1999). </s> The text of Subpart 1 at first seems to point the way to a clear answer to the question, which Subpart controls? Two sections of Subpart 1, 7502(a)(1)(C) and 7502(a)(2)(D), contain switching provisions stating that if the classification of ozone nonattainment areas is "specifically provided [for] under other provisions of [Part D]," then those provisions will control instead of Subpart 1's. Thus it is true but incomplete to note, as the Administrator does, that the substantive language of Subpart 1 is broad enough to apply to revised ozone standards. See, e.g., §7502(a)(1)(A) (instructing the Administrator to classify nonattainment areas according to "any revised standard, including a revision of any standard in effect on November 15, 1990"); §7502(a)(2)(A) (setting attainment deadlines). To determine whether that language does apply one must resolve the further textual issue whether some other provision, namely Subpart 2, provides for the classification of ozone nonattainment areas. If it does, then according to the switching provisions of Subpart 1 it will control. </s> So, does Subpart 2 provide for classifying nonattainment ozone areas under the revised standard? It unquestionably does. The backbone of the subpart is Table 1, printed in §7511(a)(1) and reproduced in the margin here,5 which defines five categories of ozone nonattainment areas and prescribes attainment deadlines for each. Section 7511(a)(1) funnels all nonattainment areas into the table for classification, declaring that "[e]ach area designated nonattainment for ozone ... shall be classified at the time of such designation, under table 1, by operation of law." And once an area has been classified, "the primary standard attainment date for ozone shall be as expeditiously as practicable but not later than the date provided in table 1." The EPA argues that this text is not as clear or comprehensive as it seems, because the title of §7511(a) reads "Classification and attainment dates for 1989 nonattainment areas," which suggests that Subpart 2 applies only to areas that were in nonattainment in 1989, and not to areas later designated nonattainment under a revised ozone standard. The suggestion must be rejected, however, because §7511(b)(1) specifically provides for the classification of areas that were in attainment in 1989 but have subsequently slipped into nonattainment. It thus makes clear that Subpart 2 is not limited solely to 1989 nonattainment areas. This eliminates the interpretive role of the title, which may only "she[d] light on some ambiguous word or phrase in the statute itself," Carter v. United States, 530 U.S. 255, 267 (2000) (internal quotation marks omitted) (quoting Pennsylvania Dept. of Corrections v. Yeskey, 331 U.S. 519, 528-529 (1947)). </s> It may well be, as the EPA argues--and as the concurring opinion below on denial of rehearing pointed out, see 195 F.3d, at 11-12--that some provisions of Subpart 2 are ill fitted to implementation of the revised standard. Using the old 1-hour averages of ozone levels, for example, as Subpart 2 requires, see §7511(a)(1); 44 Fed. Reg. 8202 (1979), would produce at best an inexact estimate of the new 8-hour averages, see 40 CFR §50.10, and App. I (1999). Also, to the extent that the new ozone standard is stricter than the old one, see Reply Brief for Petitioners in No. 99-1257, p.17 ("the stricter 8-hour NAAQS"); 62 Fed. Reg. 38856, 38858 (1997) (8-hour standard of 0.09 ppm rather than 0.08 ppm would have "generally represent[ed] the continuation of the [old] level of protection"), the classification system of Subpart 2 contains a gap, because it fails to classify areas whose ozone levels are greater than the new standard (and thus nonattaining) but less than the approximation of the old standard codified by Table 1. And finally, Subpart 2's method for calculating attainment dates--which is simply to count forward a certain number of years from November 15, 1990 (the date the 1990 CAA Amendments took force), depending on how far out of attainment the area started--seems to make no sense for areas that are first classified under a new standard after November 15, 1990. If, for example, areas were classified in the year 2000, many of the deadlines would already have expired at the time of classification. </s> These gaps in Subpart 2's scheme prevent us from concluding that Congress clearly intended Subpart 2 to be the exclusive, permanent means of enforcing a revised ozone standard in nonattainment areas. The statute is in our view ambiguous concerning the manner in which Subpart 1 and Subpart 2 interact with regard to revised ozone standards, and we would defer to the EPA's reasonable resolution of that ambiguity. See FDA v. Brown & Williamson Tobacco Corp., 526 U.S. 415, 424 (1999). We cannot defer, however, to the interpretation the EPA has given. </s> Whatever effect may be accorded the gaps in Subpart 2 as implying some limited applicability of Subpart 1, they cannot be thought to render Subpart 2's carefully designed restrictions on EPA discretion utterly nugatory once a new standard has been promulgated, as the EPA has concluded. The principal distinction between Subpart 1 and Subpart 2 is that the latter eliminates regulatory discretion that the former allowed. While Subpart 1 permits the EPA to establish classifications for nonattainment areas, Subpart 2 classifies areas as a matter of law based on a table. Compare §7502(a)(1) with §7511(a)(1) (Table 1). Whereas the EPA has discretion under Subpart 1 to extend attainment dates for as long as 12 years, under Subpart 2 it may grant no more than 2 years' extension. Compare §§7502(a)(2)(A) and (C) with §7511(a)(5). Whereas Subpart 1 gives the EPA considerable discretion to shape nonattainment programs, Subpart 2 prescribes large parts of them by law. Compare §7502(c) and (d) with §7511a. Yet according to the EPA, Subpart 2 was simply Congress's "approach to the implementation of the [old] 1-hour" standard, and so there was no reason that "the new standard could not simultaneously be implemented under ... subpart 1." 62 Fed. Reg. 38856, 38885 (1997); see also id., at 38873 ("the provisions of subpart 1 ... would apply to the implementation of the new 8-hour ozone standards"). To use a few apparent gaps in Subpart 2 to render its textually explicit applicability to nonattainment areas under the new standard utterly inoperative is to go over the edge of reasonable interpretation. The EPA may not construe the statute in a way that completely nullifies textually applicable provisions meant to limit its discretion. </s> The EPA's interpretation making Subpart 2 abruptly obsolete is all the more astonishing because Subpart 2 was obviously written to govern implementation for some time. Some of the elements required to be included in SIP's under Subpart 2 were not to take effect until many years after the passage of the Act. See §7511a(e)(3) (restrictions on "electric utility and industrial and commercial boiler[s]" to be "effective 8 years after November 15, 1990"); §7511a(c)(5)(A) (vehicle monitoring program to "[b]egi[n] 6 years after November 15, 1990"); §7511a(g)(1) (emissions milestone requirements to be applied "6 years after November 15, 1990, and at intervals of every 3 years thereafter"). A plan reaching so far into the future was not enacted to be abandoned the next time the EPA reviewed the ozone standard--which Congress knew could happen at any time, since the technical staff papers had already been completed in late 1989. See 58 Fed. Reg. 13008, 13010 (1993); see also 42 U.S.C. §7409(d)(1) (NAAQS must be reviewed and, if appropriate, revised at least once every five years). Yet nothing in the EPA's interpretation would have prevented the agency from aborting Subpart 2 the day after it was enacted. Even now, if the EPA's interpretation were correct, some areas of the country could be required to meet the new, more stringent ozone standard in at most the same time that Subpart 2 had allowed them to meet the old standard. Compare §7502(a)(2) (Subpart 1 attainment dates) with §7511(a) (Subpart 2 attainment dates). Los Angeles, for instance, "would be required to attain the revised NAAQS under Subpart 1 no later than the same year that marks the outer time limit for attaining Subpart 2's one-hour ozone standard." Brief for Petitioners in No. 99-1257, p. 49. An interpretation of Subpart 2 so at odds with its structure and manifest purpose cannot be sustained. </s> We therefore find the EPA's implementation policy to be unlawful, though not in the precise respect determined by the Court of Appeals. After our remand, and the Court of Appeals' final disposition of this case, it is left to the EPA to develop a reasonable interpretation of the nonattainment implementation provisions insofar as they apply to revised ozone NAAQS. </s> * * * </s> To summarize our holdings in these unusually complex cases: (1) The EPA may not consider implementation costs in setting primary and secondary NAAQS under §109(b) of the CAA. (2) Section 109(b)(1) does not delegate legislative power to the EPA in contravention of Art. I, §1, of the Constitution. (3) The Court of Appeals had jurisdiction to review the EPA's interpretation of Part D of Title I of the CAA, relating to the implementation of the revised ozone NAAQS. (4) The EPA's interpretation of that Part is unreasonable. </s> The judgment of the Court of Appeals is affirmed in part and reversed in part, and the cases are remanded for proceedings consistent with this opinion. </s> It is so ordered. </s> CHRISTINE TODD WHITMAN, ADMINISTRATOROF ENVIRONMENTAL PROTECTIONAGENCY, etal., PETITIONERS </s> 99-1257v. </s> AMERICAN TRUCKING ASSOCIATIONS,INC., etal. </s> AMERICAN TRUCKING ASSOCIATIONS,INC., etal., PETITIONERS </s> 99-1426v. </s> CHRISTINE TODD WHITMAN, ADMINISTRATOROF ENVIRONMENTAL PROTECTIONAGENCY, etal. </s> on writs of certiorari to the united states court ofappeals for the district of columbia circuit </s> [February 27, 2001] </s> Justice Thomas, concurring. </s> I agree with the majority that §109's directive to the agency is no less an "intelligible principle" than a host of other directives that we have approved. Ante, at 13-15. I also agree that the Court of Appeals' remand to the agency to make its own corrective interpretation does not accord with our understanding of the delegation issue. Ante, at 12. I write separately, however, to express my concern that there may nevertheless be a genuine constitutional problem with §109, a problem which the parties did not address. </s> The parties to this case who briefed the constitutional issue wrangled over constitutional doctrine with barely a nod to the text of the Constitution. Although this Court since 1928 has treated the "intelligible principle" requirement as the only constitutional limit on congressional grants of power to administrative agencies, see J. W. Hampton, Jr., & Co. v. United States, 276 U.S. 394, 409 (1928), the Constitution does not speak of "intelligible principles." Rather, it speaks in much simpler terms: "All legislative Powers herein granted shall be vested in a Congress." U.S. Const., Art. 1, §1 (emphasis added). I am not convinced that the intelligible principle doctrine serves to prevent all cessions of legislative power. I believe that there are cases in which the principle is intelligible and yet the significance of the delegated decision is simply too great for the decision to be called anything other than "legislative." </s> As it is, none of the parties to this case has examined the text of the Constitution or asked us to reconsider our precedents on cessions of legislative power. On a future day, however, I would be willing to address the question whether our delegation jurisprudence has strayed too far from our Founders' understanding of separation of powers. </s> CHRISTINE TODD WHITMAN, ADMINISTRATOROF ENVIRONMENTAL PROTECTIONAGENCY, etal., PETITIONERS </s> 99-1257v. </s> AMERICAN TRUCKING ASSOCIATIONS,INC., etal. </s> AMERICAN TRUCKING ASSOCIATIONS,INC., etal., PETITIONERS </s> 99-1426v. </s> CHRISTINE TODD WHITMAN, ADMINISTRATOROF ENVIRONMENTAL PROTECTIONAGENCY, etal. </s> on writs of certiorari to the united states court ofappeals for the district of columbia circuit </s> [February 27, 2001] </s> Justice Stevens, with whom Justice Souter joins, concurring in part and concurring in the judgment. </s> Section 109(b)(1) delegates to the Administrator of the Environmental Protection Agency (EPA) the authority to promulgate national ambient air quality standards (NAAQS). In Part III of its opinion, ante, at 11-15, the Court convincingly explains why the Court of Appeals erred when it concluded that §109 effected "an unconstitutional delegation of legislative power." American Trucking Assns., Inc. v. EPA, 175 F. 3d 1027, 1033 (CADC 1999) (per curiam). I wholeheartedly endorse the Court's result and endorse its explanation of its reasons, albeit with the </s> following caveat. </s> The Court has two choices. We could choose to articulate our ultimate disposition of this issue by frankly acknowledging that the power delegated to the EPA is "legislative" but nevertheless conclude that the delegation is constitutional because adequately limited by the terms of the authorizing statute. Alternatively, we could pretend, as the Court does, that the authority delegated to the EPA is somehow not "legislative power." Despite the fact that there is language in our opinions that supports the Court's articulation of our holding,1 I am persuaded that it would be both wiser and more faithful to what we have actually done in delegation cases to admit that agency rulemaking authority is "legislative power."2 </s> The proper characterization of governmental power should generally depend on the nature of the power, not on the identity of the person exercising it. See Black's Law Dictionary 899 (6th ed. 1990) (defining "legislation" as, inter alia, "[f]ormulation of rule[s] for the future"); 1 K. Davis & R. Pierce, Administrative Law Treatise §2.3, p.37 (3d ed. 1994) ("If legislative power means the power to make rules of conduct that bind everyone based on resolution of major policy issues, scores of agencies exercise legislative power routinely by promulgating what are candidly called `legislative rules'"). If the NAAQS that the EPA promulgated had been prescribed by Congress, everyone would agree that those rules would be the product of an exercise of "legislative power." The same characterization is appropriate when an agency exercises rulemaking authority pursuant to a permissible delegation from Congress. </s> My view is not only more faithful to normal English usage, but is also fully consistent with the text of the Constitution. In Article I, the Framers vested "All legislative Powers" in the Congress, Art.I., §1, just as in Article II they vested the "executive Power" in the President, Art.II, §1. Those provisions do not purport to limit the authority of either recipient of power to delegate authority to others. See Bowsher v. Synar, 478 U.S. 714, 752 (1986) (Stevens, J., concurring in judgment) ("Despite the statement in Article I of the Constitution that `All legislative powers herein granted shall be vested in a Congress of the United States,' it is far from novel to acknowledge that independent agencies do indeed exercise legislative powers"); INS v. Chadha, 462 U.S. 919, 985-986 (1983) (White, J., dissenting) ("[L]egislative power can be exercised by independent agencies and Executive departments ..."); 1 Davis §2.6, p. 66 ("The Court was probably mistaken from the outset in interpreting Article I's grant of power to Congress as an implicit limit on Congress' authority to delegate legislative power"). Surely the authority granted to members of the Cabinet and federal law enforcement agents is properly characterized as "Executive" even though not exercised by the President. Cf. Morrison v. Olson, 487 U.S. 654, 705-706 (1988) (Scalia, J., dissenting) (arguing that the independent counsel exercised "executive power" unconstrained by the President). </s> It seems clear that an executive agency's exercise of rulemaking authority pursuant to a valid delegation from Congress is "legislative." As long as the delegation provides a sufficiently intelligible principle, there is nothing inherently unconstitutional about it. Accordingly, while I join Parts I, II, and IV of the Court's opinion, and agree with almost everything said in Part III, I would hold that when Congress enacted §109, it effected a constitutional delegation of legislative power to the EPA. </s> CHRISTINE TODD WHITMAN, ADMINISTRATOROF ENVIRONMENTAL PROTECTIONAGENCY, etal., PETITIONERS </s> 99-1257v. </s> AMERICAN TRUCKING ASSOCIATIONS,INC., etal. </s> AMERICAN TRUCKING ASSOCIATIONS,INC., etal., PETITIONERS </s> 99-1426v. </s> CHRISTINE TODD WHITMAN, ADMINISTRATOROF ENVIRONMENTAL PROTECTIONAGENCY, etal. </s> on writs of certiorari to the united states court ofappeals for the district of columbia circuit </s> [February 27, 2001] </s> Justice Breyer, concurring in part and concurring in the judgment. </s> I join Parts I, III, and IV of the Court's opinion. I also agree with the Court's determination in Part II that the Clean Air Act does not permit the Environmental Protection Agency to consider the economic costs of implementation when setting national ambient air quality standards under §109(b)(1) of the Act. But I would not rest this conclusion solely upon §109's language or upon a presumption, such as the Court's presumption that any authority the Act grants the EPA to consider costs must flow from a "textual commitment" that is "clear." Ante, at 7. In order better to achieve regulatory goals--for example, to allocate resources so that they save more lives or produce a cleaner environment--regulators must often take account of all of a proposed regulation's adverse effects, at least where those adverse effects clearly threaten serious and disproportionate public harm. Hence, I believe that, other things being equal, we should read silences or ambiguities in the language of regulatory statutes as permitting, not forbidding, this type of rational regulation. </s> In this case, however, other things are not equal. Here, legislative history, along with the statute's structure, indicates that §109's language reflects a congressional decision not to delegate to the agency the legal authority to consider economic costs of compliance. </s> For one thing, the legislative history shows that Congress intended the statute to be "technology forcing." Senator Edmund Muskie, the primary sponsor of the 1970 amendments to the Act, introduced them by saying that Congress' primary responsibility in drafting the Act was not "to be limited by what is or appears to be technologically or economically feasible," but "to establish what the public interest requires to protect the health of persons," even if that means that "industries will be asked to do what seems to be impossible at the present time." 116 Cong. Rec. 32901-32902 (1970), 1 Legislative History of the Clean Air Amendments of 1970 (Committee Report compiled for the Senate Committee on Public Works by the Library of Congress), Ser. No. 93-18, p. 227 (1974) (hereinafter Leg. Hist.) (emphasis added). </s> The Senate directly focused upon the technical feasibility and cost of implementing the Act's mandates. And it made clear that it intended the Administrator to develop air quality standards set independently of either. The Senate Report for the 1970 amendments explains: </s> "In the Committee discussions, considerable concern was expressed regarding the use of the concept of technical feasibility as the basis of ambient air standards. The Committee determined that 1) the health of people is more important than the question of whether the early achievement of ambient air quality standards protective of health is technically feasible; and, 2) the growth of pollution load in many areas, even with application of available technology, would still be deleterious to public health. . . . </s> "Therefore, the Committee determined that existing sources of pollutants either should meet the standard of the law or be closed down . . . ." S.Rep. No. 91-1196, pp. 2-3 (1970), 1 Leg. Hist. 402-403 (emphasis added). </s> Indeed, this Court, after reviewing the entire legislative history, concluded that the 1970 amendments were "expressly designed to force regulated sources to develop pollution control devices that might at the time appear to be economically or technologically infeasible." Union Elec. Co. v. EPA, 427 U.S. 246, 257 (1976) (emphasis added). And the Court added that the 1970 amendments were intended to be a "drastic remedy to . . . a serious and otherwise uncheckable problem." Id., at 256. Subsequent legislative history confirms that the technology-forcing goals of the 1970 amendments are still paramount in today's Act. See Clean Air Conference Report (1977): Statement of Intent; Clarification of Select Provisions, 123 Cong. Rec. 27070 (1977) (stating, regarding the 1977 amendments to the Act, that "this year's legislation retains and even strengthens the technology forcing . . . goals of the 1970 Act"); S.Rep. No. 101-228, p. 5 (1989) (stating that the 1990 amendments to the Act require ambient air quality standards to be set at "the level that `protects the public health' with an `adequate margin of safety,' without regard to the economic or technical feasibility of attainment" (emphasis added)). </s> To read this legislative history as meaning what it says does not impute to Congress an irrational intent. Technology-forcing hopes can prove realistic. Those persons, for example, who opposed the 1970 Act's insistence on a 90% reduction in auto emission pollutants, on the ground of excessive cost, saw the development of catalytic converter technology that helped achieve substantial reductions without the economic catastrophe that some had feared. See §6(a) of the Clean Air Act Amendments of 1970, amending §§202(b)(1)(A), (B), 84 Stat. 1690 (codified at 42 U.S.C. §§7521(b)(1)(A), (B)) (requiring a 90% reduction in emissions); 1 Leg. Hist. 238, 240 (statement of Sen. Griffin) (arguing that the emissions standards could "force [the automobile] industry out of existence" because costs "would not be taken into account"); see generally Reitze, Mobile Source Air Pollution Control, 6 Envtl. Law. 309, 326-327 (2000) (discussing the development of the catalytic converter). </s> At the same time, the statute's technology-forcing objective makes regulatory efforts to determine the costs of implementation both less important and more difficult. It means that the relevant economic costs are speculative, for they include the cost of unknown future technologies. It also means that efforts to take costs into account can breed time-consuming and potentially unresolvable arguments about the accuracy and significance of cost estimates. Congress could have thought such efforts not worth the delays and uncertainties that would accompany them. In any event, that is what the statute's history seems to say. See Union Elec., supra, at 256-259. And the matter is one for Congress to decide. </s> Moreover, the Act does not, on this reading, wholly ignore cost and feasibility. As the majority points out, ante, at 6-7, the Act allows regulators to take those concerns into account when they determine how to implement ambient air quality standards. Thus, States may consider economic costs when they select the particular control devices used to meet the standards, and industries experiencing difficulty in reducing their emissions can seek an exemption or variance from the state implementation plan. See Union Elec., supra, at 266 ("[T]he most important forum for consideration of claims of economic and technological infeasibility is before the state agency formulating the implementation plan"). </s> The Act also permits the EPA, within certain limits, to consider costs when it sets deadlines by which areas must attain the ambient air quality standards. 42 U.S.C. §7502(a)(2)(A) (providing that "the Administrator may extend the attainment date . . . for a period no greater than 10 years from the date of designation as nonattainment, considering the severity of nonattainment and the availability and feasibility of pollution control measures"); §7502(a)(2)(C) (permitting the Administrator to grant up to two additional 1-year extensions); cf. §§7511(a)(1), (5) (setting more rigid attainment deadlines for areas in nonattainment of the ozone standard, but permitting the Administrator to grant up to two 1-year extensions). And Congress can change those statutory limits if necessary. Given the ambient air quality standards' substantial effects on States, cities, industries, and their suppliers and customers, Congress will hear from those whom compliance deadlines affect adversely, and Congress can consider whether legislative change is warranted. See, e.g., Steel Industry Compliance Extension Act of 1981, 95 Stat. 139 (codified at 42 U.S.C. §7413(e) (1988 ed.)) (repealed 1990) (granting the Administrator discretion to extend the ambient air quality standard attainment date set in the 1977 Act by up to three years for steelmaking facilities). </s> Finally, contrary to the suggestion of the Court of Appeals and of some parties, this interpretation of §109 does not require the EPA to eliminate every health risk, however slight, at any economic cost, however great, to the point of "hurtling" industry over "the brink of ruin," or even forcing "deindustrialization." American Trucking Assns., Inc. v. EPA, 175 F.3d 1027, 1037, 1038, n.4 (CADC 1999); see also Brief for Cross-Petitioners in No. 99-1426, p. 25. The statute, by its express terms, does not compel the elimination of all risk; and it grants the Administrator sufficient flexibility to avoid setting ambient air quality standards ruinous to industry. </s> Section 109(b)(1) directs the Administrator to set standards that are "requisite to protect the public health" with "an adequate margin of safety." But these words do not describe a world that is free of all risk--an impossible and undesirable objective. See Industrial Union Dept., AFL-CIO v. American Petroleum Institute, 448 U.S. 607, 642 (1980) (plurality opinion) (the word "safe" does not mean "risk-free"). Nor are the words "requisite" and "public health" to be understood independent of context. We consider football equipment "safe" even if its use entails a level of risk that would make drinking water "unsafe" for consumption. And what counts as "requisite" to protecting the public health will similarly vary with background circumstances, such as the public's ordinary tolerance of the particular health risk in the particular context at issue. The Administrator can consider such background circumstances when "decid[ing] what risks are acceptable in the world in which we live." Natural Resources Defense Council, Inc. v. EPA, 824 F.2d 1146, 1165 (CADC 1987). </s> The statute also permits the Administrator to take account of comparative health risks. That is to say, she may consider whether a proposed rule promotes safety overall. A rule likely to cause more harm to health than it prevents is not a rule that is "requisite to protect the public health." For example, as the Court of Appeals held and the parties do not contest, the Administrator has the authority to determine to what extent possible health risks stemming from reductions in tropospheric ozone (which, it is claimed, helps prevent cataracts and skin cancer) should be taken into account in setting the ambient air quality standard for ozone. See 175 F.3d, at 1050-1053 (remanding for the Administrator to make that determination). </s> The statute ultimately specifies that the standard set must be "requisite to protect the public health" "in the judgment of the Administrator," §109(b)(1), 84 Stat. 1680 (emphasis added), a phrase that grants the Administrator considerable discretionary standard-setting authority. </s> The statute's words, then, authorize the Administrator to consider the severity of a pollutant's potential adverse health effects, the number of those likely to be affected, the distribution of the adverse effects, and the uncertainties surrounding each estimate. Cf. Sunstein, Is the Clean Air Act Unconstitutional?, 98 Mich. L.Rev. 303, 364 (1999). They permit the Administrator to take account of comparative health consequences. They allow her to take account of context when determining the acceptability of small risks to health. And they give her considerable discretion when she does so. </s> This discretion would seem sufficient to avoid the extreme results that some of the industry parties fear. After all, the EPA, in setting standards that "protect the public health" with "an adequate margin of safety," retains discretionary authority to avoid regulating risks that it reasonably concludes are trivial in context. Nor need regulation lead to deindustrialization. Preindustrial society was not a very healthy society; hence a standard demanding the return of the Stone Age would not prove "requisite to protect the public health." </s> Although I rely more heavily than does the Court upon legislative history and alternative sources of statutory flexibility, I reach the same ultimate conclusion. Section 109 does not delegate to the EPA authority to base the national ambient air quality standards, in whole or in part, upon the economic costs of compliance. </s> FOOTNOTES Footnote 1 </s> Together with No. 99-1426, American Trucking Associations, Inc., etal. v. Whitman, Administrator of Environmental Protection Agency, etal., also on certiorari to the same court. </s> FOOTNOTES Footnote 1 </s> None of the sections of the CAA in which the District of Columbia Circuit has found authority for the EPA to consider costs shares §109(b)(1)'s prominence in the overall statutory scheme. See, e.g., Michigan v. EPA, 213 F.3d 663, 678-679 (CADC 2000); George E. Warren Corp. v. EPA, 159 F.3d 616, 623-624 (CADC 1998); Natural Resources Defense Council, Inc. v. EPA, 824 F.2d 1146, 1154-1168 (CADC 1987) (en banc). </s> Footnote 2 </s> Respondents contend that this advice is required to be included in the NAAQS rulemaking record--which, if true, would suggest that it was relevant to the standard-setting process. But the provision respondents cite for their contention, 42 U.S.C. §7607(d)(3), requires only that "pertinent findings, recommendations, and comments by the Scientific Review Committee" be included. The Committee's advice concerning certain aspects of "adverse public health ... effects" from various attainment strategies is unquestionably pertinent; but to say that Committee-generated cost data are pertinent is to beg the question. Likewise, while "all written comments" must be placed in the docket, §7607(d)(4)(B)(i), the EPA need respond only to the "significant" ones, §7407(d)(6)(B); comments regarding cost data are not significant if cost data are irrelevant. </s> Footnote 3 </s> Respondents scarcely mention in their arguments the secondary NAAQS required by §109(b)(2), 42 U.S.C. §7409(b)(2). For many of the same reasons described in the body of the opinion, as well as the text of §109(b)(2), which instructs the EPA to set the standards at a level "requisite to protect the public welfare from any known or anticipated adverse effects associated with the presence of such air pollutant in the ambient air" (emphasis added), we conclude that the EPA may not consider implementation costs in setting the secondary NAAQS. </s> Footnote 4 </s> Respondents' speculation that the EPA is secretly considering the costs of attainment without telling anyone is irrelevant to our interpretive inquiry. If such an allegation could be proved, it would be grounds for vacating the NAAQS, because the Administrator had not followed the law. See, e.g., Chevron U.S.A. Inc. v. Natural Resources Defense Council, Inc., 467 U.S. 837, 842-843 (1984); Atlantic Mut. Ins. Co. v. Commissioner, 523 U.S. 382, 387 (1998). It would not, however, be grounds for this Court's changing the law. </s> Footnote 5 </s> </s> TABLE I </s> Primary standard </s> Area classDesign value*attainment date** </s> Marginal0.121 up to 0.1383years after </s> November 15, 1990 </s> Moderate0.138 up to 0.1606years after </s> November 15, 1990 </s> Serious0.160 up to 0.1809years after </s> November 15, 1990 </s> Severe0.180 up to 0.28015years after </s> November 15, 1990 </s> Extreme0.280 and above 20years after </s> November 15, 1990 </s> *The design value is measured in parts per million (ppm). </s> **The primary standard attainment date is measured from November 15, 1990. </s> FOOTNOTES Footnote 1 </s> See, e.g., Touby v. United States, 500 U.S. 160, 165 (1991); United States v. Shreveport Grain & Elevator Co., 287 U.S. 77, 85 (1932); J. W. Hampton, Jr., & Co. v. United States, 276 U.S. 394, 407 (1928); Field v. Clark, 143 U.S. 649, 692 (1892). </s> Footnote 2 </s> See Mistretta v. United States, 488 U.S. 361, 372 (1989) ("[O]ur jurisprudence has been driven by a practical understanding that in our increasingly complex society ... Congress simply cannot do its job absent an ability to delegate power ..."). See also Loving v. United States, 517 U.S. 748, 758 (1996) ("[The nondelegation] principle does not mean ... that only Congress can make a rule of prospective force"); 1 K. Davis & R. Pierce, Administrative Law Treatise §2.6, p. 66 (3d ed. 1994) ("Except for two 1935 cases, the Court has never enforced its frequently announced prohibition on congressional delegation of legislative power").

United States Supreme Court UNITED STATES v. GAMBLING DEVICES(1953) No. 14 Argued: October 12, 1953Decided: December 7, 1953 </s> The Act of January 2, 1951, forbids the interstate shipment of gambling devices, requires every dealer in gambling devices to register his places of business "in such district" with the Attorney General and report to him all sales and deliveries of gambling devices "in the district," and provides for the seizure and forfeiture of gambling devices possessed in violation of the Act. Certain dealers in gambling devices were indicted for violations of the registration and reporting requirements of the Act, without any allegation that the devices they sold had moved or would move in interstate commerce; and a libel to forfeit certain gambling devices was filed, without alleging that they ever were transported in or in any way affected interstate commerce. Held: Judgments dismissing the indictments and the libel are affirmed. Pp. 442-454. </s> Affirmed. </s> For opinion of MR. JUSTICE JACKSON, in which MR. JUSTICE FRANKFURTER and MR. JUSTICE MINTON join, see p. 442. </s> For opinion of MR. JUSTICE BLACK, with whom MR. JUSTICE DOUGLAS joins, see p. 452. </s> For dissenting opinion of MR. JUSTICE CLARK, with whom THE CHIEF JUSTICE, MR. JUSTICE REED and MR. JUSTICE BURTON concur, see p. 454. </s> [Footnote * Together with No. 40, United States v. Denmark, and No. 41, United States v. Braun, on appeals from the United States District Court for the Southern District of Georgia. </s> Acting Solicitor General Stern argued the cause for the United States. With him on the briefs were Assistant Attorney General Olney, Beatrice Rosenberg and Carl H. Imlay. Solicitor General Cummings was on the Statement as to Jurisdiction in No. 14; Acting Solicitor General Stern in Nos. 40 and 41. [346 U.S. 441, 442] </s> Shelby Myrick argued the cause and filed a brief for appellees in Nos. 40 and 41. No appearance for appellee in No. 14. </s> MR. JUSTICE JACKSON announced the judgment of the Court and an opinion in which MR. JUSTICE FRANKFURTER and MR. JUSTICE MINTON join. </s> These cases present unsuccessful attempts, by two different procedures, to enforce the view of the Department of Justice as to construction of the Act of January 2, 1951, 1 which prohibits shipment of gambling machines in interstate commerce but includes incidental registration and reporting provisions. Two indictments charge Denmark and Braun severally with engaging in the business of dealing in gambling devices without registering with the Attorney General and reporting sales and deliveries. Both indictments were dismissed. The other proceeding is a libel to forfeit five gambling machines seized by Federal Bureau of Investigation agents from a country club in Tennessee. It also was dismissed. </s> The three cases, here on Government appeals, are similar in features which led to their dismissal and which raise constitutional issues. The indictments do not allege that the accused dealers, since the effective date of the Act or for that matter at any other time, have bought, sold or moved gambling devices in interstate commerce, or that the devices involved in their unreported sales have, since the effective date of the Act or at any other time, moved in interstate commerce or ever would do so. The libel does not show that the country club's machines were at any time transported in or in any way affect interstate commerce. </s> Section 2 of the Act prohibits transportation of gambling devices in interstate commerce except to any state [346 U.S. 441, 443] which exempts itself or its subdivision by state law. 2 Section 3 requires every manufacturer and dealer in gambling devices annually to register his business and name and monthly to file detailed information as to each device sold and delivered during the preceding month. 3 Section [346 U.S. 441, 444] 6 provides criminal penalties for failure to register or for violation of the transportation section, 4 and 7 authorizes forfeiture of devices sold in violation of the Act. 5 </s> The information requirements are not expressly limited to persons engaged or transactions occurring in interstate commerce or conditioned on any connection therewith. Neither does the Act by any specific terms direct its application to transactions such as we have here. </s> Appellees contend, first, that the Act should not be construed to reach dealers, transactions or machines [346 U.S. 441, 445] unless shown to have some relation to interstate commerce; second, construed otherwise, the Act exceeds the power delegated to Congress under the Commerce Clause of the Constitution; third, the statute is unconstitutionally vague. </s> The Government answers, first, that the statute, literally read, reaches all dealers and transactions and the possession of all unreported devices without reference to interstate commerce; second, to make effective the prohibition of transportation in interstate commerce, Congress may constitutionally require reporting of all intrastate transactions; and, third, while Congress, by oversight, left an inappropriate and confusing phrase in the Act, the defect is not fatal inasmuch as the Attorney General has power to supplement the Act by regulations which will cure its indefiniteness. 6 </s> [346 U.S. 441, 446] </s> We do not intimate any ultimate answer to the appellees' constitutional questions other than to observe that they cannot be dismissed as frivolous, nor as unimportant to the the nature of our federation. No precedent of this Court sustains the power of Congress to enact legislation penalizing failure to report information concerning acts not shown to be in, or mingled with, or found to affect commerce. The course of decision relied on by the Government on analysis falls short of the holding asked of us here. Indeed, we find no instance where Congress has attempted under the commerce power to impose reporting duties under penal sanction which would raise the question posed by these proceedings. 7 It is apparent [346 U.S. 441, 447] that the Government's pleadings raise, and no doubt were intended to raise, a far-reaching question as to the extent of congressional power over matters internal to the individual states. </s> Of course, Congress possesses not only power to regulate commerce among the several states but also an in-exact power "to make all laws which shall be necessary and proper for carrying into execution" its enumerated powers. In some instances Congress has left to an administrative body, such as the Interstate Commerce Commission or the National Labor Relations Board, the power to decide on a case-to-case basis whether the particular intrastate activity affects interstate commerce so as to warrant exercise of the power to reach into intrastate affairs. 8 Decisions under this type of legislation give the Government no support, for no such determination is required by this Act, and the Government asserts no such finding by anyone is necessary. In other statutes Congress has set up economic regulations which lay hold of activities in interstate commerce but also include intrastate activities so intermingled therewith that separation [346 U.S. 441, 448] is impractical or impossible. 9 Of course, decisions upholding legislation requiring information in aid of the taxing power 10 afford no support here, because the taxing power penetrates and permeates every activity, intrastate or interstate, within the Nation. While general statements, out of these different contexts, might bear upon the subject one way or another, it is apparent that the precise question tendered to us now is not settled by any prior decision. </s> The principle is old and deeply imbedded in our jurisprudence that this Court will construe a statute in a manner that requires decision of serious constitutional questions only if the statutory language leaves no reasonable alternative. United States v. Rumely, 345 U.S. 41 . This is not because we would avoid or postpone [346 U.S. 441, 449] difficult decisions. The predominant consideration is that we should be sure Congress has intentionally put its power in issue by the legislation in question before we undertake a pronouncement which may have far-reaching consequences upon the powers of the Congress or the powers reserved to the several states. To withhold passing upon an issue of power until we are certain it is knowingly precipitated will do no great injury, for Congress, once we have recognized the question, can make its purpose explicit and thereby necessitate or avoid decision of the question. Judicial abstention is especially wholesome where we are considering a penal statute. Our policy in constitutional cases is reinforced by the long tradition and sound reasons which admonish against enlargement of criminal statutes by interpretation. </s> This Court does and should accord a strong presumption of constitutionality to Acts of Congress. This is not a mere polite gesture. It is a deference due to deliberate judgment by constitutional majorities of the two Houses of Congress that an Act is within their delegated power or is necessary and proper to execution of that power. The rational and practical force of the presumption is at its maximum only when it appears that the precise point in issue here has been considered by Congress and has been explicitly and deliberately resolved. 11 But the presumption can have little realism when responsible congressional committees and leaders, in managing a bill, have told Congress that the bill will not reach that which the Act is invoked in this Court to cover. </s> We do not question that literal language of this Act is capable of the broad, unlimited construction urged by the Government. Indeed, if it were enacted for a [346 U.S. 441, 450] unitary system of government, no other construction would be appropriate. But we must assume that the implications and limitations of our federal system constitute a major premise of all congressional legislation, though not repeatedly recited therein. Against the background of our tradition and system of government, we cannot say that the lower courts, which have held as a matter of statutory construction that this Act does not reach purely intrastate matters, have not made a permissible interpretation. 12 We find in the text no unmistakable intention of Congress to raise the constitutional questions implicit in the Government's effort to apply the Act in its most extreme impact upon affairs considered normally reserved to the states. </s> Judges differ as to the value of legislative history in statutory construction, but the Government often relies upon it to sustain its interpretation of statutes. However, in this case its reference to legislative history is conspicuously meager and unenlightening. 13 On the other hand, for what it is worth, appellees point out much that was reported by responsible committees and said by proponents of this antigambling-device legislation to indicate that Congress did not intend to raise the issues [346 U.S. 441, 451] here presented and was not aware it was doing so. For example, Senator Johnson, sponsor of the bill which eventually became this Act, declared that ". . . it keeps the Federal Government out of State and local police powers; no Federal official is going to become an enforcement officer in any State or locality." 14 The committee handling the bill reported: "On the other hand, the committee desires to emphasize that Federal law enforcement in the field of gambling cannot and should not be considered a substitute for State and local law enforcement in this field." 15 But here it was the Federal Bureau of Investigation which entered a country club and seized slot machines not shown ever to have had any connection with interstate commerce in any manner whatever. If this is not substituting federal for state enforcement, it is difficult to know how it could be accomplished. A more local and detailed act of enforcement is hardly conceivable. These cases, if sustained, would substantially take unto the Federal Government the entire pursuit of the gambling device. </s> No committee appears to have anticipated this, for the then Attorney General informed the committee, and it reported itself in agreement with the view, that "Actually enforcement against those people who gamble or use these machines wrongfully in the States is left with the States, and with the local officials, and there is absolutely no intention on the part of the Federal Government, express or otherwise, in this bill or anything that accompanies it, to get us into a prohibition era." 16 It is [346 U.S. 441, 452] impossible to reconcile statements of this kind, on which the Congress may have placed reliance, with the Government's present interpretation of the Act. </s> As we have indicated, the present indictments and libel are so framed as to apply in extreme form the most expansive interpretation of this Act. All that we would decide at present is a question of statutory construction. We think the Act does not have the explicitness necessary to sustain the pleadings which the Government has drafted in these cases. On this ground alone, we would affirm the judgments below. </s> Judgments affirmed. </s> Footnotes [Footnote 1 64 Stat. 1134, 15 U.S.C. (Supp. V) 1171-1177. </s> [Footnote 2 In pertinent part: "It shall be unlawful knowingly to transport any gambling device to any place in a State, the District of Columbia, or a possession of the United States from any place outside of such State, the District of Columbia, or possession: Provided, That this section shall not apply to transportation of any gambling device to a place in any State which has enacted a law providing for the exemption of such State from the provisions of this section, or to a place in any subdivision of a State if the State in which such subdivision is located has enacted a law providing for the exemption of such subdivision from the provisions of this section. . . ." 64 Stat. 1134, 15 U.S.C. (Supp. V) 1172. </s> [Footnote 3 "Upon first engaging in business, and thereafter on or before the 1st day of July of each year, every manufacturer of and dealer in gambling devices shall register with the Attorney General his name or trade name, the address of his principal place of business, and the addresses of his places of business in such district. On or before the last day of each month every manufacturer of and dealer in gambling devices shall file with the Attorney General an inventory and record of all sales and deliveries of gambling devices as of the close of the preceding calendar month for the place or places of business in the district. The monthly record of sales and deliveries of such gambling devices shall show the mark and number identifying each article together with the name and address of the buyer or consignee thereof and the name and address of the carrier. Duplicate bills or invoices, if complete in the foregoing respects, may be used in filing the record of sales and deliveries. For the purposes of this Act, every manufacturer or dealer shall mark and number each gambling device so that it is individually identifiable. In cases of sale, delivery, or shipment of gambling devices in unassembled form, the manufacturer or dealer shall separately mark and number the components of each gambling device with a common mark and number as if it were an assembled gambling device. It shall be unlawful for any manufacturer or dealer to sell, deliver, or ship any gambling device which is not marked and numbered for identification as herein provided; and it shall be unlawful for any manufacturer or dealer to [346 U.S. 441, 444] manufacture, recondition, repair, sell, deliver, or ship any gambling device without having registered as required by this section, or without filing monthly the required inventories and records of sales and deliveries." 64 Stat. 1135, 15 U.S.C. (Supp. V) 1173. </s> [Footnote 4 "Whoever violates any of the provisions of sections 2, 3, 4, or 5 of this Act shall be fined not more than $5,000 or imprisoned not more than two years, or both." 64 Stat. 1135, 15 U.S.C. (Supp. V) 1176. </s> [Footnote 5 "Any gambling device transported, delivered, shipped, manufactured, reconditioned, repaired, sold, disposed of, received, possessed, or used in violation of the provisions of this Act shall be seized and forfeited to the United States. All provisions of law relating to the seizure, summary and judicial forfeiture, and condemnation of vessels, vehicles, merchandise, and baggage for violation of the customs laws; the disposition of such vessels, vehicles, merchandise, and baggage or the proceeds from the sale thereof; the remission or mitigation of such forfeitures; and the compromise of claims and the award of compensation to informers in respect of such forfeitures shall apply to seizures and forfeitures incurred, or alleged to have been incurred, under the provisions of this Act, insofar as applicable and not inconsistent with the provisions hereof: Provided, That such duties as are imposed upon the collector of customs or any other person with respect to the seizure and forfeiture of vessels, vehicles, merchandise, and baggage under the customs laws shall be performed with respect to seizures and forfeitures of gambling devices under this Act by such officers, agents, or other persons as may be authorized or designated for that purpose by the Attorney General." 64 Stat. 1135, 15 U.S.C. (Supp. V) 1177. </s> [Footnote 6 The ambiguity in the statute arose from the following facts: In the bill originally submitted to the Senate, S. 3357, 3 began: ". . . every manufacturer of and dealer in gambling devices shall register with the collector of internal revenue for each district in which such business is to be carried on, his name [etc.] . . . ." (Emphasis added.) See 96 Cong. Rec. 13649; Hearings before House Committee on Interstate and Foreign Commerce on S. 3357, 81st Cong., 2d Sess. 2. However, the Treasury Department wrote the House committee that since the bill did not concern the collection of revenue, the Justice Department should handle the registration of gambling devices. See H. R. Rep. No. 2769, 81st Cong., 2d Sess. 14; Hearings on S. 3357, supra, at 8-9. The House committee therefore deleted from the bill the language italicized above and substituted the words "Attorney General." See H. R. Rep. No. 2769, supra, at 8-9; 96 Cong. Rec. 13650, 14735, 15106, 15108, 16701. The deletion left without meaning the phrase "in such district," which appeared later in the section and which had previously referred back to the district in which the business was to be carried on. </s> The Attorney General attempted to clarify the ambiguity by issuing Department of Justice Order No. 4173, 28 CFR, 1952 Supp., 3. He claimed authority to issue such a regulation under R. S. 161, 5 U.S.C. 22, which reads: "The head of each department is authorized to prescribe regulations, not inconsistent with law, for [346 U.S. 441, 446] the government of his department, the conduct of its officers and clerks, the distribution and performance of its business, and the custody, use, and preservation of the records, papers, and property appertaining to it." </s> [Footnote 7 Under the liquor law enforcement statutes, the offense was only complete when the unlabeled liquor was shipped in interstate commerce. E. g., 35 Stat. 1137, as amended, 49 Stat. 1930, 18 U.S.C. 390. See Blumenthal v. United States, 88 F.2d 522, 524-525; Arnold v. United States, 115 F.2d 523, 524. The marking and labeling section of the Ashurst-Sumners Act, 49 Stat. 494, 18 U.S.C. 396c, specifically provided that prison-made goods must be marked "when shipped or transported in interstate or foreign commerce." See Kentucky Whip & Collar Co. v. Illinois Central R. Co., 299 U.S. 334, 344 , 352-353, where a suit for mandatory injunction under the Act alleged that the goods had been delivered in interstate commerce. A similar provision appeared in the subsequent statute. 62 Stat. 786, 18 U.S.C. (Supp. III) 1762 (a). The Lacey Act of 1900, 31 Stat. 188, required packages containing dead animals to be plainly marked "when shipped by interstate commerce." See Rupert v. United States, 181 F. 87, 88, 91, where an indictment under the Act charged interstate shipments. The statute preventing passage of lottery tickets in interstate commerce, 62 Stat. 762, 18 U.S.C. (Supp. III) 1301, contains no labeling, marking, or information requirements. Neither do the stolen property statutes. 62 Stat. 805, 806, 807, 63 Stat. 96, 18 U.S.C. (Supp. III) 2311-2317. </s> [Footnote 8 Interstate Commerce Act, 36 Stat. 550, as amended, 41 Stat. 484, 49 U.S.C. 13 (4), Houston, E. & W. T. R. Co. v. United States, 234 U.S. 342, 357 -359; Florida v. United States, 282 U.S. 194 ; North Carolina v. United States, 325 U.S. 507, 511 ; King v. United States, 344 U.S. 254, 267 -276. National Labor Relations Act, 49 Stat. 450, 452, 453, 454, 455, 29 U.S.C. 152 (6), (7), 155, 160 (a), (e), (f), as amended, 61 Stat. 138, 140, 146, 147-148, 29 U.S.C. (Supp. III) 152 (6), (7), 155, 160 (a), (e), (f), Labor Board v. Jones & Laughlin Steel Corp., 301 U.S. 1, 31 , 47; Myers v. Bethlehem Shipbuilding Corp., 303 U.S. 41, 49 -50; Newport News Shipbuilding & Dry Dock Co. v. Schauffler, 303 U.S. 54, 57 -58; Santa Cruz Fruit Packing Co. v. Labor Board, 303 U.S. 453, 466 -468; Consolidated Edison Co. v. Labor Board, 305 U.S. 197, 223 -224; Labor Board v. Denver Building & Construction Trades Council, 341 U.S. 675, 683 -684. </s> [Footnote 9 Hours of Service Acts (Railroads), 34 Stat. 1415, 45 U.S.C. 61-64, Baltimore & O. R. Co. v. I. C. C., 221 U.S. 612 ; Interstate Commerce Act, 34 Stat. 584, 49 U.S.C. 1 et seq., Interstate Commerce Comm'n v. Goodrich Transit Co., 224 U.S. 194 ; Grain Futures Act, 42 Stat. 998, as amended, Commodity Exchange Act, 49 Stat. 1491, 7 U.S.C. 1 et seq., Board of Trade of Chicago v. Olsen, 262 U.S. 1 ; Ashurst-Sumners Act (Convict-Made Goods), 49 Stat. 494, 18 U.S.C. 396b, 396c, Kentucky Whip & Collar Co. v. Illinois Central R. Co., 299 U.S. 334 ; Tobacco Inspection Act, 49 Stat. 731, 7 U.S.C. 511a-511q, Currin v. Wallace, 306 U.S. 1 ; Agricultural Adjustment Act of 1938, 52 Stat. 31, as amended, 7 U.S.C. 1281 et seq., Mulford v. Smith, 307 U.S. 38 ; as amended, 55 Stat. 203, 7 U.S.C. 1340, Wickard v. Filburn, 317 U.S. 111 ; Fair Labor Standards Act of 1938, 52 Stat. 1060, 29 U.S.C. 201 et seq., United States v. Darby, 312 U.S. 100 ; Oklahoma Press Publishing Co. v. Walling, 327 U.S. 186 ; Agricultural Marketing Agreement Act of 1937, 50 Stat. 246, 7 U.S.C. 608c, United States v. Wrightwood Dairy Co., 315 U.S. 110 ; Federal Food, Drug, and Cosmetic Act, 52 Stat. 1040, 21 U.S.C. 301 et seq., United States v. Walsh, 331 U.S. 432 ; United States v. Sullivan, 332 U.S. 689 . </s> [Footnote 10 United States v. Doremus, 249 U.S. 86 ; Nigro v. United States, 276 U.S. 332 ; Sonzinsky v. United States, 300 U.S. 506 ; United States v. Kahriger, 345 U.S. 22 . </s> [Footnote 11 Cf. United States v. Bekins, 304 U.S. 27 , with Ashton v. Cameron County Water Improvement District, 298 U.S. 513 . </s> [Footnote 12 United States v. Denmark, 119 F. Supp. 647; United States v. Braun, 119 F. Supp. 646; United States v. Five Gambling Devices, 119 F. Supp. 641; United States v. 15 Mills Blue Bell Gambling Machines, 119 F. Supp. 74; United States v. 178 Gambling Devices, 107 F. Supp. 394. </s> [Footnote 13 The Government cites passages from the House Committee Report to the effect that slot machines and similar gambling devices are resulting in substantial revenues to Nation-wide crime syndicates. H. R. Rep. No. 2769, supra, at 4-6. The Government also refers to statements by a Congressman and the president of a company which manufactures gambling devices to the effect that these syndicates operate in every state in the Union and reap profits in the billions of dollars. Hearings on S. 3357, supra, at 10-12, 23, 28, 29, 182, 185, 191-192; 96 Cong. Rec. 13638. </s> [Footnote 14 96 Cong. Rec. 15107. For similar statements by Senator Johnson, see 96 Cong. Rec. 15103, 15105. </s> [Footnote 15 H. R. Rep. No. 2769, supra, at 5. </s> [Footnote 16 Ibid. See also statements by Senator Ferguson, 96 Cong. Rec. 15104; and Representatives Rogers, 96 Cong. Rec. 13643-13644, 16853; Bryson, 96 Cong. Rec. 13649; Rees, 96 Cong. Rec. 13654, and Dolliver, 96 Cong. Rec. 13638. </s> MR. JUSTICE BLACK, with whom MR. JUSTICE DOUGLAS joins, concurring. </s> I concur in the judgment, but regret my inability to agree with the reasons for affirmance expressed in the opinion of MR. JUSTICE JACKSON. The language of 3 of the Act on which the charges rest requires dealers to report "all sales and deliveries of gambling devices . . . ." No other language in the Act, and nothing in its legislative history, indicates to me that Congress was not here hitting at "all sales," including purely intrastate ones. In this situation I do not feel at liberty to read intrastate sales out of the Act, even if constitutional questions could thereby be avoided. * </s> Section 3 requires a gambling device dealer to register with the Attorney General "his name or trade name, the address of his principal place of business, and the addresses [346 U.S. 441, 453] of his places of business in such district." (Emphasis supplied.) Thereafter dealers must make detailed monthly reports of inventories, sales and deliveries for the "places of business" in the district. But the use of the phrase "such district" is bound to leave a dealer bewildered. Does the phrase refer to the place where a dealer is compelled to file his papers? Or does it simply force him to tell in what "district" he maintains "places"? If a dealer is able to solve this puzzle, how is he to find "such district"? The Act gives no hint as to where the "district" is or how a person can locate it. It never describes any "district." Yet failure to comply with these unascertainable requirements is punishable by fine up to $5,000, imprisonment up to two years, or both. This punishment, at least, is certain. I would apply the established rule that "a statute which either forbids or requires the doing of an act in terms so vague that men of common intelligence must necessarily guess at its meaning and differ as to its application, violates the first essential of due process of law." Connally v. General Construction Co., 269 U.S. 385, 391 . </s> Nor can a criminal statute too vague to be constitutionally valid be saved by additions made to it by the Attorney General. Of course, Congress could have prescribed that reports should be made at reasonably accessible places designated by the Attorney General. Cf. United States v. Eaton, 144 U.S. 677 . But the Act under consideration did not do this. The Attorney General did promulgate an attempted clarifying regulation under the purported authority of R. S. 161, 5 U.S.C. 22. That statute provides no more than a general authorization to the heads of all departments to prescribe regulations governing their departments, officers, clerks, records, papers, etc. There is certainly not sufficient specificity in this grant concerning routine departmental business to support the Attorney General's attempt to [346 U.S. 441, 454] infuse life into an Act of Congress unenforceable for vagueness. The vital omission in this criminal statute can be supplied by the legislative branch of government, not by the Attorney General. I would affirm these judgments. </s> [Footnote * Holding that the Act requires reports of interstate sales would raise a serious constitutional question. The Act makes it a crime to transport gambling devices in interstate commerce. Consequently, requiring monthly reports of sales and deliveries made by an interstate dealer would require him to make monthly reports of his own crimes. The Fifth Amendment provides that no person shall be compelled "to be a witness against himself." </s> MR. JUSTICE CLARK, with whom THE CHIEF JUSTICE, MR. JUSTICE REED and MR. JUSTICE BURTON concur, dissenting. </s> I. </s> I agree with MR. JUSTICE BLACK on the question of statutory construction, that 3 of the Act means just what it says: "every manufacturer of and dealer in gambling devices" is required to register with the Attorney General and file with him certain records, without reference to interstate commerce. MR. JUSTICE JACKSON'S opinion states that "this Court will construe a statute in a manner that requires decision of serious constitutional questions only if the statutory language leaves no reasonable alternative." I agree; but I think that the statutory language involved here leaves no reasonable alternative. It would be difficult for Congress to be more explicit than to direct the statute's mandate, as it has here, to "every" manufacturer and dealer without qualification. In United States v. Sullivan, 332 U.S. 689 (1948), the Court dealt with a highly analogous situation; the opinion of the Court there was that "A restrictive interpretation should not be given a statute merely because . . . giving effect to the express language employed by Congress might require a court to face a constitutional question." 332 U.S., at 693 . </s> If by legislative history or otherwise it could persuasively be shown that Congress intended that the word "every" be given other than its plain meaning, we should likely consider such evidence in interpreting the statute. [346 U.S. 441, 455] See Boston Sand Co. v. United States, 278 U.S. 41, 48 (1928). But I think the legislative history on this issue is almost totally unenlightening. 1 Of the meager evidence available perhaps strongest support is furnished the construction resulting from a literal reading of the section. The bill, including the part of 3 here in issue as passed without discussion, was drafted pursuant to the resolution of a "crime conference" consisting of leading national and local officials and others interested in law enforcement, in cooperation with the Department of Justice. The conference's unanimous resolution was "Resolved, That this conference endorse the idea of Federal legislation to prohibit the shipment of gambling devices into or out of any State where the possession or use of such devices is illegal. Further, requiring Federal registration of all such machines sold within States." 2 The bill was drafted shortly thereafter by the Justice Department, with 3 requiring registration and filing by "every" dealer and manufacturer. That part of the section was never changed and apparently was never discussed by Congress. [346 U.S. 441, 456] </s> Concededly, to give the provision its literal meaning affords far more effective enforcement with respect to other sections of the Act than would be the case if any of the other suggested interpretations were applied. 3 </s> For these reasons I am unable to agree with the solution of these cases offered by MR. JUSTICE JACKSON. </s> II. </s> I am also unable to agree that the statute is unconstitutionally vague. </s> Section 3 requires that at specified times "every manufacturer of and dealer in gambling devices shall register with the Attorney General his name or trade name, the address of his principal place of business, and the addresses of his places of business in such district," and that there be filed monthly with the Attorney General "an inventory and record of all sales and deliveries of gambling devices as of the close of the preceding calendar month for the place or places of business in the district." </s> I do not mean to suggest that these provisions are models of clarity; when words are left in a statute by oversight, exemplary draftsmanship hardly results. But our function is not to discipline Congress for its failure to dot the i's and cross the t's. It is rather to make certain that the conduct required has been made sufficiently clear that to impose sanctions for ignoring the statute's requirements will not violate due process of law. [346 U.S. 441, 457] </s> The appellees ask us to hold that this is a case "where patently ambiguous language is so unclear and equivocal as to render its enforcement a denial of due process"; they argue that conviction here violates the rule that "no one may be required at peril of life, liberty or property to speculate as to the meaning of penal statutes," and that all are entitled to be informed as to what the statute commands or forbids, citing Lanzetta v. New Jersey, 306 U.S. 451, 453 (1939). In my view speculation is not here required, unless one seeks to avoid compliance with the law; I think that all who would comply with the law are sufficiently informed of what is required of them to assure that any bona fide attempt at compliance would be successful. </s> Appellees' complaint, according to their brief, appears to be not that the statute does not tell them what to file, but that it does not tell them where to file it. As I read the Act, several things are at once apparent: (1) the registrant must register with someone his name and the addresses of all his places of business, designating the principal one if he has more than one; (2) he must file monthly an inventory and record of all sales and deliveries of gambling devices; (3) this registration and filing must be done with the Attorney General - for the Act provides in clearest terms that he "shall register with the Attorney General his name" etc., and that he "shall file with the Attorney General an inventory" etc. I take it that, aside from 5 U.S.C. 291 which provides that the Attorney General shall be at the seat of government, it is common knowledge that the Attorney General is located in Washington, D.C. There can be no doubt that the required information sent to him there would amount to compliance. If one desired to give meaning to "district," the Attorney General has United States Attorneys representing him throughout the country. There can be no doubt that the required information sent to the Attorney [346 U.S. 441, 458] General through a local United States Attorney would amount to compliance. At any rate the Act did not leave room for doubt that the Attorney General was to receive the specified information. Subsequent to passage of the Act the Attorney General, acting pursuant to 5 U.S.C. 22, provided by regulation that the required information should be sent to him in Washington, with an exception made in the case of dealers and manufacturers in Illinois (apparently the center of the affected industry), who were directed to register and file with the United States District Attorney there. If there was ever bona fide doubt as to where to file the information, the Attorney General had now made his whereabouts for purposes of the Act crystal clear. </s> The Constitution requires that a statute must not be too vague to allow the citizen to ascertain what course of conduct he must follow to put himself safely within the bounds of the law. Lanzetta v. New Jersey, supra. No doubt the forgotten words in the Act provide room for quibbling; and the lawyer who is looking for litigation, or whose client seeks to avoid compliance with the law, can paint a picture of uncertainty and frustrated effort to fathom the unfathomable intent of Congress. But to me it is certain that, with or without the regulations, a person honestly seeking to comply with this law would inevitably have succeeded, without undue mental strain in determining the statute's import and without uncertainty as to his chances of remaining within the bounds of the law. The certainty required by the Due Process Clause is not tested from the would-be violator's standpoint; the test is rather whether adequate guidance is given to those who would be law-abiding. See Musser v. Utah, 333 U.S. 95, 97 (1948). The constitutional requirements are met when the statute prescribes a course of conduct which any person acting in good faith can recognize and act upon. The presence of the forgotten [346 U.S. 441, 459] words in this statute does not transform into a trap for the unwary the express requirements of registration and filing with the Attorney General specified information about one's person, business and places of business. </s> III. </s> The ultimate question presented by these cases is whether Congress has exceeded its constitutional power. I think it has not. </s> It appears that Congress in this Act has embarked on what it deemed the most effective course of action possible to eliminate one of the major sources of income to organized crime, while at the same time yielding to the policy of Nevada and a few other states where slot machines are legal and the underworld's control and profit are correspondingly minimized. The Act prohibits shipment of gambling devices into any state except those which act to exempt themselves from the statute. Section 3, which sets up the registration and filing requirements here in issue, was designed to make effective and enforceable the interstate shipment ban. It was thought that a report on each transfer of each machine before and after interstate shipment would enable enforcement officials to ascertain who transported the machine across state lines and thereby violated the law. Unless all such local sales were reported, it was thought that it would be an easy matter to conceal the identity of the interstate transporter by resorting to straw-man transactions, coverup intrastate "sales" before and after interstate shipment, and the like. In view of the established tie-up between slot machines and "Nation-wide crime syndicates," 4 more stringent methods of enforcement were deemed necessary to accomplish the ban on interstate [346 U.S. 441, 460] transportation of the machines than would be needed to control an activity in which dealers and manufacturers could be presumed to be law-abiding citizens who kept accurate books and accounts. The net effect of these considerations is to clearly establish that the registration and filing requirements of the Act amount to reasonably necessary, appropriate, and probably essential means for enforcing the ban on interstate transportation of gambling devices. </s> The question presented, then, is whether Congress is empowered by the Constitution to require information, reasonably necessary and appropriate to make effective and enforceable a concededly valid ban on interstate transportation of gambling devices, from persons not shown to be themselves engaged in interstate activity. I think that an affirmative answer is not inevitably dictated by prior decisions of the Court; but, more important, no decision precludes an affirmative answer. The question has not been previously decided because the legislative scheme utilized here apparently has not been heretofore attempted. But its novelty should not suggest its unconstitutionality. </s> In the body of decisional law defining the scope of Congress' powers in regard to interstate commerce, it has been clearly established that activities local in nature may be regulated if they can fairly be said to "affect" commerce, or where local goods are commingled with goods destined for interstate commerce, or were previously in interstate commerce. 5 For present purposes, these cases at least [346 U.S. 441, 461] establish that activities or goods intrastate in nature are not immune from congressional control where they are sufficiently related to interstate activities or goods controlled by Congress. </s> The Court also has on several occasions stated that the commerce power "extends to those activities intrastate which so affect interstate commerce or the exercise of the power of Congress over it as to make regulation of them appropriate means to the attainment of a legitimate end, the exercise of the granted power of Congress to regulate interstate commerce." 6 I think it may accurately be said that every sale of slot machines affects the exercise of the power of Congress over commerce, in view of the elusive [346 U.S. 441, 462] nature of the object whose interstate shipment is being controlled. </s> The Constitution empowers Congress "To make all Laws which shall be necessary and proper for carrying into Execution the foregoing Powers . . . ." McCulloch v. Maryland, 4 Wheat. 316, 421 (1819), cited in the foregoing cases, interprets this as follows: </s> "Let the end be legitimate, let it be within the scope of the constitution, and all means which are appropriate, which are plainly adapted to that end, which are not prohibited, but consist with the letter and spirit of the constitution, are constitutional." </s> The Court in that case added that much leeway is to be given Congress in determining what means are appropriate. 4 Wheat., at 423. </s> In their brief appellees attack the power of Congress under the Constitution solely on the basis that the registration and filing requirements are not reasonable means of enforcing the provision against interstate transportation of slot machines. I believe that the reasonableness and the necessity of the requirements have already been adequately demonstrated. None of the cases relied on by the appellees suggests a contrary conclusion. The Act's requirements of registration and filing as to local transactions are certainly not a mere ruse designed to invade areas of control reserved to the states, but are "naturally and reasonably adapted to the effective exercise of" the commerce power. 7 </s> If Congress by 3 had sought to regulate local activity, its power would no doubt be less clear. But here there is no attempt to regulate; all that is required is information in aid of enforcement of the conceded power to ban interstate transportation. The distinction is substantial. [346 U.S. 441, 463] See Interstate Commerce Commission v. Goodrich Transit Co., 224 U.S. 194, 211 (1912). 8 </s> In my view Congress has power to require the information described in 3 of the Act since the requirement is a means reasonably necessary to effectuate the prohibition of transporting gambling devices interstate. If it be suggested that such a holding would open possibilities for widespread congressional encroachment upon local activities whose regulation has been reserved to the states, I would point out, first, that power of regulation heretofore exclusively vested in the states remains there; and second, that the situation here is unique: the commodity involved is peculiarly tied to organized interstate crime and is itself illegal in the great majority of the states, and the federal law in issue was actively sought by local and state law enforcement officials as a means to assist them, not supplant them, in local law enforcement. I would reverse the judgments. 9 </s> [Footnote 1 The quoted and cited statements of Senator Johnson occurred in the course of debate on the bill as a whole and particularly in reference to its ban on certain interstate shipments. Apparently the only mention of the scope of 3 was the statement from the conference report that the bill "requires manufacturers and dealers in gambling devices to register annually with the Attorney General of the United States." 96 Cong. Rec. 15106. This statement occasioned no discussion. The Attorney General's statement that no "prohibition era" was contemplated and the committee report to the same effect apparently were designed to assure some Senators that the thrust of the Act was not at the gamblers, the users of the machines, who were to be left to state law enforcement measures and officials. However this may be, I suggest that the question of who was to enforce the various provisions of the Act - state officers or federal officers - is scarcely relevant to show congressional intent as to the scope of 3. </s> [Footnote 2 96 Cong. Rec. 15102. (Emphasis supplied.) </s> [Footnote 3 The construction urged by the appellees differs from that of MR. JUSTICE JACKSON. They state: ". . . the proper construction of this Act, we feel, is this: that all shipments of gambling devices in interstate commerce are prohibited except to those States where the same are legal. Manufacturers or dealers shipping into those States where it is legal should be required to register with the Attorney General and file an inventory." Brief of Appellees in Nos. 40 and 41, p. 8. (Emphasis supplied.) This construction would seem to circumvent the possible self-incrimination aspects suggested by MR. JUSTICE BLACK; it would also unduly strain statutory construction. </s> [Footnote 4 H. R. Rep. No. 2769, 81st Cong., 2d Sess., pp. 4-6; S. Rep. No. 307, 82d Cong., 1st Sess., p. 55, published after passage of the Act, made this relationship even more clear. </s> [Footnote 5 E. g., United States v. Darby, 312 U.S. 100 (1941); Wickard v. Filburn, 317 U.S. 111 (1942); Currin v. Wallace, 306 U.S. 1 (1939); United States v. Sullivan, 332 U.S. 689 (1948). In United States v. Darby, supra, at 121, the Court summarized the power of Congress to control local activities as follows: </s> "Congress, having by the present Act adopted the policy of excluding from interstate commerce all goods produced for the commerce [346 U.S. 441, 461] which do not conform to the specified labor standards, it may choose the means reasonably adapted to the attainment of the permitted end, even though they involve control of intrastate activities. Such legislation has often been sustained with respect to powers, other than the commerce power granted to the national government, when the means chosen, although not themselves within the granted power, were nevertheless deemed appropriate aids to the accomplishment of some purpose within an admitted power of the national government. See Jacob Ruppert, Inc. v. Caffey, 251 U.S. 264 ; Everard's Breweries v. Day, 265 U.S. 545, 560 ; Westfall v. United States, 274 U.S. 256, 259 . . . . Similarly Congress may require inspection and preventive treatment of all cattle in a disease infected area in order to prevent shipment in interstate commerce of some of the cattle without the treatment. Thornton v. United States, 271 U.S. 414 . . . . And we have recently held that Congress in the exercise of its power to require inspection and grading of tobacco shipped in interstate commerce may compel such inspection and grading of all tobacco sold at local auction rooms from which a substantial part but not all of the tobacco sold is shipped in interstate commerce. Currin v. Wallace [306 U.S. 1, and see to the like effect United States v. Rock Royal Co-op. [307 U.S. 533." </s> [Footnote 6 United States v. Darby, supra, at 118; United States v. Wrightwood Dairy Co., 315 U.S. 110, 119 (1942); Wickard v. Filburn, supra, at 124. (Emphasis supplied.) </s> [Footnote 7 Compare Linder v. United States, 268 U.S. 5, 17 (1925). </s> [Footnote 8 Compare Oklahoma Press Publishing Co. v. Walling, 327 U.S. 186 (1946), holding that Congress can empower the Administrator of the Fair Labor Standards Act to issue subpoenas duces tecum to obtain information from a corporation to determine whether it is covered by the Act or has violated it. </s> [Footnote 9 Once it is established that Congress can require registration and filing, I view the forfeiture sanction imposed in No. 14 as an alternative method of enforcement, which presents no substantial additional issue. Compare United States v. Stowell, 133 U.S. 1 (1890). </s> [346 U.S. 441, 464]

United States Supreme Court WARREN TRADING POST v. TAX COMM'N(1965) No. 115 Argued: March 9, 1965Decided: April 29, 1965 </s> Appellant, the operator of a retail trading post on the Navajo Indian Reservation under a license granted by the Commissioner of Indian Affairs pursuant to 25 U.S.C. 261, challenged the right of Arizona to levy a tax on its income from trading with reservation Indians on the reservation. The State Supreme Court upheld the tax. Held: Since Congress has broadly occupied the field of trading with Indians on reservations by all-inclusive regulations and statutes, the States may not impose additional burdens on the traders or the Indians, and therefore this tax may not be imposed on appellant. Pp. 686-692. </s> 95 Ariz. 110, 387 P.2d 809, reversed and remanded. </s> Edward Jacobson argued the cause and filed briefs for appellant. </s> Philip M. Haggerty, Assistant Attorney General of Arizona, argued the cause for appellees. With him on the brief were Robert W. Pickrell, Attorney General, and Walter O. Holm, Assistant Attorney General. </s> Briefs of amici curiae, urging reversal, were filed by Solicitor General Cox and Roger P. Marquis for the United States; by Arthur Lazarus, Jr., and Royal D. Marks for the Association on American Indian Affairs. Inc., et al.; by Norman M. Littell and Leland O. Graham for the Navajo Tribe of Indians, and by Edward B. Berger for the Papago Tribe. </s> MR. JUSTICE BLACK delivered the opinion of the Court. </s> Arizona has levied a tax of 2% on the "gross proceeds of sales, or gross income" of appellant Warren Trading Post Company, which does a retail trading business with [380 U.S. 685, 686] Indians on the Arizona part of the Navajo Indian Reservation under a license granted by the United States Commissioner of Indian Affairs pursuant to 19 Stat. 200, 25 U.S.C. 261 (1958 ed.). 1 Appellant claimed that as applied to its income from trading with reservation Indians on the reservation the state tax was invalid as (1) in violation of Art. I, 8, cl. 3, of the United States Constitution, which provides that "Congress shall have Power . . . To regulate Commerce . . . with the Indian Tribes"; (2) inconsistent with the comprehensive congressional plan, enacted under authority of Art. I, 8, to regulate Indian trade and traders and to have Indian tribes on reservations govern themselves. The State Supreme Court rejected these contentions and upheld the tax, one Justice dissenting. 95 Ariz. 110, 387 P.2d 809. The case is properly here on appeal under 28 U.S.C. 1257 (2) (1958 ed.). Since we hold that this state tax cannot be imposed consistently with federal statutes applicable to the Indians on the Navajo Reservation, we find it unnecessary to consider whether the tax is also barred by that part of the Commerce Clause giving Congress power to regulate commerce with the Indian tribes. </s> The Navajo Reservation was set apart as a "permanent home" for the Navajos in a treaty made with the "Navajo nation or tribe of Indians" on June 1, 1868. 2 Long before that, in fact from the very first days of our Government, the Federal Government had been permitting the Indians largely to govern themselves, free from state [380 U.S. 685, 687] interference, 3 and had exercised through statutes and treaties 4 a sweeping and dominant control over persons who wished to trade with Indians and Indian tribes. As [380 U.S. 685, 688] Chief Justice John Marshall recognized in Worcester v. Georgia, 6 Pet. 515, 556-557: </s> "From the commencement of our government, congress has passed acts to regulate trade and intercourse with the Indians; which treat them as nations, respect their rights, and manifest a firm purpose to afford that protection which treaties stipulate." </s> He went on to say that: </s> "The treaties and laws of the United States contemplate the Indian territory as completely separated from that of the states; and provide that all intercourse with them shall be carried on exclusively by the government of the union." Id., at 557. </s> See also, e. g., United States v. Forty-three Gallons of Whiskey, 93 U.S. 188 . In the very first volume of the federal statutes is found an Act, passed in 1790 by the first Congress, "to regulate trade and intercourse with the Indian tribes," requiring that Indian traders obtain a license from a federal official, and specifying in detail the conditions on which such licenses would be granted. 5 </s> Such comprehensive federal regulation of Indian traders has continued from that day to this. 6 Existing statutes make specific restrictions on trade with the Indians, 7 and [380 U.S. 685, 689] one of them, passed in 1876 and tracing back to comprehensive enactments of 1802 8 and 1834, 9 provides that the Commissioner of Indian Affairs shall have "the sole power and authority to appoint traders to the Indian tribes" and to specify "the kind and quantity of goods and the prices at which such goods shall be sold to the Indians." 10 Acting under authority of this statute and one added in 1901, 11 the Commissioner has promulgated detailed regulations prescribing in the most minute fashion who may qualify to be a trader and how he shall be licensed, penalties for acting as a trader without a license; conditions under which government employees may trade with Indians; articles that cannot be sold to Indians; and conduct forbidden on a licensed trader's premises. 12 He has ordered that detailed business records be kept and that government officials be allowed to inspect these records to make sure that prices charged are fair and reasonable; that traders pay Indians in money; that bonds be executed by proposed licensees; and that the governing body of an Indian reservation may assess from a trader "such fees, etc., as it may deem appropriate." 13 </s> [380 U.S. 685, 690] It was under these comprehensive statutes and regulations that the Commissioner of Indian Affairs licensed appellant to trade with the Indians on the Navajo Reservation. These apparently all-inclusive regulations and the statutes authorizing them would seem in themselves sufficient to show that Congress has taken the business of Indian trading on reservations so fully in hand that no room remains for state laws imposing additional burdens upon traders. 14 In fact, the Solicitor's Office of the Department of the Interior in 1940 15 and again in 1943 16 interpreted these statutes to bar States from taxing federally licensed Indian traders on their sales to reservation Indians on a reservation. We think those rulings were correct. </s> Congress has, since the creation of the Navajo Reservation nearly a century ago, left the Indians on it largely free to run the reservation and its affairs without state control, a policy which has automatically relieved Arizona of all burdens for carrying on those same responsibilities. And in compliance with its treaty obligations the Federal Government has provided for roads, education and other services needed by the Indians. 17 We [380 U.S. 685, 691] think the assessment and collection of this tax would to a substantial extent frustrate the evident congressional purpose of ensuring that no burden shall be imposed upon Indian traders for trading with Indians on reservations except as authorized by Acts of Congress or by valid regulations promulgated under those Acts. This state tax on gross income would put financial burdens on appellant or the Indians with whom it deals in addition to those Congress or the tribes have prescribed, and could thereby disturb and disarrange the statutory plan Congress set up in order to protect Indians against prices deemed unfair or unreasonable by the Indian Commissioner. And since federal legislation has left the State with no duties or responsibilities respecting the reservation Indians, we cannot believe that Congress intended to leave to the State the privilege of levying this tax. 18 Insofar as they are applied to this federally licensed Indian trader with respect to sales made to reservation [380 U.S. 685, 692] Indians on the reservation, these state laws imposing taxes cannot stand. Cf. Rice v. Santa Fe Elevator Corp., 331 U.S. 218 . The judgment of the Supreme Court of Arizona is reversed and the cause remanded for further proceedings not inconsistent with this opinion. </s> Reversed and remanded. </s> Footnotes [Footnote 1 Ariz. Rev. Stat. 42-1309, 42-1312. The tax is applicable to "every person engaging or continuing within this state in the business of selling any tangible personal property whatever at retail," with stated exceptions. Ariz. Rev. Stat. 42-1312. Appellant's challenge to these statutes is limited to the State's attempt to apply them to gross income from sales made on the reservation to reservation Indians. </s> [Footnote 2 15 Stat. 667. </s> [Footnote 3 Arizona was admitted to the Union on its agreement that "the people inhabiting said proposed State do agree and declare that they forever disclaim all right and title to . . . all lands lying within said boundaries owned or held by any Indian or Indian tribes, the right or title to which shall have been acquired through or from the United States or any prior sovereignty, and that until the title of such Indian or Indian tribes shall have been extinguished the same shall be and remain subject to the disposition and under the absolute jurisdiction and control of the Congress of the United States . . . ." Act of June 20, 1910, 36 Stat. 557, 569. See also Act of Aug. 21, 1911, 37 Stat. 39. Certain state laws have been permitted to apply to activities on Indian reservations, where those laws are specifically authorized by acts of Congress, or where they clearly do not interfere with federal policies concerning the reservations. See Organized Village of Kake v. Egan, 369 U.S. 60, 72 -75; Williams v. Lee, 358 U.S. 217, 219 -221; Thomas v. Gay, 169 U.S. 264 ; Utah & N. R. Co. v. Fisher, 116 U.S. 28, 31 -32. Compare, e. g., 18 U.S.C. 1161 (1958 ed.) (permitting application of state liquor law standards within an Indian reservation under certain conditions); 45 Stat. 1185, as amended, 25 U.S.C. 231 (1958 ed.) (permitting application of state health and education laws within a reservation under certain conditions); 18 U.S.C. 1162 (1958 ed.) and 28 U.S.C. 1360 (1958 ed.) (respectively granting certain States criminal and civil jurisdiction over offenses and causes of action involving Indians within specified Indian reservations). </s> [Footnote 4 In 1778, in its first treaty with an Indian tribe, the United States promised to provide for the Delaware Nation "a well-regulated trade, under the conduct of an intelligent, candid agent, with an adequate sallery, one more influenced by the love of his country, and a constant attention to the duties of his department by promoting the common interest, than the sinister purposes of converting and binding all the duties of his office to his private emolument . . . ." Treaty of Sept. 17, 1778, Art. V, 7 Stat. 13, 14. Similar provisions were found in other early treaties, concluded before the first Congress legislated on the subject of Indian trade. See United States Department of the Interior, Federal Indian Law 96 (hereafter cited as Federal Indian Law). In 1871 Congress forbade [380 U.S. 685, 688] future treaties with the Indian tribes but left the obligations of existing treaties unimpaired. 16 Stat. 544, 566, now 25 U.S.C. 71 (1958 ed.). </s> [Footnote 5 Act of July 22, 1790, 1 Stat. 137. </s> [Footnote 6 See generally Federal Indian Law 94-138, 373-381. </s> [Footnote 7 E. g., 4 Stat. 729, now 25 U.S.C. 263 (1958 ed.) (empowering the President in the public interest to forbid introduction of any or all goods into the territory of a tribe, and to revoke and refuse all licenses to trade with that tribe); 4 Stat. 729, as amended, now 25 U.S.C. 264 (1958 ed.) (establishing penalties for trading without a license and forbidding traders to hire white persons as clerks unless licensed to do so); 18 U.S.C. 3113 (1958 ed.) (forbidding unlawful introduction of liquor into Indian country and providing for revocation of the license of any trader violating this prohibition). </s> [Footnote 8 Act of March 30, 1802, 2 Stat. 139. </s> [Footnote 9 Act of June 30, 1834, 4 Stat. 729. </s> [Footnote 10 19 Stat. 200, 25 U.S.C. 261 (1958 ed.), provides: "The Commissioner of Indian Affairs shall have the sole power and authority to appoint traders to the Indian tribes and to make such rules and regulations as he may deem just and proper specifying the kind and quantity of goods and the prices at which such goods shall be sold to the Indians." </s> [Footnote 11 31 Stat. 1066, as amended, 25 U.S.C. 262 (1958 ed.), provides: "Any person desiring to trade with the Indians on any Indian reservation shall, upon establishing the fact, to the satisfaction of the Commissioner of Indian Affairs, that he is a proper person to engage in such trade, be permitted to do so under such rules and regulations as the Commissioner of Indian Affairs may prescribe for the protection of said Indians." </s> [Footnote 12 25 CFR 251.9, 252.6, 251.3, 252.3, 251.5, 251.8, 251.18, 251.19, 251.21, 252.15. </s> [Footnote 13 25 CFR 252.7, 251.22, 251.24, 251.10, 252.9, 252.27c. See generally 25 CFR 251, 252. </s> [Footnote 14 These statutes and regulations apply only to activities on reservations. See Taylor v. United States, 44 F.2d 531 (C. A. 9th Cir.), cert. denied, 283 U.S. 820 ; 57 I. D. 124, 125. </s> [Footnote 15 57 I. D. 124. </s> [Footnote 16 58 I. D. 562. </s> [Footnote 17 Since 1950 Congress has authorized expenditure of over $100,000,000 as part of an extensive plan to rehabilitate the Navajo and Hopi tribes of Arizona. 64 Stat. 44, as amended, 25 U.S.C. 631-640 (1958 ed.). Detailed accounts of the ways in which the Federal Government has aided and supported the Navajos and other tribes may be found in Secretary of the Interior, Annual Report, 1963, pp. 11-47; id., 1962, pp. 7-44; id., 1961, pp. 277-318. See also Federal Indian Law 268-306; Young, The Navajo Yearbook, Report No. viii, 1951-1961, A Decade of Progress (1961). </s> [Footnote 18 The Buck Act, now 4 U.S.C. 105-110 (1964 ed.), in which Congress permitted States to levy sales or use taxes within certain federal areas, has been interpreted by what appears to be the only court to consider the question before this case, and by the Interior Department, as not applying to Indian reservations. Your Food Stores, Inc. v. Village of Espanola, 68 N. M. 327, 334, 361 P.2d 950, 955-956; 58 I. D. 562. Cf. 4 U.S.C. 109 (1964 ed.), excepting taxes on Indians from the scope of the Act. We think that interpretation was correct. See S. Rep. No. 1625, 76th Cong., 3d Sess., 2, 3. Moreover, we hold that Indian traders trading on a reservation with reservation Indians are immune from a state tax like Arizona's, not simply because those activities take place on a reservation, but rather because Congress in the exercise of its power granted in Art. I, 8, has undertaken to regulate reservation trading in such a comprehensive way that there is no room for the States to legislate on the subject. Cf. Surplus Trading Co. v. Cook, 281 U.S. 647, 651 . Even assuming that the Arizona tax here is of a kind to which the Buck Act applies, nothing whatever in that Act suggests to us that Congress meant to give States new power to tax federally licensed Indian traders. See 58 I. D. 562. </s> [380 U.S. 685, 693]

United States Supreme Court DIRECTOR OF REVENUE OF MISSOURI v. CoBANK ACB, as successor to the NATIONAL BANK FOR COOPERATIVES(2001) No. 99-1792 Argued: November 28, 2000Decided: February 20, 2001 </s> The Farm Credit Act of 1933 created various lending institutions within the Farm Credit System--including banks for cooperatives--and addressed their taxation. Each of these institutions is designated as a federally chartered instrumentality of the United States. E.g., 12 U. S. C. §2121. Respondent CoBank ACB is the successor to all rights and obligations of a bank for cooperatives. In 1996, CoBank filed amended returns on behalf of that bank, requesting an exemption from all Missouri corporate income taxes and refunds on the taxes it paid for 1991 through 1994. CoBank asserted that the Supremacy Clause accords federal instrumentalities immunity from state taxation unless Congress has expressly waived this immunity, and that, because the Act's current version does not expressly do so, banks for cooperatives are exempt from Missouri's corporate income tax. The State denied the request, but the State Supreme Court reversed, stating that because the Act's current version is silent as to such banks' tax immunity, Congress cannot be said to have expressly consented to state income taxation and, thus, the banks are exempt. </s> Held:Banks for cooperatives are subject to state income taxation. Pp.5-9. </s> (a)Congress has provided that banks for cooperatives are subject to state taxation. The 1933 Act subjected such banks to state taxation except when the Unites States held stock in the banks. As soon as governmental investment in the banks was repaid (as it was by 1968), the banks had to pay state income taxes because the exemption from such taxation no longer applied. Congress did not change that rule when it amended the Act in 1971. Nor did various 1985 amendments--which discontinued the Government's authority to own stock in banks for cooperatives and deleted the two sentences within 12 U.S.C. §2134 that exempted such a bank from state taxation when the Government held stock in the bank--expressly change the taxation of banks for cooperatives. And, it would be surprising, indeed, if Congress had eliminated the States' ability to collect revenue from the banks sub silentio. The more logical interpretation, and one that accords with the Act's more than 50-year history, is that Congress merely deleted language in §2134 that had become superfluous once the United States no longer owned, and no longer could own, stock in banks for cooperatives. Pp. 5-8. </s> (b)The Act's structure confirms that banks for cooperatives are subject to state taxation. With respect to each lending institution in the Farm Credit System, the Act contains a taxation provision that specifically delineates that entity's tax immunity. Banks for cooperatives have been granted only limited tax exemptions. Had Congress intended to confer upon them the more comprehensive exemption it provided for other types of institutions, it would have done so expressly. Pp. 8-9. </s> 10 S. W. 3d 142, reversed and remanded. </s> Thomas, J., delivered the opinion for a unanimous Court. </s> DIRECTOR OF REVENUE OF MISSOURI, PETITIONER v. CoBANK ACB, as successor to the NATIONAL BANK FOR COOPERATIVES </s> on writ of certiorari to the supreme court of missouri </s> [February 20, 2001] </s> Justice Thomas delivered the opinion of the Court. </s> In this case we are asked to decide whether the National Bank for Cooperatives, which Congress has designated as a federally chartered instrumentality of the United States, is exempt from state income taxation. We hold that it is not. </s> I </s> In the Farm Credit Act of 1933, 48 Stat. 257, as amended, 12 U.S.C. §2001 et seq., Congress created various lending institutions within the Farm Credit System to meet the specific credit needs of farmers. Among these institutions were banks for cooperatives, one in each of 12 farm credit districts, and a Central Bank for Cooperatives. These banks were designed to make loansto cooperative associations engaged in marketing farm products, purchasing farm supplies, or furnishing farm services. </s> Today, the Farm Credit System includes banks for cooperatives, production credit associations, farm credit banks, and federal land bank associations. §2002(a). By statute, each of these institutions is designated as a "federally chartered instrumentalit[y] of the United States." §2121 (banks for cooperatives and Central Bank for Cooperatives); §2141 (National Bank for Cooperatives); §§2071(a) and (b)(7) (production credit associations); §2011(a) (farm credit banks); §§2091(a) and (b)(4) (federal land bank associations). The Farm Credit Act also addresses the taxation of these institutions. The provision applicable to a bank for cooperatives, the institution at issue in this case, states: </s> "Each bank for cooperatives and its obligations are instrumentalities of the United States and as such any and all notes, debentures, and other obligations issued by such bank shall be exempt, both as to principal and interest from all taxation (except surtaxes, estate, inheritance, and gift taxes) now or hereafter imposed by the United States or any State, territorial, or local taxing authority, except that interest on such obligations shall be subject to Federal income taxation in the hands of the holder." §2134. </s> Respondent CoBank ACB is the successor to all rights and obligations of the National Bank for Cooperatives, which had been formed in 1989 through the consolidation of 10 district banks for cooperatives and the Central Bank for Cooperatives.1 The National Bank for Cooperatives filed Missouri corporate income tax returns for the years 1991 through 1994 and paid the taxes shown on those returns. In March 1996, CoBank filed amended returns on behalf of the National Bank for Cooperatives, requesting an exemption from all state income taxes and refunds on the taxes paid--erroneously, it alleged--for 1991 through 1994. Relying on the doctrine of implied tax immunity that originated in McCulloch v. Maryland, 4 Wheat. 316 (1819), CoBank asserted that the Supremacy Clause of the Constitution accords federal instrumentalities immunity from state taxation unless Congress has expressly waived this immunity. CoBank argued that, because the current version of the Farm Credit Act does not expressly waive this immunity, banks for cooperatives are exempt from Missouri's corporate income tax. The Director of Revenue of Missouri denied the request. </s> On appeal, the Administrative Hearing Commission upheld the Director of Revenue's assessment of corporate income tax, because the National Bank for Cooperatives had not established that it was a federal instrumentality statutorily exempt from state taxation of its income. The commission determined that Congress did not provide expressly that banks for cooperatives, in contrast to farm credit banks and federal land bank associations, would have immunity from state income taxation. The commission reasoned that had Congress intended to confer upon banks for cooperatives the same immunity that was provided to farm credit banks and federal land bank associations, it would have done so expressly. For jurisdictional reasons, the commission did not decide CoBank's constitutional claim. </s> The Missouri Supreme Court reversed the commission's decision and held that banks for cooperatives are exempt from state income taxation.2 Production Credit Assn. of Southeastern Mo. v. Director of Revenue, 10 S.W. 3d 142, 143 (2000). The Missouri Supreme Court held that the Supremacy Clause of the Constitution provides federal instrumentalities immunity from state taxation unless Congress has expressly waived this immunity. According to the Missouri Supreme Court, because the current version of the Farm Credit Act is silent as to such institutions' immunity from state taxation, Congress cannot be said to have expressly consented to state income taxation and, thus, the institutions are exempt from state income taxes. The Missouri Supreme Court noted that other courts that had addressed the issue of state taxation of member institutions of the Farm Credit System also had concluded that the States could not tax such institutions. Id., at 143-144 (citing Farm Credit Servs. of Central Ark., PCA v. Arkansas, 76 F.3d 961, 964 (CA8 1996), rev'd on other grounds, 520 U.S. 821 (1997); State v. Farm Credit Servs. of Central Ark., 338 Ark. 322, 327, 994 S.W. 2d 453, 456 (1999), cert. denied, 529 U.S. 1036 (2000); Northwest La. Production Credit Assn. v. State, 98-1995 (La. App. 11/5/99), 746 So.2d 280). </s> The New Mexico Court of Appeals and the Indiana Supreme Court have reached the opposite conclusion with respect to state taxation of production credit associations. See Production Credit Assn. of Eastern N.M. v. Taxation and Revenue Dept., 2000 NMCA-021 ¶ ;26, 999 P.2d 1031, 1038, cert. denied, 997 P. 2d 820 (N.M. 2000); Indiana Dept. of State Revenue v. Farm Credit Servs. of Mid-America, ACA, 734 N.E. 2d 551, 560 (Ind. 2000). Since the statutory history and provisions regarding the taxation of production credit associations and banks for cooperatives are virtually identical, compare 12 U.S.C. §2077 with §2134; compare Farm Credit Act of 1971, §2.17, 85 Stat. 602, with §3.13, 85 Stat. 608; compare Farm Credit Amendments Act of 1985, §205(d)(16), 99 Stat. 1705, with §205(e)(10), 99 Stat. 1705,3 we granted certiorari to resolve this conflict. 530 U.S. 1260 (2000). </s> II </s> Congress has expressly designated banks for cooperatives as "instrumentalities of the United States." 12 U.S.C. §2121. We have held, in addressing state taxation of contractors conducting business with the United States, that an instrumentality is entitled to implied tax immunity only when it is "so closely connected to the Government that the two cannot realistically be viewed as separate entities." United States v. New Mexico, 455 U.S. 720, 735 (1982). Relying on New Mexico, the Director of Revenue argues that banks for cooperatives are not "so closely connected" to the United States as to be indistinguishable from the United States, and that banks for cooperatives thus are not entitled to immunity from state taxation. CoBank disagrees with this characterization and asks us to conclude that banks for cooperatives are indeed virtual arms of the United States, worthy of implied tax immunity under McCulloch. </s> We need not, however, reach this implied immunity question. Implied immunity becomes an issue only when Congress has failed to indicate whether an instrumentality is subject to state taxation. In this case, Congress has provided that banks for cooperatives are subject to state taxation. To be sure, Congress did not include an express statement in the current version of §2134. However, nothing in the statute indicates a repeal of the previous express approval of state taxation, and the structure of the Farm Credit Act indicates by negative implication that banks for cooperatives are not entitled to immunity. </s> A </s> Upon their creation in 1933, banks for cooperatives were subject to state income taxation except during periods when the United States held stock in the banks. Farm Credit Act of 1933, §63, 48 Stat. 267 ("Such banks, ... and their income, shall be exempt from all taxation now or hereafter imposed by the United States or by any State, Territorial, or local taxing authority .... The exemption provided herein shall not apply ... with respect to ... any ... Bank for Cooperatives, or its property or income after the stock held in it by the United States has been retired"). Under this statute, as soon as governmental investment in a bank for cooperatives was repaid (as it was for all such banks by 1968), the bank had to pay state income taxes because the exemption from such taxation no longer applied. </s> When Congress amended the Farm Credit Act in 1971, it did not change the rule that banks for cooperatives are subject to state taxation unless the United States holds stock in the banks. Farm Credit Act of 1971, §3.13, 85 Stat. 608. Although all banks for cooperatives were at the time privately owned, Congress provided that the Governor of the Farm Credit Administration had the authority on behalf of the United States to purchase stock in banks for cooperatives "as a temporary investment in the stock of the institution to help one or several of the banks ... to meet emergency credit needs of borrowers." §4.0, 85 Stat. 609. The 1971 version of §2134 therefore provided, in relevant part: </s> "Such banks ... and their income shall be exempt from all taxation now or hereafter imposed by the United States or by any State, territorial, or local taxing authority .... The exemption provided in the preceding sentence shall apply only for any year or part thereof in which stock in the bank for cooperatives is held by the Governor of the Farm Credit Administration." §3.13, 85 Stat. 608-609. </s> In 1985, Congress enacted various amendments to the Act. Among other things, these amendments eliminated the position of Governor of the Farm Credit Administration, discontinued the Farm Credit Administration's authority to own stock in banks for cooperatives, and included numerous "Technical and Conforming Amendments." Farm Credit Amendments Act of 1985, §201, 99 Stat. 1688; §101, 99 Stat. 1678; §205, 99 Stat. 1703-1707. One of these technical and conforming amendments was the deletion of the two sentences within §2134 that, first, exempted a bank for cooperatives from state taxation and, second, limited that exemption to periods when the Governor held stock in the bank. §205(e)(10), 99 Stat. 1705, as amended, 12 U.S.C. §2134. </s> CoBank argues that the deletion of these two sentences altered the States' ability to tax the income of banks for cooperatives. According to CoBank, because the deletion eliminated the express statutory authorization for such taxation, Congress intended banks for cooperatives to be immune from state taxation under McCulloch's implied immunity doctrine. We do not share CoBank's interpretation as to the effect of this amendment, because there is no indication that Congress intended to change the taxation of banks for cooperatives with the 1985 amendments. Since 1933, the States could collect revenue from banks for cooperatives. Nothing in the 1985 amendments expressly changes this. And, it would be surprising, indeed, if Congress had eliminated this important fact sub silentio. </s> CoBank's interpretation would mean that Congress made a radical--but entirely implicit--change in the taxation of banks for cooperatives with the 1985 amendment to §2134. The amendment to §2134 was merely one of numerous "technical and conforming amendments" to the Farm Credit Act. Farm Credit Amendments Act of 1985, §205, 99 Stat. 1703-1707 (section entitled "Technical and Conforming Amendments"). In fact, the deletion of the sentence within §2134 referring to the Governor was one of more than 30 deletions of references to the Governor, a position eliminated by the 1985 amendments to the Act. Ibid. The more logical interpretation of this amendment to §2134 is that Congress merely deleted language that had become superfluous once the United States no longer owned, and no longer could own, stock in banks for cooperatives. This explanation accords with the more than 50-year history of the Farm Credit Act, permitting the States to tax banks for cooperatives except when there was governmental investment in the banks. Had Congress simply deleted the final sentence of §2134 that limited the exemption while retaining the sentence granting the exemption, we would have no trouble concluding that Congress had eliminated the States' ability to tax banks for cooperatives. Short of this act, however, we find Congress' silence insufficient to disrupt the 50-year history of state taxation of banks for cooperatives. </s> B </s> In addition, the structure of the Farm Credit Act confirms that banks for cooperatives are subject to state taxation. With respect to each lending institution in the Farm Credit System, the Act contains a taxation provision that specifically delineates the immunity from taxation enjoyed by that entity. For example, farm credit banks and federal land bank associations receive the type of immunity from state taxation that the Missouri Supreme Court held to be implied here for banks for cooperatives. See 12 U.S.C. §2023 ("The Farm Credit Banks and the capital, reserves, and surplus thereof, and the income derived therefrom, shall be exempt from Federal, State, municipal, and local taxation ..."); §2098 ("Each Federal land bank association and the capital, reserves, and surplus thereof, and the income derived therefrom, shall be exempt from Federal, State, municipal, and local taxation ..."). </s> By contrast, since their creation in 1933, banks for cooperatives have been granted only limited exemptions from taxation. Had Congress intended to confer upon banks for cooperatives the more comprehensive exemption from taxation that it had provided to farm credit banks and federal land bank associations, it would have done so expressly as it had done elsewhere in the Farm Credit Act. Thus, in light of the structure of the Farm Credit Act--and the explicit grant of immunity to other institutions within the Farm Credit System--Congress' silence with respect to banks for cooperatives indicates that banks for cooperatives are subject to state taxation. </s> * * * </s> The judgment of the Missouri Supreme Court is reversed, and the case is remanded for further proceedings not inconsistent with this opinion. </s> It is so ordered. </s> FOOTNOTES Footnote 1 </s> CoBank is an "agricultural credit bank," which the Farm Credit Administration recognizes as having the combined authority of a bank for cooperatives and a farm credit bank. See 12 CFR §§618.8005(c), 619.9020 (2000). </s> Footnote 2 </s> In this consolidated appeal, the Missouri Supreme Court also addressed the taxation of production credit associations and held that such institutions are exempt from state taxation. </s> Footnote 3 </s> See also Farm Credit Act of 1933, §63, 48 Stat. 267.

United States Supreme Court MINNEAPOLIS & ST. LOUIS R. CO. v. U.S.(1959) No. 12 Argued: Decided: December 14, 1959 </s> Under 5 (2) of the Interstate Commerce Act, the Commission was confronted with rival applications by several railroads for authority to acquire control of the Toledo, Peoria & Western Railroad, an independent, short-line, "bridge carrier" of through east-west traffic by-passing the congested Chicago and St. Louis gateways and connecting with 16 other railroads. After extended hearings, the Commission found that the plan for joint control of Western by the Santa Fe and Pennsylvania Railroads contemplated that Western would continue to be operated as a separate and independent carrier with responsible local management and that all existing routes via Western would be maintained and kept open without discrimination between connecting lines of railroads; but that the plan of the Minneapolis & St. Louis Railroad to acquire sole control of Western contemplated its disappearance as an independent and neutral connection for 15 other carriers, that it would be extremely harmful to other carriers and that it would result in termination of the employment of most of Western's 24 executives and 225 other employees. The Commission concluded that the acquisition and plan of operation by the Santa Fe and Pennsylvania, subject to stated conditions, was within the scope of 5 (2) of the Act, that the proposed terms and conditions were just and reasonable, and that the transaction would be consistent with the public interest. It, therefore, approved the Santa Fe-Pennsylvania application, dismissed the Minneapolis application, and denied applications by several intervening railroads for permission to participate in the acquisition of Western's stock. The District Court sustained the Commission's order. Held: The judgment is affirmed. Pp. 176-194. [361 U.S. 173, 174] </s> 1. The record shows that the Commission's finding that continued operation of Western as a "separate and independent carrier" was required by the "public interest" did not deprive the Minneapolis & St. Louis Railroad of "fair comparative consideration" and that it was made after full and fair consideration; and the District Court did not err in so holding. Pp. 184-185. </s> 2. Notwithstanding appellants' contention that acquisition of Western by Santa Fe and Pennsylvania would create a combination in restraint of commerce in violation of 1 of the Sherman Act and would lessen competition or tend to create a monopoly in violation of 7 of the Clayton Act, the record shows that the Commission fully estimated the scope and appraised the effects of any resulting curtailment of competition and concluded that the proposed acquisition and plan of operation would not result in any significant lessening of competition; and this determination rests upon adequate findings, supported by substantial evidence, and is well within the limits of the Commission's discretion under the Act. Pp. 185-189. </s> (a) Although 5 (11) does not authorize the Commission to "ignore" the antitrust laws, it does authorize the Commission to approve acquisitions which might otherwise violate the antitrust laws, if it finds that such acquisitions are in the public interest, and, upon approval of the acquisitions by the Commission, it relieves the acquiring carriers from the operation of the antitrust laws. Pp. 185-187. </s> (b) As respects railroad acquisitions, the Commission is not so bound by the antitrust laws that it must permit them to overbear what it finds to be in the public interest, and the wisdom and experience of the Commission, not of the courts, must determine whether the proposed acquisition is in the public interest. Pp. 187-188. </s> (c) The Commission gave extensive consideration to this contention of appellants and determined that the acquisition of Western by Santa Fe and Pennsylvania and their plan of operation of Western would not result in any significant lessening of competition; and that determination was based upon adequate findings, supported by substantial evidence, and was well within the limits of the Commission's discretion under the Act. Pp. 188-189. </s> 3. Notwithstanding appellants' contention that Pennsylvania actually contracted to purchase 50% of Western's stock from a trust company which had four common directors with Pennsylvania and that such purchase would violate 10 of the Clayton [361 U.S. 173, 175] Act, the Commission's action in approving Pennsylvania's acquisition of the stock, after fully considering all factors bearing thereon, did not exceed the statutory limits of the Commission's discretion. Pp. 189-191. </s> 4. Whether or not 5 (11) operates only in futuro is immaterial in this case, since the existing contractual arrangements through which Pennsylvania asked authority to acquire 50% of Western's stock looked entirely to the future. Pp. 191-192. </s> 5. Notwithstanding appellants' contention that the Commission violated 8 (b) of the Administrative Procedure Act by failing to make findings which, they think, were compelled by the evidence, the record discloses that the Commission made adequate subsidiary findings upon all material issues and made the ultimate findings required by 5 (2), that they support the Commission's order and that they are, in turn, supported by substantial evidence. Pp. 192-194. </s> 6. The District Court fairly considered and decided all of the issues raised by appellants, accorded to them a full and fair judicial review, and reached a right result. P. 194. </s> 165 F. Supp. 893, affirmed. </s> [Footnote * Together with No. 27, South Dakota et al. v. United States et al., and No. 28, Minnesota et al. v. United States et al., also on appeals from the same Court. </s> Max Swiren and Harold J. Soderberg argued the cause for appellants. Max Swiren, John G. Dorsey and Richard Musenbrock were on the brief for the Minneapolis & St. Louis Railway Co., appellant in No. 12; Parnell Donohue, Attorney General of South Dakota, Herman L. Bode, Assistant Attorney General, and Ernest W. Stephens for the State of South Dakota et al., appellants in No. 27; and Miles Lord, Attorney General of Minnesota, and Harold J. Soderberg, Assistant Attorney General, for the State of Minnesota et al., appellants in No. 28. </s> Robert W. Ginnane and Starr Thomas argued the cause for appellees. Solicitor General Rankin, Acting Assistant Attorney General Bicks, Richard A. Solomon, Robert W. Ginnane and B. Franklin Taylor, Jr. were on the brief for the United States and the Interstate Commerce Commission; Grenville Beardsley, Attorney General of Illinois, and Harry R. Begley, Special Assistant Attorney General, [361 U.S. 173, 176] for the State of Illinois; Starr Thomas, Carl E. Bagge and Edwin A. Lucas for the Atchison, Topeka & Santa Fe Railway Co. et al.; and Robert H. Walker for certain municipalities and shippers et al., appellees. </s> MR. JUSTICE WHITTAKER delivered the opinion of the Court. </s> These appeals present questions arising out of rival applications by several rail carriers to the Interstate Commerce Commission under 5 (2) of the Interstate Commerce Act 1 for authority to acquire control of Toledo, Peoria & Western Railroad Company. [361 U.S. 173, 177] </s> "Western" is an independent, short-line "bridge carrier" 2 of through east-west traffic by-passing the congested Chicago gateway. Its line is about 234 miles long, extending from its connection with the Pennsylvania Railroad Company ("Pennsylvania") at Effner, on the Illinois-Indiana state line, westward, through Peoria, to its connection with the main line of the Atchison, Topeka & Santa Fe Railway Company ("Santa Fe") at Lomax, Illinois, and thence southwesterly a short distance to Keokuk, Iowa. Its headquarters, shops and yards are located in East Peoria where it has 24 executives and where, and elsewhere along its line, it has about 225 other employees. It has connections for the interchange of traffic with 16 railroads, the principal ones being with the Pennsylvania at Effner, with the Santa Fe at Lomax, and with the New York, Chicago & St. Louis Railroad Company ("Nickel Plate"), the Illinois Terminal Railroad Company, the [361 U.S. 173, 178] Chicago, Burlington & Quincy Railroad Company ("Burlington") and the Minneapolis & St. Louis Railway Company ("Minneapolis") at Peoria. Its interchange connections with the other 10 railroads are at 17 other towns along its line. </s> Western has outstanding 90,000 shares of common capital stock, 82% of which is owned by the testamentary trustees of the estate of George P. McNear - Wilmington Trust Company and Guy Gladson - and the remaining 18% is owned by members of the McNear family, a bank and the president of Western. In 1954, the trustees determined to sell their Western stock, and rival efforts were commenced by Minneapolis, on the one hand, and by the Santa Fe and Pennsylvania, on the other hand, to purchase it. (Four of Wilmington Trust Company's directors were also directors of Pennsylvania.) Those negotiations culminated in a contract between the trustees and the Santa Fe, dated May 26, 1955, providing for the sale by the former and purchase by the latter of the stock at a price of $135 per share, subject to the Commission's approval. 3 Soon afterward, like agreements [361 U.S. 173, 179] were made by the Santa Fe with the holders of the remaining 18% of the Western stock. </s> On June 28, 1955, the Santa Fe entered into a contract to sell to the Pennsylvania Company, a wholly owned subsidiary of Pennsylvania, 50% of the outstanding capital stock of Western at $135 per share, 4 subject to approval of the Commission. </s> On July 8, 1955, the Santa Fe and Pennsylvania Company and its parent, Pennsylvania, applied to the Commission under 5 (2) of the Act 5 for approval of [361 U.S. 173, 180] those stock purchase agreements and the consequent joint control of Western. The Minneapolis intervened and objected to the application, as did also the States of Minnesota and South Dakota and their respective public service regulatory commissions. </s> Thereafter, on October 13, 1955, the Minneapolis applied to the Commission, under the same section of the Act, for authority to acquire sole control of Western, expressing its willingness to enter into contracts with Western's stockholders to purchase their stock at the same price and on the same terms as set forth in their existing contracts with the Santa Fe. The Santa Fe, the Pennsylvania Company and Pennsylvania intervened in the latter proceeding and objected to the Minneapolis application. </s> On motion of Minneapolis, the Commission consolidated the two proceedings. Thereafter, seven other railroads having interchange connections with Western's line intervened. Two of them sought authority, at all events, 6 and two others of them sought authority, under stated conditions, 7 to participate, under 5 (2) (d) of the Act. [361 U.S. 173, 181] in the acquisition of the Western stock on an equal basis with the successful applicant. The State of Illinois, 18 cities or towns and seven chambers of commerce located on or along Western's line, two labor organizations representing Western's employees, and a large number of shippers over Western's line, intervened in support of the Santa Fe-Pennsylvania application and in opposition to the Minneapolis application. </s> After an extended consolidated hearing before him, the Commission's examiner issued a proposed report recommending approval of the Santa Fe-Pennsylvania application and dismissal of the Minneapolis application. Thereafter, upon exceptions, and briefs and arguments in their support, Division 4 of the Commission issued its report. It was confronted, as it said, with four alternative proposals, (1) for authorization of joint control of Western by the Santa Fe and Pennsylvania, (2) for authorization of sole control by the Minneapolis, (3) for authorization of two other railroads, at all events, and of two more railroads, under stated conditions, to participate in the acquisition of the Western stock on an equal basis with the successful applicant, 8 and (4) denial of both applications. </s> The Commission observed that "[t]hese proceedings represent a new and more complicated phase in the administration of section 5, since [they involve] 2 applications for authority to control the same property, and petitions by 4 other carriers for inclusion in the transaction under varying circumstances." It recognized that, under 5 (2) [361 U.S. 173, 182] of the Act and the National Transportation Policy, 9 it was required to "weigh whether each application is consistent with the public interest, with or without inclusion of other railroads, considering not only other intervening petitioners seeking such inclusion but also the other applicant and nonparticipating railroads as well." It thought that the burden of proof was "most heavy for an applicant in a proceeding like this, because it must not only overbalance the claims of those seeking to share in the control but also of those seeking to exclude it from the transaction." It conceived it to be its duty, under the Act and the National Transportation Policy, to "arrive at a standard of public interest and determine which of the various plans of control most nearly approximates it." </s> The Commission found that the Santa Fe-Pennsylvania plan contemplates that Western "will continue to be operated as a separate and independent carrier with responsible management located along its lines"; that it "will continue to maintain its own solicitation forces and will be entirely free to solicit traffic in such manner as best to serve the interests of the Western," and that all "existing routes and channels of trade via the Western will be maintained and kept open without discrimination between connecting lines of railroad." It found, on the other hand, that the Minneapolis plan "unequivocally contemplates the disappearance of the Western as an independent and neutral connection for the other 15 carriers with which it presently works"; that "[f]or all practical purposes the Western would be integrated, consolidated, and merged into the Minneapolis for ownership, management, and operation"; that features of the Minneapolis plan "would be extremely harmful to other carriers"; that Western's headquarters office at Peoria would be eliminated, leaving only a trainmaster and a roadmaster at [361 U.S. 173, 183] that point, and that the employment of most of Western's 24 executives and 225 other employees would be severed. </s> The Commission further found that "[o]nly the Minneapolis and its supporting interveners, the States of Minnesota and South Dakota, advocate the disappearance of the Western as a separate and independent operating carrier," and that all other parties to, and intervenors in, the proceedings "insist that the separate and independent operation of the Western under its present local management is a public necessity." It then found that the "[p]ublic interest demands that the present policies of the Western in all respects be continued." It thereupon made the ultimate finding, required by 5 (2) (b) of the Act, that the acquisition and plan of operation by the Santa Fe and Pennsylvania, subject to stated conditions, was "within the scope of section 5 (2) of the Interstate Commerce Act, as amended; that the terms and conditions proposed [by them] are just and reasonable, and that the transaction will be consistent with the public interest." The Commission then entered its order approving the Santa Fe-Pennsylvania application, dismissing the Minneapolis application, and denying the petitions of the several intervening railroads which sought to participate in the acquisition of the Western stock. 295 I. C. C. 523. </s> Thereafter, Minneapolis petitioned the whole Commission for a reconsideration, and alternatively requested that, if the approval of the Santa Fe-Pennsylvania application be permitted to stand, it be authorized to participate equally with those railroads in the purchase of Western's stock on the same terms. That petition was denied. </s> Minneapolis then timely filed a complaint in the District Court for Minnesota against the United States and the Interstate Commerce Commission to vacate the Commission's order. The States of Minnesota and South Dakota and their respective regulatory commissions. [361 U.S. 173, 184] being interested in strengthening the Minneapolis, which operates in those States, intervened in support of the complaint. The defendants answered, asserting the full legality of the Commission's order. The Santa Fe, the Pennsylvania, the Pennsylvania Company, the State of Illinois, the 18 cities and seven chambers of commerce and the numerous shippers who were intervenors before the Commission, intervened in opposition to the complaint. The Nickel Plate intervened, complaining that the Commission had improperly denied its request to participate in the purchase of the Western stock. </s> A three-judge court was convened and, after hearing, rendered its opinion and judgment sustaining the Commission's order. 165 F. Supp. 893. On separate appeals by the Minneapolis, the State of Minnesota and its regulatory commission, and the State of South Dakota and its regulatory commission, the case was brought here and we noted probable jurisdiction. 359 U.S. 933 . All of those who were defendants and intervenors in opposition to the complaint in the District Court, except the Nickel Plate, are appellees in this Court. </s> Minneapolis, supported by the States of Minnesota and South Dakota, contends, first, that the Commission improperly adopted at the outset of its report the standard of "separate and independent management" of Western as the criterion governing the comparative merits of the rival plans, which was antithetic to its application, and thereby deprived it of "fair comparative consideration," and that the District Court erred in approving the Commission's action. </s> The record does not support that contention. Rather, it shows that the Commission's governing standard was the "public interest," although it ultimately did find that the public interest would be best served by Western's continued operation as a "separate and independent carrier." We believe that the recited findings show that the Commission [361 U.S. 173, 185] carefully "weighed" and considered "each application" in its labors to determine which, if either, of them was "consistent with the public interest." Its subsidiary findings (a) that the Minneapolis plan "unequivocally contemplates the disappearance of the Western as an independent and neutral connection for the other 15 carriers with which it presently works," (b) that certain features of the Minneapolis plan "would be extremely harmful to other carriers," (c) that the Minneapolis plan contemplates the elimination of Western's office and the separation of its employees, and (d) that numerous witnesses insisted "that the separate and independent operation of the Western under its present local management is a public necessity," fully support its conclusional finding that the "[p]ublic interest demands that the present policies of the Western in all respects be continued." That finding, though antithetic to Minneapolis' application, did not deprive it of "fair comparative consideration," but, on the contrary, it seems to us, was made by the Commission after full and fair consideration, and the District Court did not err in so holding. </s> Appellants' principal contention appears to be that acquisition of control of Western by Santa Fe and Pennsylvania will create a combination in restraint of commerce in violation of 1 of the Sherman Act 10 and will lessen competition or tend to create a monopoly in violation of 7 of the Clayton Act, 11 and that the Commission's approval of their application was an abuse of power. </s> On their face these contentions would seem to run in the teeth of the language and purpose of 5 (11) of the Interstate Commerce Act. That section, in substance, provides that "The authority conferred by this section shall be exclusive and plenary, and any carrier or corporation [361 U.S. 173, 186] participating in . . . any transaction approved by the Commission thereunder, shall have full power . . . to carry such transaction into effect and to own and operate any properties and exercise any control or franchises acquired through said transaction . . . and any carriers . . . participating in a transaction approved or authorized under the provisions of this section shall be and they are hereby relieved from the operation of the antitrust laws and of all other restraints, limitations, and prohibitions of law . . . insofar as may be necessary to enable [it] to carry into effect the transaction so approved or provided for in accordance with the terms and conditions, if any, imposed by the Commission, and to hold, maintain, and operate any properties and exercise any control or franchises acquired through such transaction." 24 Stat. 380, as amended, 54 Stat. 908, 49 U.S.C. 5 (11). </s> Section 5 (11) is both a more recent and a more specific expression of congressional policy than 1 of the Sherman Act and 7 of the Clayton Act, and in terms relieves the acquiring carrier, upon approval by the Commission of the acquisition, "from the operation of the antitrust laws . . . ." Although 5 (11) does not authorize the Commission to "ignore" the antitrust laws, McLean Trucking Co. v. United States, 321 U.S. 67, 80 , there can be "little doubt that the Commission is not to measure proposals for [acquisitions] by the standards of the antitrust laws." 321 U.S., at 85 -86. The problem is one of accommodation of 5 (2) and the antitrust legislation. The Commission remains obligated to "estimate the scope and appraise the effects of the curtailment of competition which will result from the proposed [acquisition] and consider them along with the advantages of improved service [and other matters in the public interest] to determine whether the [acquisition] will assist in effectuating the over-all transportation policy." 321 U.S., at 87 . [361 U.S. 173, 187] </s> Even though such acquisitions might otherwise violate the antitrust laws, Congress has authorized the Commission to approve them, if it finds they are in the public interest, "because it recognized that in some circumstances they were appropriate for effectuation of the national transportation policy. It was informed that this policy would be furthered by `encouraging the organization of stronger units' in the . . . industry. And in authorizing those [acquisitions] it did not import the general policies of the anti-trust laws as a measure of their permissibility. It in terms relieved participants in appropriate [acquisitions] from the requirements of those laws. 5 (11)." 321 U.S., at 85 . It must be presumed that, in enacting this legislation, Congress took account of the fact that railroads are subject to strict regulation and supervision. "Against this background, no other inference is possible but that, as a factor in determining the propriety of [railroad acquisitions] the preservation of competition among carriers, although still a value, is significant chiefly as it aids in the attainment of the objectives of the national transportation policy." 321 U.S., at 85 -86. </s> As respects railroad acquisitions, the Commission is not so bound by the antitrust laws that it must permit them to overbear what it finds to be in "the public interest." A contrary view would, in effect, permit the Commission to authorize only those acquisitions which would not offend those laws. "As has been said, this would render meaningless the exemption relieving the participants in a properly approved [acquisition] of the requirements of those laws . . . ." 321 U.S., at 86 . Resolution of the conflicting considerations "is a complex task which requires extensive facilities, expert judgment and considerable knowledge of the transportation industry. Congress left that task to the Commission `to the end that the wisdom and experience of that Commission may be used not only in connection with this form of transportation, [361 U.S. 173, 188] but in its coordination of all other forms.' 79 Cong. Rec. 12207. `The wisdom and experience of that commission,' not of the courts, must determine whether the proposed [acquisition] is `consistent with the public interest.' Cf. Interstate Commerce Commission v. Illinois Central R. Co., 215 U.S. 452 ; Pennsylvania Co. v. United States, 236 U.S. 351 ; United States v. Chicago Heights Trucking Co., 310 U.S. 344 ; Purcell v. United States, 315 U.S. 381 ." 321 U.S., at 87 -88. </s> Here, the Commission gave extensive consideration to the anti-competitive contentions advanced by appellants, devoting more than five pages of its report to that matter. It found that "[a]ll the carriers endeavoring to participate in its control are in competition with Western"; that the "important thing is not whether there is possibility of competition, but whether there is probability of existing or potential competition being diminished or strangled by the Western under the control of the Santa Fe and the Pennsylvania." After an extended analysis of the complex facts and conflicting evidence, the Commission found that control of Western by the Santa Fe and Pennsylvania would not result in any significant lessening of competition. It pointed to the fact that although the Santa Fe's "long haul" is to Chicago and the Pennsylvania's "next to longest haul" is also to Chicago (its longest haul being to St. Louis) the Santa Fe has agreed, and is bound, "to place Lomax on a parity with Chicago from a solicitation standpoint, and . . . the Pennsylvania will recognize Effner as one of its principal interchanges along with Chicago and St. Louis"; that "there may be some diversion of traffic, but such diversion would not jeopardize the maintenance of adequate transportation service by the objecting intervening carriers." </s> The Commission also pointed to the fact that Western had been in a prolonged receivership until 1927 when George P. McNear acquired its stock at a receiver's sale, [361 U.S. 173, 189] Toledo, P. & W. R. Co. Acquisition, 124 I. C. C. 181. It further found that Western's modern existence began at that time and, under the guidance of McNear, was built into a fine railroad; that since McNear's death, in 1947, the present management has continued, with much success, the policies he established. Those policies, the Commission found, were, and are, "to maintain strict neutrality between all connections, and to participate in any haul of traffic no matter how slight [as a bridge] carrier through Peoria as an alternative route, bypassing the congested terminals of Chicago and St. Louis," and that those policies are to be continued under the Santa Fe-Pennsylvania plan. </s> We think it is clear from this summary of its analysis and findings that the Commission fully estimated the scope and appraised the effects of any curtailment of competition which might result from the acquisition of Western by the Santa Fe and Pennsylvania, and, after having done so, concluded that their acquisition and plan of operation of Western would not result in any significant lessening of competition. Congress has left the task of making that determination to the wisdom and experience of the Commission. The determination it has made rests upon adequate findings which are, in turn, supported by substantial evidence and is well within the limits of its discretion under the Act. </s> Appellants argue that the Pennsylvania, in actuality, contracted to purchase 50% of the Western stock from Wilmington Trust Company, a co-trustee of the McNear trust, and that, since four persons were directors of both companies, that proposed stock purchase violates 10 of the Clayton Act; that the Commission was without power to approve it; that, in any event, its action in "condoning" it was an abuse of power; and that the District Court, for those reasons also, erred in upholding the Commission's order. [361 U.S. 173, 190] </s> The Commission found that the Santa Fe in entering into the contract of May 26, 1955, with the trustees of the McNear trust was "acting on behalf of that carrier alone." But even if we assume, for present purposes, that it was acting as well for the Pennsylvania, the result must be the same. Section 10 of the Clayton Act prohibits a common carrier engaged in commerce from having "any dealings in securities" of more than $50,000, in the aggregate, in any one year, "with another corporation, . . . when the said common carrier shall have upon its board of directors . . . any person who is at the same time a director [of] such other corporation . . ., except such purchases [as] shall be made . . . by competitive bidding under regulations to be prescribed by [the] Commission." 38 Stat. 734, 15 U.S.C. 20. </s> Section 10 of the Clayton Act is, of course, an antitrust law, 12 and much of what we have just said relative to the problem of accommodation of 5 (2) of the Interstate Commerce Act and the antitrust laws is equally applicable to this contention. The evident purpose of 10 of the Clayton Act was to prohibit a corporation from abusing a carrier by palming off upon it securities, supplies and other articles without competitive bidding and at excessive prices through overreaching by, or other misfeasance of, common directors, to the financial injury of the carrier and the consequent impairment of its ability to serve the public interest. 13 But, even if this purchase [361 U.S. 173, 191] of securities might, under other circumstances, violate 10 of the Clayton Act, Congress, by 5 (11) of the Interstate Commerce Act, has authorized the Commission to approve it if it finds that so doing is in the public interest. And Congress has expressly said that, upon such approval, the carrier shall be relieved "from the operation of the anti-trust laws . . . ." A contrary view would, in effect, permit the Commission to authorize only those stock purchases which would not, in the absence of 5 (11), offend the antitrust laws. "As has been said, this would render meaningless the exemption relieving the participants in a properly approved [acquisition] of the requirements of those laws . . . ." McLean Trucking Co. v. United States, supra, at 86. </s> Here, the Commission fully considered the contracts under which the Pennsylvania proposes to acquire a 50% interest in the Western stock and all other factors bearing on that matter and, after doing so, approved them. That action by the Commission did not exceed the statutory limits within which Congress has confined its discretion. </s> Minneapolis contends that 5 (11) operates only in futuro and confers "no authority to purge the taint of a transaction illegal at the time it was brought to the Commission." Whether there is merit in that contention, as a legal abstraction, we need not decide, for here the existing contractual arrangements through which Pennsylvania asks authority to acquire 50% of the Western stock look entirely to the future. Neither the stock sale and purchase contract between the trustees and the Santa Fe nor the one between the Santa Fe and the Pennsylvania [361 U.S. 173, 192] Company is a consummated transaction, but each is expressly subject to, and will become effective only upon, approval by the Commission. Apart from criminal prosecutions, with which we are not here concerned, it seems plain that approval of an acquisition by the Commission operates under 5 (11), as that section says, to relieve the acquiring carrier "from the operation of the antitrust laws . . . ." </s> Appellants next contend that the Commission violated 8 (b) of the Administrative Procedure Act by failing to make findings which, they think, were compelled by the evidence. </s> There can be no doubt that the Administrative Procedure Act applies to proceedings before the Commission, Riss & Co. v. United States, 341 U.S. 907 , and see Chicago & Eastern Illinois R. Co. v. United States, 344 U.S. 917 . </s> The last sentence of 8 (b) provides: </s> "All [administrative] decisions . . . shall become a part of the record and include a statement of (1) findings and conclusions, as well as the reasons or basis therefor, upon all the material issues of fact, law, or discretion presented on the record; and (2) the appropriate rule, order, sanction, relief, or denial thereof." 14 </s> Upon the basis of that language, appellants argue that the Commission should have found that the price which the Santa Fe agreed to pay for the Western stock of $135 per share was excessive. Though the Commission made no express finding upon that matter it did discuss it, pointing out that the certified value of Western's properties for ratemaking purposes was more than $13,500,000; that it has no outstanding preferred stock and is relatively free of debt; that it has a fine earning record; that the transaction was at arm's length; that Minneapolis had [361 U.S. 173, 193] offered $133 per share for the stock within a few days of the time when the Santa Fe contracted for its purchase at $135 per share; and that the Minneapolis sought authority in this proceeding to acquire the stock at the same price. The Commission concluded that if $135 per share was a fair price for the one it was also for the other. </s> Upon the same basis, appellants also argue that the Commission should have found that the Minneapolis application was in the public interest in that its acquisition of Western would greatly strengthen both Minneapolis and Western by eliminating many duplicating facilities and by reducing operating expenses by more than $1,770,000 annually. The Commission did not make a specific finding upon that matter, but it did give consideration to it and found that most of that saving - more than $1,300,000 annually - would be at the expense of Western's employees - a matter which, because of the express command of clause 4 of 5 (2) (c) of the Interstate Commerce Act (see note 1), it evidently thought was not consistent with the public interest. Appellants further argue that the Commission should have found that the Minneapolis plan afforded adequate protection to Western's employees by providing for their absorption into the Minneapolis as attrition among its own employees permitted. Again, although the Commission made no specific finding upon that contention it did consider and discuss it, and we think the law required no more. </s> Appellants challenge the Commission's failure to make a number of other subsidiary findings, all of which have been considered, but we find that they relate to contentions that are so collateral or immaterial that the law did not require specific findings upon them. By the express terms of 8 (b), the Commission is not required to make subordinate findings on every collateral contention advanced, but only upon those issues of fact, law, or [361 U.S. 173, 194] discretion which are "material." From a thorough examination of the record, we are persuaded that the Commission has made adequate subsidiary findings upon all material issues and has made the ultimate findings required by 5 (2), that they support the Commission's order, and are, in turn, supported by substantial evidence. </s> Finally, appellants contend that the District Court, because of inadequate subsidiary findings by the Commission, was unable to, or at least did not, afford them a proper judicial review, and merely "rubber stamped" the Commission's order. Whether or not we approve all of the reasons and legal conclusions of the District Court, it is clear that it fairly considered and decided all of the issues raised by appellants, accorded to them a full and fair judicial review, and reached a right result. Accordingly the judgment is </s> Affirmed. </s> MR. JUSTICE DOUGLAS dissents. </s> Footnotes [Footnote 1 Section 5 (2) of the Interstate Commerce Act (24 Stat. 380, as amended, 54 Stat. 905, 49 U.S.C. 5 (2)) provides, in pertinent part, that: "(a) It shall be lawful, with the approval and authorization of the Commission, as provided in subdivision (b) of this paragraph - "(i) for . . . two or more carriers jointly, to acquire control of another through ownership of its stock or otherwise . . . . . . . . . "(b) Whenever a transaction is proposed under subdivision (a) of this paragraph, the carrier . . . seeking authority therefor shall present an application to the Commission, and thereupon the Commission shall notify . . . [designated parties], and shall afford reasonable opportunity for interested parties to be heard. If the Commission shall consider it necessary in order to determine whether the findings specified below may properly be made, it shall set said application for public hearing; and a public hearing shall be held in all cases where carriers by railroad are involved unless the Commission determines that a public hearing is not necessary in the public interest. If the Commission finds that, subject to such terms and conditions and such modifications as it shall find to be just and reasonable, the proposed transaction is within the scope of subdivision (a) of this paragraph and will be consistent with the public interest, it shall enter an order approving and authorizing such transaction, upon the terms and conditions, and with the modifications, so found to be just and reasonable . . . . "(c) In passing upon any proposed transaction under the provisions of this paragraph, the Commission shall give weight to the [361 U.S. 173, 177] following considerations, among others: (1) The effect of the proposed transaction upon adequate transportation service to the public; (2) the effect upon the public interest of the inclusion, or failure to include, other railroads in the territory involved in the proposed transaction; (3) the total fixed charges resulting from the proposed transaction; and (4) the interest of the carrier employees affected. "(d) The Commission shall have authority in the case of a proposed transaction under this paragraph involving a railroad or railroads, as a prerequisite to its approval of the proposed transaction, to require, upon equitable terms, the inclusion of another railroad or other railroads in the territory involved, upon petition by such railroad or railroads requesting such inclusion, and upon a finding that such inclusion is consistent with the public interest. . . . . . "(f) As a condition of its approval, under this paragraph, of any transaction involving a carrier or carriers by railroad subject to the provisions of this chapter, the Commission shall require a fair and equitable arrangement to protect the interests of the railroad employees affected. . . ." </s> [Footnote 2 The term "bridge carrier" appears to mean a short-line carrier which transports through traffic from one long-line carrier to another. </s> [Footnote 3 During the negotiations, Minneapolis first offered $69.50, and later $80, per share for the stock. On April 15, 1955, the Santa Fe and Pennsylvania each obtained letter commitments from the trustees for the sale to each of them of 26% of the Western stock at a price of $100 per share. (Near the same time the Rock Island made a like offer to the trustees for 26% of the Western stock, but that offer was not accepted.) But a dispute arose - and apparently still exists between the trustees and Pennsylvania - with respect to the validity of those commitments. Thereupon, Minneapolis offered the trustees $133 per share for the Western stock, but that offer was not accepted, and on May 26, 1955, the Santa Fe, acting, as the Commission found, "on behalf of that carrier alone," agreed with the trustees for the sale by the latter and purchase by the former of all the Western stock held by the trustees at a price of $135 per share, and those parties on that date entered into a contract, accordingly, subject to approval of the Commission. </s> [Footnote 4 The contract of June 28, 1955, between the Santa Fe and the Pennsylvania Company provided that it was without prejudice to any claims, causes of action or rights which Pennsylvania may have against the trustees of the McNear estate with respect to the letter commitment of April 15, 1955, for the sale by the trustees to Pennsylvania of 26% of the Western stock; and that, in the event Pennsylvania should acquire from the trustees, under that letter commitment, all or any part of such shares, the obligation of the Santa Fe under the contract to sell Western shares to the Pennsylvania Company was to be reduced accordingly. It appears that litigation was then, and is yet, pending by Pennsylvania against the trustees for the enforcement of the letter commitment of April 15, 1955. The contract also contained a covenant which, in essence, provided that (1) Western "will continue to be operated as a separate and independent carrier with responsible management located along its lines in order to preserve to shippers and communities the present direct access to its officials," (2) that Western's properties will be maintained and improved, (3) that Western "will continue to maintain its own solicitation forces and will be entirely free to solicit traffic in such manner as best to serve the interests of" Western, (4) that all "existing routes and channels of trade via [Western] will be maintained and kept open without discrimination between connecting lines of railroad," and (5) that the Board of Directors of Western shall consist of 11 members, of whom one shall be the president of the company, two shall be officers of the Santa Fe, two shall be officers of the Pennsylvania Company, or Pennsylvania, or both, and the remaining six shall be prominent citizens not connected with either of the parties but selected by them through mutual agreement. </s> [Footnote 5 See note 1. </s> [Footnote 6 The New York, Chicago & St. Louis Railroad Company ("Nickel Plate") and the Chicago, Rock Island & Pacific Railroad Company ("Rock Island") sought authority, under 5 (2) (d) of the Act (see note 1), to be included in the acquisition of Western's stock on an equal basis with the successful applicant or applicants. </s> [Footnote 7 The Chicago, Burlington & Quincy Railroad Company ("Burlington") and the Wabash Railroad Company ("Wabash") did not object to approval of the Santa Fe-Pennsylvania application, provided the order required continuation of present routes and channels of trade via existing junctions and gateways and of all existing traffic and operating relations and arrangements, but they asked, in the event any railroad other than the Santa Fe and Pennsylvania be authorized to acquire an interest in Western's stock, that they, too, be authorized to participate therein to the same extent as any such other railroad. The Illinois Central Railroad Company ("Illinois Central"), the Gulf, Mobile & Ohio Railroad Company ("Gulf") and the Chicago & North Western Railway Company ("North Western") asked that, [361 U.S. 173, 181] if either application be approved, the order be conditioned to require the maintenance of all routes and channels of trade via existing gateways. The Monon Railroad Company asked that if the Santa Fe-Pennsylvania application be approved, the order contain a requirement that Pennsylvania shall grant to it certain trackage rights, and, if not done, that the Santa Fe-Pennsylvania application be denied. </s> [Footnote 8 See notes 6 and 7. </s> [Footnote 9 49 U.S.C., n. preceding 1, 54 Stat. 899. </s> [Footnote 10 15 U.S.C. 1, 26 Stat. 209. </s> [Footnote 11 15 U.S.C. 18, 38 Stat. 731. </s> [Footnote 12 It is clear that 10 of the Clayton Act is included in the "antitrust laws" referred to in 5 (11) of the Interstate Commerce Act. Section 1 of the Clayton Act, 15 U.S.C. (1952 ed.) 12, provides that "`Anti-trust laws,' as used in sections 12, 13, 14-21, and 22-27 of this title, includes sections 1-27 of this title." Moreover, 5 (11) avoids any ambiguity by including "all other restraints, limitations, and prohibitions of law, Federal, State, or municipal." </s> [Footnote 13 The legislative history of 10 of the Clayton Act, though meager, supports the view stated in the text. In fact, the language of the several drafts of 10, together with the types of abuses cited in [361 U.S. 173, 191] support of its enactment, suggests strongly that the words "dealings in securities" were intended to cover only a carrier's dealings with related persons in its own securities. See H. R. Rep. No. 627, 63d Cong., 2d Sess., p. 3; S. Rep. No. 698, 63d Cong., 2d Sess., pp. 47-48; S. Doc. No. 585, 63d Cong., 2d Sess., pp. 8-9; 51 Cong. Rec. 15943. </s> [Footnote 14 60 Stat. 242, 5 U.S.C. 1007 (b). </s> [361 U.S. 173, 195]

United States Supreme Court LUCY v. ADAMS(1955) No. 294 Argued: Decided: October 10, 1955 </s> The injunction which the District Court issued in this case, but suspended pending appeal to the Court of Appeals, is reinstated to the extent that it enjoins and restrains the respondent and others designated from denying these petitioners, solely on account of their race or color, the right to enroll in the University of Alabama and pursue courses of study there. </s> 134 F. Supp. 235, injunction reinstated in part. </s> Arthur D. Shores, Constance Baker Motley, Robert L. Carter and Thurgood Marshall for petitioners. </s> Frontis H. Moore for respondent. </s> PER CURIAM. </s> Petitioners, Autherine J. Lucy and Polly Anne Myers, citizens of Alabama, have been seeking admission to the University of Alabama since September 1952. Respondent William F. Adams is Dean of Admissions of the University. After hearings, United States District Judge Grooms of the Northern District of Alabama found that petitioners had been denied admission to the University "solely on account of their race and color." Holding this [350 U.S. 1, 2] denied petitioners equal protection of state laws, the court permanently enjoined respondent Adams, his agents, employees and others acting in concert with respondent "from denying the plaintiffs and others similarly situated the right to enroll in the University of Alabama and pursue courses of study thereat, solely on account of their race or color." 134 F. Supp. 235. Respondent's motion to suspend the injunction pending appeal to the United States Court of Appeals for the Fifth Circuit was granted by the District Judge. A judge of that court denied a motion to vacate the suspension and reinstate the injunction. A similar motion is now before us. </s> The motion is granted and the injunction is reinstated to the extent that it enjoins and restrains the respondent and others designated from denying these petitioners, Autherine Lucy and Polly Anne Myers, the right to enroll in the University of Alabama and pursue courses of study there. Sipuel v. Board of Regents of the University of Oklahoma, 332 U.S. 631 ; Sweatt v. Painter, 339 U.S. 629 ; McLaurin v. Oklahoma State Regents for Higher Education, 339 U.S. 637 . In other respects, the motion is denied. </s> [350 U.S. 1, 3]

United States Supreme Court UNITED STATES v. VON NEUMANN(1986) No. 84-1144 Argued: November 4, 1985Decided: January 14, 1986 </s> Respondent purchased a car in Switzerland and had it shipped to Vancouver, Canada. After he had picked up the car in Vancouver, he drove to the United States border but failed to declare the car when asked by a United States customs officer whether he had anything to declare. Customs then seized the car pursuant to 19 U.S.C. 1497, which provides that any article not declared upon entry into the United States that by law must be declared is subject to forfeiture or to a penalty equaling the value of the article. Respondent, rather than waiting to challenge the seizure in a judicial forfeiture action that might be initiated by the Government, immediately chose the other statutory option of filing a petition for administrative remission of the forfeiture. Two weeks later he posted a bond for $24,500, the car's value, and Customs released the car. The Customs Service did not respond to the remission petition until 36 days after it was filed, at which time the penalty for failure to declare the car was reduced to $3,600, and this penalty was upheld on administrative review. Respondent then filed a complaint in Federal District Court, seeking cancellation of the penalty on the ground that he had not violated 1497, and a declaration that the seizure and penalty were unlawful. The District Court disagreed and entered judgment for the Government. The Court of Appeals held that the 36-day delay in acting on respondent's remission petition denied him due process of law in violation of the Fifth Amendment. Subsequently on remand from this Court for reconsideration in light of United States v. $8,850, 461 U.S. 555 , the Court of Appeals held that the four-factor balancing test of Barker v. Wingo, 407 U.S. 514 - the length of the delay, the reason for the delay, the defendant's assertion of his right, and prejudice suffered by the defendant - applied in $8,850 in determining whether a delay in bringing a forfeiture proceeding violated due process should also be applied to determine whether the 36-day delay in this case violated due process, and accordingly remanded to the District Court to determine that question under the above test. </s> Held: </s> On the record, the 36-day delay did not deprive respondent of property without due process of law. Pp. 249-251. </s> (a) Respondent's right to a forfeiture proceeding meeting the Barker test provides the postseizure hearing required by due process to protect respondent's property interest in the car. The remission statute simply [474 U.S. 242, 243] grants the Secretary of the Treasury the discretion not to pursue a complete forfeiture despite the Government's entitlement to one. Remission proceedings are not necessary to a forfeiture determination, and therefore are not constitutionally required. Thus, there is no constitutional basis for a claim that respondent's interest in the car, or in the money put up to secure the bond, entitled him to a speedy answer to his remission petition. Pp. 249-250. </s> (b) Even if respondent had a property right under the remission statute that cannot be taken away without due process that includes a speedy answer to the remission petition, any due process requirement of timely disposition was more than adequately provided for here. It is not shown that he suffered any prejudice from the 36-day delay. Pp. 250-251. </s> 729 F.2d 657, reversed. </s> BRENNAN, J., delivered the opinion of the Court, in which WHITE, MARSHALL, BLACKMUN, POWELL, REHNQUIST, and O'CONNOR, JJ., joined, and in Parts I and II of which BURGER, C. J., joined. BURGER, C. J., filed an opinion concurring in part, post, p. 251. STEVENS, J., filed an opinion concurring in the judgment, post, p. 252. </s> Alan I. Horowitz argued the cause for the United States. With him on the brief were Acting Solicitor General Fried, Assistant Attorney General Trott, and Deputy Solicitor General Frey. </s> Charles L. Birke argued the cause and filed a brief for respondent. </s> JUSTICE BRENNAN delivered the opinion of the Court. </s> We must decide in this case whether a 36-day delay by the United States Customs Service in responding to a remission petition filed by respondent in response to the seizure of his car by customs agents deprived respondent of property without due process of law. </s> I </s> Title 19 U.S.C. 1497 1 provides that any article not declared upon entry into the United States which by law [474 U.S. 242, 244] must be declared is subject to forfeiture or to a penalty equaling the value of the article. After seizure of an article by the United States Customs Service, a claimant to it has essentially two options. He may pursue an administrative remedy under 19 U.S.C. 1618 (1982 ed., Supp. III), 2 which vests in the Secretary of the Treasury the discretionary authority to mitigate or remit the penalty or forfeiture, or he may challenge the seizure in a judicial forfeiture action initiated by the Government. 3 19 U.S.C. 1602-1604. 4 </s> [474 U.S. 242, 245] </s> In 1974, respondent John Von Neumann shipped to Vancouver, Canada, a 1974 Jaguar Panther automobile he purchased in Switzerland. On January 20, 1975, he and a friend picked up the car in Vancouver, obtained a release from Canadian Customs to take possession of the vehicle and also obtained a form that Von Neumann was to deliver to the Canadian Customs station at the border. Von Neumann failed to deliver the form to Canadian Customs officials. He claimed that he inadvertently drove past the Canadian Customs station because of poor visibility and inadequate directions. Instead, Von Neumann and his friend arrived at the United States border checkpoint at Blaine, Washington, where they were questioned by United States Immigration Officer Harry Perkins, a designated customs officer. Canadian Customs officials had earlier alerted United States Customs that Von Neumann's car would be crossing the border, and Perkins specifically asked Von Neumann whether he had anything to declare. When Von Neumann failed to declare the automobile, Perkins asked him into the checkpoint station and referred the matter to Customs Inspector Donald E. Morrison. Upon being asked why he had not declared the car, Von Neumann explained that he did not think a declaration was required. Morrison then seized the car pursuant to 19 U.S.C. 1497. </s> That same day, January 20, Von Neumann prepared a "Petition for Remission or Mitigation of Forfeitures and Penalties Incurred," pursuant to 19 U.S.C. 1618, explaining that he had not intended to violate United States Customs laws when he failed to declare the car. Two weeks later, on February 3, Von Neumann posted a bond for $24,500, the [474 U.S. 242, 246] value of his car, and Customs released the vehicle pursuant to its authority under 19 U.S.C. 1614. On February 12, counsel for Von Neumann filed a supplement to the original remission petition. On February 25-36 days after the petition was filed - the Seattle District Director of the Customs Service, pursuant to delegation of authority from the Secretary of the Treasury, 5 acted on Von Neumann's remission petition, and informed Von Neumann that the penalty for failure to declare the car was being reduced to $3,600. On administrative review of this determination, the Regional Commissioner of Customs in San Francisco, on April 14, 1975, upheld the $3,600 penalty. </s> Having exhausted his administrative remedies, Von Neumann filed a complaint in the United States District Court for the Central District of California. He sought cancellation of the $3,600 penalty on the ground that he had not violated 1497. He also requested an injunction prohibiting Customs from placing his name on a computer list of violators, and a declaration that this seizure and penalty were unlawful. The District Court found that Von Neumann had violated 19 U.S.C. 1497, and that seizure of the car therefore was proper. The court also upheld the validity of the remission and mitigation procedures. Accordingly, it entered judgment for the Government. 6 Von Neumann appealed this decision, [474 U.S. 242, 247] challenging both the procedures followed by Customs in imposing the penalty and also the penalty itself. </s> The Court of Appeals for the Ninth Circuit agreed with the District Court that Von Neumann had violated 1497. 660 F.2d 1319, 1323 (1981). The court, however, also considered and sustained Von Neumann's claim that the 36-day delay in acting on his remission petition denied Von Neumann due process of law in violation of the Fifth Amendment. The court reasoned that speed in the handling of the remission petition, particularly where the seizure is of an automobile, is constitutionally required - that strict guidelines in responding to remission petitions are necessary "to ensure the due process rights of administrative claimants," id., at 1326-1327, and concluded that Customs must "act on a petition for remission or mitigation within 24 hours of receipt," id., at 1327. In addition, the court ruled, a claimant has a right to a personal appearance to present his or her claim. Ibid. </s> The Government petitioned for certiorari. We granted the petition, vacated, and remanded for reconsideration in light of United States v. $8,850, 461 U.S. 555 (1983). 462 U.S. 1101 (1983). In $8,850, however, the issue presented did not involve the remission procedure; rather the question was whether the Government's 18-month delay in bringing a forfeiture proceeding violated the claimant's right to due process of law. The Court held that due process requires a postseizure determination within a reasonable time of the seizure. We concluded that the four-factor balancing test of Barker v. Wingo, 407 U.S. 514 (1972), provides the relevant framework for determining whether a delay was reasonable. The Barker test involves a weighing of four factors: the length of any delay, the reason for the delay, the defendant's assertion of his right, and prejudice suffered by the defendant. Applying this test to the 18-month delay before it, the [474 U.S. 242, 248] Court in $8,850 found no unreasonable delay, in part because a substantial portion of the delay in question was attributable to pending administrative and criminal proceedings. </s> On remand in this case, the Court of Appeals recognized that $8,850 "presented a somewhat different issue from that arising in the instant case," 729 F.2d 657, 659 (1984), because $8,850 dealt with forfeiture rather than the remission procedure. Nevertheless, it concluded that this Court's holding in $8,850 "reinforces our earlier view that due process rights attach to the processing of the petition for remission," 729 F.2d, at 660, and therefore reaffirmed its holding that "due process requires Customs to act promptly in ruling on petitions for remission or mitigation under 19 U.S.C. 1618." Ibid. The court recognized that its earlier attempt to set specific time limits for the processing of remission petitions was "ill-advised," ibid., and held instead that the Barker factors should also be applied to determine whether Customs has violated due process in delaying a response to a remission petition. The court accordingly remanded the case to the District Court to consider whether the 36-day delay violated due process. In addition, however, the court made clear its view that the circumstances of this case support a finding of a due process violation. Thus, the court noted that the propriety of the length of the delay may turn on the nature of the item that has been seized, and reemphasized the point made in its earlier opinion that "special hardships [are] imposed on persons deprived of the use of their automobiles . . . ." 729 F.2d, at 661. With respect to the reason for the delay, the Court of Appeals observed that the "record here provides no obvious reason for the Government's one-month delay in processing von Neumann's petition, although we note that Customs processes a great number of petitions each year." Ibid. In addition, the court pointed to the filing of the remission petition itself as the necessary assertion of the right to a speedy determination under Barker. Finally, the court [474 U.S. 242, 249] noted that prejudice could be established by the inconvenience of being without a vehicle for any length of time. </s> Arguing that due process considerations do not govern the Secretary's disposition of remission petitions, the Government petitioned for certiorari. We granted the Government's petition. 471 U.S. 1064 (1984). We now reverse. </s> II </s> We understand respondent to argue that his property interest in his car gives him a constitutional right to a speedy disposition of his remission petition without awaiting a forfeiture proceeding. We disagree. Implicit in this Court's discussion of timeliness in $8,850 was the view that the forfeiture proceeding, without more, provides the postseizure hearing required by due process to protect Von Neumann's property interest in the car. 7 Respondent argues, however, that "[t]he petition for remission procedure is just one step in which it is determined whether that property interest will be extinguished via a judicial foreclosure proceeding." Brief for Respondent 8-9. We think respondent misunderstands the remission procedure's role. It is true that, as a practical matter, most forfeitures are disposed of through the administrative remission procedures, 8 but that is constitutionally [474 U.S. 242, 250] irrelevant. We noted in One Lot Emerald Cut Stones v. United States, 409 U.S. 232, 234 (1972), that in the event an item is not declared at the border under 1497 "[t]he Government need only prove that the property was brought into the United States without the required declaration; the Government bears no burden with respect to intent." The remission statute simply grants the Secretary the discretion not to pursue a complete forfeiture despite the Government's entitlement to one. Remission proceedings supply both the Government and the claimant a way to resolve a dispute informally rather than in judicial forfeiture proceedings. But remission proceedings are not necessary to a forfeiture determination, and therefore are not constitutionally required. Thus there is no constitutional basis for a claim that respondent's interest in the car, or in the money put up to secure the bond, entitles him to a speedy answer to his remission petition. </s> III </s> While his interest in the car is the only basis on which respondent relies in his support of the Court of Appeals' decision, the Government asks that the Court adjudge the case of a claimant who relies on the argument that 1618 itself creates a property right which cannot be taken away without due process that includes a speedy answer to a remission petition. The Government argues that the statute creates no such right. We need not address the hypothetical, however. It is abundantly clear on the record in this case that, even if respondent had such a property right, any due process requirement of timely disposition was more than adequately provided here. It is difficult, indeed impossible, to see what prejudice respondent suffered from the 36-day delay in the response. True, he was without his car for 14 days, and then, for another 22 days, without the money he [474 U.S. 242, 251] had to put up to secure a bond, and Von Neumann urges the importance of automobiles to citizens in this society. But we have already noted that his right to a forfeiture proceeding meeting the Barker test satisfies any due process right with respect to the car and the money. In fact, it is not altogether certain that the delay dated from the filing on January 20 of the original remission petition. Respondent supplemented his remission petition and was given a final decision just 13 days later. Moreover, respondent gives no hint as to how or why even a 36-day delay in the disposition of his remission petition deprived him of the process he claims was his due in connection with that petition. He does not argue that the delay prejudiced his defense against the forfeiture, see $8,850, 461 U.S., at 569 , and with respect to preparing his "case" for remission, that case was made at the time of filing and could not have been affected by the subsequent delay. On the record before us, the 36-day delay cannot be said to deprive respondent of due process of law. </s> Reversed. </s> Footnotes [Footnote 1 Section 497, 46 Stat. 728, 19 U.S.C. 1497, provides: </s> "Any article not included in the declaration and entry as made, and, before examination of the baggage was begun, not mentioned in writing by such person, if written declaration and entry was required, or orally if written [474 U.S. 242, 244] declaration and entry was not required, shall be subject to forfeiture and such person shall be liable to a penalty equal to the value of such article." </s> [Footnote 2 Section 618, 46 Stat. 757, as amended and set forth in 19 U.S.C. 1618 (1982 ed., Supp. III), provides in pertinent part: </s> "Whenever any person interested in any vessel, vehicle, aircraft, merchandise, or baggage seized under the provisions of this chapter, or who has incurred, or is alleged to have incurred, any fine or penalty thereunder, files with the Secretary of the Treasury if under the customs laws . . . before the sale of such vessel, vehicle, aircraft, merchandise, or baggage a petition for the remission or mitigation of such fine, penalty, or forfeiture, the Secretary of the Treasury . . . if he finds that such fine, penalty, or forfeiture was incurred without willful negligence or without any intention on the part of the petitioner to defraud the revenue or to violate the law, or finds the existence of such mitigating circumstances as to justify the remission or mitigation of such fine, penalty, or forfeiture, may remit or mitigate the same upon such terms and conditions as he deems reasonable and just, or order discontinuance of any prosecution relating thereto." </s> [Footnote 3 The claimant may trigger the Government's initiation of forfeiture proceedings. In United States v. $8,850, 461 U.S. 555, 569 (1983), we noted: </s> "A claimant is able to trigger rapid filing of a forfeiture action if he desires it. First, the claimant can file an equitable action seeking an order compelling the filing of the forfeiture action or return of the seized property. See Slocum v. Mayberry, 2 Wheat. 1, 10 (1817) (Marshall, C. J.). Less formally, the claimant could simply request that the Customs Service refer the matter to the United States Attorney. If the claimant believes the initial seizure was improper, he could file a motion under Federal Rule of Criminal Procedure 41(e) for a return of the seized property." </s> [Footnote 4 When the Jaguar was seized in this case, a customs officer could have instituted nonjudicial, summary forfeiture proceedings if the value of the car had been not more than $10,000. See 19 U.S.C. 1607-1609. Congress has since raised this limit to $100,000. 19 U.S.C. 1607 (1982 ed., [474 U.S. 242, 245] Supp. III). Even for a seizure of property appraised at less than $100,000, the claimant has a right to a judicial determination upon posting a bond to cover costs in the sum of $2,500 or 10% of the value of the claimed property, whichever is smaller, but not less than $250. 19 U.S.C. 1608 (1982 ed., Supp. III). </s> [Footnote 5 The Secretary of the Treasury is authorized by statute to act on petitions for remission. 19 U.S.C. 1618. This authority has been delegated to District Directors of the Customs Service in some cases where the total value of the merchandise forfeited does not exceed $100,000, 19 CFR 171.21 (1985). At the time of this seizure, the limit was $25,000. See 19 CFR 171.21 (1974). </s> [Footnote 6 The Government filed a contingent counterclaim seeking recovery of the full $24,500 in accordance with 19 U.S.C. 1497, in the event the District Court found the mitigation invalid. Because the District Court entered judgment in favor of the Government on the merits of Von Neumann's complaint, it denied the contingent counterclaim. In its answer in the District Court the Government had also contended that the remission and mitigation sought and received by respondent was a settlement, [474 U.S. 242, 247] accord, and satisfaction binding on Von Neumann. The District Court did not reach this issue; nor do we. </s> [Footnote 7 In $8,850 the claimant conceded that no preseizure hearing is required when Customs makes a seizure at the border. Respondent does not dispute that here, and we doubt that he could. In $8,850 we noted that while the general rule is that "absent an `extraordinary situation' a party cannot invoke the power of the state to seize a person's property without a prior judicial determination that the seizure is justified. . . . [D]ue process does not require federal customs officials to conduct a hearing before seizing items subject to forfeiture." 461 U.S., at 562 , n. 12. We reasoned that such a requirement would make customs processing entirely unworkable and also found that because "the seizure serves important governmental purposes[,] a preseizure notice might frustrate the statutory purpose . . . ." Ibid. </s> [Footnote 8 We noted in $8,850 that Customs processes over 50,000 noncontraband forfeitures per year, and that in 90% of all seizures, the claimant files a petition for remission or mitigation. We further noted that the Secretary [474 U.S. 242, 250] in turn grants at least partial relief for an estimated 75% of the petitions. Typically, this mitigation process terminates the dispute without the necessity of filing a forfeiture action. </s> CHIEF JUSTICE BURGER, concurring in part. </s> I join Parts I and II of the majority opinion, but do not agree with the Court's failure, in Part III of the opinion, to resolve an important question that is properly before the Court. </s> Part III declines to address the question whether a claimant may assert a due process "property" interest in the result of a discretionary petition for reduction of a statutory penalty. This question was expressly presented by our grant of the Government's petition for certiorari. The two opinions of the Court of Appeals are sufficiently ambiguous as to leave unclear whether or not that court was relying on Von Neumann's interest in the car itself, or on some interest in having his penalty reduced. In its initial opinion the Court of Appeals held that "[t]he delay in processing [respondent's] petition for remission or mitigation . . . violated his due process [474 U.S. 242, 252] right to prompt consideration of his claim." 660 F.2d 1319, 1327 (CA9 1981) (emphasis added). </s> Whether respondent has any due process right in his claim for mitigation of the statutory penalty is a question properly before the Court, and we have an obligation to address it. Resolution of this issue is not difficult. We held in Connecticut Board of Pardons v. Dumschat, 452 U.S. 458 (1981), that a prisoner has no liberty interest cognizable under due process in a claim for a discretionary grant of parole, even though under the state parole procedure inmates were regularly and routinely granted release. It follows directly that there can be no possible due process property interest in a discretionary grant of a reduction in a statutory penalty unless we are prepared to modify Dumschat. </s> I would confront and resolve this issue rather than relying on the Court's alternative holding that the 36-day period satisfies due process regardless of what due process "interests" were actually involved. </s> JUSTICE STEVENS, concurring in the judgment. </s> The fact that remission procedures are not constitutionally required, ante, at 249-250, does not shed any light on the question whether the Government has an obligation to process remission petitions with reasonable diligence. For even though it was not obligated to do so, Congress has enacted legislation authorizing the Secretary of the Treasury to create such a procedure. The importance of this statutory procedure is underlined by the fact that it is used to resolve almost 50,000 claims every year. Its practical significance is also suggested by the fact that the number of at least partially successful claimants in remission proceedings is triple the number that come away emptyhanded. This record indicates that the remission petition is a principal mechanism for resolving the dispute between the Government and the individual that frequently results from the seizure of property at our borders. [474 U.S. 242, 253] </s> When Congress authorizes a member of the Cabinet to establish a procedure of this importance to thousands of individuals, it surely intends that the procedure will be administered in a regular and fundamentally fair way. One element of fair procedure is a requirement of reasonable diligence in processing claims. Absent clear evidence to the contrary, I would therefore construe the statute as implicitly commanding the Secretary to act diligently, and would not speculate about the possibility that a wholly arbitrary remission procedure would comply with the Due Process Clause of the Fifth Amendment. * </s> Nevertheless, I agree with the Court's ultimate conclusion that on this record respondent has not demonstrated that the 36-day delay in responding to his petition was unlawful. I therefore concur in the judgment. </s> [Footnote * The Government concedes that, at least before the Customs Service acts on a remission petition, Congress has intended that the timeliness of the Government's response be fully reviewable. See Brief for United States 25, n. 20 ("A claimant is not powerless . . . to obtain a speedy resolution of the question of his interest in the property. If delay in processing the administrative petition for remission or mitigation is unreasonable under the Administrative Procedure Act, the claimant may file suit to attempt to compel the agency to act. 5 U.S.C. 706(1)"). </s> [474 U.S. 242, 254]

United States Supreme Court DOWNUM v. UNITED STATES(1963) No. 489 Argued: March 20, 1963Decided: April 22, 1963 </s> In a Federal District Court, petitioner was indicted on six counts for federal offenses. When his case was called for trial, both sides announced ready. A jury was selected and sworn and instructed to return at 2 p. m. When it did so, the prosecution asked that the jury be discharged because a key witness on two counts was not present. Petitioner moved that those two counts be dismissed for want of prosecution and that the trial continue on the remaining counts. That motion was denied, and the judge discharged the jury over petitioner's objection. Two days later, the case was called again; a second jury was impaneled; and petitioner pleaded former jeopardy. Held: In the circumstances of this case, that plea should have been sustained. Pp. 734-738. </s> 300 F.2d 137, reversed. </s> Richard Tinsman, by appointment of the Court, 371 U.S. 884 , argued the cause and filed a brief for petitioner. </s> Assistant Deputy Attorney General Geoghegan argued the cause for the United States. On the brief were Solicitor General Cox, Assistant Attorney General Miller and Beatrice Rosenberg. </s> MR. JUSTICE DOUGLAS delivered the opinion of the Court. </s> This case, involving a federal prosecution for stealing from the mail and forging and uttering checks so stolen, presents a question under the Double Jeopardy Clause of the Fifth Amendment - ". . . nor shall any person be subject for the same offence to be twice put in jeopardy of life or limb . . . ." Petitioner and three others were charged in an indictment containing eight counts. The codefendants pleaded guilty, petitioner being tried alone [372 U.S. 734, 735] before a jury and convicted on all but Counts 1 and 2, which did not apply to him. The claim of double jeopardy arose as follows: </s> On the morning of April 25, 1961, the case was called for trial and both sides announced ready. A jury was selected and sworn and instructed to return at 2 p. m. When it returned, the prosecution asked that the jury be discharged because its key witness on Counts 6 and 7 was not present - one Rutledge, who was the payee on the checks involved in those counts. Petitioner moved that Counts 6 and 7 be dismissed for want of prosecution and asked that the trial continue on the rest of the counts. This motion was denied and the judge discharged the jury over petitioner's objection. Two days later when the case was called again and a second jury impaneled, petitioner pleaded former jeopardy. His plea was overruled, a trial was had, and he was found guilty. The Court of Appeals affirmed, 300 F.2d 137; and we granted the petition for certiorari because of the seeming conflict between this decision and Cornero v. United States, 48 F.2d 69, from the Ninth Circuit. 371 U.S. 811 . </s> The present case was one of a dozen set for call during the previous week, and those cases involved approximately 100 witnesses. Subpoenas for all of them, including Rutledge, had been delivered to the marshal for service. The day before the case was first called, the prosecutor's assistant checked with the marshal and learned that Rutledge's wife was going to let him know where her husband was, if she could find out. No word was received from her and no follow-up was made. The prosecution allowed the jury to be selected and sworn even though one of its key witnesses was absent and had not been found. </s> From United States v. Perez, 9 Wheat. 579, decided in 1824, to Gori v. United States, 367 U.S. 364 , decided in 1961, it has been agreed that there are occasions when a [372 U.S. 734, 736] second trial may be had although the jury impaneled for the first trial was discharged without reaching a verdict and without the defendant's consent. The classic example is a mistrial because the jury is unable to agree. United States v. Perez, supra; Logan v. United States, 144 U.S. 263, 298 ; Dreyer v. Illinois, 187 U.S. 71, 85 -86; Keerl v. Montana, 213 U.S. 135 . In Wade v. Hunter, 336 U.S. 684 , the tactical problems of an army in the field were held to justify the withdrawal of a court-martial proceeding and the commencement of another one on a later day. Discovery by the judge during a trial that a member or members of the jury were biased pro or con one side has been held to warrant discharge of the jury and direction of a new trial. Wade v. Hunter, supra, 689; Simmons v. United States, 142 U.S. 148 ; Thompson v. United States, 155 U.S. 271 . At times the valued right of a defendant to have his trial completed by the particular tribunal summoned to sit in judgment on him may be subordinated to the public interest - when there is an imperious necessity to do so. Wade v. Hunter, supra, 690. Differences have arisen as to the application of the principle. See Brock v. North Carolina, 344 U.S. 424 ; Green v. United States, 355 U.S. 184, 188 . Harassment of an accused by successive prosecutions or declaration of a mistrial so as to afford the prosecution a more favorable opportunity to convict are examples when jeopardy attaches. Gori v. United States, supra, 369. But those extreme cases do not mark the limits of the guarantee. The discretion to discharge the jury before it has reached a verdict is to be exercised "only in very extraordinary and striking circumstances," to use the words of Mr. Justice Story in United States v. Coolidge, 25 Fed. Cas. 622, 623. For the prohibition of the Double Jeopardy Clause is "not against being twice punished, but against being twice put in jeopardy." United States v. Ball, 163 U.S. 662, 669 . [372 U.S. 734, 737] </s> The jury first selected to try petitioner and sworn was discharged because a prosecution witness had not been served with a summons and because no other arrangements had been made to assure his presence. That witness was essential only for two of the six counts concerning petitioner. Yet the prosecution opposed petitioner's motion to dismiss those two counts and to proceed with a trial on the other four counts - a motion the court denied. Here, as in Wade v. Hunter, supra, at 691, we refuse to say that the absence of witnesses "can never justify discontinuance of a trial." Each case must turn on its facts. On this record, however, we think what was said in Cornero v. United States, supra, states the governing principle. There a trial was first continued because prosecution witnesses were not present, and when they had not been found at the time the case was again called, the jury was discharged. A plea of double jeopardy was sustained when a second jury was selected, the court saying: </s> "The fact is that, when the district attorney impaneled the jury without first ascertaining whether or not his witnesses were present, he took a chance. While their absence might have justified a continuance of the case in view of the fact that they were under bond to appear at that time and place, the question presented here is entirely different from that involved in the exercise of the sound discretion of the trial court in granting a continuance in furtherance of justice. The situation presented is simply one where the district attorney entered upon the trial of the case without sufficient evidence to convict. This does not take the case out of the rule with reference to former jeopardy. There is no difference in principle between a discovery by the district attorney immediately after the jury was [372 U.S. 734, 738] impaneled that his evidence was insufficient and a discovery after he had called some or all of his witnesses." 48 F.2d, at 71. </s> That view, which has some support in the authorities. 1 is in our view the correct one. We resolve any doubt "in favor of the liberty of the citizen, rather than exercise what would be an unlimited, uncertain, and arbitrary judicial discretion." 2 This means that the judgment below must be and is </s> Reversed. </s> Footnotes [Footnote 1 In United States v. Watson, 28 Fed. Cas. 499, 500-501, the court ruled as follows: </s> "The illness of the district attorney, it not appearing by the minutes that such illness occurred after the jury was sworn, or that it was impossible for the assistant district attorney to conduct the trial, and the motion to put off the case for the term being made by such assistant, cannot be regarded as creating a manifest necessity for withdrawing a juror. So, too, as to the absence of witnesses for the prosecution, it does not appear by the minutes that such absence was first made known to the law officers of the government after the jury was sworn, or that it occurred under such circumstances as to create a plain and manifest necessity justifying the withdrawing of a juror. The mere illness of the district attorney, or the mere absence of witnesses for the prosecution, under the circumstances disclosed by the record in this case, is no ground upon which, in the exercise of a sound discretion, a court can, on the trial of an indictment, properly discharge a jury, without the consent of the defendant, after the jury has been sworn and the trial has thus commenced. To admit the propriety of the exercise of the discretion on such grounds would be to throw open the door for the indulgence of caprice and partiality by the court, to the possible and probable prejudice of the defendants. When the trial of an indictment has been commenced by the swearing of the jury, the defendant is in their charge, and is entitled to a verdict of acquittal if the case on the part of the prosecution is, for any reason, not made out against him, unless he consents to the discharging of the jury without giving a verdict, or unless there is such a legal necessity for discharging them as would, if spread on the record, enable a court of error to say that the discharge was proper." And see United States v. Shoemaker, 27 Fed. Cas. 1067. </s> [Footnote 2 United States v. Watson, supra, note 1, p. 501. [372 U.S. 734, 739] </s> MR. JUSTICE CLARK, with whom MR. JUSTICE HARLAN, MR. JUSTICE STEWART and MR. JUSTICE WHITE join, dissenting. </s> The Court in applying the rule of Cornero v. United States, 48 F.2d 69 (C. A. 9th Cir. 1931), says that "the valued right of a defendant to have his trial completed by the particular tribunal summoned to sit in judgment on him may be subordinated to the public interest - when there is an imperious necessity to do so." (Emphasis supplied.) The Court of Appeals was urged to adopt the Cornero rule, but it refused. Applying that rule here, the Court orders the conviction reversed and petitioner set free. * </s> [372 U.S. 734, 740] </s> In Wade v. Hunter, 336 U.S. 684 (1949), this Court refused to follow the Cornero rule, which was characterized as holding that the absence of witnesses was not such an "imperious" or "urgent necessity" as to come within the recognized exception to the double jeopardy provision. Id., at 691. The Court said: </s> "We are asked to adopt the Cornero rule under which petitioner contends the absence of witnesses can never justify discontinuance of a trial. Such a rigid formula is inconsistent with the guiding principles of the Perez decision [United States v. Perez, 9 Wheat. 579 (1824)] to which we adhere. Those principles command courts in considering whether a trial should be terminated without judgment to take `all circumstances into account' and thereby forbid the mechanical application of an abstract formula. The value of the Perez principles thus lies in their capacity for informed application under widely different circumstances without injury to the defendants or to the public interest." Ibid. </s> I adhere to Wade v. Hunter, which in short holds that "a trial can be discontinued when particular circumstances manifest a necessity for so doing, and when failure to discontinue would defeat the ends of justice." Id., at 690. </s> In order to apply the principles of Wade v. Hunter, it is necessary that the facts be recalled. On Wednesday or Thursday of the week preceding trial, some 12 cases, including petitioner's, were set by the court for the following Monday. This was, in the words of the trial judge, "very short notice." Transcript of Record, p. 18. Subpoenas were issued by the District Attorney's office for approximately 100 witnesses and placed in the hands of the marshal. The petitioner's case was No. 10 on the list, and the prosecutor stated that he did not foresee that it would be reached on Tuesday, the second day of the [372 U.S. 734, 741] week's hearings. The prosecutor's office was shorthanded, one of the assistants being in the military service. The prosecutor who had been assigned to petitioner's case had learned from the marshal the previous day that the wife of a Mr. Rutledge, who was the key witness in petitioner's case, would inform them of her husband's where-abouts, if she should learn of it. Since the prosecutor was trying another case on the Tuesday morning that petitioner's case was called, he was unable immediately to contact the marshal and determine whether Mr. Rutledge was present, and he announced ready for trial without ascertaining this. The jury for petitioner's case was selected and then excused until 2 p. m., and the prosecutor proceeded to complete the hearing of his other case before noon. Then, upon checking with the marshal's office during the noon recess, the prosecutor discovered that Rutledge was not present. He immediately informed the judge in his chambers, and upon the opening of the afternoon session defense counsel was advised in open court that the key witness of the Government was not available and the case would have to go over a couple of days. A defense motion to dismiss two of the six counts in the indictment - those on which Rutledge was the key witness - on the ground of lack of prosecution and proceed to trial on the remaining counts was denied by the court, and the jury was discharged - all over objections from the defense. Two days later the case was called and the petitioner interposed his plea of double jeopardy. Thereafter, a second jury was impaneled, and petitioner was tried and found guilty on all counts. </s> The first jury had never begun to act in this case. Petitioner was never formally arraigned in the presence of the first jury, nor was any evidence presented or heard for or against him at that time, nor was he required to put on any defense. In addition, the second jury having been [372 U.S. 734, 742] impaneled two days later, there was no continued or prolonged anxiety, nor was the petitioner caused any additional expense or embarrassment, deprived of any right or prejudiced in any way. Neither has petitioner contended that one jury was more or less favorable than the other. </s> The conclusions of the trial court and the Court of Appeals indicate that they viewed the circumstances in which the prosecutor found himself as having resulted from excusable oversight. There is no indication that the prosecutor's explanation was a mere cover for negligent preparation or that his action was in any way deliberate. There is nothing in the record that even suggests that the circumstances were used by the prosecutor for the purpose of securing a more favorable jury or in any way to take advantage of or to harass the petitioner. Indeed, it appears to be just one of those circumstances which often creep into a prosecutor's life as a result of inadvertence when many cases must be handled during a short trial period. </s> We can of course visualize other ways of handling the situation. The judge might have held the first jury together, rather than discharging them, until Mr. Rutledge's attendance could have been obtained. But this, viewed prospectively from the moment the court acted, would have tied up 12 men on the panel for an indefinite period and disrupted the calendar for the entire week, if not longer. It is entirely understandable that the trial judge was concerned with his calendar. Moreover, even if a two-day continuance in the above manner - holding the first jury - were later held improper on appeal from the trial court's judgment, the petitioner could then be retried after suffering not only the time and expense of one full trial but also the disclosure of his defense. Nor is the claim of petitioner that the Government should have proceeded on the other counts of the indictment, which he claims did not require the testimony [372 U.S. 734, 743] of Rutledge, any more tenable. This not only would have required two trials but also might raise the legal proposition that the prosecution on the remaining two counts was barred. While ordinarily the other four counts might have been sufficient to support a maximum sentence, the prosecutor might well have had good reason, in addition to the obvious preference for one rather than two trials, for wanting all counts considered in one proceeding. The indictment charged the petitioner with forging and passing government checks and conspiring with two codefendants, who pleaded guilty, to commit those acts. Rutledge was the payee of some of the checks and might well have been an important, though not the key, witness with reference to the conspiracy. In fact, the prosecutor expressed to the trial court his opinion that, under the entire indictment, he could not safely go to trial without the attendance of Rutledge. Transcript of Record, pp. 19-20. </s> As I see the problem, the issue is whether the action of the prosecutor in failing to check on the presence of his witness before allowing a jury to be sworn was of such moment that it constituted a deprival of the petitioner's rights and entitled him to a verdict of acquittal without any trial on the merits. Obviously under the facts here he suffered no such deprivation. Ever since Perez this Court has recognized that the "ends of public justice" must be considered in determining such a question. 9 Wheat., at 580. In this light I cannot see how this Court finds that the trial judge abused his discretion in affording the Government a two-day period in which to bring forward its key witness who, to its surprise, was found to be temporarily absent. I believe that the "ends of public justice," to which Mr. Justice Story referred in Perez, require that the Government have a fair opportunity to present the people's case and obtain adjudication on the merits, rather than that the criminal be turned free because of the harmless oversight of the prosecutor. </s> [Footnote * Both Cornero and United States v. Watson, 28 Fed. Cas. 499 (D.C. S. D. N. Y. 1868), which the Court says supports Cornero, are entirely distinguishable on their facts. In Cornero the Government sought a five-day continuance because its witnesses could not be found. This was followed by a mistrial and then two years later a second trial, as contrasted with a mere two-day delay in the instant case before a second jury was impaneled and the trial begun. It could therefore be said realistically that the Government proceeded at the first trial in Cornero without its evidence and that the retrial after two years was an harassment. Moreover, subpoenas in Cornero had neither been issued nor served, while here the subpoena had been issued but, for reasons which the trial court thought justifiable, it had not been served. In Watson the Court granted an eight-day continuance after the jury was sworn, on the ground that the District Attorney was ill and government witnesses were absent. Upon resumption of the trial the prosecutor asked that the case go off for the term because of the continued illness of the District Attorney. In holding that these circumstances did not warrant the discharge of the jury the Court observed that the illness of the District Attorney did not appear to have occurred after the jury was sworn, that apparently the government officers had not first learned of the absence of witnesses after the jury had been sworn, and that it was not shown that it was impossible for the Assistant District Attorney to conduct the trial. Nor was there any indication in Watson that subpoenas had been issued. </s> [372 U.S. 734, 744]

United States Supreme Court PEGRAM et al. v. HERDRICH(2000) No. 98-1949 Argued: February 23, 2000Decided: June 12, 2000 </s> Petitioners (collectively Carle) function as a health maintenance organization (HMO) owned by physicians providing prepaid medical services to participants whose employers contract with Carle for coverage. Respondent Herdrich was covered by Carle through her husband's employer, State Farm Insurance Company. After petitioner Pegram, a Carle physician, required Herdrich to wait eight days for an ultrasound of her inflamed abdomen, her appendix ruptured, causing peritonitis. She sued Carle in state court for, inter alia, fraud. Carle responded that the Employee Retirement Income Security Act of 1974 (ERISA) preempted the fraud counts and removed the case to federal court. The District Court granted Carle summary judgment on one fraud count, but granted Herdrich leave to amend the other. Her amended count alleged that the provision of medical services under terms rewarding physician owners for limiting medical care entailed an inherent or anticipatory breach of an ERISA fiduciary duty, since the terms created an incentive to make decisions in the physicians' self-interest, rather than the plan participants' exclusive interests. The District Court granted Carle's motion to dismiss on the ground that Carle was not acting as an ERISA fiduciary. The Seventh Circuit reversed the dismissal. </s> Held: Because mixed treatment and eligibility decisions by HMO physicians are not fiduciary decisions under ERISA, Herdrich does not state an ERISA claim. Pp. 5-25. </s> (a) Whether Carle is a fiduciary when acting through its physician owners depends on some background of fact and law about HMO organizations, medical benefit plans, fiduciary obligation, and the meaning of Herdrich's allegations. The defining feature of an HMO is receipt of a fixed fee for each patient enrolled under the terms of a contract to provide specified health care if needed. Like other risk bearing organizations, HMOs take steps to control costs. These measures are commonly complemented by specific financial incentives to physicians, rewarding them for decreasing utilization of health-care services, and penalizing them for excessive treatment. Hence, an HMO physician's financial interest lies in providing less care, not more. Herdrich argues that Carle's incentive scheme of annually paying physician owners the profit resulting from their own decisions rationing care distinguishes its plan from HMOs generally, so that reviewing Carle's decision under a fiduciary standard would not open the door to claims against other HMOs. However, inducement to ration care is the very point of any HMO scheme, and rationing necessarily raises some risks while reducing others. Thus, any legal principle purporting to draw a line between good and bad HMOs would embody a judgment about socially acceptable medical risk that would turn on facts not readily accessible to courts and on social judgments not wisely required of courts unless resort cannot be had to the legislature. Because courts are not in a position to derive a sound legal principle to differentiate an HMO like Carle from other HMOs, this Court assumes that the decisions listed in Herdrich's count cannot be subject to a claim under fiduciary standards unless all such decisions by all HMOs acting through their physicians are judged by the same standards and subject to the same claims. Pp.5-9. </s> (b) Under ERISA, a fiduciary is someone acting in the capacity of manager, administrator, or financial adviser to a "plan," and Herdrich's count accordingly charged Carle with a breach of fiduciary duty in discharging its obligations under State Farm's medical plan. The common understanding of "plan" is a scheme decided upon in advance. Here the scheme comprises a set of rules defining a beneficiary's rights and providing for their enforcement. When employers contract with an HMO to provide benefits to employees subject to ERISA, their agreement may, as here, provide elements of a plan by setting out the rules under which beneficiaries will be entitled to care. ERISA's provision that fiduciaries shall discharge their duties with respect to a plan "solely in the interest of the participants and beneficiaries," 29 U. S. C. 1104(a)(1), is rooted in the common law of trusts, but an ERISA fiduciary may also have financial interests adverse to beneficiaries. Thus, in every case charging breach of ERISA fiduciary duty, the threshold question is not whether the actions of some person providing services under the plan adversely affected a beneficiary's interest, but whether that person was performing a fiduciary function when taking the action subject to complaint. Pp. 9-13. </s> (c) Herdrich claims that Carle became a fiduciary, acting through its physicians, when it contracted with State Farm. It then breached its duty to act solely in the beneficiaries' interest, making decisions affecting medical treatment while influenced by a scheme under which the physician owners ultimately profited from their own choices to minimize the medical services provided. Herdrich's count lists mixed eligibility and treatment decisions: decisions relying on medical judgments in order to make plan coverage determinations. Pp. 13-18. </s> (d) Congress did not intend an HMO to be treated as a fiduciary to the extent that it makes mixed eligibility decisions acting through its physicians. Congress is unlikely to have thought of such decisions as fiduciary. The common law trustee's most defining concern is the payment of money in the beneficiary's interest, and mixed eligibility decisions have only a limited resemblance to that concern. Consideration of the consequences of Herdrich's contrary view leave no doubt as to Congress's intent. Recovery against for-profit HMOs for their mixed decisions would be warranted simply upon a showing that the profit incentive to ration care would generally affect such decisions, in derogation of the fiduciary standard to act in the patient's interest without possibility of conflict. And since the provision for profits is what makes a for-profit HMO a proprietary organization, Herdrich's remedy--return of profit to the plan for the participants' benefit--would be nothing less than elimination of the for-profit HMO. The Judiciary has no warrant to precipitate the upheaval that would follow a refusal to dismiss Herdrich's claim. Congress, which as promoted the formation of HMOs for 27 years, may choose to restrict its approval to certain preferred forms, but the Judiciary would be acting contrary to congressional policy if it were to entertain an ERISA fiduciary claim portending wholesale attacks on existing HMOs solely because of their structure. The Seventh Circuit's attempt to confine the fiduciary breach to cases where the sole purpose of delaying or withholding treatment is to increase the physician's financial reward would also lead to fatal difficulties. The HMO's defense would be that its physician acted for good medical reasons. For all practical purposes, every claim would boil down to a malpractice claim, and the fiduciary standard would be nothing but the traditional medical malpractice standard. The only value to plan participants of such an ERISA fiduciary action would be eligibility for attorney's fees if they won. A physician would also be subject to suit in federal court applying an ERISA standard of reasonable medical skill. This would, in turn, seem to preempt a state malpractice claim, even though ERISA does not preempt such claims absent a clear manifestation of congressional purpose, New York State Conference of Blue Cross & Blue Shield Plans v. Travelers Ins. Co., 514 U.S. 645. Pp. 18-25. </s> 154 F.3d 362, reversed. </s> Souter, J., delivered the opinion for a unanimous Court. </s> LORI PEGRAM, etal., PETITIONERS v. CYNTHIA HERDRICH </s> on writ of certiorari to the united states court of appeals for the seventh circuit </s> [June 12, 2000] </s> Justice Souter delivered the opinion of the Court. </s> The question in this case is whether treatment decisions made by a health maintenance organization, acting through its physician employees, are fiduciary acts within the meaning of the Employee Retirement Income Security Act of 1974 (ERISA), 88 Stat. 832, as amended, 29 U.S.C. §§1001 et seq. (1994 ed. and Supp. III). We hold that they are not. </s> I </s> Petitioners, Carle Clinic Association, P.C., Health Alliance Medical Plans, Inc., and Carle Health Insurance Management Co., Inc. (collectively Carle) function as a health maintenance organization (HMO) organized for profit. Its owners are physicians providing prepaid medical services to participants whose employers contract with Carle to provide such coverage. Respondent, Cynthia Herdrich, was covered by Carle through her husband's employer, State Farm Insurance Company. </s> The events in question began when a Carle physician, petitioner Lori Pegram,1 examined Herdrich, who was experiencing pain in the midline area of her groin. Six days later, Dr. Pegram discovered a six by eight centimeter inflamed mass in Herdrich's abdomen. Despite the noticeable inflammation, Dr. Pegram did not order an ultrasound diagnostic procedure at a local hospital, but decided that Herdrich would have to wait eight more days for an ultrasound , to be performed at a facility staffed by Carle more than 50 miles away. Before the eight days were over, Herdrich's appendix ruptured, causing peritonitis. See 154 F.3d 362, 365, n.1 (CA7 1998). </s> Herdrich sued Pegram and Carle in state court for medical malpractice, and she later added two counts charging state-law fraud. Carle and Pegram responded that ERISA preempted the new counts, and removed the case to federal court,2 where they then sought summary judgment on the state-law fraud counts. The District Court granted their motion as to the second fraud count but granted Herdrich leave to amend the one remaining. This she did by alleging that provision of medical services under the terms of the Carle HMO organization, rewarding its physician owners for limiting medical care, entailed an inherent or anticipatory breach of an ERISA fiduciary duty, since these terms created an incentive to make decisions in the physicians' self-interest, rather than the exclusive interests of plan participants.3 </s> Herdrich sought relief under 29 U.S.C. §1109(a), which provides that </s> "[a]ny person who is a fiduciary with respect to a plan who breaches any of the responsibilities, obligations, or duties imposed upon fiduciaries by this subchapter shall be personally liable to make good to such plan any losses to the plan resulting from each such breach, and to restore to such plan any profits of such fiduciary which have been made through use of assets of the plan by the fiduciary, and shall be subject to such other equitable or remedial relief as the court may deem appropriate, including removal of suchfiduciary." </s> When Carle moved to dismiss the ERISA count for failure to state a claim upon which relief could be granted, the District Court granted the motion, accepting the Magistrate Judge's determination that Carle was not "involved [in these events] as" an ERISA fiduciary. App. to Pet. for Cert. 63a. The original malpractice counts were then tried to a jury, and Herdrich prevailed on both, receiving $35,000 in compensation for her injury. 154 F.3d, at 367. She then appealed the dismissal of the ERISA claim to the Court of Appeals for the Seventh Circuit, which reversed. The court held that Carle was acting as a fiduciary when its physicians made the challenged decisions and that Herdrich's allegations were sufficient to state a claim: </s> "Our decision does not stand for the proposition that the existence of incentives automatically gives rise to a breach of fiduciary duty. Rather, we hold that incentives can rise to the level of a breach where, as pleaded here, the fiduciary trust between plan participants and plan fiduciaries no longer exists (i.e., where physicians delay providing necessary treatment to, or withhold administering proper care to, plan beneficiaries for the sole purpose of increasing their bonuses)." Id., at 373. </s> We granted certiorari, 527 U.S. 1068 (1999), and now reverse the Court of Appeals. </s> II </s> Whether Carle is a fiduciary when it acts through its physician owners as pleaded in the ERISA count depends on some background of fact and law about HMO organizations, medical benefit plans, fiduciary obligation, and the meaning of Herdrich's allegations. </s> A </s> Traditionally, medical care in the United States has been provided on a "fee-for-service" basis. A physician charges so much for a general physical exam, a vaccination, a tonsillectomy, and so on. The physician bills the patient for services provided or, if there is insurance and the doctor is willing, submits the bill for the patient's care to the insurer, for payment subject to the terms of the insurance agreement. Cf. R. Rosenblatt, S. Law, & S. Rosenbaum, Law and the American Health Care System 543-544 (1997) (hereinafter Rosenblatt) (citing Weiner & de Lissovoy, Razing a Tower of Babel: A Taxonomy for Managed Care and Health Insurance Plans, 18 J. Health Politics, Policy & Law 75, 76-78 (Summer 1993)). In a fee-for-service system, a physician's financial incentive is to provide more care, not less, so long as payment is forthcoming. The check on this incentive is a physician's obligation to exercise reasonable medical skill and judgment in the patient's interest. </s> Beginning in the late 1960's, insurers and others developed new models for health-care delivery, including HMOs. Cf. Rosenblatt 546. The defining feature of an HMO is receipt of a fixed fee for each patient enrolled under the terms of a contract to provide specified health care if needed. The HMO thus assumes the financial risk of providing the benefits promised: if a participant never gets sick, the HMO keeps the money regardless, and if a participant becomes expensively ill, the HMO is responsible for the treatment agreed upon even if its cost exceeds the participant's premiums. </s> Like other risk-bearing organizations, HMOs take steps to control costs. At the least, HMOs, like traditional insurers, will in some fashion make coverage determinations, scrutinizing requested services against the contractual provisions to make sure that a request for care falls within the scope of covered circumstances (pregnancy, for example), or that a given treatment falls within the scope of the care promised (surgery, for instance). They customarily issue general guidelines for their physicians about appropriate levels of care. See id., at 568-570. And they commonly require utilization review (in which specific treatment decisions are reviewed by a decisionmaker other than the treating physician) and approval in advance (precertification) for many types of care, keyed to standards of medical necessity or the reasonableness of the proposed treatment. See Andreson, Is Utilization Review the Practice of Medicine?, Implications for Managed Care Administrators, 19 J. Legal Med. 431, 432 (Sept. 1998). These cost-controlling measures are commonly complemented by specific financial incentives to physicians, rewarding them for decreasing utilization of health-care services, and penalizing them for what may be found to be excessive treatment, see Rosenblatt 563-565; John K. Iglehart, Health Policy Report: The American Health Care System--Managed Care, 327 New England J. Med. 742, 742-747 (1992). Hence, in an HMO system, a physician's financial interest lies in providing less care, not more. The check on this influence (like that on the converse, fee-for-service incentive) is the professional obligation to provide covered services with a reasonable degree of skill and judgment in the patient's interest. See Brief for American Medical Association as Amicus Curiae 17-21. </s> The adequacy of professional obligation to counter financial self-interest has been challenged no matter what the form of medical organization. HMOs became popular because fee-for-service physicians were thought to be providing unnecessary or useless services; today, many doctors and other observers argue that HMOs often ignore the individual needs of a patient in order to improve the HMOs' bottom lines. See, e.g., 154 F.3d, at 375-378 (citing various critics of HMOs).4 In this case, for instance, one could argue that Pegram's decision to wait before getting an ultrasound for Herdrich, and her insistence that the ultrasound be done at a distant facility owned by Carle, reflected an interest in limiting the HMO's expenses, which blinded her to the need for immediate diagnosis and treatment. </s> B </s> Herdrich focuses on the Carle scheme's provision for a "year-end distribution," n.3, supra, to the HMO's physician owners. She argues that this particular incentive device of annually paying physician owners the profit resulting from their own decisions rationing care can distinguish Carle's organization from HMOs generally, so that reviewing Carle's decisions under a fiduciary standard as pleaded in Herdrich's complaint would not open the door to like claims about other HMO structures. While the Court of Appeals agreed, we think otherwise, under the law as now written. </s> Although it is true that the relationship between sparing medical treatment and physician reward is not a subtle one under the Carle scheme, no HMO organization could survive without some incentive connecting physician reward with treatment rationing. The essence of an HMO is that salaries and profits are limited by the HMO's fixed membership fees. See Orentlicher, Paying Physicians More To Do Less: Financial Incentives to Limit Care, 30 U. Rich. L.Rev. 155, 174 (1996). This is not to suggest that the Carle provisions are as socially desirable as some other HMO organizational schemes; they may not be. See, e.g., Grumbach, Osmond, Vranigan, Jaffe, & Bindman, Primary Care Physicians' Experience of Financial Incentives in Managed-Care Systems, 339 New Eng. J. Med. 1516 (1998) (arguing that HMOs that reward quality of care and patient satisfaction would be preferable to HMOs that reward only physician productivity). But whatever the HMO, there must be rationing and inducement to ration. </s> Since inducement to ration care goes to the very point of any HMO scheme, and rationing necessarily raises some risks while reducing others (ruptured appendixes are more likely; unnecessary appendectomies are less so), any legal principle purporting to draw a line between good and bad HMOs would embody, in effect, a judgment about socially acceptable medical risk. A valid conclusion of this sort would, however, necessarily turn on facts to which courts would probably not have ready access: correlations between malpractice rates and various HMO models, similar correlations involving fee-for-service models, and so on. And, of course, assuming such material could be obtained by courts in litigation like this, any standard defining the unacceptably risky HMO structure (and consequent vulnerability to claims like Herdrich's) would depend on a judgment about the appropriate level of expenditure for health care in light of the associated malpractice risk. But such complicated factfinding and such a debatable social judgment are not wisely required of courts unless for some reason resort cannot be had to the legislative process, with its preferable forum for comprehensive investigations and judgments of social value, such as optimum treatment levels and health care expenditure. Cf. Turner Broadcasting System, Inc. v. FCC, 512 U.S. 622, 665-666 (1994) (opinion of Kennedy, J.) ("Congress is far better equipped than the judiciary to `amass and evaluate the vast amounts of data' bearing upon an issue as complex and dynamic as that presented here" (quoting Walters v. National Assn. of Radiation Survivors, 473 U.S. 305, 331, n.12 (1985))); Patsy v. Board of Regents of Fla., 457 U.S. 496, 513 (1982) ("[T]he relevant policy considerations do not invariably point in one direction, and there is vehement disagreement over the validity of the assumptions underlying many of them. The very difficulty of these policy considerations, and Congress' superior institutional competence to pursue this debate, suggest that legislative not judicial solutions are preferable" (footnote omitted)). </s> We think, then, that courts are not in a position to derive a sound legal principle to differentiate an HMO like Carle from other HMOs.5 For that reason, we proceed on the assumption that the decisions listed in Herdrich's complaint cannot be subject to a claim that they violate fiduciary standards unless all such decisions by all HMOs acting through their owner or employee physicians are to be judged by the same standards and subject to the same claims. </s> C </s> We turn now from the structure of HMOs to the requirements of ERISA. A fiduciary within the meaning of ERISA must be someone acting in the capacity of manager, administrator, or financial adviser to a "plan," see 29 U.S.C. §§1002(21)(A)(i)-(iii), and Herdich's ERISA count accordingly charged Carle with a breach of fiduciary duty in discharging its obligations under State Farm's medical plan. App. to Pet. for Cert. 85a-86a. ERISA's definition of an employee welfare benefit plan is ultimately circular: "any plan, fund, or program ... to the extent that such plan, fund, or program was established ... for the purpose of providing ... through the purchase of insurance or otherwise ... medical, surgical, or hospital care or benefits." §1002(1)(A). One is thus left to the common understanding of the word "plan" as referring to a scheme decided upon in advance, see Webster's New International Dictionary 1879 (2d ed. 1957); Jacobson & Pomfret, Form, Function, and Managed Care Torts: Achieving Fairness and Equity in ERISA Jurisprudence, 35 Houston L.Rev. 985, 1050 (1998). Here the scheme comprises a set of rules that define the rights of a beneficiary and provide for their enforcement. Rules governing collection of premiums, definition of benefits, submission of claims, and resolution of disagreements over entitlement to services are the sorts of provisions that constitute a plan. See Hansen v. Continental Ins. Co., 940 F.2d 971, 974 (CA5 1991). Thus, when employers contract with an HMO to provide benefits to employees subject to ERISA, the provisions of documents that set up the HMO are not, as such, an ERISA plan, but the agreement between an HMO and an employer who pays the premiums may, as here, provide elements of a plan by setting out rules under which beneficiaries will be entitled to care. </s> D </s> As just noted, fiduciary obligations can apply to managing, advising, and administering an ERISA plan, the fiduciary function addressed by Herdrich's ERISA count being the exercise of "discretionary authority or discretionary responsibility in the administration of [an ERISA] plan," 29 U.S.C. §1002(21)(A)(iii). And as we have already suggested, although Carle is not an ERISA fiduciary merely because it administers or exercises discretionary authority over its own HMO business, it may still be a fiduciary if it administers the plan. </s> In general terms, fiduciary responsibility under ERISA is simply stated. The statute provides that fiduciaries shall discharge their duties with respect to a plan "solely in the interest of the participants and beneficiaries," §1104(a)(1), that is, "for the exclusive purpose of (i) providing benefits to participants and their beneficiaries; and (ii) defraying reasonable expenses of administering the plan," §1104(a)(1)(A).6 These responsibilities imposed by ERISA have the familiar ring of their source in the common law of trusts. See Central States, Southeast & Southwest Areas Pension Fund v. Central Transport, Inc., 472 U.S. 559, 570 (1985) ("[R]ather than explicitly enumerating all of the powers and duties of trustees and other fiduciaries, Congress invoked the common law of trusts to define the general scope of their authority and responsibility"). Thus, the common law (understood as including what were once the distinct rules of equity) charges fiduciaries with a duty of loyalty to guarantee beneficiaries' interests: "The most fundamental duty owed by the trustee to the beneficiaries of the trust is the duty of loyalty.... It is the duty of a trustee to administer the trust solely in the interest of the beneficiaries." 2A A. Scott & W. Fratcher, Trusts §170, 311 (4th ed. 1987) (hereinafter Scott); see also G.Bogert & G. Bogert, Law of Trusts and Trustees §543 (rev. 2d ed. 1980) ("Perhaps the most fundamental duty of a trustee is that he must display throughout the administration of the trust complete loyalty to the interests of the beneficiary and must exclude all selfish interest and all consideration of the interests of third persons"); Central States, supra, at 570-571; Meinhard v. Salmon, 249 N.Y. 458, 464, 164 N.E. 545, 546 (1928) (Cardozo, J.) ("Many forms of conduct permissible in a workaday world for those acting at arm's length, are forbidden to those bound by fiduciary ties. A trustee is held to something stricter than the morals of the market place. Not honesty alone, but the punctilio of an honor the most sensitive, is then the standard of behavior"). </s> Beyond the threshold statement of responsibility, however, the analogy between ERISA fiduciary and common law trustee becomes problematic. This is so because the trustee at common law characteristically wears only his fiduciary hat when he takes action to affect a beneficiary, whereas the trustee under ERISA may wear different hats. </s> Speaking of the traditional trustee, Professor Scott's treatise admonishes that the trustee "is not permitted to place himself in a position where it would be for his own benefit to violate his duty to the beneficiaries." 2A Scott, §170, at 311. Under ERISA, however, a fiduciary may have financial interests adverse to beneficiaries. Employers, for example, can be ERISA fiduciaries and still take actions to the disadvantage of employee beneficiaries, when they act as employers (e.g., firing a beneficiary for reasons unrelated to the ERISA plan), or even as plan sponsors (e.g., modifying the terms of a plan as allowed by ERISA to provide less generous benefits). Nor is there any apparent reason in the ERISA provisions to conclude, as Herdrich argues, that this tension is permissible only for the employer or plan sponsor, to the exclusion of persons who provide services to an ERISA plan. </s> ERISA does require, however, that the fiduciary with two hats wear only one at a time, and wear the fiduciary hat when making fiduciary decisions. See Hughes Aircraft Co. v. Jacobson, 525 U.S. 432, 443-444 (1999); Varity Corp. v. Howe, 516 U.S. 489, 497 (1996). Thus, the statute does not describe fiduciaries simply as administrators of the plan, or managers or advisers. Instead it defines an administrator, for example, as a fiduciary only "to the extent" that he acts in such a capacity in relation to a plan. 29 U.S.C. §1002(21)(A). In every case charging breach of ERISA fiduciary duty, then, the threshold question is not whether the actions of some person employed to provide services under a plan adversely affected a plan beneficiary's interest, but whether that person was acting as a fiduciary (that is, was performing a fiduciary function) when taking the action subject to complaint. </s> E </s> The allegations of Herdrich's ERISA count that identify the claimed fiduciary breach are difficult to understand. In this count, Herdrich does not point to a particular act by any Carle physician owner as a breach. She does not complain about Pegram's actions, and at oral argument her counsel confirmed that the ERISA count could have been brought, and would have been no different, if Herdrich had never had a sick day in her life. Tr. of Oral Arg. 53-54. </s> What she does claim is that Carle, acting through its physician owners, breached its duty to act solely in the interest of beneficiaries by making decisions affecting medical treatment while influenced by the terms of the Carle HMO scheme, under which the physician owners ultimately profit from their own choices to minimize the medical services provided. She emphasizes the threat to fiduciary responsibility in the Carle scheme's feature of a year-end distribution to the physicians of profit derived from the spread between subscription income and expenses of care and administration. App. to Pet. for Cert. 86a. </s> The specific payout detail of the plan was, of course, a feature that the employer as plan sponsor was free to adopt without breach of any fiduciary duty under ERISA, since an employer's decisions about the content of a plan are not themselves fiduciary acts. Lockheed Corp. v. Spink, 517 U.S. 882, 887 (1996) ("Nothing in ERISA requires employers to establish employee benefit plans. Nor does ERISA mandate what kind of benefit employers must provide if they choose to have such a plan").7 Likewise it is clear that there was no violation of ERISA when the incorporators of the Carle HMO provided for the year-end payout. The HMO is not the ERISA plan, and the incorporation of the HMO preceded its contract with the State Farm plan. See 29 U.S.C. §1109(b) (no fiduciary liability for acts preceding fiduciary status). </s> The nub of the claim, then, is that when State Farm contracted with Carle, Carle became a fiduciary under the plan, acting through its physicians. At once, Carle as fiduciary administrator was subject to such influence from the year-end payout provision that its fiduciary capacity was necessarily compromised, and its readiness to act amounted to anticipatory breach of fiduciary obligation. </s> F </s> The pleadings must also be parsed very carefully to understand what acts by physician owners acting on Carle's behalf are alleged to be fiduciary in nature.8 It will help to keep two sorts of arguably administrative acts in mind. Cf. Dukes v. U.S. Healthcare, Inc., 57 F.3d 350, 361 (CA3 1995) (discussing dual medical/administrative roles of HMOs). What we will call pure "eligibility decisions" turn on the plan's coverage of a particular condition or medical procedure for its treatment. "Treatment decisions," by contrast, are choices about how to go about diagnosing and treating a patent's condition: given a patient's constellation of symptoms, what is the appropriate medical response? </s> These decisions are often practically inextricable from one another, as amici on both sides agree. See Brief for Washington Legal Foundation as Amicus Curiae 12; Brief of Health Law, Policy, and Ethics Scholars as Amici Curiae 10. This is so not merely because, under a scheme like Carle's, treatment and eligibility decisions are made by the same person, the treating physician. It is so because a great many and possibly most coverage questions are not simple yes-or-no questions, like whether appendicitis is a covered condition (when there is no dispute that a patient has appendicitis), or whether acupuncture is a covered procedure for pain relief (when the claim of pain is unchallenged). The more common coverage question is a when-and-how question. Although coverage for many conditions will be clear and various treatment options will be indisputably compensable, physicians still must decide what to do in particular cases. The issue may be, say, whether one treatment option is so superior to another under the circumstances, and needed so promptly, that a decision to proceed with it would meet the medical necessity requirement that conditions the HMO's obligation to provide or pay for that particular procedure at that time in that case. The Government in its brief alludes to a similar example when it discusses an HMO's refusal to pay for emergency care on the ground that the situation giving rise to the need for care was not an emergency, Brief for United States as Amicus Curiae 20-21.9 In practical terms, these eligibility decisions cannot be untangled from physicians' judgments about reasonable medical treatment, and in the case before us, Dr. Pegram's decision was one of that sort. She decided (wrongly, as it turned out) that Herdrich's condition did not warrant immediate action; the consequence of that medical determination was that Carle would not cover immediate care, whereas it would have done so if Dr. Pegram had made the proper diagnosis and judgment to treat. The eligibility decision and the treatment decision were inextricably mixed, as they are in countless medical administrative decisions every day. </s> The kinds of decisions mentioned in Herdrich's ERISA count and claimed to be fiduciary in character are just such mixed eligibility and treatment decisions: physicians' conclusions about when to use diagnostic tests; about seeking consultations and making referrals to physicians and facilities other than Carle's; about proper standards of care, the experimental character of a proposed course of treatment, the reasonableness of a certain treatment, and the emergency character of a medical condition. </s> We do not read the ERISA count, however, as alleging fiduciary breach with reference to a different variety of administrative decisions, those we have called pure eligibility determinations, such as whether a plan covers an undisputed case of appendicitis. Nor do we read it as claiming breach by reference to discrete administrative decisions separate from medical judgments; say, rejecting a claim for no other reason than the HMO's financial condition. The closest Herdrich's ERISA count comes to stating a claim for a pure, unmixed eligibility decision is her general allegation that Carle determines "which claims are covered under the Plan and to what extent," App. to Pet. for Cert. 86a. But this vague statement, difficult to interpret in isolation, is given content by the other elements of the complaint, all of which refer to decisions thoroughly mixed with medical judgment. Cf. 5A C. Wright & A. Miller, Federal Practice and Procedure §1357, pp. 320-321 (1990) (noting that, where specific allegations clarify the meaning of broader allegations, they may be used to interpret the complaint as a whole). Any lingering uncertainty about what Herdrich has in mind is dispelled by her brief, which explains that this allegation, like the others, targets medical necessity determinations. Brief for Respondent 19; see also id., at 3.10 </s> III </s> A </s> Based on our understanding of the matters just discussed, we think Congress did not intend Carle or any other HMO to be treated as a fiduciary to the extent that it makes mixed eligibility decisions acting through its physicians. We begin with doubt that Congress would ever have thought of a mixed eligibility decision as fiduciary in nature. At common law, fiduciary duties characteristically attach to decisions about managing assets and distributing property to beneficiaries. See Bogert & Bogert, Law of Trusts and Trustees, §§551, 741-747, 751-775, 781-799; 2A Scott, §§176, 181, 3 id., §§188-193, 3A id., §232. Trustees buy, sell, and lease investment property, lend and borrow, and do other things to conserve and nurture assets. They pay out income, choose beneficiaries, and distribute remainders at termination. Thus, the common law trustee's most defining concern historically has been the payment of money in the interestof the beneficiary. </s> Mixed eligibility decisions by an HMO acting through its physicians have, however, only a limited resemblance to the usual business of traditional trustees. To be sure, the physicians (like regular trustees) draw on resources held for others and make decisions to distribute them in accordance with entitlements expressed in a written instrument (embodying the terms of an ERISA plan). It is also true that the objects of many traditional private and public trusts are ultimately the same as the ERISA plans that contract with HMOs. Private trusts provide medical care to the poor; thousands of independent hospitals are privately held and publicly accountable trusts, and charitable foundations make grants to stimulate the provision of health services. But beyond this point the resemblance rapidly wanes. Traditional trustees administer a medical trust by paying out money to buy medical care, whereas physicians making mixed eligibility decisions consume the money as well. Private trustees do not make treatment judgments, whereas treatment judgments are what physicians reaching mixed decisions do make, by definition. Indeed, the physicians through whom HMOs act make just the sorts of decisions made by licensed medical practitioners millions of times every day, in every possible medical setting: HMOs, fee-for-service proprietorships, public and private hospitals, military field hospitals, and so on. The settings bear no more resemblance to trust departments than a decision to operate turns on the factors controlling the amount of a quarterly income distribution. Thus, it is at least questionable whether Congress would have had mixed eligibility decisions in mind when it provided that decisions administering a plan were fiduciary in nature. Indeed, when Congress took up the subject of fiduciary responsibility under ERISA, it concentrated on fiduciaries' financial decisions, focusing on pension plans, the difficulty many retirees faced in getting the payments they expected, and the financial mismanagement that had too often deprived employees of their benefits. See, e.g., S.Rep. No. 93-127, p.5 (1973); S.Rep. No. 93-383, p.17 (1973); id., at 95. Its focus was far from the subject of Herdrich's claim. </s> Our doubt that Congress intended the category of fiduciary administrative functions to encompass the mixed determinations at issue here hardens into conviction when we consider the consequences that would follow from Herdrich's contrary view. </s> B </s> First, we need to ask how this fiduciary standard would affect HMOs if it applied as Herdrich claims it should be applied, not directed against any particular mixed decision that injured a patient, but against HMOs that make mixed decisions in the course of providing medical care for profit. Recovery would be warranted simply upon showing that the profit incentive to ration care would generally affect mixed decisions, in derogation of the fiduciary standard to act solely in the interest of the patient without possibility of conflict. Although Herdrich is vague about the mechanics of relief, the one point that seems clear is that she seeks the return of profit from the pockets of the Carle HMO's owners, with the money to be given to the plan for the benefit of the participants. See 29 U.S.C. §1109(a) (return of all profits is an appropriate ERISA remedy). Since the provision for profit is what makes the HMO a proprietary organization, her remedy in effect would be nothing less than elimination of the for-profit HMO. Her remedy might entail even more than that, although we are in no position to tell whether and to what extent nonprofit HMO schemes would ultimately survive the recognition of Herdrich's theory.11 It is enough to recognize that the Judiciary has no warrant to precipitate the upheaval that would follow a refusal todismiss Herdrich's ERISA claim. The fact is that for over 27 years the Congress of the United States has promoted the formation of HMO practices. The Health Maintenance Organization Act of 1973, 87 Stat. 914, 42 U.S.C. §300e et seq., allowed the formation of HMOs that assume financial risks for the provision of health care services, and Congress has amended the Act several times, most recently in 1996. See 110 Stat. 1976, codified at 42 U.S.C. §300e (1994 ed, Supp. III). If Congress wishes to restrict its approval of HMO practice to certain preferred forms, it may choose to do so. But the Federal Judiciary would be acting contrary to the congressional policy of allowing HMO organizations if it were to entertain an ERISA fiduciary claim portending wholesale attacks on existing HMOs solely because of their structure, untethered to claims of concrete harm. </s> C </s> The Court of Appeals did not purport to entertain quite the broadside attack that Herdrich's ERISA claim thus entails, see 154 F.3d, at 373, and the second possible consequence of applying the fiduciary standard that requires our attention would flow from the difficulty of extending it to particular mixed decisions that on Herdrich's theory are fiduciary in nature. </s> The fiduciary is, of course, obliged to act exclusively in the interest of the beneficiary, but this translates into no rule readily applicable to HMO decisions or those of any other variety of medical practice. While the incentive of the HMO physician is to give treatment sparingly, imposing a fiduciary obligation upon him would not lead to a simple default rule, say, that whenever it is reasonably possible to disagree about treatment options, the physician should treat aggressively. After all, HMOs came into being because some groups of physicians consistently provided more aggressive treatment than others in similar circumstances, with results not perceived as justified by the marginal expense and risk associated with intervention; excessive surgery is not in the patient's best interest, whether provided by fee-for-service surgeons or HMO surgeons subject to a default rule urging them to operate. Nor would it be possible to translate fiduciary duty into a standard that would allow recovery from an HMO whenever a mixed decision influenced by the HMO's financial incentive resulted in a bad outcome for the patient. It would be so easy to allege, and to find, an economic influence when sparing care did not lead to a well patient, that any such standard in practice would allow a factfinder to convert an HMO into a guarantor of recovery. </s> These difficulties may have led the Court of Appeals to try to confine the fiduciary breach to cases where "the sole purpose" of delaying or withholding treatment was to increase the physician's financial reward, ibid. But this attempt to confine mixed decision claims to their most egregious examples entails erroneous corruption of fiduciary obligation and would simply lead to further difficulties that we think fatal. While a mixed decision made solely to benefit the HMO or its physician would violate a fiduciary duty, the fiduciary standard condemns far more than that, in its requirement of "an eye single" toward beneficiaries' interests, Donovan v. Bierwirth, 680 F.2d 263, 271 (CA2 1982). But whether under the Court of Appeals's rule or a straight standard of undivided loyalty, the defense of any HMO would be that its physician did not act out of financial interest but for good medical reasons, the plausibility of which would require reference to standards of reasonable and customary medical practice in like circumstances. That, of course, is the traditional standard of the common law. See W. Keeton, D. Dobbs, R. Keeton, & D. Owens, Prosser and Keeton on Law of Torts §32, pp.188-189 (5th ed. 1984). Thus, for all practical purposes, every claim of fiduciary breach by an HMO physician making a mixed decision would boil down to a malpractice claim, and the fiduciary standard would be nothing but the malprac-tice standard traditionally applied in actions against physicians. </s> What would be the value to the plan participant of having this kind of ERISA fiduciary action? It would simply apply the law already available in state courts and federal diversity actions today, and the formulaic addition of an allegation of financial incentive would do nothing but bring the same claim into a federal court under federal-question jurisdiction. It is true that in States that do not allow malpractice actions against HMOs the fiduciary claim would offer a plaintiff a further defendant to be sued for direct liability, and in some cases the HMO might have a deeper pocket than the physician. But we have seen enough to know that ERISA was not enacted out of concern that physicians were too poor to be sued, or in order to federalize malpractice litigation in the name of fiduciary duty for any other reason. It is difficult, in fact, to find any advantage to participants across the board, except that allowing them to bring malpractice actions in the guise of federal fiduciary breach claims against HMOs would make them eligible for awards of attorney's fees if they won. See 29 U.S.C. §1132(g)(1). But, again, we can be fairly sure that Congress did not create fiduciary obligations out of concern that state plaintiffs were not suing often enough, or were paying too much in legal fees. </s> The mischief of Herdrich's position would, indeed, go further than mere replication of state malpractice actions with HMO defendants. For not only would an HMO be liable as a fiduciary in the first instance for its own breach of fiduciary duty committed through the acts of its physician employee, but the physician employee would also be subject to liability as a fiduciary on the same basic analysis that would charge the HMO. The physician who made the mixed administrative decision would be exercising authority in the way described by ERISA and would therefore be deemed to be a fiduciary. See 29 CFR §§2509.75-5, Question D1; 2509.75-8, Question D-3 (1993) (stating that an individual who exercises authority on behalf of an ERISA fiduciary in interpreting and administering a plan will be deemed a fiduciary). Hence the physician, too, would be subject to suit in federal court applying an ERISA standard of reasonable medical skill. This result, in turn, would raise a puzzling issue of preemption. On its face, federal fiduciary law applying a malpractice standard would seem to be a prescription for preemption of state malpractice law, since the new ERISA cause of action would cover the subject of a state-law malpractice claim. See 29 U.S.C. §1144 (preempting state laws that "relate to [an] employee benefit plan"). To be sure, New York State Conference of Blue Cross & Blue Shield Plans v. Travelers Ins. Co., 514 U.S. 645, 654-655 (1995), throws some cold water on the preemption theory; there, we held that, in the field of health care, a subject of traditional state regulation, there is no ERISA preemption without clear manifestation of congressional purpose. But in that case the convergence of state and federal law was not so clear as in the situation we are positing; the state-law standard had not been subsumed by the standard to be applied under ERISA. We could struggle with this problem, but first it is well to ask, again, what would be gained by opening the federal courthouse doors for a fiduciary malpractice claim, save for possibly random fortuities such as more favorable scheduling, or the ancillary opportunity to seek attorney's fees. And again, we know that Congress had no such haphazard boons in prospect when it defined the ERISA fiduciary, nor such a risk to the efficiencyof federal courts as a new fiduciary-malpractice jurisdiction would pose in welcoming such unheard-of fiduciary litigation. </s> IV </s> We hold that mixed eligibility decisions by HMO physicians are not fiduciary decisions under ERISA. Herdrich's ERISA count fails to state an ERISA claim, and the judgment of the Court of Appeals is reversed. </s> It is so ordered. </s> FOOTNOTES Footnote 1 </s> Although Lori Pegram, a physician owner of Carle, is listed as a petitioner, it is unclear to us that she retains a direct interest in the outcome of this case. </s> Footnote 2 </s> Herdrich does not contest the propriety of removal before us, and we take no position on whether or not the case was properly removed. As we will explain, Herdrich's amended complaint alleged ERISA violations, over which the federal courts have jurisdiction, and we therefore have jurisdiction regardless of the correctness of the removal. See Grubbs v. General Elec. Credit Corp., 405 U.S. 699 (1972); Mackay v. Uinta Development Co., 229 U.S. 173 (1913). </s> Footnote 3 </s> The specific allegations were these: </s> "11. Defendants are fiduciaries with respect to the Plan and under 29 [U.S.C. §]1109(a) are obligated to discharge their duties with respect to the Plan solely in the interest of the participants and beneficiaries and </s> "a. for the exclusive purpose of: </s> "i. providing benefits to participants and their beneficiaries; and </s> "ii. defraying reasonable expenses of administering the Plan; </s> "b. with the care, skill, prudence, and diligence under the circumstances then prevailing that a prudent man acting in a like capacity and familiar with such matters would use in the conduct of an enterprise of a like character and like aims. </s> "12. In breach of that duty: </s> "a. CARLE owner/physicians are the officers and directors of HAMP and CHIMCO and receive a year-end distribution, based in large part upon, supplemental medical expense payments made to CARLE by HAMP and CHIMCO; </s> "b. Both HAMP and CHIMCO are directed and controlled by CARLE owner/physicians and seek to fund their supplemental medical expense payments to CARLE: </s> "i. by contracting with CARLE owner/physicians to provide the medical services contemplated in the Plan and then having those contracted owner/physicians: </s> "(1) minimize the use of diagnostic tests; </s> "(2) minimize the use of facilities not owned by CARLE; and </s> "(3) minimize the use of emergency and non-emergency consultation and/or referrals to non-contracted physicians. </s> "ii. by administering disputed and non-routine health insurance claims and determining: </s> "(1) which claims are covered under the Plan and to what extent; </s> "(2) what the applicable standard of care is; </s> "(3) whether a course of treatment is experimental; </s> "(4) whether a course of treatment is reasonable and customary; and </s> "(5) whether a medical condition is an emergency." App to Pet. for Cert. 85a-86a. </s> Footnote 4 </s> There are, of course, contrary perspectives, and we endorse neither side of the debate today. </s> Footnote 5 </s> They are certainly not capable of making that distinction on a motion to dismiss; if we accepted the Court of Appeals's reasoning, complaints against any flavor of HMO would have to proceed at least to the summary judgment stage. </s> Footnote 6 </s> In addition, fiduciaries must discharge their duties </s> "(B) with the care, skill, prudence, and diligence under the circumstances then prevailing that a prudent man acting in a like capacity and familiar with such matters would use in the conduct of an enterprise of a like character and with like aims; </s> "(C) by diversifying the investments of the plan so as to minimize the risk of large losses, unless under the circumstances it is clearly prudent not to do so; and </s> "(D) in accordance with the documents and instruments governing the plan insofar as such documents and instruments are consistent with the provisions of this subchapter and subchapter III of this chapter." 29 U.S.C. §1104(a)(1). </s> Footnote 7 </s> It does not follow that those who administer a particular plan design may not have difficulty in following fiduciary standards if the design is awkward enough. A plan might lawfully provide for a bonus for administrators who denied benefits to every 10th beneficiary, but it would be difficult for an administrator who received the bonus to defend against the claim that he had not been solely attentive to the beneficiaries' interests in carrying out his administrative duties. The important point is that Herdrich is not suing the employer, State Farm, and her claim cannot be analyzed as if she were. </s> Footnote 8 </s> Herdrich argues that Carle is judicially estopped from denying its fiduciary status as to the relevant decisions, because it sought and sucessfully defended removal of Herdrich's state action to the Federal District Court on the ground that it was a fiduciary with respect to Herdrich's fraud claims. Judicial estoppel generally prevents a party from prevailing in one phase of a case on an argument and then relying on a contradictory argument to prevail in another phase. See Rissetto v. Plumbers & Steamfitters Local 343, 94 F.3d 597, 605 (CA9 1996). The fraud claims in Herdrich's initial complaint, however, could be read to allege breach of a fiduciary obligation to disclose physician incentives to limit care, whereas her amended complaint alleges an obligation to avoid such incentives. Although we are not presented with the issue here, it could be argued that Carle is a fiduciary insofar as it has discretionary authority to administer the plan, and so it is obligated to disclose characteristics of the plan and of those who provide services to the plan, if that information affects beneficiaries' material interests. See, e.g., Glaziers and Glassworkers Union Local No. 252 Annuity Fund v. Newbridge Securities, Inc., 93 F.3d 1171, 1179-1181 (CA3 1996) (discussing the disclosure obligations of an ERISA fiduciary); cf. Varity Corp. v. Howe, 516 U.S. 489, 505 (1996) (holding that ERISA fiduciaries may have duties to disclose information about plan prospects that they have no duty, or even power, to change). </s> But failure to disclose is no longer the allegation of the amended complaint. Because fiduciary duty to disclose is not necessarily coextensive with fiduciary responsibility for the subject matter of the disclosure, Carle is not estopped from contesting its fiduciary status with respect to the allegations of the amended complaint. </s> Footnote 9 </s> ERISA makes separate provision for suits to receive particular benefits. See 29 U.S.C. §1132(a)(1)(B). We have no occasion to discuss the standards governing such a claim by a patient who, as in the example in text, was denied reimbursement for emergency care. Nor have we reason to discuss the interaction of such a claim with state law causes of action, see infra, at 24-25. </s> Footnote 10 </s> Though this case involves a motion to dismiss under Federal Rule of Civil Procedure 12(b)(6), and the complaint should therefore be construed generously, we may use Herdrich's brief to clarify allegations in her complaint whose meaning is unclear. See C. Wright & A. Miller, Federal Practice and Procedure, §1364, pp.480-481 (1990); Southern Cross Overseas Agencies, Inc. v. Wah Kwong Shipping Group Ltd., 181 F.3d 410, 428, n.8 (CA3 1999); Alicke v. MCI Communications Corp., 111 F.3d 909, 911 (CADC 1997); Early v. Bankers Life & Cas. Co., 959 F.2d 75, 79 (CA7 1992). </s> Footnote 11 </s> Herdrich's theory might well portend the end of nonprofit HMOs as well, since those HMOs can set doctors' salaries. A claim against a nonprofit HMO could easily allege that salaries were excessively high because they were funded by limiting care, and some nonprofits actually use incentive schemes similar to that challenged here, see Pulvers v. Kaiser Foundation Health Plan, 99 Cal. App. 3d 560, 565, 160 Cal. Rptr. 392, 393-394 (1979) (rejecting claim against nonprofit HMO based on physician incentives). See Brody, Agents Without Principals: The Economic Convergence of the Nonprofit and For-Profit Organizational Forms, 40 N.Y.L.S.L.Rev. 457, 493, and n.152 (1996) (discussing ways in which nonprofit health providers may reward physician employees).

United States Supreme Court STEVEN SPEARS v. UNITED STATES(2009) No. 08-5721 Argued: Decided: January 21, 2009 </s> Per Curiam. </s> Steven Spears was found guilty of conspiracy to distribute at least 50 grams of cocaine base and at least 500 grams of powder cocaine, in violation of 21 U.S.C. §§841(a)(1), (b)(1)(A), (b)(1)(B), 846. At sentencing, the District Court determined that the drug quantities attributable to Spears yielded an offense level of 38, that his criminal history justified placing him in the Guidelines' criminal history category IV, and that the resulting advisory Guidelines sentencing range was 324 to 405 months' imprisonment. The District Court was of the view that the Guidelines' 100:1 ratio between powder cocaine and crack cocaine quantities, see United States Sentencing Commission, Guidelines Manual §2D1.1(c) (Nov. 2006) (USSG),** yielded an excessive sentence in light of the sentencing factors outlined in 18 U.S.C. §3553(a). Relying in part on decisions from other District Courts, see United States v. Perry, 389 F.Supp. 2d 278, 307-308 (RI 2005); United States v. Smith, 359 F.Supp. 2d 771, 781-782 (ED Wis. 2005), which in turn relied on a report from the Sentencing Commission criticizing the 100:1 ratio, see United States Sentencing Commission, Report to Congress: Cocaine and Federal Sentencing Policy 106-107, App. A, pp.3-6 (May 2002) (hereinafter Report to Congress), the District Court recalculated Spears' offense level based on a 20:1 crack-to-powder ratio. That yielded an offense level of 34 and a sentencing range of 210 to 262 months' imprisonment. The District Court sentenced Spears to 240 months in prison, the statutory mandatory minimum. See United States v. Spears, 469 F.3d 1166, 1173-1174 (CA8 2006) (en banc) (Spears I). </s> On cross-appeal, the Government argued that "the district court erred by categorically rejecting the 100:1 quantity ratio and substituting its own ratio in calculating Spears's sentence." Id., at 1174. The Eighth Circuit reversed Spears' sentence and remanded for resentencing, holding that "neither Booker nor §3553(a) authorizes district courts to reject the 100:1 quantity ratio and use a different ratio in sentencing defendants for crack cocaine offenses." Id., at 1176. This Court vacated the judgment of the Eighth Circuit, and remanded for further consideration in light of Kimbrough v. United States, 552 U.S. ___ (2007). Spears v. United States, 552 U.S. ___ (2008). </s> On remand, the Eighth Circuit again reversed Spears' sentence and remanded for resentencing. 533 F.3d 715, 716 (2008) (en banc) (Spears II). It concluded, again, that the District Court "may not categorically reject the ratio set forth by the Guidelines," id., at 717, and "'impermissibly varied by replacing the 100:1 quantity ratio inherent in the advisory Guidelines range with a 20:1 quantity ratio,'" ibid. (quoting Spears I, supra, at 1178). Spears again petitioned for a writ of certiorari. Because the Eighth Circuit's decision on remand conflicts with our decision in Kimbrough, we grant the petition for certiorari and reverse. </s> In Kimbrough, we held that "under Booker, the cocaine Guidelines, like all other Guidelines, are advisory only," 552 U.S., at ___ (slip op., at 2), and that "it would not be an abuse of discretion for a district court to conclude when sentencing a particular defendant that the crack/powder disparity yields a sentence 'greater than necessary' to achieve §3553(a)'s purpose, even in a mine-run case," id., at ___ (slip op., at 21) (emphasis added). The correct interpretation of that holding is the one offered by the dissent in Spears II: "The Court thus established that even when a particular defendant in a crack cocaine case presents no special mitigating circumstances--no outstanding service to country or community, no unusually disadvantaged childhood, no overstated criminal history score, no post-offense rehabilitation--a sentencing court may nonetheless vary downward from the advisory guideline range. The court may do so based solely on its view that the 100-to-1 ratio embodied in the sentencing guidelines for the treatment of crack cocaine versus powder cocaine creates 'an unwarranted disparity within the meaning of §3553(a),' and is 'at odds with §3553(a).' The only fact necessary to justify such a variance is the sentencing court's disagreement with the guidelines--its policy view that the 100-to-1 ratio creates an unwarranted disparity." 533 F.3d, at 719 (opinion of Colloton, J.) (citations omitted). </s> Kimbrough considered and rejected the position taken by the Eighth Circuit below. It noted that "a district court's decision to vary from the advisory Guidelines may attract greatest respect when the sentencing judge finds a particular case 'outside the "heartland" to which the Commission intends individual Guidelines to apply.'" 552 U.S., at ___ (slip op., at 20-21) (quoting Rita v. United States, 551 U.S. 338, 351 (2007)). The implication was that an "inside the heartland" departure (which is necessarily based on a policy disagreement with the Guidelines and necessarily disagrees on a "categorical basis") may be entitled to less respect. Our opinion said, however, that the "crack cocaine Guidelines ... present no occasion for elaborative discussion of this matter because those Guidelines do not exemplify the Commission's exercise of its characteristic institutional role." 552 U.S., at ___ (slip op., at 21). Kimbrough thus holds that with respect to the crack cocaine Guidelines, a categorical disagreement with and variance from the Guidelines is not suspect. </s> That was indeed the point of Kimbrough: a recognition of district courts' authority to vary from the crack cocaine Guidelines based on policy disagreement with them, and not simply based on an individualized determination that they yield an excessive sentence in a particular case. The latter proposition was already established pre-Kimbrough, see United States v. Booker, 543 U.S. 220, 245-246 (2005), and the Government conceded as much in Kimbrough. 552 U.S., at ___, n.13 (slip op., at 13, n.13). That the Government did not prevail in Kimbrough proves that its concession--"that a district court may vary from the 100:1 ratio if it does so 'based on the individualized circumstance[s]' of a particular case," ibid.--understated the extent of district courts' sentencing discretion. </s> In drawing a distinction between "individualized, case-specific" consideration of the Guidelines' ratio and categorical rejection and replacement of that ratio, the Eighth Circuit relied in part, Spears II, supra, at 717, on the following passage from Kimbrough: "The [district] court did not purport to establish a ratio of its own. Rather, it appropriately framed its final determination in line with §3553(a)'s overarching instruction to 'impose a sentence sufficient, but not greater than necessary' to accomplish the sentencing goals advanced in §3553(a)(2)." 552 U.S., at ___ (slip op., at 22). </s> This says that it was "appropriate" for the District Court in Kimbrough not to specify what ratio it was using, but merely to proceed with §3553(a) analysis. The Eighth Circuit read that to mean that district courts, in the course of their individualized determinations, may not categorically disagree with the Guidelines ratio, and (consequently) may not substitute their own ratio for that of the Guidelines. If it meant that, our vacating of the Eighth Circuit's judgment in Spears I would have been inexplicable, because that supposedly impermissible disagreement and substitution was precisely the reason for Spears I's reversal of the District Court. See Spears I, 469 F.3d, at 1175-1176. As a logical matter, of course, rejection of the 100:1 ratio, explicitly approved by Kimbrough, necessarily implies adoption of some other ratio to govern the mine-run case. A sentencing judge who is given the power to reject the disparity created by the crack-to-powder ratio must also possess the power to apply a different ratio which, in his judgment, corrects the disparity. Put simply, the ability to reduce a mine-run defendant's sentence necessarily permits adoption of a replacement ratio. </s> To the extent the above quoted language has obscured Kimbrough's holding, we now clarify that district courts are entitled to reject and vary categorically from the crack-cocaine Guidelines based on a policy disagreement with those Guidelines. Here, the District Court's choice of replacement ratio was based upon two well-reasoned decisions by other courts, which themselves reflected the Sentencing Commission's expert judgment that a 20:1 ratio would be appropriate in a mine-run case. See Perry, 389 F.Supp. 2d, at 307-308; Smith, 359 F.Supp. 2d, at 781-782; Report to Congress 106-107, App. A, pp.3-6. </s> The alternative approach--adopted by the Eighth Circuit--would likely yield one of two results. Either district courts would treat the Guidelines' policy embodied in the crack-to-powder ratio as mandatory, believing that they are not entitled to vary based on "categorical" policy disagreements with the Guidelines, or they would continue to vary, masking their categorical policy disagreements as "individualized determinations." The latter is institutionalized subterfuge. The former contradicts our holding in Kimbrough. Neither is an acceptable sentencing practice. </s> In opposing Spears' present petition for a writ of certiorari, the Government contends that the Eighth Circuit's opinion stands only for the noncontroversial proposition that a remand for resentencing was warranted in this case because the District Court did not properly consider all of the §3553(a) sentencing factors. Brief in Opposition 12-13. But the Government did not present that argument below, and the Eighth Circuit's opinion plainly did not rest on that ground. It concluded instead that "the district court may not categorically reject the ratio set forth by the Guidelines." Spears II, 533 F.3d, at 717. The Eighth Circuit has since read its own opinion to mean what it says, see United States v. Judon, 284 Fed. Appx. 371, 372 (2008) (per curiam), and so do we. In any event, to the extent the District Court cut short its sentencing analysis, it did so only because it had already determined that a mandatory minimum sentence was required, thus mooting any further arguments for a reduced sentence. The decision not to entertain pointless arguments hardly constitutes procedural error. </s> The dissent contends, post, at 1, that the Eighth Circuit recognized Kimbrough's core holding when it stated that in conducting "an individualized assessment based upon the particular circumstances of a defendant's case, a district court may determine the 100:1 quantity ratio results in a harsher sentence than necessary," Spears II, supra, at 717. But that was not Kimbrough's holding; it was the Government's position in Kimbrough, which did not prevail. And it is expressly contradicted by Kimbrough's holding that district courts are entitled to vary from the crack-cocaine guidelines in a mine-run case where there are no "particular circumstances" that would otherwise justify a variance from the Guidelines' sentencing range. </s> The dissent believes that "[t]his petition involves the arguably distinct issue whether district courts that do disagree with the policy underlying the Guidelines may adopt their own categorical crack-powder ratios in place of the ratio set forth in the Guidelines." Post, at 1. But that is in fact not distinct from the issue we addressed in Kimbrough. To say that the judge who considers the 100:1 ratio excessive cannot apply a different ratio is to say that the Kimbrough-sanctioned district-court disagreement with the 100:1 ratio cannot honestly be given effect. It is absurd to think that a sentence which is reasonable in light of the statutory sentencing factors, see 18 U.S.C. §3553(a), becomes unreasonable if the sentencing judge chooses to specify his disagreement, and the degree of his disagreement, with the 100:1 ratio, which is the entire basis for his Guidelines departure. </s> The dissent says that "Apprendi, Booker, Rita, Gall, and Kimbrough have given the lower courts a good deal to digest over a relatively short period." Post, at 3. True enough--and we should therefore promptly remove from the menu the Eighth Circuit's offering, a smuggled-in dish that is indigestible. Finally, the dissent points out that other courts have followed the Eighth Circuit's course, see United States v. Russell, 537 F.3d 6, 11 (CA1 2008); United States v. Gunter, 527 F.3d 282, 286 (CA3 2008). Both of those courts, like the Eighth Circuit, seized upon the language from Kimbrough quoted above in order to stand by the course they had adopted pre-Kimbrough--and in the case of the First Circuit, despite this Court's having vacated and remanded, in light of Kimbrough, the prior First Circuit judgment which had established that course. See Pho v. United States, 552 U.S. ___ (2008). If the error of those opinions is, as we think, evident, they demonstrate the need to clarify at once the holding of Kimbrough. *  *  * </s> The petition for certiorari and the motion for leave to proceed in forma pauperis are granted. The judgment of the Court of Appeals is reversed, and the case is remanded for further proceedings consistent with this opinion. It is so ordered. Justice Kennedy would grant the petition for a writ of certiorari and set the case for oral argument. </s> Justice Thomas dissents. </s> STEVEN SPEARS v. UNITED STATES on petition for writ of certiorari to the united states court of appeals for the eighth circuit No. 08-5721. Decided January 21, 2009 </s> Chief Justice Roberts, with whom Justice Alito joins, dissenting. </s> I dissent from the Court's summary reversal in this case. As explained by the majority here and the dissenting judges below, there are cogent arguments that the Eighth Circuit's decision was contrary to our decision last Term in Kimbrough v. United States, 552 U.S. ___ (2007). But I do not think any error is so apparent as to warrant the bitter medicine of summary reversal, and I think there are good reasons not to address the question presented at this time. </s> In the decision below, the Court of Appeals recognized Kimbrough's core holding that district courts have authority to depart from the Guidelines based on policy concerns: "In considering the overall goals of sentencing under [18 U.S.C.] §3553(a) and conducting an individualized assessment based upon the particular circumstances of a defendant's case, a district court may determine the 100:1 quantity ratio results in a harsher sentence than necessary." 533 F.3d 715, 717 (CA8 2008). This petition involves the arguably distinct issue whether district courts that do disagree with the policy underlying the Guidelines may adopt their own categorical crack-powder ratios in place of the ratio set forth in the Guidelines. </s> There is at least some language in Kimbrough that seems to support the Court of Appeals' holding. In Kimbrough, we noted with apparent approval that the District Court "did not purport to establish a ratio of its own." 552 U.S., at ___ (slip op., at 22) (emphasis added). Rather, we held, the District Court "appropriately framed its final determination in line with §3553(a)'s overarching instruction to impose a sentence sufficient, but not greater than necessary to accomplish the sentencing goals advanced in §3553(a)(2)." Ibid. (internal quotation marks omitted). </s> Two other Courts of Appeals agree with the Eighth Circuit's interpretation of this language. See United States v. Russell, 537 F.3d 6, 11 (CA1 2008) (emphasizing "the importance of individualized, case-by-case sentencing determinations, rather than a reliance on generalized ratios"); United States v. Gunter, 527 F.3d 282, 286 (CA3 2008) ("a district court may not employ a 'rubber stamp' approach that categorically rejects the crack/powder disparity without an individualized assessment of the §3553(a) factors"). The majority cites no circuit court decision contrary to that of the Eighth Circuit in this case. </s> This is not the stuff of summary reversal. The majority may well be correct that its holding today follows from Kimbrough, but it is not clear to me that this result was part and parcel of the holding in that case, especially in light of the language quoted above. </s> At the same time, I do not believe this case meets our normal criteria for plenary consideration. As noted, there is no split in the lower courts on the question whether a district court may replace the crack-powder ratio in the Guidelines with a categorical ratio of the court's own choosing. And, as explained above, I do not think the Court of Appeals has "so far departed from the accepted and usual course of judicial proceedings . . . as to call for an exercise of this Court's supervisory power." S.Ct. Rule 10(a). In other words, this is exactly the sort of issue that could benefit from further attention in the courts of appeals. We should not rush to answer a novel question about the application of a one-year-old decision in the absence of a pronounced conflict among the circuits. </s> Apprendi, Booker, Rita, Gall, and Kimbrough have given the lower courts a good deal to digest over a relatively short period. We should give them some time to address the nuances of these precedents before adding new ones. As has been said, a plant cannot grow if you constantly yank it out of the ground to see if the roots are healthy. </s> FOOTNOTESFootnote **The Sentencing Commission has since reduced the crack-to-powder ratio. See USSG, Supp. App. C, Amdt. 706 (Nov. 2007).

United States Supreme Court UNITED STATES v. DEGE(1960) No. 14 Argued: October 20, 1959Decided: June 27, 1960 </s> A husband and wife are not legally incapable of violating 18 U.S.C. 371 by conspiring with each other to commit an offense against the United States. Pp. 51-55. </s> Order dismissing indictment reversed. </s> Jerome M. Feit argued the cause for the United States. With him on the brief were Solicitor General Rankin, Assistant Attorney General Wilkey and Beatrice Rosenberg. </s> Thomas Whelan argued the cause for appellees. With him on the brief was J. Robert O'Connor. </s> MR. JUSTICE FRANKFURTER delivered the opinion of the Court. </s> This is an indictment charging husband and wife with conspiring to commit an offense against the United States in violation of 371 of Title 18 of the United States Code, which was enacted by Congress on June 25, 1948, 62 Stat. 683, 701, in connection with 545 of that Code, id., 716, in that they sought illicitly to bring goods into the United States with intent to defraud it. On authority of controlling decisions of its Circuit, Dawson v. United States, 10 F.2d 106, and Gros v. United States, 138 F.2d 261, the District Court dismissed the indictment on the ground that it did not state an offense, to wit, a husband and wife are legally incapable of conspiring within the condemnation of 371. The case came here on direct review of the order dismissing the indictment, 358 U.S. 944 , under the Criminal Appeals Act of March 2, 1907, now 18 U.S.C. 3731. [364 U.S. 51, 52] The construction of 371 by the Court of Appeals for the Ninth Circuit has been explicitly rejected by the Court of Appeals for the District of Columbia Circuit, Johnson v. United States, 81 U.S. App. D.C. 254, 157 F.2d 209, and by the Court of Appeals for the Fifth Circuit, Thompson v. United States, 227 F.2d 671, and Wright v. United States, 243 F.2d 569. </s> The question raised by these conflicting views is clearcut and uncomplicated. The claim that husband and wife are outside the scope of an enactment of Congress in 1948, making it an offense for two persons to conspire, must be given short shrift once we heed the admonition of this Court that "we free our minds from the notion that criminal statutes must be construed by some artificial and conventional rule," United States v. Union Supply Co., 215 U.S. 50, 55 , and therefore do not allow ourselves to be obfuscated by medieval views regarding the legal status of woman and the common law's reflection of them. Considering that legitimate business enterprises between husband and wife have long been commonplaces in our time, it would enthrone an unreality into a rule of law to suggest that man and wife are legally incapable of engaging in illicit enterprises and therefore, forsooth, do not engage in them. </s> None of the considerations of policy touching the law's encouragement or discouragement of domestic felicities on the basis of which this Court determined appropriate rules for testimonial compulsion as between spouses, Hawkins v. United States, 358 U.S. 74 , and Wyatt v. United States, 362 U.S. 525 , are relevant to yielding to the claim that an unqualified interdiction by Congress against a conspiracy between two persons precludes a husband and wife from being two persons. Such an immunity to husband and wife as a pair of conspirators would have to attribute to Congress one of two assumptions: either that responsibility [364 U.S. 51, 53] of husband and wife for joint participation in a criminal enterprise would make for marital disharmony, or that a wife must be presumed to act under the coercive influence of her husband and, therefore, cannot be a willing participant. The former assumption is unnourished by sense; the latter implies a view of American womanhood offensive to the ethos of our society. </s> The fact of the matter is that we are asked to write into law a doctrine that parrot-like has been repeated in decisions and texts from what was given its authoritative expression by Hawkins early in the eighteenth century. He wrote: </s> "It plainly appears from the Words of the Statute, That one Person alone cannot be guilty of Conspiracy within the Purport of it; from whence it follows, . . . That no such Prosecution is maintainable against a Husband and Wife only, because they are esteemed but as one Person in Law, and are presumed to have but one Will." (Hawkins, Pleas of the Crown, 4th ed. 1762, Bk. I, chap. 1xxii, Sect. 8, p. 192.) </s> The pronouncement of Hawkins apparently rests on a case in a Year Book of 38 Edward III, decided in 1365. The learning invoked for this ancient doctrine has been questioned by modern scholarship. See Williams, The Legal Unity of Husband and Wife, 10 Mod. L. Rev., 16 (1947); and cf. Winfield, The History of Conspiracy (1921), 27, p. 64, and 37, p. 88. But in any event the answer to Hawkins with his Year Book authority, as a basis for a decision by the Supreme Court of the United States in 1960 construing a statute enacted in 1948, was definitively made long ago by Mr. Justice Holmes: </s> "It is revolting to have no better reason for a rule of law than that so it was laid down in the time of Henry IV. It is still more revolting if the grounds [364 U.S. 51, 54] upon which it was laid down have vanished long since, and the rule simply persists from blind imitation of the past." Holmes, Collected Legal Papers, 187 (1920), reprinting The Path of the Law, 10 Harv. L. Rev. 457, 469 (1897). </s> For this Court now to act on Hawkins's formulation of the medieval view that husband and wife "are esteemed but as one Person in Law, and are presumed to have but one Will" would indeed be "blind imitation of the past." It would require us to disregard the vast changes in the status of woman - the extension of her rights and correlative duties - whereby a wife's legal submission to her husband has been wholly wiped out, not only in the English-speaking world generally but emphatically so in this country. </s> How far removed we were even nearly a century ago when Congress passed the original statute against criminal conspiracy, the Act of March 2, 1867, 14 Stat. 484, from the legal and social climate of eighteenth century common law regarding the status of woman is pithily illustrated by recalling the self-deluding romanticism of Blackstone, whereby he could conscientiously maintain that "even the disabilities, which the wife lies under, are for the most part intended for her protection and benefit. So great a favorite is the female sex of the laws of England." Blackstone, Commentaries on the Laws of England (1765), Bk. I, ch. 15, p. 433. It would be an idle parade of learning to document the statement that these common-law disabilities were extensively swept away in our different state of society, both by legislation and adjudication, long before the originating conspiracy Act of 1867 was passed. Suffice it to say that we cannot infuse into the conspiracy statute a fictitious attribution to Congress of regard for the medieval notion of woman's submissiveness to the benevolent coercive powers of a husband in [364 U.S. 51, 55] order to relieve her of her obligation of obedience to an unqualifiedly expressed Act of Congress by regarding her as a person whose legal personality is merged in that of her husband making the two one. </s> Reversed. </s> MR. CHIEF JUSTICE WARREN, with whom MR. JUSTICE BLACK and MR. JUSTICE WHITTAKER join, dissenting. </s> If the Court's opinion reflects all that there is to this case, it is astonishing that it has taken so many years for the federal judiciary to loose itself from the medieval chains of the husband-wife conspiracy doctrine. The problem, as the Court sees it, is almost absurdly uncomplicated: The basis for the notion that husband and wife are not subject to a conspiracy charge is that man and wife are one; but we know that man and wife are two, not one; therefore, there is no basis for the notion that husband and wife are not subject to a conspiracy charge. I submit that this simplistic an approach will not do. </s> The Court apparently does not assert that if the husband-wife conspiracy doctrine was widely accepted when the conspiracy statute was passed in 1867, 14 Stat. 484, and therefore was presumably within Congress' understanding of the reach of that statute, nonetheless this Court should now reject the rule because it finds it nonsensical. Instead, the Court's position is that </s> "It would be an idle parade of learning to document the statement that these common-law disabilities [of women] were extensively swept away in our different state of society, both by legislation and adjudication, long before the originating conspiracy Act of 1867 was passed." </s> But, however rapidly nineteenth century jurisprudence moved toward a recognition of the individuality of women in other areas, it is wholly inaccurate to imply that the law [364 U.S. 51, 56] of conspiracy changed apace. In fact, the earliest case repudiating the husband-wife doctrine which the Government has been able to cite is Dalton v. People, 68 Colo. 44, 189 P. 37, which was decided, as the Government puts it, "[a]s early as 1920." And if the doctrine is an anachronism today, as the Court says, its unusual hardiness is demonstrated by the fact that the decision of the Court represents a departure from the general rule which prevails today in the English-speaking world. As recently as 1957, the Privy Council approved the husband-wife doctrine, 1 and other Commonwealth courts are in accord. 2 For American decisions, see Annot., 4 A. L. R. 266, 71 A. L. R. 1116, 46 A. L. R. 2d 1275. </s> Thus it seems clear that if the 1867 statute is to be construed to reflect Congress' intent as it was in 1867, the Court's decision is erroneous. And I believe that we must focus upon that intent, inasmuch as there is no indication that Congress meant to change the law by the 1948 legislation which re-enacted without material variation the old conspiracy statute. 3 Surely when a rule of law is well established in the common law and is part of the legislative purpose when a relevant statute is passed, that rule should not be rejected by this Court in the absence of an explicit subsequent repudiation of it by Congress. 4 </s> [364 U.S. 51, 57] Consequently, I would be compelled to dissent whether or not I believed the rule to be supported by reason. </s> But more, I cannot agree that the rule is without justification. Inasmuch as Mr. Justice Holmes' observation that it is "revolting" to follow a doctrine only "from blind imitation of the past" is hardly novel, the tenacious adherence of the judiciary to the husband-wife conspiracy doctrine indicates to me that the rule may be predicated upon underlying policies unconnected with problems of women's suffrage or capacity to sue. The "definitive answer" to the question posed by this case is not to be found in a breezy aphorism from the collected papers of Mr. Justice Holmes, for "[g]eneral propositions do not decide concrete cases." 5 </s> It is not necessary to be wedded to fictions to approve the husband-wife conspiracy doctrine, for one of the dangers which that doctrine averts is the prosecution and conviction of persons for "conspiracies" which Congress never meant to be included within the statute. A wife, simply by virtue of the intimate life she shares with her husband, might easily perform acts that would technically be sufficient to involve her in a criminal conspiracy with him, but which might be far removed from the arm's-length [364 U.S. 51, 58] agreement typical of that crime. It is not a medieval mental quirk or an attitude "unnourished by sense" to believe that husbands and wives should not be subjected to such a risk, or that such a possibility should not be permitted to endanger the confidentiality of the marriage relationship. While it is easy enough to ridicule Hawkins' pronouncement in Pleas of the Crown 6 from a metaphysical point of view, the concept of the "oneness" of a married couple may reflect an abiding belief that the communion between husband and wife is such that their actions are not always to be regarded by the criminal law as if there were no marriage. </s> By making inroads in the name of law enforcement into the protection which Congress has afforded to the marriage relationship, the Court today continues in the path charted by the recent decision in Wyatt v. United States, 362 U.S. 525 , where the Court held that, under the circumstances of that case, a wife could be compelled to testify against her husband over her objection. One need not waver in his belief in virile law enforcement to insist that there are other things in American life which are also of great importance, and to which even law enforcement must accommodate itself. One of these is the solidarity and the confidential relationship of marriage. The Court's opinion dogmatically asserts that the husband-wife conspiracy doctrine does not in fact protect this relationship, and that hence the doctrine "enthrone[s] an unreality into a rule of law." I am not easily persuaded that a rule accepted by so many people for so many centuries can be so lightly dismissed. But in any event, I submit that the power to depose belongs to Congress, not to this Court. I dissent. </s> Footnotes [Footnote 1 Mawji v. Reginam, 41 Crim. App. R. 69, 1 All Eng. Rep. 1957. 385. </s> [Footnote 2 See Kowbel v. The Queen, 110 Can. Crim. Cas. 47 (1954); The King v. McKechie 1926. N. Z. L. R. 1. </s> [Footnote 3 18 U.S.C. 371. </s> [Footnote 4 "There are no judgments in Canada, dealing with this particular matter, but I think it is well settled that since many centuries, it has been the law of England that a husband and wife cannot alone conspire to commit an indictable offence. These views have been expressed during over six centuries, and I would be slow to believe that the hesitations of a few modern writers could justify us to brush [364 U.S. 51, 57] aside what has always been considered as the existing law. . . . It may very well be amended by legislative intervention, but as long as it is not, it must be applied." Kowbel v. The Queen, 110 Can. Crim. Cas. 47, 52 (1954). (Taschereau, J.) </s> "Had it been the intention of Parliament to abolish the common law defence with which we are concerned it would be expected that plain words dealing expressly with such defence would have been used . . . . I can find nothing in the general words [of the statute] to warrant imputing to Parliament the intention of taking away this ancient common law defence of a husband and wife . . . ." Id., at 54-55. (Cartwright, J.) </s> [Footnote 5 Lochner v. New York, 198 U.S. 45, 76 (dissenting opinion). </s> [Footnote 6 Hawkins, 1 Pleas of the Crown (4th ed. 1762), 192. </s> [364 U.S. 51, 59]

United States Supreme Court LEHMAN BROTHERS v. SCHEIN(1974) No. 73-439 Argued: March 19, 1974Decided: April 29, 1974 </s> [Footnote * Together with No. 73-440, Simon v. Schein et al., and No. 73-495, Investors Diversified Services, Inc., et al. v. Schein et al., also on certiorari to the same court. </s> Shareholders' derivative diversity suits were brought in federal court in New York, alleging that the president of a Florida corporation as a fiduciary, with others, used inside information about projected corporate earnings for profit and hence was liable to the corporation for the unlawful profits. The District Court, looking to New York's choice-of-law rules, held that under Florida law, which it held governed, the defendants were not liable, and dismissed the complaints. The Court of Appeals reversed, finding that Florida law, though controlling, was not decisive, and that in this situation, Florida "would probably" apply a certain New York decision to impose liability. Held: While resort to an available certification procedure, such as is available in Florida, is not obligatory where there is doubt as to local law, and its use in a given case is discretionary, resort to such procedure seems particularly appropriate here in view of the novelty of the question, the unsettled state of Florida law, and the fact that when federal judges in New York attempt to predict uncertain Florida law, they act as "outsiders" not exposed to local law. Hence, the case is remanded to the Court of Appeals to reconsider whether the controlling issue of state law should be certified to the Florida Supreme Court. Pp. 389-392. </s> 478 F.2d 817, vacated and remanded. </s> DOUGLAS, J., delivered the opinion for a unanimous Court. REHNQUIST, J., filed a concurring opinion, post, p. 392. </s> James J. Hagan argued the cause for all petitioners. With him on the briefs for petitioner in No. 73-439 was Stephen P. Duggan. David Hartfield, Jr., and Laura [416 U.S. 386, 387] Banfield were on the brief for petitioner in No. 73-440. James V. Hayes, John E. Tobin, Richard Y. Holcomb, and Allan R. Freedman were on the briefs for petitioners in No. 73-495. </s> Donald N. Ruby argued the cause for all respondents. With him on the brief were Benedict Wolf, Edward A. Berman, and Victor P. Muskin. </s> MR. JUSTICE DOUGLAS delivered the opinion of the Court. </s> These cases are here on petitions for certiorari and raise one identical question. </s> These are suits brought in the District Court for the Southern District of New York. Lum's, one of the respondents in the Lehman Bros. petition, is a Florida corporation with headquarters in Miami. Each of the three petitions, which we consolidated for oral argument, involves shareholders' derivative suits naming Lum's and others as defendants; and the basis of federal jurisdiction is diversity of citizenship, 28 U.S.C. 1332 (a) (1), about which there is no dispute. </s> The complaints allege that Chasen, president of Lum's, called Simon, a representative of Lehman Bros., and told him about disappointing projections of Lum's earnings, estimates that were confidential, not public. Simon is said to have told an employee of IDS 1 about them. On the next day, it is alleged that the IDS defendants sold [416 U.S. 386, 388] 83,000 shares of Lum's on the New York Stock Exchange for about $17.50 per share. Later that day the exchanges halted trading in Lum's stock and on the next trading day it opened at $14 per share, the public being told that the projected earnings would be "substantially lower" than anticipated. The theory of the complaints was that Chasen was a fiduciary but used the inside information along with others for profit and that Chasen and his group are liable to Lum's for their unlawful profits. </s> Lehman and Simon defended on the ground that the IDS sale was not made through them and that neither one benefited from the sales. Nonetheless plaintiffs claimed that Chasen and the other defendants were liable under Diamond v. Oreamuno, 24 N. Y. 2d 494, 248 N. E. 2d 910 (1969). Diamond proceeds on the theory that "inside" information of an officer or director of a corporation is an asset of the corporation which had been acquired by the insiders as fiduciaries of the company and misappropriated in violation of trust. </s> The District Court looked to the choice-of-law rules of the State of New York, Klaxon Co. v. Stentor Electric Mfg. Co., 313 U.S. 487 (1941), and held that the law of the State of incorporation governs the existence and extent of corporate fiduciary obligations, as well as the liability for violation of them. Diamond did, indeed, so indicate, 24 N. Y. 2d, at 503-504, 248 N. E. 2d, at 915. </s> The District Court in examining Florida law concluded that, although the highest court in Florida has not considered the question, several district courts of appeal indicate that a complaint which fails to allege both wrongful acts and damage to the corporation must be dismissed. 2 The District Court went on to consider whether if Florida followed the Diamond rationale, defendants would be liable. It concluded that the [416 U.S. 386, 389] present complaints go beyond Diamond, as Chasen, the only fiduciary of Lum's involved in the suits, never sold any of his holdings on the basis of inside information. The other defendants were not fiduciaries of Lum's. 3 The District Court accordingly dismissed the complaints, 335 F. Supp. 329 (1971). </s> The Court of Appeals by a divided vote reversed the District Court. 478 F.2d 817 (CA2 1973). While the Court of Appeals held that Florida law was controlling, it found none that was decisive. So it then turned to the law of other jurisdictions, particularly that of New York, to see if Florida "would probably" interpret Diamond to make it applicable here. The Court of Appeals concluded that the defendants had engaged with Chasen "to misuse corporate property," id., at 822, and that the theory of Diamond reaches that situation, "viewing the case as the Florida court would probably view it." Ibid. There were emanations from other Florida decisions 4 that made the majority on the Court of Appeals feel that Florida would follow that reading of Diamond. Such a construction of Diamond, the Court of Appeals said, would have "the prophylactic effect of providing a disincentive to insider trading." Id., at 823. And so it would. Yet under the regime of Erie R. Co. v. Tompkins, 304 U.S. 64 (1938), a State can make just the opposite her law, providing there is no over-riding federal rule which pre-empts state law by reason of federal curbs on trading in the stream of commerce. </s> The dissenter on the Court of Appeals urged that that court certify the state-law question to the Florida Supreme Court as is provided in Fla. Stat. Ann. 25.031 [416 U.S. 386, 390] and its Appellate Rule 4.61. 478 F.2d, at 828. That path is open to this Court and to any court of appeals of the United States. We have, indeed, used it before 5 as have courts of appeals. 6 </s> Moreover when state law does not make the certification procedure available, 7 a federal court not infrequently will stay its hand, remitting the parties to the state court to resolve the controlling state law on which the federal rule may turn. Kaiser Steel Corp. v. W. S. Ranch Co., 391 U.S. 593 (1968). Numerous applications of that practice are reviewed in Meredith v. Winter Haven, 320 U.S. 228 (1943), which teaches that the mere difficulty in ascertaining local law is no excuse for remitting the parties to a state tribunal for the start of another lawsuit. We do not suggest that where there is doubt as to local law and where the certification procedure is available, [416 U.S. 386, 391] resort to it is obligatory. It does, of course, in the long run save time, energy, and resources and helps build a cooperative judicial federalism. 8 Its use in a given case rests in the sound discretion of the federal court. </s> Here resort to it would seem particularly appropriate in view of the novelty of the question and the great unsettlement of Florida law, Florida being a distant State. When federal judges in New York attempt to predict uncertain Florida law, they act, as we have referred to ourselves on this Court in matters of state law, as "outsiders" lacking the common exposure to local law which comes from sitting in the jurisdiction. </s> "Reading the Texas statutes and the Texas decisions as outsiders without special competence in Texas law, we would have little confidence in our independent judgment regarding the application of that law to the present situation. The lower court did deny that the Texas statutes sustained the Commission's assertion of power. And this represents the view of an able and experienced circuit judge of the circuit which includes Texas and of two capable district judges trained in Texas law." Railroad Comm'n v. Pullman Co., 312 U.S. 496, 499 (1941). </s> See also MacGregor v. State Mutual Life Assur. Co., 315 U.S. 280, 281 (1942); Reitz v. Mealey, 314 U.S. 33, 39 (1941). </s> The judgment of the Court of Appeals is vacated and the cases are remanded so that that court may reconsider [416 U.S. 386, 392] whether the controlling issue of Florida law should be certified to the Florida Supreme Court pursuant to Rule 4.61 of the Florida Appellate Rules. </s> So ordered. </s> Footnotes [Footnote 1 Investors Diversified Services, Inc., Investors Variable Payment Fund, Inc., and IDS New Dimensions Fund, Inc., were defendants in the Schein case. Of those, only Investors Diversified Services, Inc., is a defendant in the other derivative action brought by Gregorio. The dismissal of the third derivative action (Gildenhorn) was not pursued on appeal. One Sit and one Jundt, defendants alleged to be employees of IDS, Inc., were dismissed from the case by the District Court for lack of personal jurisdiction. There was no appeal from that dismissal. </s> [Footnote 2 E. g., Palma v. Zerbey, 189 So.2d 510, 511 (Fla. App. 1966). </s> [Footnote 3 The District Court also held that whether Chasen would be liable not for profiting himself from the inside information but for revealing it to others could not be reached as Chasen, a nonresident of New York, had not been properly served. </s> [Footnote 4 See, e. g., Quinn v. Phipps, 93 Fla. 805, 113 So. 419 (1927). </s> [Footnote 5 Aldrich v. Aldrich, 375 U.S. 249 (1963); Dresner v. City of Tallahassee, 375 U.S. 136 (1963). </s> [Footnote 6 Trail Builders Supply Co. v. Reagan, 430 F.2d 828 (CA5 1970); Gaston v. Pittman, 413 F.2d 1031 (CA5 1969); Martinez v. Rodriquez, 410 F.2d 729 (CA5 1969); Moragne v. States Marine Lines, Inc., 409 F.2d 32 (CA5 1969), rev'd on other grounds, 398 U.S. 375 (1970); Hopkins v. Lockheed Aircraft Corp., 394 F.2d 656 (CA5 1968); Life Ins. Co. of Virginia v. Shifflet, 380 F.2d 375 (CA5 1967); Green v. American Tobacco Co., 325 F.2d 673 (CA5 1963); Sun Insurance Office v. Clay, 319 F.2d 505 (CA5 1963). The Fifth Circuit's willingness to certify is in part a product of frequent state court repudiation of its interpretations of state law. See the cases summarized in United Services Life Ins. Co. v. Delaney, 328 F.2d 483, 486-487 (CA5 1964) (Brown, C. J., concurring). </s> [Footnote 7 Certification procedures are available in several States, including Colorado, Colo. Appellate Rule 21.1 (1970); Hawaii, Haw. Rev. Stat. 602-36 (1969); Louisiana, La. Rev. Stat. Ann. 13:72.1 (Supp. 1973); Maine, Me. Rev. Stat. Ann., Tit. 4, 57 (1964); Maryland, Md. Ann. Code, Art. 26, 161 (Supp. 1973); Massachusetts, Mass. Sup. Jud. Ct. Rule 3:21 (1973); Montana, Mont. Sup. Ct. Rule 1 (1973); New Hampshire, N. H. Rev. Stat. Ann. 490 App. R. 20 (Supp. 1973); and Washington, Wash. Rev. Code Ann. 2.60.010-2.60.030 (Supp. 1972). </s> [Footnote 8 See Wright, The Federal Courts and the Nature and Quality of State Law, 13 Wayne L. Rev. 317 (1967); Kurland, Toward a Co-Operative Judicial Federalism: The Federal Court Abstention Doctrine, 24 F. R. D. 481 (1960); Note, Inter-Jurisdictional Certification: Beyond Abstention Toward Cooperative Judicial Federalism, 111 U. Pa. L. Rev. 344 (1963); Note, Florida's Interjurisdictional Certification: A Reexamination To Promote Expanded National Use, 22 U. Fla. L. Rev. 21 (1969). </s> MR. JUSTICE REHNQUIST, concurring. </s> The Court says that use of state court certification procedures by federal courts "does, of course, in the long run save time, energy, and resources and helps build a cooperative judicial federalism." Ante, at 391. It also observes that "[w]e do not suggest that where there is doubt as to local law and where the certification procedure is available, resort to it is obligatory," ante, at 390-391, and further states that "[i]ts use in a given case rests in the sound discretion of the federal court." Ante, at 391. I agree with each of these propositions, but I think it appropriate to emphasize the scope of the discretion of federal judges in deciding whether to use such certification procedures. </s> Petitioners here were defendants in the District Court. That court, applying applicable New York choice-of-law rules, decided that Florida law governs the case and, finding that the respondents' complaint requested relief which would extend the substantive law even beyond New York's apparently novel decision in Diamond v. Oreamuno, 24 N. Y. 2d 494, 248 N. E. 2d 910 (1969), dismissed the complaint on the merits. The Court of Appeals agreed that Florida law applied, but held that Florida law would permit recovery on the claim stated by respondents. The opinion of the dissenting judge of the Court of Appeals, disagreeing with the majority's analysis of Florida law, added in a concluding paragraph that in light of the uncertainty of Florida law, the Florida certification procedure should have been utilized by the Court of Appeals. On rehearing, [416 U.S. 386, 393] petitioners requested the Court of Appeals to utilize this procedure, but they concede that this is the first such request that they made. Thus petitioners seek to upset the result of more than two years of trial and appellate litigation on the basis of a point which they first presented to the Court of Appeals upon petition for rehearing. Cf. Hostetter v. Idlewild Liquor Corp., 377 U.S. 324, 329 (1964). </s> The authority which Congress has granted this Court to review judgments of the courts of appeals undoubtedly vests us not only with the authority to correct errors of substantive law, but to prescribe the method by which those courts go about deciding the cases before them. Western Pacific Railroad Case, 345 U.S. 247 (1953). But a sensible respect for the experience and competence of the various integral parts of the federal judicial system suggests that we go slowly in telling the courts of appeals or the district courts how to go about deciding cases where federal jurisdiction is based on diversity of citizenship, cases which they see and decide far more often than we do. </s> This Court has held that a federal court may not remit a diversity plaintiff to state courts merely because of the difficulty in ascertaining local law, Meredith v. Winter Haven, 320 U.S. 228 (1943); it has also held that unusual circumstances may require a federal court having jurisdiction of an action to nonetheless abstain from deciding doubtful questions of state law, e. g., Louisiana Power & Light Co. v. City of Thibodaux, 360 U.S. 25 (1959); Kaiser Steel Corp. v. W. S. Ranch Co., 391 U.S. 593 (1968) (per curiam). In each of these situations, our decisions have dealt with the issue of how to reconcile the exercise of the jurisdiction which Congress has conferred upon the federal courts with the important considerations of comity and cooperative federalism which [416 U.S. 386, 394] are inherent in a federal system, both of which must be subject to a single national policy within the federal judiciary. </s> At the other end of the spectrum, however, I assume it would be unthinkable to any of the Members of this Court to prescribe the process by which a district court or a court of appeals should go about researching a point of state law which arises in a diversity case. Presumably the judges of the district courts and of the courts of appeals are at least as capable as we are in determining what the Florida courts have said about a particular question of Florida law. </s> State certification procedures are a very desirable means by which a federal court may ascertain an undecided point of state law, especially where, as is the case in Florida, the question can be certified directly to the court of last resort within the State. But in a purely diversity case such as this one, the use of such a procedure is more a question of the considerable discretion of the federal court in going about the decisionmaking process than it is a question of a choice trenching upon the fundamentals of our federal-state jurisprudence. </s> While certification may engender less delay and create fewer additional expenses for litigants than would abstention, it entails more delay and expense than would an ordinary decision of the state question on the merits by the federal court. See Clay v. Sun Insurance Office, 363 U.S. 207, 226 -227 (1960) (dissenting opinion). The Supreme Court of Florida has promulgated an appellate rule, Fla. Appellate Rule 4.61 (1967), which provides that upon certification by a federal court to that court, the parties shall file briefs there according to a specified briefing schedule, that oral argument may be granted upon application, and that the parties shall pay the costs of the [416 U.S. 386, 395] certification. * Thus while the certification procedure is more likely to produce the correct determination of state law, additional time and money are required to achieve such a determination. </s> If a district court or court of appeals believes that it can resolve an issue of state law with available research materials already at hand, and makes the effort to do so, its determination should not be disturbed simply because the certification procedure existed but was not used. The question of whether certification on the facts of this case, particularly in view of the lateness of its suggestion by petitioners, would have advanced the goal of correctly disposing of this litigation on the state law issue is one which I would leave, and I understand that the Court would leave, to the sound judgment of the court making the initial choice. But since the Court has today for the first time expressed its view as to the use of certification procedures by the federal courts, I agree that it is appropriate to vacate the judgment of the Court of Appeals and remand the cases in order that the Court of Appeals may reconsider certification in light of the Court's opinion. </s> [Footnote * Fla. Appellate Rule 4.61 (1967) provides in part: "f. Costs of Certificate. The costs of the certificate and filing fee shall be equally divided between the parties unless otherwise ordered by this Court. "g. Briefs and Argument. The appellant or moving party in the federal court shall file and serve upon its adversary its brief on the question certified within 30 days after the filing of said certificate in the appellate court of this state having jurisdiction. The appellee or responding party in the federal court shall file and serve upon its adversary its brief within 20 days after the receipt of appellant's or moving party's brief and a reply brief shall be filed within 10 days thereafter. "h. Oral Argument. Oral argument may be granted upon application and, unless for good cause shown the time be enlarged by special order of the Court prior to the hearing thereon, the parties shall be allowed the same time as in other causes on the merits." </s> [416 U.S. 386, 396]

United States Supreme Court HAZELWOOD SCHOOL DISTRICT v. UNITED STATES(1977) No. 76-255 Argued: April 27, 1977Decided: June 27, 1977 </s> The United States brought this action against petitioners, the Hazelwood, Mo., School District, located in St. Louis County, and various officials, alleging that they were engaged in a "pattern or practice" of teacher employment discrimination in violation of Title VII of the Civil Rights Act of 1964, as amended, which became applicable to petitioners as public employers on March 24, 1972. The District Court following trial ruled that the Government had failed to establish a pattern or practice of discrimination. The Court of Appeals reversed, in part on the ground that the trial court's analysis of statistical data rested on an irrelevant comparison of Negro teachers to Negro pupils in Hazelwood, instead of a comparison of Negro teachers in Hazelwood to Negro teachers in the relevant labor market area, which it found to consist of St. Louis County and the city of St. Louis, where 15.4% of the teachers are Negro. In the 1972-1973 and 1973-1974 school years only 1.4% and 1.8%, respectively, of Hazelwood's teachers were Negroes, and this statistical disparity, particularly when viewed against the background of Hazelwood's teacher hiring procedures, was held to constitute a prima facie case of a pattern or practice of racial discrimination. Petitioners contend that the statistical data on which the Court of Appeals relied cannot sustain a finding of a violation of Title VII. Held: The Court of Appeals erred in disregarding the statistical data in the record dealing with Hazelwood's hiring after it became subject to Title VII and the court should have remanded the case to the District Court for further findings as to the relevant labor market area and for an ultimate determination whether Hazelwood has engaged in a pattern or practice of employment discrimination since March 24, 1972. Though the Court of Appeals was correct in the view that a proper comparison was between the racial composition of Hazelwood's teaching staff and the racial composition of the qualified public school teacher population in the relevant labor market, it erred in disregarding the possibility that the prima facie statistical proof in the record might at the trial court level be rebutted by statistics dealing with Hazelwood's post-Act hiring practices such as with respect [433 U.S. 299, 300] to the number of Negroes hired compared to the total number of Negro applicants. For, once a prima facie case has been established by statistical work-force disparities, the employer must be given an opportunity to show that "the claimed discriminatory pattern is a product of pre-Act hiring rather than unlawful post-Act discrimination," Teamsters v. United States, 431 U.S. 324, 360 . The record showed, but the Court of Appeals in its conclusions ignored, that for the two-year period 1972-1974 3.7% of the new teachers hired in Hazelwood were Negroes. The court accepted the Government's argument that the relevant labor market was St. Louis County and the city of St. Louis without considering petitioners' contention that St. Louis County alone (where the figure was 5.7%) was the proper area because the city of St. Louis attempts to maintain a 50% Negro teaching staff. The difference between the figures may well be significant since the disparity between 3.7% and 5.7% may be sufficiently small to weaken the Government's other proof, while the disparity between 3.7% and 15.4% may be sufficiently large to reinforce it. In determining what figures provide the most accurate basis for comparison to the hiring figures at Hazelwood numerous other factors, moreover, must also be evaluated by the trial court. Pp. 306-313. </s> 534 F.2d 805, vacated and remanded. </s> STEWART, J., delivered the opinion of the Court, in which BURGER, C. J., and BRENNAN, WHITE, MARSHALL, BLACKMUN, POWELL, and REHNQUIST, JJ., joined. BRENNAN, J., post, p. 313, and WHITE, J., post, p. 347, filed concurring opinions. STEVENS, J., filed a dissenting opinion, post, p. 314. </s> William H. Allen argued the cause for petitioners. With him on the briefs were Coleman S. Hicks and Don O. Russell. </s> Deputy Solicitor General Wallace argued the cause for the United States. With him on the brief were Solicitor General McCree, Assistant Attorney General Days, Thomas S. Martin, Brain K. Landsberg, Walter W. Barnett, and Cynthia L. Attwood. * </s> [Footnote * Briefs of amici curiae urging affirmance were filed by Robert Allen Sedler and Joel M. Gora for the American Civil Liberties Union; by Robert A. Murphy, Richard S. Kohn, and Richard T. Seymour for the Lawyers' Committee for Civil Rights Under Law; by Jack Greenberg, James C. Gray, Jr., Patrick O. Patterson, Eric Schnapper, and Louis Gilden [433 U.S. 299, 301] for the NAACP Legal Defense and Educational Fund, Inc.; and by Stephen J. Pollak, Richard M. Sharp, and David Rubin for the National Education Assn. [433 U.S. 299, 301] </s> MR. JUSTICE STEWART delivered the opinion of the Court. </s> The petitioner Hazelwood School District covers 78 square miles in the northern part of St. Louis County, Mo. In 1973 the Attorney General brought this lawsuit against Hazelwood and various of its officials, alleging that they were engaged in a "pattern or practice" of employment discrimination in violation of Title VII of the Civil Rights Act of 1964, 78 Stat. 253, as amended, 42 U.S.C. 2000e et seq. (1970 ed. and Supp. V). 1 The complaint asked for an injunction requiring Hazelwood to cease its discriminatory practices, to take affirmative steps to obtain qualified Negro faculty members, and to offer employment and give backpay to victims of past illegal discrimination. </s> Hazelwood was formed from 13 rural school districts between 1949 and 1951 by a process of annexation. By the 1967-1968 school year, 17,550 students were enrolled in the district, of whom only 59 were Negro; the number of Negro pupils increased to 576 of 25,166 in 1972-1973, a total of just over 2%. </s> From the beginning, Hazelwood followed relatively unstructured procedures in hiring its teachers. Every person requesting an application for a teaching position was sent one, and completed applications were submitted to a central personnel [433 U.S. 299, 302] office, where they were kept on file. 2 During the early 1960's the personnel office notified all applicants whenever a teaching position became available, but as the number of applications on file increased in the late 1960's and early 1970's, this practice was no longer considered feasible. The personnel office thus began the practice of selecting anywhere from 3 to 10 applicants for interviews at the school where the vacancy existed. The personnel office did not substantively screen the applicants in determining which of them to send for interviews, other than to ascertain that each applicant, if selected, would be eligible for state certification by the time he began the job. Generally, those who had most recently submitted applications were most likely to be chosen for interviews. 3 </s> Interviews were conducted by a department chairman, program coordinator, or the principal at the school where the teaching vacancy existed. Although those conducting the interviews did fill out forms rating the applicants in a number of respects, it is undisputed that each school principal possessed virtually unlimited discretion in hiring teachers for his school. The only general guidance given to the principals was to hire the "most competent" person available, and such intangibles as "personality, disposition, appearance, poise, voice, articulation, and ability to deal with people" counted heavily. The principal's choice was routinely honored by Hazelwood's Superintendent and the Board of Education. </s> In the early 1960's Hazelwood found it necessary to recruit new teachers, and for that purpose members of its staff visited a number of colleges and universities in Missouri and bordering States. All the institutions visited were predominantly white, and Hazelwood did not seriously recruit at either of the [433 U.S. 299, 303] two predominantly Negro four-year colleges in Missouri. 4 As a buyer's market began to develop for public school teachers, Hazelwood curtailed its recruiting efforts. For the 1971-1972 school year, 3,127 persons applied for only 234 teaching vacancies; for the 1972-1973 school year, there were 2,373 applications for 282 vacancies. A number of the applicants who were not hired were Negroes. 5 </s> Hazelwood hired its first Negro teacher in 1969. The number of Negro faculty members gradually increased in successive years: 6 of 957 in the 1970 school year; 16 of 1,107 by the end of the 1972 school year; 22 of 1,231 in the 1973 school year. By comparison, according to 1970 census figures, of more than 19,000 teachers employed in that year in the St. Louis area, 15.4% were Negro. That percentage figure included the St. Louis City School District, which in recent years has followed a policy of attempting to maintain a 50% Negro teaching staff. Apart from that school district, 5.7% of the teachers in the county were Negro in 1970. </s> Drawing upon these historic facts, the Government mounted its "pattern or practice" attack in the District Court upon four different fronts. It adduced evidence of (1) a history of alleged racially discriminatory practices, (2) statistical disparities in hiring, (3) the standardless and largely subjective hiring procedures, and (4) specific instances of alleged discrimination against 55 unsuccessful Negro applicants for teaching jobs. Hazelwood offered virtually no additional evidence in response, relying instead on evidence introduced by the Government, perceived deficiencies in the Government's case, and its own officially promulgated policy "to hire all [433 U.S. 299, 304] teachers on the basis of training, preparation and recommendations, regardless of race, color or creed." 6 </s> The District Court ruled that the Government had failed to establish a pattern or practice of discrimination. The court was unpersuaded by the alleged history of discrimination, noting that no dual school system had ever existed in Hazelwood. The statistics showing that relatively small numbers of Negroes were employed as teachers were found nonprobative, on the ground that the percentage of Negro pupils in Hazelwood was similarly small. The court found nothing illegal or suspect in the teacher-hiring procedures that Hazelwood had followed. Finally, the court reviewed the evidence in the 55 cases of alleged individual discrimination, and after stating that the burden of proving intentional discrimination was on the Government, it found that this burden had not been sustained in a single instance. Hence, the court entered judgment for the defendants. 392 F. Supp. 1276 (ED Mo.). </s> The Court of Appeals for the Eighth Circuit reversed. 534 F.2d 805. After suggesting that the District Court had assigned inadequate weight to evidence of discriminatory conduct on the part of Hazelwood before the effective date of Title VII, 7 the Court of Appeals rejected the trial court's [433 U.S. 299, 305] analysis of the statistical data as resting on an irrelevant comparison of Negro teachers to Negro pupils in Hazelwood. The proper comparison, in the appellate court's view, was one between Negro teachers in Hazelwood and Negro teachers in the relevant labor market area. Selecting St. Louis County and St. Louis City as the relevant area, 8 the Court of Appeals compared the 1970 census figures, showing that 15.4% of teachers in that area were Negro, to the racial composition of Hazelwood's teaching staff. In the 1972-1973 and 1973-1974 school years, only 1.4% and 1.8%, respectively, of Hazelwood's teachers were Negroes. This statistical disparity, particularly when viewed against the background of the teacher-hiring procedures that Hazelwood had followed, was held to constitute a prima facie case of a pattern or practice of racial discrimination. </s> In addition, the Court of Appeals reasoned that the trial court had erred in failing to measure the 55 instances in which Negro applicants were denied jobs against the four-part standard for establishing a prima facie case of individual discrimination set out in this Court's opinion in McDonnell Douglas Corp. v. Green, 411 U.S. 792, 802 . 9 Applying that [433 U.S. 299, 306] standard, the appellate court found 16 cases of individual discrimination, 10 which "buttressed" the statistical proof. Because Hazelwood had not rebutted the Government's prima facie case of a pattern or practice of racial discrimination, the Court of Appeals directed judgment for the Government and prescribed the remedial order to be entered. 11 </s> We granted certiorari, 429 U.S. 1037 , to consider a substantial question affecting the enforcement of a pervasive federal law. </s> The petitioners primarily attack the judgment of the Court of Appeals for its reliance on "undifferentiated work force statistics to find an unrebutted prima facie case of employment discrimination." 12 The question they raise, in short, is [433 U.S. 299, 307] whether a basic component in the Court of Appeals' finding of a pattern or practice of discrimination - the comparatively small percentage of Negro employees on Hazelwood's teaching staff - was lacking in probative force. </s> This Court's recent consideration in Teamsters v. United States, 431 U.S. 324 , of the role of statistics in pattern-or-practice suits under Title VII provides substantial guidance in evaluating the arguments advanced by the petitioners. In that case we stated that it is the Government's burden to "establish by a preponderance of the evidence that racial discrimination was the [employer's] standard operating procedure - the regular rather than the unusual practice." Id., at 336. We also noted that statistics can be an important source of proof in employment discrimination cases, since </s> "absent explanation, it is ordinarily to be expected that nondiscriminatory hiring practices will in time result in a work force more or less representative of the racial and ethnic composition of the population in the community from which employees are hired. Evidence of longlasting and gross disparity between the composition of a work force and that of the general population thus may be significant even though 703 (j) makes clear that Title VII imposes no requirement that a work force mirror the general population." Id., at 340 n. 20. </s> See also Arlington Heights v. Metropolitan Housing Dev. Corp., 429 U.S. 252, 266 ; Washington v. Davis, 426 U.S. 229, 241 -242. Where gross statistical disparities can be shown, they alone may in a proper case constitute prima facie proof [433 U.S. 299, 308] of a pattern or practice of discrimination. Teamsters, supra, at 339. </s> There can be no doubt, in light of the Teamsters case, that the District Court's comparison of Hazelwood's teacher work force to its student population fundamentally misconceived the role of statistics in employment discrimination cases. The Court of Appeals was correct in the view that a proper comparison was between the racial composition of Hazelwood's teaching staff and the racial composition of the qualified public school teacher population in the relevant labor market. 13 See Teamsters, supra, at 337-338, and n. 17. The percentage of Negroes on Hazelwood's teaching staff in 1972-1973 was 1.4%, and in 1973-1974 it was 1.8%. By contrast, the percentage of qualified Negro teachers in the area was, according to the 1970 census, at least 5.7%. 14 Although these differences [433 U.S. 299, 309] were on their face substantial, the Court of Appeals erred in substituting its judgment for that of the District Court and holding that the Government had conclusively proved its "pattern or practice" lawsuit. </s> The Court of Appeals totally disregarded the possibility that this prima facie statistical proof in the record might at the trial court level be rebutted by statistics dealing with Hazelwood's hiring after it became subject to Title VII. Racial discrimination by public employers was not made illegal under Title VII until March 24, 1972. A public employer who from that date forward made all its employment decisions in a wholly nondiscriminatory way would not violate Title VII even if it had formerly maintained an all-white work force by purposefully excluding Negroes. 15 For this reason, [433 U.S. 299, 310] the Court cautioned in the Teamsters opinion that once a prima facie case has been established by statistical work-force disparities, the employer must be given an opportunity to show that "the claimed discriminatory pattern is a product of pre-Act hiring rather than unlawful post-Act discrimination." 431 U.S., at 360 . </s> The record in this case showed that for the 1972-1973 school year, Hazelwood hired 282 new teachers, 10 of whom (3.5%) were Negroes; for the following school year it hired 123 new teachers, 5 of whom (4.1%) were Negroes. Over the two-year period, Negroes constituted a total of 15 of the 405 new teachers hired (3.7%). Although the Court of Appeals briefly mentioned these data in reciting the facts, it wholly ignored them in discussing whether the Government had shown a pattern or practice of discrimination. And it gave no consideration at all to the possibility that post-Act data as to the number of Negroes hired compared to the total number of Negro applicants might tell a totally different story. 16 </s> What the hiring figures prove obviously depends upon the figures to which they are compared. The Court of Appeals accepted the Government's argument that the relevant comparison was to the labor market area of St. Louis County and the city of St. Louis, in which, according to the 1970 census, 15.4% of all teachers were Negro. The propriety of that comparison was vigorously disputed by the petitioners, who urged that because the city of St. Louis has made special attempts to maintain a 50% Negro teaching staff, inclusion of [433 U.S. 299, 311] that school district in the relevant market area distorts the comparison. Were that argument accepted, the percentage of Negro teachers in the relevant labor market area (St. Louis County alone) as shown in the 1970 census would be 5.7% rather than 15.4%. </s> The difference between these figures may well be important; the disparity between 3.7% (the percentage of Negro teachers hired by Hazelwood in 1972-1973 and 1973-1974) and 5.7% may be sufficiently small to weaken the Government's other proof, while the disparity between 3.7% and 15.4% may be sufficiently large to reinforce it. 17 In determining [433 U.S. 299, 312] which of the two figures - or, very possibly, what intermediate figure - provides the most accurate basis for comparison to the hiring figures at Hazelwood, it will be necessary to evaluate such considerations as (i) whether the racially based hiring policies of the St. Louis City School District were in effect as far back as 1970, the year in which the census figures were taken; 18 (ii) to what extent those policies have changed the racial composition of that district's teaching staff from what it would otherwise have been; (iii) to what extent St. Louis' recruitment policies have diverted to the city, teachers who might otherwise have applied to Hazelwood; 19 (iv) to what extent Negro teachers employed by the city would prefer employment in other districts such as Hazelwood; and (v) what the experience in other school districts in St. Louis County indicates about the validity of excluding the City School District from the relevant labor market. </s> It is thus clear that a determination of the appropriate comparative figures in this case will depend upon further evaluation by the trial court. As this Court admonished in Teamsters: "[S]tatistics . . . come in infinite variety . . . . [T]heir usefulness depends on all of the surrounding facts and circumstances." 431 U.S., at 340 . Only the trial court is in a position to make the appropriate determination after further findings. And only after such a determination is made can a foundation be established for deciding whether or not Hazelwood engaged in a pattern or practice of racial [433 U.S. 299, 313] discrimination in its employment practices in violation of the law. 20 </s> We hold, therefore, that the Court of Appeals erred in disregarding the post-Act hiring statistics in the record, and that it should have remanded the case to the District Court for further findings as to the relevant labor market area and for an ultimate determination of whether Hazelwood engaged in a pattern or practice of employment discrimination after March 24, 1972. 21 Accordingly, the judgment is vacated, and the case is remanded to the District Court for further proceedings consistent with this opinion. </s> It is so ordered. </s> [For concurring opinion of MR. JUSTICE WHITE, see post, p. 347.] </s> Footnotes [Footnote 1 Under 42 U.S.C. 2000e-6 (a), the Attorney General was authorized to bring a civil action "[W]henever [he] has reasonable cause to believe that any person or group of persons is engaged in a pattern or practice of resistance to the full enjoyment of any of the rights secured by [Title VII], and that the pattern or practice is of such a nature and is intended to deny the full exercise of [those rights]." The 1972 amendments to Title VII directed that this function be transferred as of March 24, 1974, to the Equal Employment Opportunity Commission, at least with respect to private employers. 2000e-6 (c) (1970 ed., Supp. V); see also 2000e-5 (f) (1) (1970 ed., Supp. V). The present lawsuit was instituted more than seven months before that transfer. </s> [Footnote 2 Before 1954 Hazelwood's application forms required designation of race, and those forms were in use as late as the 1962-1963 school year. </s> [Footnote 3 Applicants with student or substitute teaching experience at Hazelwood were given preference if their performance had been satisfactory. </s> [Footnote 4 One of those two schools was never visited even though it was located in nearby St. Louis. The second was briefly visited on one occasion, but no potential applicant was interviewed. </s> [Footnote 5 The parties disagree whether it is possible to determine from the present record exactly how many of the job applicants in each of the school years were Negroes. </s> [Footnote 6 The defendants offered only one witness, who testified to the total number of teachers who had applied and were hired for jobs in the 1971-1972 and 1972-1973 school years. They introduced several exhibits consisting of a policy manual, policy book, staff handbook, and historical summary of Hazelwood's formation and relatively brief existence. </s> [Footnote 7 As originally enacted, Title VII of the Civil Rights Act of 1964 applied only to private employers. The Act was expanded to include state and local governmental employers by the Equal Employment Opportunity Act of 1972, 86 Stat. 103, whose effective date was March 24, 1972. See 42 U.S.C. 2000e (a), (b), (f), (h) (1970 ed., Supp. V). </s> The evidence of pre-Act discrimination relied upon by the Court of Appeals included the failure to hire any Negro teachers until 1969, the failure to recruit at predominantly Negro colleges in Missouri, and somewhat inconclusive evidence that Hazelwood was responsible for a 1962 [433 U.S. 299, 305] Mississippi newspaper advertisement for teacher applicants that specified "white only." </s> [Footnote 8 The city of St. Louis is surrounded by, but not included in, St. Louis County. Mo. Ann. Stat. 46.145 (1966). </s> [Footnote 9 Under McDonnell Douglas, a prima facie case of illegal employment discrimination is established by showing </s> "(i) that [an individual] belongs to a racial minority; (ii) that he applied and was qualified for a job for which the employer was seeking applicants; (iii) that, despite his qualifications, he was rejected; and (iv) that, after his rejection, the position remained open and the employer continued to seek applicants from persons of complainant's qualifications." 411 U.S., at 802 . </s> Upon proof of these four elements, "[t]he burden then must shift to the employer to articulate some legitimate, nondiscriminatory reason for the employee's rejection." Ibid. </s> [Footnote 10 The Court of Appeals held that none of the 16 prima facie cases of individual discrimination had been rebutted by the petitioners. See 534 F.2d, at 814. </s> [Footnote 11 The District Court was directed to order that the petitioners cease from discriminating on the basis of race or color in the hiring of teachers, promulgate accurate job descriptions and hiring criteria, recruit Negro and white applicants on an equal basis, give preference in filling vacancies to the 16 discriminatorily rejected applicants, make appropriate backpay awards, and submit periodic reports to the Government on its progress in hiring qualified Negro teachers. Id., at 819-820. </s> [Footnote 12 In their petition for certiorari and brief on the merits, the petitioners have phrased the question as follows: </s> "Whether a court may disregard evidence that an employer has treated actual job applicants in a nondiscriminatory manner and rely on undifferentiated workforce statistics to find an unrebutted prima facie case of employment discrimination in violation of Title VII of the Civil Rights Act of 1964." </s> Their petition for certiorari and brief on the merits did raise a second question: "Whether Congress has authority under Section 5 of the Fourteenth Amendment to prohibit by Title VII of the Civil Rights Act of 1964 employment practices of an agency of a state government in the absence of proof that the agency purposefully discriminated against applicants on the basis of race." That issue, however, is not presented by the facts in this case. The Government's opening statement in the trial court explained that its evidence was designed to show that the scarcity [433 U.S. 299, 307] of Negro teachers at Hazelwood "is the result of purpose" and is attributable to "deliberately continued employment policies." Thus here, as in Teamsters v. United States, 431 U.S. 324 , "[t]he Government's theory of discrimination was simply that the [employer], in violation of 703 (a) of Title VII, regularly and purposefully treated Negroes . . . less favorably than white persons." Id., at 335 (footnote omitted). </s> [Footnote 13 In Teamsters, the comparison between the percentage of Negroes on the employer's work force and the percentage in the general areawide population was highly probative, because the job skill there involved - the ability to drive a truck - is one that many persons possess or can fairly readily acquire. When special qualification are required to fill particular jobs, comparisons to the general population (rather than to the smaller group of individuals who possess the necessary qualifications) may have little probative value. The comparative statistics introduced by the Government in the District Court, however, were properly limited to public school teachers, and therefore this is not a case like Mayor v. Educational Equality League, 415 U.S. 605 , in which the racial-composition comparisons failed to take into account special qualifications for the position in question. Id., at 620-621. </s> Although the petitioners concede as a general matter the probative force of the comparative work-force statistics, they object to the Court of Appeals' heavy reliance on these data on the ground that applicant-flow data, showing the actual percentage of white and Negro applicants for teaching positions at Hazelwood, would be firmer proof. As we have noted, see n. 5, supra, there was no clear evidence of such statistics. We leave it to the District Court on remand to determine whether competent proof of those data can be adduced. If so, it would, of course, be very relevant. Cf. Dothard v. Rawlinson, post, at 330. </s> [Footnote 14 As is discussed below, the Government contends that a comparative [433 U.S. 299, 309] figure of 15.4%, rather than 5.7%, is the appropriate one. See infra, at 310-312. But even assuming, arguendo, that the 5.7% figure urged by the petitioners is correct, the disparity between that figure and the percentage of Negroes on Hazelwood's teaching staff would be more than fourfold for the 1972-1973 school year, and threefold for the 1973-1974 school year. A precise method of measuring the significance of such statistical disparities was explained in Castaneda v. Partida, 430 U.S. 482, 496 -497, n. 17. It involves calculation of the "standard deviation" as a measure of predicted fluctuations from the expected value of a sample. Using the 5.7% figure as the basis for calculating the expected value, the expected number of Negroes on the Hazelwood teaching staff would be roughly 63 in 1972-1973 and 70 in 1973-1974. The observed number in those years was 16 and 22, respectively. The difference between the observed and expected values was more than six standard deviations in 1972-1973 and more than five standard deviations in 1973-1974. The Court in Castaneda noted that "[a]s a general rule for such large samples, if the difference between the expected value and the observed number is greater than two or three standard deviations," then the hypothesis that teachers were hired without regard to race would be suspect. 430 U.S., at 497 n. 17. </s> [Footnote 15 This is not to say that evidence of pre-Act discrimination can never have any probative force. Proof that an employer engaged in racial discrimination prior to the effective date of Title VII might in some circumstances support the inference that such discrimination continued, particularly where relevant aspects of the decisionmaking process had [433 U.S. 299, 310] undergone little change. Cf. Fed. Rule Evid. 406; Arlington Heights v. Metropolitan Housing Dev. Corp., 429 U.S. 252, 267 ; 1 J. Wigmore, Evidence 92 (3d ed. 1940); 2 id., 302-305, 371, 375. And, of course, a public employer even before the extension of Title VII in 1972 was subject to the command of the Fourteenth Amendment not to engage in purposeful racial discrimination. </s> [Footnote 16 See n. 13, supra, and n. 21, infra. But cf. Teamsters, 431 U.S., at 364 -367. </s> [Footnote 17 Indeed, under the statistical methodology explained in Castaneda v. Partida, supra, at 496-497, n. 17, involving the calculation of the standard deviation as a measure of predicted fluctuations, the difference between using 15.4% and 5.7% as the areawide figure would be significant. If the 15.4% figure is taken as the basis for comparison, the expected number of Negro teachers hired by Hazelwood in 1972-1973 would be 43 (rather than the actual figure of 10) of a total of 282, a difference of more than five standard deviations; the expected number in 1973-1974 would be 19 (rather than the actual figure 5) of a total of 123, a difference of more than three standard deviations. For the two years combined, the difference between the observed number of 15 Negro teachers hired (of a total of 405) would vary from the expected number of 62 by more than six standard deviations. Because a fluctuation of more than two or three standard deviations would undercut the hypothesis that decisions were being made randomly with respect to race, 430 U.S., at 497 n. 17, each of these statistical comparisons would reinforce rather than rebut the Government's other proof. If, however, the 5.7% areawide figure is used, the expected number of Negro teachers hired in 1972-1973 would be roughly 16, less than two standard deviations from the observed number of 10; for 1973-1974, the expected value would be roughly seven, less than one standard deviation from the observed value of 5; and for the two years combined, the expected value of 23 would be less than two standard deviations from the observed total of 15. A more precise method of analyzing these statistics confirms the results of the standard deviation analysis. See F. Mosteller, R. Rourke, & G. Thomas, Probability with Statistical Applications 494 (2d ed. 1970). </s> These observations are not intended to suggest that precise calculations of statistical significance are necessary in employing statistical proof, [433 U.S. 299, 312] but merely to highlight the importance of the choice of the relevant labor market area. </s> [Footnote 18 In 1970 Negroes constituted only 42% of the faculty in St. Louis city schools, which could indicate either that the city's policy was not yet in effect or simply that its goal had not yet been achieved. </s> [Footnote 19 The petitioners observe, for example, that Harris Teachers College in St. Louis, whose 1973 graduating class was 60% Negro, is operated by the city. It is the petitioners' contention that the city's public elementary and secondary schools occupy an advantageous position in the recruitment of Harris graduates. </s> [Footnote 20 Because the District Court focused on a comparison between the percentage of Negro teachers and Negro pupils in Hazelwood, it did not undertake an evaluation of the relevant labor market, and its casual dictum that the inclusion of the city of St. Louis "distorted" the labor market statistics was not based upon valid criteria. 392 F. Supp. 1276, 1287 (ED Mo.). </s> [Footnote 21 It will also be open to the District Court on remand to determine whether sufficiently reliable applicant-flow data are available to permit consideration of the petitioners' argument that those data may undercut a statistical analysis dependent upon hirings alone. </s> MR. JUSTICE BRENNAN, concurring. </s> I join the Court's opinion. Similarly to our decision in Dayton Board of Education v. Brinkman, post, p. 406, today's opinion revolves around the relative factfinding roles of district courts and courts of appeals. It should be plain, however, that the liberal substantive standards for establishing a Title VII violation, including the usefulness of statistical proof, are reconfirmed. </s> In the present case, the District Court had adopted a wholly inappropriate legal standard of discrimination, and therefore [433 U.S. 299, 314] did not evaluate the factual record before it in a meaningful way. This remand in effect orders it to do so. It is my understanding, as apparently it is MR. JUSTICE STEVENS', post, at 318 n. 5, that the statistical inquiry mentioned by the Court, ante, at 311 n. 17, and accompanying text, can be of no help to the Hazelwood School Board in rebutting the Government's evidence of discrimination. Indeed, even if the relative comparison market is found to be 5.7% rather than 15.4% black, the applicable statistical analysis at most will not serve to bolster the Government's case. This obviously is of no aid to Hazelwood in meeting its burden of proof. Nonetheless I think that the remand directed by the Court is appropriate and will allow the parties to address these figures and calculations with greater care and precision. I also agree that given the misapplication of governing legal principles by the District Court, Hazelwood reasonably should be given the opportunity to come forward with more focused and specific applicant-flow data in the hope of answering the Government's prima facie case. If, as presently seems likely, reliable applicant data are found to be lacking, the conclusion reached by my Brother STEVENS will inevitably be forthcoming. </s> MR. JUSTICE STEVENS, dissenting. </s> The basic framework in a pattern-or-practice suit brought by the Government under Title VII of the Civil Rights Act of 1964 is the same as that in any other lawsuit. The plaintiff has the burden of proving a prima facie case; if he does so, the burden of rebutting that case shifts to the defendant. 1 In this [433 U.S. 299, 315] case, since neither party complains that any relevant evidence was excluded, our task is to decide (1) whether the Government's evidence established a prima facie case; and (2), if so, whether the remaining evidence is sufficient to carry Hazelwood's burden of rebutting that prima facie case. </s> I </s> The first question is clearly answered by the Government's statistical evidence, its historical evidence, and its evidence relating to specific acts of discrimination. </s> One-third of the teachers hired by Hazelwood resided in the city of St. Louis at the time of their initial employment. As Mr. Justice Clark explained in his opinion for the Court of Appeals, it was therefore appropriate to treat the city, as well as the county, as part of the relevant labor market. 2 </s> [433 U.S. 299, 316] In that market, 15% of the teachers were black. In the Hazelwood District at the time of trial less than 2% of the teachers were black. An even more telling statistic is that after Title VII became applicable to it, only 3.7% of the new teachers hired by Hazelwood were black. Proof of these gross disparities was in itself sufficient to make out a prima facie case of discrimination. See Teamsters v. United States, 431 U.S. 324, 339 ; Castaneda v. Partida, 430 U.S. 482, 494 -498. </s> As a matter of history, Hazelwood employed no black teachers until 1969. Both before and after the 1972 amendment making the statute applicable to public school districts, Hazelwood used a standardless and largely subjective hiring procedure. Since "relevant aspects of the decisionmaking process had undergone little change," it is proper to infer that the pre-Act policy of preferring white teachers continued to influence Hazelwood's hiring practices. 3 </s> The inference of discrimination was corroborated by post-Act evidence that Hazelwood had refused to hire 16 qualified black applicants for racial reasons. Taking the Government's evidence as a whole, there can be no doubt about the sufficiency of its prima facie case. [433 U.S. 299, 317] </s> II </s> Hazelwood "offered virtually no additional evidence in response," ante, at 303. It challenges the Government's statistical analysis by claiming that the city of St. Louis should be excluded from the relevant market and pointing out that only 5.7% of the teachers in the county (excluding the city) were black. It further argues that the city's policy of trying to maintain a 50% black teaching staff diverted teachers from the county to the city. There are two separate reasons why these arguments are insufficient: they are not supported by the evidence; even if true, they do not overcome the Government's case. </s> The petitioners offered no evidence concerning wage differentials, commuting problems, or the relative advantages of teaching in an inner-city school as opposed to a suburban school. Without any such evidence in the record, it is difficult to understand why the simple fact that the city was the source of a third of Hazelwood's faculty should not be sufficient to demonstrate that it is a part of the relevant market. The city's policy of attempting to maintain a 50/50 ratio clearly does not undermine that conclusion, particularly when the record reveals no shortage of qualified black applicants in either Hazelwood or other suburban school districts. 4 Surely not all of the 2,000 black teachers employed by the city were unavailable for employment in Hazelwood at the time of their initial hire. </s> But even if it were proper to exclude the city of St. Louis from the market, the statistical evidence would still tend to prove discrimination. With the city excluded, 5.7% of the teachers in the remaining market were black. On the basis of a random selection, one would therefore expect 5.7% of [433 U.S. 299, 318] the 405 teachers hired by Hazelwood in the 1972-1973 and 1973-1974 school years to have been black. But instead of 23 black teachers, Hazelwood hired only 15, less than two-thirds of the expected number. Without the benefit of expert testimony, I would hesitate to infer that the disparity between 23 and 15 is great enough, in itself, to prove discrimination. 5 It is perfectly clear, however, that whatever probative force this disparity has, it tends to prove discrimination and does absolutely nothing in the way of carrying Hazelwood's burden of overcoming the Government's prima facie case. </s> Absolute precision in the analysis of market data is too much to expect. We may fairly assume that a nondiscriminatory selection process would have resulted in the hiring of somewhere between the 15% suggested by the Government and the 5.7% suggested by petitioners, or perhaps 30 or 40 black teachers, instead of the 15 actually hired. 6 On that assumption, the Court of Appeals' determination that there were 16 individual cases of discriminatory refusal to hire black applicants in the post-1972 period seems remarkably accurate. </s> In sum, the Government is entitled to prevail on the present record. It proved a prima facie case, which Hazelwood failed to rebut. Why, then, should we burden a busy federal court with another trial? Hazelwood had an opportunity to offer evidence to dispute the 16 examples of racially motivated refusals to hire; but as the Court notes, the Court of Appeals has already "held that none of the 16 prima facie cases of [433 U.S. 299, 319] individual discrimination had been rebutted by the petitioners. See 534 F.2d 805, 814 (CA8)." Ante, at 306 n. 10. Hazelwood also had an opportunity to offer any evidence it could muster to show a change in hiring practices or to contradict the fair inference to be drawn from the statistical evidence. Instead, it "offered virtually no additional evidence in response," ante, at 303. </s> Perhaps "a totally different story" might be told by other statistical evidence that was never presented, ante, at 310. No lawsuit has ever been tried in which the losing party could not have pointed to a similar possibility. 7 It is always possible to imagine more evidence which could have been offered, but at some point litigation must come to an end. 8 </s> [433 U.S. 299, 320] </s> Rather than depart from well-established rules of procedure, I would affirm the judgment of the Court of Appeals. 9 Since that judgment reflected a correct appraisal of the record, I see no reason to prolong this litigation with a remand neither side requested. 10 </s> [Footnote 1 "At the initial, `liability' stage of a pattern-or-practice suit the Government is not required to offer evidence that each person for whom it will ultimately seek relief was a victim of the employer's discriminatory policy. Its burden is to establish a prima facie case that such a policy existed. The burden then shifts to the employer to defeat the prima facie showing of a pattern or practice by demonstrating that the Government's proof is either inaccurate or insignificant. An employer might show, for [433 U.S. 299, 315] example, that the claimed discriminatory pattern is a product of pre-Act hiring rather than unlawful post-Act discrimination, or that during the period it is alleged to have pursued a discriminatory policy it made too few employment decisions to justify the inference that it had engaged in a regular practice of discrimination." Teamsters v. United States, 431 U.S. 324, 360 . </s> [Footnote 2 "We accept the Government's contention that St. Louis City and County is the relevant labor market area for our consideration. The relevant labor market area is that area from which the employer draws its employees. United States v. Ironworkers Local 86, 443 F.2d 544, 551 n. 19 (9th Cir. 1971). Of the 176 teachers hired by Hazelwood between October, 1972, and September, 1973, approximately 80 percent resided in St. Louis City and County at the time of their initial employment. Approximately one-third of the teachers hired during this period resided in the City of St. Louis and 40 percent resided in areas of St. Louis County other than the Hazelwood District." 534 F.2d 805, 811-812, n. 7 (1976). </s> It is noteworthy that in the Court of Appeals, Chief Judge Gibson, in dissent, though urging - as Hazelwood had in the District Court - that the labor market was even broader than the Government contended, id., at 821, did not question the propriety of including the city in the same market as the county, see Defendants' Brief and Memorandum in Support of Its Proposed Findings of Fact and Conclusions of Law, filed on Aug. 21, [433 U.S. 299, 316] 1974, in Civ. Act. No. 73-C-553 (A) (ED Mo.), p. 24. In this Court, petitioners had abandoned any argument similar to that made below. </s> [Footnote 3 Proof that an employer engaged in racial discrimination prior to the effective date of the Act creates the inference that such discrimination continued "particularly where relevant aspects of the decisionmaking process [have] undergone little change. Cf. Fed. Rule Evid. 406; Arlington Heights v. Metropolitan Housing Dev. Corp., 429 U.S. 252, 267 ; 1 J. Wigmore, Evidence 92 (3d ed. 1940); 2 id., 302-305, 371, 375. And, of course, a public employer even before the extension of Title VII in 1972 was subject to the command of the Fourteenth Amendment not to engage in purposeful racial discrimination." Ante, at 309-310, n. 15. </s> Since Hazelwood's hiring before 1972 was so clearly discriminatory, there is some irony in its claim that "Hazelwood continued [after 1972] to select its teachers on the same careful basis that it had relied on before in staffing its growing system." Brief for Petitioners 29-30. </s> [Footnote 4 "Had there been evidence obtainable to contradict and disprove the testimony offered by [the Government], it cannot be assumed that the State would have refrained from introducing it." Pierre v. Louisiana, 306 U.S. 354, 361 -362. </s> [Footnote 5 After I had drafted this opinion, one of my law clerks advised me that, given the size of the two-year sample, there is only about a 5% likelihood that a disparity this large would be produced by a random selection from the labor pool. If his calculation (which was made using the method described in H. Blalock, Social Statistics 151-173 (1972)) is correct, it is easy to understand why Hazelwood offered no expert testimony. </s> [Footnote 6 Some of the other school districts in the county have a 10% ratio of blacks on their faculties. See Plaintiff's Exhibit 54 in Civ. Act. No. 73-C-553 (A) (ED Mo. 1975); Brief for United States 30 n. 30. </s> [Footnote 7 Since Hazelwood failed to offer any "applicant-flow data" at the trial, and since it does not now claim to have any newly discovered evidence, I am puzzled by MR. JUSTICE BRENNAN'S explanation of the justification for a remand. Indeed, after the first trial was concluded, Hazelwood emphasized the fact that no evidence of this kind had been presented; it introduced no such evidence itself. It stated: </s> "There is absolutely no evidence in this case that provides any basis for making a comparison between black applicants and white applicants and their treatment by the Hazelwood School District relative to hiring or not being hired for a teaching position." Defendants' Brief and Memorandum in Support of Its Proposed Findings of Fact and Conclusions of Law, supra, n. 2, at 22. </s> [Footnote 8 My analysis of this case is somewhat similar to MR. JUSTICE REHNQUIST'S analysis in Dothard v. Rawlinson: </s> "If the defendants in a Title VII suit believe there to be any reason to discredit plaintiffs' statistics that does not appear on their face, the opportunity to challenge them is available to the defendants just as in any other lawsuit. They may endeavor to impeach the reliability of the statistical evidence, they may offer rebutting evidence, they may disparage in arguments or in briefs the probative weight which the plaintiffs' evidence should be accorded. Since I agree with the Court that appellants made virtually no such effort, . . . I also agree with it that the District Court cannot be said to have erred as a matter of law in finding that a prima facie case had been made out in the instant case." Post, at 338-339 (concurring opinion). </s> [Footnote 9 It is interesting to compare the disposition in this case with that in Castaneda v. Partida, 430 U.S. 482 . In Castaneda, as in this case, "[i]nexplicably, the State introduced practically no evidence," id., at 498. But in Castaneda, unlike the present case, the Court affirmed the finding of discrimination, rather than giving the State a second chance at trying its case. (It should be noted that the Castaneda Court expressly stated that it was possible that the statistical discrepancy could have been explained by the State. Id., at 499.) </s> [Footnote 10 Hazelwood's brief asks only for a remand "for reconsideration of the alleged individual cases of discrimination . . . ." Brief for Petitioners 78. Hazelwood explains: "[The question raised in its petition for certiorari is] a question of law. It is a question of what sort of evidentiary showing satisfies Title VII. . . . The question is whether on the evidence of record an unrebutted prima facie case was established." Reply Brief for Petitioners 2. </s> [433 U.S. 299, 321]

United States Supreme Court S. E. C. v. VARIABLE ANNUITY CO.(1959) No. 290 Argued: Decided: March 23, 1959 </s> Respondent corporations, calling themselves "life insurance" companies and submitting to regulation by the insurance commissioners of the District of Columbia and several States, offer for sale in interstate commerce so-called "variable annuity" contracts, which have some of the features of conventional life insurance and annuity contracts but which entitle the purchasers, not to a specified definite amount per annum, but only to fluctuating amounts based upon pro rata participations in respondents' investment portfolios and the gains and losses thereon. Held: Such "variable annuity" contracts are "securities" which must be registered with the Securities and Exchange Commission under the Securities Act of 1933, and the issuers are subject to regulation under the Investment Company Act of 1940, since such contracts are not "insurance" policies or "annuity" contracts and respondents are not "insurance" companies or engaged in the "business of insurance," within the meaning of the exemption provisions of those Acts or the McCarran-Ferguson Act. Pp. 66-73. </s> (a) While the States have traditionally regulated the business of insurance, their characterization of particular contracts is not conclusive, since the construction of the exemption provisions of the Federal Acts presents federal questions. Pp. 68-69. </s> (b) the issuer of a "variable annuity" contract that has no element of fixed return does not assume any investment risk, which is inherent in the concepts of "insurance" and "annuity." Pp. 71-73. </s> 103 U.S. App. D.C. 197, 257 F.2d 201, reversed. </s> [Footnote * Together with No. 237, National Association of Securities Dealers, Inc., v. Variable Annuity Life Insurance Co. of America et al., also on certiorari to the same Court. [359 U.S. 65, 66] </s> Thomas G. Meeker argued the cause for petitioner in No. 290. With him on the brief were Solicitor General Rankin, John F. Davis, David Ferber and Pace Reich. </s> John H. Dorsey argued the cause and filed a brief for petitioner in No. 237. </s> Roy W. McDonald and James M. Earnest argued the causes for the Variable Annuity Life Insurance Company of America, respondent. With them on the brief was Malcolm Fooshee. </s> Benjamin H. Dorsey argued the causes for the Equity Annuity Life Insurance Co., respondent. With him on the brief were Smith W. Brookhart and Ralph E. Becker. </s> Frank F. Roberson filed a brief in No. 290 for the Mutual Life Insurance Company of New York et al., as amici curiae, in support of respondents. </s> MR. JUSTICE DOUGLAS delivered the opinion of the Court. </s> This is an action instituted by the Securities and Exchange Commission 1 to enjoin respondents from offering their annuity contracts to the public without registering them under the Securities Act of 1933, 48 Stat. 74, 15 U.S.C. 77a, and complying with the Investment Company Act of 1940, 54 Stat. 789, 15 U.S.C. 80a. The District Court denied relief, 155 F. Supp. 521; and the Court of Appeals affirmed, 103 U.S. App. D.C. 197, 257 F.2d 201. The case is here on petitions for writs of certiorari which we granted, 358 U.S. 812 , because of the importance of the question presented. [359 U.S. 65, 67] </s> Respondents are regulated under the insurance laws of the District of Columbia and several other States. It is argued that that fact brings into play the provisions of the McCarran-Ferguson Act, 59 Stat. 33, 15 U.S.C. 1011, 2 (b) of which provides that "No Act of Congress shall be construed to invalidate, impair or supersede any law enacted by any State for the purpose of regulating the business of insurance . . . ." It is said that the conditions under which that law is applicable are satisfied here. The District of Columbia and some of the States are "regulating" these annuity contracts and, if the Commission is right, the Federal Acts would at least to a degree "supersede" the state regulations since the Federal Acts prescribe their own peculiar requirements. 2 Moreover, "insurance" or "annuity" contracts are exempt from the Securities Act when "subject to the supervision of the insurance commissioner . . . of any State . . . ." 3 Respondents are also exempt from the Investment Company Act if they are "organized as an insurance company, whose primary and predominant business activity is the writing of insurance . . . and which is subject to supervision by the insurance commissioner . . . of a State . . . ." 4 While the term "security" as defined in the Securities Act 5 is broad enough to include any [359 U.S. 65, 68] "annuity" contract, and the term "investment company" as defined in the Investment Company Act 6 would embrace an "insurance company," the scheme of the exemptions lifts pro tanto the requirements of those two Federal Acts to the extent that respondents are actually regulated by the States as insurance companies, if indeed they are such. The question common to the exemption provisions of the Securities Act and the Investment Company Act and to 2 (b) of the McCarran-Ferguson Act is whether respondents are issuing contracts of insurance. </s> We start with a reluctance to disturb the state regulatory schemes that are in actual effect, either by displacing them or by superimposing federal requirements on transactions that are tailored to meet state requirements. When the States speak in the field of "insurance," they speak with the authority of a long tradition. For the [359 U.S. 65, 69] regulation of "insurance," though within the ambit of federal power (United States v. Underwriters Assn., 322 U.S. 533 ), has traditionally been under the control of the States. </s> We deal, however, with federal statutes where the words "insurance" and "annuity" are federal terms. Congress was legislating concerning a concept which had taken on its coloration and meaning largely from state law, from state practice, from state usage. Some States deny these "annuity" contracts any status as "insurance." 7 Others accept them under their "insurance" statutes. 8 It is apparent that there is no uniformity in the rulings of the States on the nature of these "annuity" contracts. In any event how the States may have ruled is not decisive. For, as we have said, the meaning of "insurance" or "annuity" under these Federal Acts is a federal question. </s> While all the States regulate "annuities" under their "insurance" laws, traditionally and customarily they have been fixed annuities, offering the annuitant specified and definite amounts beginning with a certain year of his or her life. The standards for investment of funds underlying these annuities have been conservative. The variable annuity introduced two new features. First, premiums collected are invested to a greater degree in common stocks and other equities. Second, benefit payments vary with the success of the investment policy. The first variable annuity apparently appeared in this country about 1952 when New York created the College Retirement Equities Fund 9 to provide annuities for teachers. [359 U.S. 65, 70] It came into existence as a result of a search for a device that would avoid paying annuitants in depreciated dollars. 10 The theory was that returns from investments in common stocks would over the long run tend to compensate for the mounting inflation. The holder of a variable annuity cannot look forward to a fixed monthly or yearly amount in his advancing years. It may be greater or less, depending on the wisdom of the investment policy. In some respects the variable annuity has the characteristics of the fixed and conventional annuity: payments are made periodically; they continue until the annuitant's death or in case other options are chosen until the end of a fixed term or until the death of the last of two persons; payments are made both from principal and income; and the amounts vary according to the age and sex of the annuitant. Moreover, actuarially both the fixed-dollar annuity and the variable annuity are calculated by identical principles. Each issuer assumes the risk of mortality from the moment the contract is issued. That risk is an actuarial prognostication that a certain number of annuitants will survive to specified ages. Even if a substantial number live beyond their predicted demise, the company issuing the annuity - whether it be fixed or variable - is obligated to make the annuity payments on the basis of the mortality prediction reflected in the contract. This is the mortality risk assumed both by respondents and by those who issue fixed annuities. It is this feature, common to both, that respondents stress when they urge that this is basically an insurance device. 11 </s> [359 U.S. 65, 71] </s> The difficulty is that, absent some guarantee of fixed income, the variable annuity places all the investment risks on the annuitant, none on the company. 12 The holder gets only a pro rata share of what the portfolio of equity interests reflects - which may be a lot, a little, or nothing. We realize that life insurance is an evolving institution. Common knowledge tells us that the forms have greatly changed even in a generation. And we would not undertake to freeze the concepts of "insurance" or "annuity" into the mold they fitted when these Federal Acts were passed. But we conclude that the concept of "insurance" involves some investment risk-taking on the part of the company. The risk of mortality, assumed here, gives these variable annuities an aspect of insurance. Yet it is apparent, not real; superficial, not substantial. In hard reality the issuer of a variable annuity that has no element of a fixed return assumes no true risk in the insurance sense. It is no answer to say that the risk of declining returns in times of depression is the reciprocal of the fixed-dollar annuitant's risk of loss of purchasing power when prices are high and gain of purchasing power when they are low. We deal with a more conventional concept of risk-bearing when we speak of "insurance." For in common understanding "insurance" involves a guarantee that at least some fraction of the benefits will be payable in fixed amounts. See Spellacy v. American Life Ins. Assn., 144 Conn. 346, 354-355, 131 A. 2d 834, 839; Couch, Cyclopedia of Insurance Law, Vol. 1, 25; Richards, Law of Insurance, Vol. 1, 27; Appleman, Insurance Law and Practice, Vol. 1, 81. The companies that issue these annuities take the risk of failure. [359 U.S. 65, 72] But they guarantee nothing to the annuitant except an interest in a portfolio of common stocks or other equities 13 - an interest that has a ceiling but no floor. 14 </s> [359 U.S. 65, 73] There is no true underwriting of risks, 15 the one earmark of insurance as it has commonly been conceived of in popular understanding and usage. </s> Reversed. </s> Footnotes [Footnote 1 National Association of Securities Dealers, Inc., petitioner in No. 237, and the Equity Annuity Life Ins. Co., a respondent in each case, were allowed to intervene. </s> [Footnote 2 For example, the Investment Company Act has provisions governing the size of investment companies, 14; the affiliations of directors, officers, and employees, 10; the relation of investment advisers and underwriters of investment companies, 15; the transactions between investment companies and their affiliates and underwriters, 17; the capital structure of investment companies, 18; their dividend policies, 19; their loans, 21. </s> [Footnote 3 3 (a) (8). </s> [Footnote 4 3 (c) (3) and 2 (a) (17). </s> [Footnote 5 Section 2 (1) provides: </s> "When used in this title, unless the context otherwise requires - </s> "(1) The term `security' means any note, stock, treasury stock, bond, debenture, evidence of indebtedness, certificate of interest or [359 U.S. 65, 68] participation in any profit-sharing agreement, collateral-trust certificate, preorganization certificate or subscription, transferable share, investment contract, voting-trust certificate, certificate of deposit for a security, fractional undivided interest in oil, gas, or other mineral rights, or, in general, any interest or instrument commonly known as a `security,' or any certificate of interest or participation in, temporary or interim certificate for, receipt for, guarantee of, or warrant or right to subscribe to or purchase, any of the foregoing." 15 U.S.C. 77 (b) (1). </s> [Footnote 6 Section 3 (a) provides in part: </s> "When used in this title, `investment company' means any issuer which - </s> "(1) is or holds itself out as being engaged primarily, or proposes to engage primarily, in the business of investing, reinvesting, or trading in securities; </s> . . . . . </s> "(3) is engaged or proposes to engage in the business of investing, reinvesting, owning, holding, or trading in securities, and owns or proposes to acquire investment securities having a value exceeding 40 per centum of the value of such issuer's total assets (exclusive of Government securities and cash items) on an unconsolidated basis." </s> [Footnote 7 See 1 CCH, Blue Sky Reporter (1956) #4711; Spellacy v. American Life Ins. Assn., 144 Conn. 346, 131 A. 2d 834. </s> [Footnote 8 See People v. Supreme Brotherhood, 193 Misc. 996, 86 N. Y. S. 2d 127. </s> [Footnote 9 N. Y. Laws 1952, c. 124. </s> [Footnote 10 See Morrisey, Dispute Over the Variable Annuity, 35 Harv. Bus. Rev. 75; Johnson, The Variable Annuity: What It is and Why It is Needed, Ins. L. J., June 1956, p. 357; Day and Melnikoff, The Variable Annuity as a Life Insurance Company Product, 10 J. Am. Soc. Ch. L. Under. 45; Barrons, Vol. 36, Jan. 23, 1956, p. 3. </s> [Footnote 11 See Day, A Variable Annuity is Not a "Security," 32 Notre Dame Law. 642. </s> [Footnote 12 See Bellinger, Hagmann and Martin, The Meaning and Usage of the Word "Annuity," 9 J. Am. Soc. Ch. L. Under. 261; Haussermann, The Security in Variable Annuities, Ins. L. J., June 1956, p. 382. </s> [Footnote 13 See Securities & Exchange Comm'n v. Howey Co., 328 U.S. 293, 298 -299: </s> ". . . an investment contract for purposes of the Securities Act means a contract, transaction or scheme whereby a person invests his money in a common enterprise and is led to expect profits solely from the efforts of the promoter or a third party, it being immaterial whether the shares in the enterprise are evidenced by formal certificates or by nominal interests in the physical assets employed in the enterprise." See Loss and Cowett, Blue Sky Law (1958), pp. 351, 356-357. </s> [Footnote 14 These companies use an assumed net investment rate of 3 1/2 percent per annum in the actuarial calculation of the initial annuity payment. If the net investment rate were at all times precisely 3 1/2 percent, the amount of annuity payments would not vary. But there is no guarantee as to this. The companies use a reporting device, the annuity unit, the value of which informs the annuity holder of the variations in the company's actual returns from the assumed investment rate of 3 1/2 percent. To state the matter in more detail: the amount of any payment depends on the value of the "annuity unit" and the number of such units held by the annuitant. At the time when he has paid all of his premium and is entitled to his first annuity payment, he will have a certain monetary interest in the fund (determined by the number of "accumulation units" he holds). The first payment is determined by reference to standard annuity tables, assuming a net investment return of 3 1/2 percent per annum. It is the amount per month which a capital contribution of the annuitant's interest in the fund by a person of his age and sex would buy. This figure is converted into annuity units by dividing it by the then value of an annuity unit. The number of annuity units held by the annuitant remains constant throughout the payout period. </s> The value of an annuity unit is determined each month as follows: The value of the unit for the preceding month is multiplied by the net investment factor (adjusted to neutralize the 3 1/2 percent interest factor used in the annuity table), which is the sum of one plus the net investment rate. The net investment rate is (after a slight reduction for a margin to cover expenses, and provide for contingency reserves and addition to surplus) the ratio of investment income plus (minus) net realized and unrealized capital gains (losses) less certain [359 U.S. 65, 73] taxes to the value of the fund during that month. The number of annuity units held times the value of each unit in a month produces the annuity payment for that month. </s> [Footnote 15 There is one true insurance feature to some of these policies, though it is ancillary and secondary to the annuity feature. If the applicant is insurable and 60 years of age or under, he gets life insurance on a decreasing basis for a term of five years. </s> MR. JUSTICE BRENNAN, with whom MR. JUSTICE STEWART joins, concurring. </s> I join the opinion and judgment of the Court. However, there are additional reasons which lead me to the Court's result, and since the nature of this case lends it to rather extended treatment, I will express these reasons separately. </s> First. The facts of this case are quite complex, but the basic problem involved is much more simple. I will try to point it up before developing the details of the sort of contracts sold by the respondents. It is one of the coverage of two Acts of Congress which concentrated on applying specific forms of regulatory controls to the various ways in which organizations get and administer other people's money - the Securities Act of 1933 1 and the Investment Company Act of 1940. 2 These Acts were specifically drawn to exclude any "insurance policy" and any "annuity contract" (Securities Act 3 (a) (8)) [359 U.S. 65, 74] and any "insurance company" 3 (Investment Company Act 3 (c) (3)) from their coverage. These exclusions were to take effect where the issuer of the policy or contract was subject to the supervision of the state "insurance commissioner, bank commissioner, or any agency or officer performing like functions" (Securities Act 3 (a) (8)) or where a company classifiable as an "insurance company" was "subject to supervision by the insurance commissioner or a similar official or agency of a State" (Investment Company Act 2 (a) (17)). The exclusions left these contracts and companies to the sole control of such state officials. Except for these exclusions, there is little doubt that these contracts and the companies issuing them would be subject to the Federal Acts. 4 </s> [359 U.S. 65, 75] </s> Why these exclusions? They could not have been made out of some general desire on the part of Congress to avoid any concurrent regulation by both the Federal Government and the States of investments or companies subject to the two Acts. On the contrary, 18 of the Securities Act and 50 of the Investment Company Act preserve generally the jurisdiction of state officials over their subject matter; the former in terms of "the jurisdiction of the securities commission (or any agency or office performing like functions) of any State" and the latter in terms of "the jurisdiction of any other commission, board, agency, or officer of . . . any State or political subdivision." Conversely, of course, however adequately State Securities Commissioners might regulate an investment, it was not for that reason to be freed from federal regulation. Concurrent regulation, then, was contemplated by the Acts as a quite generally prevailing matter. Nor is it rational to assume that Congress thought that any business whatsoever regulated by a specific class of officials, the State Insurance Commissioners, would be for that reason so perfectly conducted and regulated that all the protections of the Federal Acts would be unnecessary. This approach of personally selective deference to the state administrators is hardly to be attributed to Congress. The point must have been that there then was a form of "investment" known as insurance (including "annuity contracts") which did not present very squarely the sort of problems that the Securities Act and the Investment Company Act were devised to deal with, and which were, in many details, subject to a form of state regulation of a sort which made the federal regulation even less relevant. </s> At this time, of course, the sort of "variable annuity" contract with which we are concerned in this case did not exist. When Congress made the exclusions provided for in the Acts, it did not make them with the "variable [359 U.S. 65, 76] annuity" contract before it. Of course, the point is not that if the insurance industry seeks to retain its exemption, it must limit itself to the forms of policies and contracts in effect in 1933 and 1940. But if a brand-new form of investment arrangement emerges which is labeled "insurance" or "annuity" by its promoters, the functional distinction that Congress set up in 1933 and 1940 must be examined to test whether the contract falls within the sort of investment form that Congress was then willing to leave exclusively to the State Insurance Commissioners. In that inquiry, an analysis of the regulatory and protective purposes of the Federal Acts and of state insurance regulation as it then existed becomes relevant. 5 </s> At the core of the 1933 Act are the requirements of a registration statement and prospectus to be used in connection with the issuance of "securities" - that term being very broadly defined. 6 Detailed schedules, set forth [359 U.S. 65, 77] in the Act, list the material that the registration statement and the prospectus are to contain. 7 The emphasis is on disclosure; the philosophy of the Act is that full disclosure of the details of the enterprise in which the investor is to put his money should be made so that he can intelligently appraise the risks involved. </s> The regulation of life insurance and annuities by the States proceeded, and still proceeds, on entirely different principles. It seems as paternalistic as the Securities Act of 1933 was keyed to free, informed choice. Prescribed contract clauses are ordained legislatively or administratively. Solvency and the adequacy of reserves to meet the company's obligations are supervised by the establishment of permissible categories of investments and through official examination. 8 The system does not depend on disclosure to the public, and, once given this form of regulation and the nature of the "product," it might be difficult in the case of the traditional life insurance or annuity contract to see what the purpose of it would be. </s> This congressional division of regulatory functions is rational and purposeful in the case of a traditional life insurance or annuity policy, where the obligations of the company were measured in fixed-dollar terms and where the investor could not be said, in any meaningful sense, to be a sharer in the investment experience of the company. [359 U.S. 65, 78] In fact, one of the basic premises of state regulation would appear to be that in one sense the investor in an annuity or life insurance company not become a direct sharer in the company's investment experience; that his investment in the policy or contract be sufficiently protected to prevent this. But the situation changes where the coin of the company's obligation is not money but is rather the present condition of its investment portfolio. To this extent, the historic functions of state insurance regulation become meaningless. Prescribed limitations on investment and examination of solvency and reserves become perfectly circular to the extent that there is no obligation to pay except in terms measured by one's portfolio. But beyond controlling corporate solvency and the adequacy of reserves, and maintaining observance of the legal list of investments, the state plans of regulation do not go in regulating investment policy. Where the nature of the obligation assumed is such, the federally protected interests in disclosure to the investor of the nature of the corporation to whom he is asked to entrust his money and the purposes for which it is to be used become obvious and real. The contract between the investor and the organization no longer squares with the sort of contract in regard to which Congress in 1933 thought its "disclosure" statute was unnecessary. </s> The provisions of the Investment Company Act of 1940, which passes beyond a simple "disclosure" philosophy, also are informed by policies that are very relevant to the contracts involved in this case. While the Act does cover face-amount certificate companies whose obligations are specified in fixed-dollar amounts, 9 the majority of its provisions are of greatest regulatory relevance in the case of the much more common sort of [359 U.S. 65, 79] investment company, where the investors (or at least certain categories of them) participate on an "equity" basis in the investment experience of the enterprise. Salient regulatory provisions call for registration and recital, by an investment company, of its investment policies and operating practices; 10 regulate the relationships between the company and its investment adviser, including fees and provisions for termination of the contract; 11 regulate trading practices, 12 changes in investment policy, 13 the issuance of senior securities, 14 proxies and voting trusts, 15 the terms of redemption by investors of their interests in the company; 16 regulate, in the case of periodic investment plans (which were made subject to special regulation), the "sales load," or amount of the investor's payment that does not become part of his interest in the enterprise; 17 and provide for detailed reports to investors. 18 While these controls apply in many cases to fixed-dollar obligations, like face-amount certificates and the bonds of closed-end investment companies, they are of particular relevance to situations where the investor is committing his funds to the hands of others on an equity basis, with the view that the funds will be invested in securities and his fortunes will depend on the success of the investment. The traditional state insurance department regulation of contract terms, reserves, solvency, and permissible investments simply does not touch the points of definition of investment policy and investment technique, and control over investment policy changes and over the interests of the men who shape the policies of investment and furnish investment advice that the 1940 Federal Act provides. These controls may be largely irrelevant to traditional banks and insurance companies, which Congress clearly exempted; they were not investing [359 U.S. 65, 80] heavily in equity securities and holding out the possibilities of capital gains through fund management; but where the investor is asked to put his money in a scheme for managing it on an equity basis, it is evident that the Federal Act's controls become vital. </s> This is not to say that because subjection of the contracts in question here to federal regulation is desirable, it has in fact been accomplished; but one must apply a test in terms of the purposes of the Federal Acts as a guide to interpreting the scope of an exemption from their coverage for "insurance." Cf. Securities & Exchange Comm'n v. W. J. Howey Co., 328 U.S. 293, 299 . When Congress passed the Securities Act of 1933 and the Investment Company Act of 1940, no State Insurance Commissioner was, incident to his duties in regulating insurance companies, engaged in the sort of regulation, outlined above as provided in the Federal Acts, that Congress thought would be appropriate for the protection of people entrusting their money to others to be invested on an equity basis. There is no reason to suppose that Congress intended to make an exemption of forms of investment to which its regulatory scheme was very relevant in favor of a form of state regulation which would not be relevant to them at all. </s> Second. Much bewilderment could be engendered by this case if the issue were whether the contracts in question were "really" insurance or "really" securities - one or the other. It is rather meaningless to view the problem as one of pigeonholing these contracts in one category or the other. Obviously they have elements of conventional insurance, even apart from the fixed-dollar term life insurance and the disability waiver of premium insurance sold with some of these contracts (both of which are quite incidental to the main undertaking). They patently contain a significant annuity feature (unless one defines an annuity as a contract necessarily providing fixed-sum payments), 19 </s> [359 U.S. 65, 81] and the granting of annuities has been considered part of the business of life insurance. 20 Of course, some urge that even the traditional annuity has few "insurance" features and is basically a form of investment. 1 Appleman, Insurance Law and Practice, 83; Prudential Ins. Co. v. Howell, 29 N. J. 116, 121-122, 148 A. 2d 145, 148. But the point is that, even though these contracts contain, for what they are worth, features of traditional annuity contracts, administering them also involves a very substantial and in fact predominant element of the business of an investment company, and that in a way totally foreign to the business of a traditional life insurance and annuity company, as traditionally regulated by state law. This is what leads to the conclusion that it is not within the intent of the 1933 and 1940 statutes to exempt them. </s> The individual deferred variable annuity contract of respondent Variable Annuity Life Insurance Company (VALIC) gives a basis for exploration of this. A sample [359 U.S. 65, 82] contract, given in evidence in the District Court, is one issued to a 35-year-old male, providing for his making 30 annual payments of $1,000 each. Of this, $39.60 is the consideration for an undertaking by the company by which payment of the annual $1,000 is waived in the event of disability. Of the remaining $960.40, designated the "basic annuity premium," specified percentages are used to credit to the account of the investor certain "accumulation units." Of the first year's "basic annuity premium," less than 45% is so used; for the next 4 years, the percentage is in the approximate range of 85% to 87%; 21 for years 6 through 10, the figure is 89%, and for the remainder of the 30-year pay-in period it is 92%. Declining term life insurance in a fixed-dollar amount, beginning at five times the annual "basic annuity premium" the first year and declining through a period of 5 years to nil, is provided as a benefit over and above the "accumulation units" credited to the account of the investor. 22 The contract is said to build up a "cash value" as the investor's payment "buys" further accumulation units, but while the value is one which can and would be finally settled by the payment of dollars, the obligation owed by the company to the investor is not one owed to him in dollar terms. It is one which is measured only in terms of "units" - the petitioners suggest a resemblance to "shares" - in a portfolio. The units are established by an [359 U.S. 65, 83] arbitrary computation which has the effect of dividing the company's investment assets as of a starting day into a number of units, and assigning to each unit its share of the over-all market value - though the division is not in fact made. 23 Then monthly the value of the units is recomputed. This is done, broadly, by taking into account all interest and dividends paid on the company's portfolio and all realized capital gains and losses, with relevant income taxes, together with all unrealized capital shrinkage and increase, less a monthly surcharge of 0.15% (1.8% per annum) of asset value. 24 New dollars from investors which "buy" units buy them at the new rate, thus preventing dilution, and those investors who draw down their accumulated units receive cash for them at such rate. 25 </s> [359 U.S. 65, 84] </s> The contract uses insurance terminology throughout and many of the common features of life insurance and annuity policies are operative in regard to it at this "pay-in" stage. There are "incontestability" and "suicide" clauses (which mainly relate to the term insurance); a "grace period" allowed for the payment of premiums; a provision for "policy loans" (the drawing down of accumulated units in cash, subject to replacement later to the extent that repayment of the amount of money received will then permit, the transaction bearing a resemblance to the liquidation by a common stock investor of his holdings in anticipation of a "bear market"); and provision for a "cash value" (that is, for the cashing in of the accumulated units, subject to a surrender charge in the early years). And very certainly the commitment of the [359 U.S. 65, 85] company eventually to disburse the accumulated values on a life annuity basis once the pay-in period is over is present throughout this period. But what the investor is participating in during this period, despite its acknowledged "insurance" features, is something quite similar to a conventional open-end management investment company, under a periodic investment plan. The investor's cash (less a charge analogous to a loading charge, which is, at least in the early years, very high, but which, it should be said, has to cover annuity premium taxes and some quite conventional mortality risks) goes to buy "units" in a portfolio managed by the persons in control of the corporation. His "units" fluctuate with the income and capital gain and loss experience of the management of the portfolio. He may cash them in, wholly or partially. The amount of his equity is subjected to a charge, on asset value, of 1.8% per annum. Except for the temporary term insurance and the waiver of premium coverage, the entire nature of the company's obligation to its investor during this period is not in dollars (though of course it will be converted into them, just as a commodity transaction can be), but solely in terms of the value of its portfolio. In this sort of operation, examination by state insurance officials to determine the adequacy of reserves and solvency becomes less and less meaningful. The disclosure policy of the Securities Act of 1933 becomes, by comparison, more and more relevant. And the detailed protections of the 1940 legislation - disclosure of investment policy, regulation of changes of that policy, of capital structure, conflicts of interest, investment advisers - all become relevant in an acute way here. These are the basic protections that Congress intended investors to have when they put their money into the hands of an investment trust; there is no adequate substitute for them in the traditional regulatory controls administered by state insurance departments, [359 U.S. 65, 86] because these controls are not relevant to the specific regulatory problems of an investment trust. 26 </s> The same conclusions follow from a consideration of the next stage of this contract. Before the maturity date, when the schedule of payments in on the contract ceases and the payments out commence, the investor can draw down his "units" in cash, and dispense with all "annuity" features. Failing this, he is entitled to elect one of several annuity alternatives. These are, in the sample policy, a straight life annuity on the life of the investor, a straight life annuity with 10 years' payments certain, and a joint and survivor annuity on the life of the investor and another. Again, while the duration of the company's obligation to pay is independent of its investment experience, the amount of each payment is not a direct money obligation but a function of the status of the company's portfolio. The amounts of the payments are calculated in this fashion: The dollar value of the accumulated units credited to the investor throughout the years is [359 U.S. 65, 87] ascertained. A standard annuity table (including a 3 1/2% interest assumption) is used to determine the dollar amount of the first monthly pay-out, based on a capital contribution of the accumulated amount, under the option selected by the investor. The number of "annuity units" (which are functions of the fluctuating asset value of the portfolio of the company) that this amount would buy is computed, and this number of annuity units is paid (transmuted into a varying cash payment) to the investor every subsequent month for the duration of the company's commitment under the option selected. Like that of an "accumulation unit" during the pay-in period, the value in dollars of an "annuity unit" is readjusted monthly to give effect to the investment income of the securities in the company's portfolio for the period, as well as to capital gains and losses, realized and unrealized. Since the first payment (which forms the basis for measurement of the subsequent payments) contains an assumed interest factor, and since the monthly valuation change includes income items - interest and dividends - received in respect of the company's portfolio, to avoid paying double "interest" the 3 1/2% assumed interest factor is wrung out every month by multiplying the preceding month's valuation by 0.9971. 27 And the 1.8% annual surcharge on asset value is applied also. 28 </s> [359 U.S. 65, 88] </s> The effect of this is that the investor, during the pay-out period, is in almost every way as much a participant in something equivalent to an investment trust as before. His monthly payment is not really a dollar payment, though it is converted into dollars before it is paid to him; it is a payment in terms of a portfolio of securities. It is true that the company has a fixed obligation to continue payments, and that the duration and the amount of the payments are not affected by collective longevity in excess of the company's assumptions; the company's obligation to continue payments is not limited in any way by reference to the number of units owned by all the investors [359 U.S. 65, 89] at the start of their annuity periods. If the lives of the group of investors exceed the longevity assumptions of the table, the proceeds of what might otherwise have been characterized as a very high "loading charge" (8% at its lowest application, with 11% the minimum for the first 10 years) and a substantial "annual management fee" (1.8% of asset value annually) will have to provide, with the company's other surplus and capital, enough to continue payments. But the individual payment is still a payment measured basically in the same way as one's interest in an investment trust is measured. And in a very real sense the investor is more vitally interested in the investment experience of the company at this period than he ever was in the pay-in period, and in a way more vitally than any holder of an open-end investment company certificate, or share in a publicly traded closed-end company ever is: he has become completely "locked in." He obviously cannot draw down the present value of his "units" once the option to receive annuity payments has been exercised; he cannot "cash in his chips" that he bought in the faith of the management of the fund; his rights are technically assignable, but practically unmarketable since they depend on his individual life span. The company can radically change investment policies, change advisers, do whatever it pleases (so long as it does not run afoul of the minimal investment regulations of the State), and there is nothing the contract holder can do about it. It is not rational to say that Congress abandoned the very appropriate protections of the Investment Company Act in this investor's case in favor of provisions of state regulation that are quite irrelevant to the basic problems of protecting him. </s> The respondents seek to equate this contract with a fixed-dollar "participating" annuity sold by a mutual company, or one sold by a stock company on a participating basis. This contention is not persuasive. While [359 U.S. 65, 90] investment experience in a "participating" contract can redound to the benefit of the policyholder, the contracts are sold as fixed-dollar obligations. The "dividends" are promoted as such. During the pay-in period, they might be thought of as a reduction of premium. 29 They may very well represent favorable mortality risk experience, particularly where the company's investments are conservative. And the annuity-paying insurance company's investments are doubtless administered in the light of the fixed obligation of the company. The company is not committed by its literature to perform part of the job of a common-stock investment trust. 30 No one has yet tried to follow the academic suggestion of respondent VALIC, and reduce the fixed guarantee of a traditional life annuity to the point of insignificance and make the rest of the return to the contract holder variable, by selling it on a "participating" basis. 31 The comparison of the premium cost of such a contract to its fixed return might well make it unsalable to the public. Even more unpersuasive is the respondents' argument that even in a traditional annuity the policyholder bears the investment risk in the sense that he stands the risk of the company's insolvency. The prevention of insolvency [359 U.S. 65, 91] and the maintenance of "sound" financial condition in terms of fixed-dollar obligations is precisely what traditional state regulation is aimed at. The protection of share interests in a fluctuating, managed fund has received the attention of specific federal legislation. Both are "investment risks" in a sense, but they differ vastly in kind and lend themselves to different regulatory schemes. </s> Accordingly, while these contracts contain insurance features, they contain to a very substantial degree elements of investment contracts as administered by equity investment trusts. They contain these elements in a way different in kind from the way that insurance and annuity policies did when Congress wrote the exemptions for them in the 1933 Act and the 1940 Act. Since Congress was intending a broad coverage in both these remedial Acts and since these contracts present regulatory problems of the very sort that Congress was attempting to solve by them, I conclude that Congress did not intend to exclude contracts like these by reason of the "insurance" exemptions. </s> Third. The respondents contend that a reversal of the judgment will put them out of business. The reason given is that if the Investment Company Act of 1940 applies to them, they are probably categorizable under it as open-end management companies, 32 and it is [359 U.S. 65, 92] declared unlawful by 18 of the Act for an open-end company to have outstanding any "senior security," that is, any security senior to any other class of securities. These companies have capital stock, and the contracts in question would be securities senior to the stock. 33 If one assumes that this is correct, there is of course the possibility that the SEC might use its broad dispensing powers in this regard, and in any event, the whole point would be of no concern at all if the contracts in question were issued by mutual companies. 34 But in the final analysis, it is not decisive of the issues here that a holding that these contracts [359 U.S. 65, 93] are subject to the Federal Acts might require some modification in the business of issuing them. Since these contracts are in fact covered by the Acts, there can be no reason why their issuers should be able to carry on the investment business in a way which Congress has forbidden. </s> Similarly, it may be conceded freely that this form of investment contract may be one of great potential benefit to the public. So, of course, may be orthodox open-end investment trusts, and they clearly are regulated by federal law. In short, notions that this form of arrangement is a desirable one and that it might be well to allow it to exist for a while immune from federal regulation are not relevant to the matter for decision. Congress regulates by general statutes. The passage of a federal regulatory statute is a delicate balancing of many national legislative interests and political forces. Congress need not go through the initial travail of re-enacting its general regulatory scheme every time a new form of enterprise is introduced, if that new form falls within the scheme's coverage. If there is deemed wise any adjustment of the regulatory scheme in the light of new developments in the subject matter to which it extends, Congress may make it. </s> [Footnote 1 48 Stat. 74, as amended, 15 U.S.C. 77a-77aa. </s> [Footnote 2 54 Stat. 789, as amended, 15 U.S.C. 80a-1 to 80a-52. </s> The Court's opinion makes it clear why the issue is identical under the McCarran-Ferguson Act, 59 Stat. 33, as amended, 15 U.S.C. 1011-1015. </s> [Footnote 3 Defined as a "company which is organized as an insurance company, whose primary and predominant business activity is the writing of insurance or the reinsuring of risks underwritten by insurance companies, and which is subject to supervision by the insurance commissioner or a similar official or agency of a State . . . ." Investment Company Act 2 (a) (17). The business of the respondents here consists solely of issuing contracts of the nature of those in question here. </s> [Footnote 4 Under the Securities Act, it would appear that in the case of the ordinary insurance policy, the exemption would be just confirmatory of the policy's noncoverage under the definition of security. See H. R. Rep. No. 85, 73d Cong., 1st Sess. 15. The status of an ordinary annuity contract might be different. But, in any event, absent the specific insurance exclusion, it would appear that the variable annuity contract would come under the term "investment contract" or possibly "certificate of interest or participation in any profit-sharing agreement" in the definition of security, 2 (1). On the other hand, even an ordinary insurance company might be an investment company within the meaning of 3 (a) (1) and 3 (a) (3) of the Investment Company Act, were it not for the specific exemption. The Chief Counsel of the SEC's Investment Trust Study testified that the specific exemption was necessary in the light of the definition. See Hearings before Subcommittee of the Senate Committee on Banking and Currency on S. 3580, 76th Cong., 3d Sess. 181. A fortiori a company issuing the sort of contracts in question here would be included if there were no question of the insurance exemption. </s> [Footnote 5 No subsequent development in state insurance regulation appears to have occurred which would better adapt the system to regulation of companies performing the functions of investment trusts; but of course, in any event, the issue is the scope of state regulation in 1933 and 1940. The basic patterns do not appear to have changed and present-day regulation (apart from any measures which may have been taken specifically to deal with the contracts in question) can be examined to see the sort of regulation that Congress was deferring to in the Acts. </s> [Footnote 6 ". . . any note, stock, treasury stock, bond, debenture, evidence of indebtedness, certificate of interest or participation in any profit-sharing agreement, collateral-trust certificate, preorganization certificate or subscription, transferable share, investment contract, voting-trust certificate, certificate of deposit for a security, fractional undivided interest in oil, gas, or other mineral rights, or, in general, any interest or instrument commonly known as a `security,' or any certificate of interest or participation in, temporary or interim certificate for, receipt for, guarantee of, or warrant or right to subscribe to or purchase, any of the foregoing." Securities Act 2 (1), 15 U.S.C. 77 (b) (1). </s> [Footnote 7 Securities Act 7 and 10 and Schedules A and B. </s> [Footnote 8 A leading text on life insurance outlines the areas of state life insurance regulation as follows: the establishment of a standard of solvency for the setting up of minimum reserves; the organization of domestic companies and the admission of foreign insurers; the rendition of annual statements and the making (frequently on a cooperative basis among the States) of periodic examinations; overseeing the equitable treatment of policyholders by prescribing contract terms and checking misrepresentation, discrimination, rebating and "twisting"; licensing and regulating the conduct of agents; and supervision of investments in accord with a statutory permissive list. Huebner and Black, Life Insurance (5th ed. 1958), pp. 518-524. </s> [Footnote 9 See 3 (a) (2). Specific regulatory provisions for this sort of company are found in 28. Reserve requirements are established by the Federal Act as a method of regulation. </s> [Footnote 10 8. </s> [Footnote 11 15. </s> [Footnote 12 12. </s> [Footnote 13 13. </s> [Footnote 14 18. </s> [Footnote 15 20. </s> [Footnote 16 22. </s> [Footnote 17 27. </s> [Footnote 18 30 (d). </s> [Footnote 19 The important insurance State of Connecticut has. See Spellacy v. American Life Ins. Assn., 144 Conn. 346, 355, 131 A. 2d 834, 839. In any event, these contracts are annuities, "life annuities," in the sense that they provide for payments at periodic intervals for a period measured by a human life or lives, with the payments representing both an income element and a liquidation of contributed capital, with no further return of the investor's capital after the annuity period runs. Cf. Heubner and Black, op. cit., supra, at 99-100. Of course, there are annuity contracts which provide payments only for terms of years. See Vance, Insurance (3d ed. 1951), p. 1020. These have no mortality factor, and, it would appear, no insurance element at all. One of the alternative settlement options under one respondent's policies is a "variable" form of such an arrangement. </s> [Footnote 20 State statutes make it clear that the writing of traditional annuities is part of the usual business of life insurance companies. See, e. g., Cal. Insurance Code 101; Conn. Gen. Stat., 1949, c. 295, 6144; Smith-Hurd Ill. Ann. Stat., Tit. 73, 616; N. Y. Insurance Law, 46, 190. Cf. Huebner and Black, op. cit., supra, at 92; Mehr and Osler, Modern Life Insurance (rev. ed. 1956), pp. 69-70. </s> [Footnote 21 The precise percentages are: first year, 44.79%; second, 85.27%; third, 85.82%; fourth, 86.45%; fifth, 87.17%. The pattern for the second through fifth years would appear to reflect the diminishing cost of declining term insurance sold as part of the contract. </s> [Footnote 22 The cost of such insurance, bought separately, would be about 2% of the first 5-years' pay-ins. Longer terms than the 5-year are available. The contract is sold without term life insurance and without waiver of premium on disability to persons who are deemed "uninsurable." The fixed-dollar term insurance and the disability waiver risks of VALIC are heavily reinsured in orthodox insurance companies. </s> [Footnote 23 Even before there are contract holders, a "unit" is set up in terms of the then value of the company's investment portfolio. While the number of units credited to investors does not accordingly account for the entire value of the "fund," the value of the units fluctuates as the value of the company's investment portfolio fluctuates in the same fashion as if they were shares in an open-end investment fund. </s> [Footnote 24 The surcharge is accounted for in the same way as that part of the premium gross income that does not go toward the crediting of accumulation units. The analogy is to an annual "management fee" in an investment trust. Of course, the surcharge is not in fact paid to anyone as a fee for any specific purpose; but to the extent that it is made, a portion of the company's assets is freed from being charged with the valuation of units credited to investors. To this extent, the company's assets become available for the payment of expenses, for the satisfaction of its obligations in the event the investors as a group outlive their tabular expectancy, and for dividends to common stockholders. </s> [Footnote 25 A concrete example of a few years' hypothetical experience during the pay-in period may illustrate the workings of these contracts. It is based on the specific contract described in the text. </s> Assume a unit value of $1 at the start of the contract. The investor's first annual payment of $1,000, less the disability waiver premium and the "loading charge," buys 430 units at the $1 rate. </s> Assume a favorable year in the company's portfolio's market performance; net capital gains (realized and unrealized) of 15% and [359 U.S. 65, 84] interest and dividends of 3% of original value, all net of income taxes. On the average asset value at month ends during the year, the 1.8% annual charge would come to about 2% of original value. This would make the value of a unit after a year about $1.16. </s> Of the second annual premium of $1,000, $819 goes toward buying 706 units at the new rate of $1.16. Thus after the second annual premium, the investor has 1,136 units to his credit. </s> Assume a very favorable second year in the market, with net capital gains of 25% of the year's beginning value (29 cents a unit) and income items of 5% of beginning value (about 6 cents a unit), all net of income taxes. The annual charge of 1.8% will come to about 2.4 cents per unit, and the resulting value at year end will be about $1.49 per unit. </s> Of the third annual premium of $1,000, $824 goes toward buying 553 units at the new rate of $1.49. Thus after the third annual premium, the investor has 1,689 units to his credit. </s> Assume a bear market the third year, with a 12% net capital shrinkage in the company's portfolio (about 18 cents a unit) and income at 2% of beginning value (3 cents a unit), all net of income taxes. The 1.8% charge would come to about 2.5 cents a unit. These adjustments would give a year end unit value of about $1.31 a unit. </s> If instead of going on with the contract, the investor then "cashed in his chips," he would get $2,212.59 for his 1,689 units, less a $10 surrender charge. </s> [Footnote 26 The least-subtle example of the absent protections is that regarding investment policy. The state investment lists are minima; within the limits of the lists, the companies have very broad discretion in making investments, see Mehr and Osler, op. cit., supra, at 612, and there appears to be no control at all over their changing their investment policies. The difference in emphasis between the two forms of regulation and the obvious correspondence of the contract in question with an investment trust in this essential regulatory matter hardly needs underscoring. </s> Even the minimal controls over investment policy furnished by the prescribed lists are administered primarily by one State, the State of incorporation. New York's Insurance Law, 90, applying in terms the local controls, at least "in substance," to foreign companies doing business within the State, appears the exception rather than the rule. See Vance, op. cit., supra, at 43. Other States insist on their own requirements as to part of the assets of a foreign insurance company doing a local business. See Cal. Insurance Code 1153. Some States explicitly make some deference to the State of incorporation. See Smith-Hurd Ill. Ann. Stat., Tit. 73, 723 (e). </s> [Footnote 27 The reciprocal of 1.000 plus monthly interest at the rate of 3 1/2% per annum. </s> [Footnote 28 A concrete hypothetical example of the workings of the contract in the pay-out period may be useful. Assume that the investor described in the text and in footnote 25 did not cash in his contract, but kept it during the entire 30-year pay-in period. Assume that he has accumulated, through premium-payment "purchases" at varying prices throughout the years, 14,000 units and that the value of a unit has mounted to $3 over the years. The investor can now take his $42,000 in cash, if he chooses. But let us assume that he is healthy and without dependents, so that he is moved to elect the option of a straight life annuity. This capital contribution of $42,000 by a 65-year-old [359 U.S. 65, 88] male would buy a fixed-dollar annuity of $286 a month. This is in fact what our investor will get the first month. But this first monthly payment will be used to fix the number of annuity units he will receive monthly for the rest of his life. </s> Assume that the value at this time of an annuity unit is $2. (While the value of an annuity unit tends to move in the same direction as the value of an accumulation unit, it differs from it because every month it is multiplied by 0.9971 to "wring out" the assumed interest factor in the annuity table. So over the years, the current values of the two sorts of units will drift apart, even though they move the same way with the fluctuations of the company's portfolio.) At the $2 rate, the first monthly payment is 143 units, and this number of units will be paid the investor monthly for life. </s> Assume that there is a sharp break in the market during the first month of the pay-out period. (Actually, there is a one-month lag in computation, but for the purposes of demonstration this can be ignored.) Suppose this market break shrinks the capital value of the company's portfolio by 8% (16 cents a unit). Assume income items during the month at 3% per annum (0.5 cents). Then deduct the omnipresent 1.8% annual charge (0.3 cents). This puts the current value at $1.842; the 0.9971 multiplier must be applied to wring out the interest assumption in the annuity table. This gives an adjusted value of $1.8367. The investor is then paid, for his second monthly payment, 143 units at this new rate, or $262.65. </s> The recomputation of the unit value takes place monthly, and every month the investor is paid 143 units at the new rate, whatever this may come to in dollars. </s> [Footnote 29 See Mehr and Osler, op. cit., supra, at 583; cf. Fuller v. Metropolitan Life Ins. Co., 70 Conn. 647, 666, 41 A. 4, 11. </s> [Footnote 30 In the traditional form of insurance, the appreciation potential of common stocks is said not to be the predominant reason for an insurer's investing in them. While many States allow investment in them in varying degrees, commentators emphasize that the purpose of such investment is primarily diversification of investment; in certain industries, common stock may be the only sort of available investment. Huebner and Black, op. cit., supra, at 505. Of course, the primary investment aim of the traditional insurer is preservation of dollar capital with income. Id., at 507. </s> [Footnote 31 VALIC's hypothetical is an annuity based on an investment return of 1/2% per annum and an average mortality at 110 years. </s> [Footnote 32 According to 5, "`Open-end company' means a management company [i. e., an investment company other than a unit investment trust or a face-amount certificate company, 4] which is offering for sale or has outstanding any redeemable security of which it is the issuer." The redeemability of these contracts during the pay-in period would appear to make their issuer come under this definition. Even if the companies were considered closed-end companies, they argue that other provisions of 18 would pose very difficult problems for them. See 18 (a). </s> [Footnote 33 The companies say that this is because their contracts are debt obligations. It is quite doubtful whether the contracts can be described as debts; certainly they are not much more of a debt than a redeemable share in an orthodox open-end company is; here the redemption feature is expressed in outright redeemability during the pay-in period and in liquidation on an annuity basis in the pay-out period. But in any event, whether the contracts are debts or not, they have priority over the companies' stock, and the provisions dealing with senior securities would appear to cover them. </s> [Footnote 34 The most basic purpose of the provision might be viewed by the SEC as the protection, in the case of the traditional open-end company, of the investment certificate holders from the creation of securities senior to their interests (as well as preventing, in the interest of their purchasers, the creation of a class of "senior" securities which would be senior only to freely redeemable junior securities). Since it is the senior securities here which are the analogs of open-end investment trust certificates, quite the contrary situation might be thought to be presented. The SEC's dispensing authority in regard to the Investment Company Act is found in 6 (c), which provides: "The Commission, by rules and regulations upon its own motion, or by order upon application, may conditionally or unconditionally exempt any person, security, or transaction, or any class or classes of persons, securities, or transactions, from any provision or provisions of this title or of any rule or regulation thereunder, if and to the extent that such exemption is necessary or appropriate in the public interest and consistent with the protection of investors and the purposes fairly intended by the policy and provisions of this title." </s> MR. JUSTICE HARLAN, whom MR. JUSTICE FRANKFURTER, MR. JUSTICE CLARK and MR. JUSTICE WHITTAKER join, dissenting. </s> The issue in these cases is whether Variable Annuity Life Insurance Company of America (VALIC) and The Equity Annuity Life Insurance Company (EALIC) are subject to regulation by the Securities and Exchange Commission under the Securities Act of 1933 and the Investment Company Act of 1940 with respect to their variable annuity business. [359 U.S. 65, 94] </s> Section 3 (a) (8) of the Securities Act, 48 Stat. 74, 76, 15 U.S.C. 77c (a) (8), provides that the statute shall not apply to: </s> "Any insurance or endowment policy or annuity contract or optional annuity contract, issued by a corporation subject to the supervision of the insurance commissioner, bank commissioner, or any agency or officer performing like functions, of any State or Territory of the United States or the District of Columbia." </s> Section 3 (c) (3) of the Investment Company Act, 54 Stat. 789, 798, 15 U.S.C. 80a-3 (c) (3), puts outside the coverage of the Act "[a]ny . . . insurance company," and 2 (a) (17), 54 Stat. 789, 793, 15 U.S.C. 80a-2 (a) (17), defines an insurance company as: </s> "a company which is organized as an insurance company, whose primary and predominant business activity is the writing of insurance or the reinsuring of risks underwritten by insurance companies, and which is subject to supervision by the insurance commissioner or a similar official or agency of a State; or any receiver or similar official or any liquidating agent for such a company, in his capacity as such." </s> These two insurance companies are organized under the Life Insurance Act of the District of Columbia, 35 D.C. Code, 1951, 35-301 to 35-803, and are subject to regulation by the Superintendent of Insurance of the District of Columbia, who has approved the annuity policies written by them. At the time of trial VALIC had also qualified to do business in Arkansas, Kentucky, and West Virginia, and its annuity policies had likewise been approved by the insurance departments of those States. 1 Both companies in the District of Columbia, [359 U.S. 65, 95] and VALIC in the other States, offer their policies to the public only through insurance agents duly licensed by the local insurance authority. </s> Variable annuity policies are a recent development in the insurance business designed to meet inflationary trends in the economy by substituting for annuity payments in fixed-dollar amounts payments in fluctuating amounts, measured ultimately by the company's success in investing the premium payments received from annuitants. One of the early pioneers in this field was Teachers Insurance and Annuity Association, a New York regulated life insurance organization engaged in selling annuities to college personnel. The Association in 1950 made exhaustive studies into the feasibility and soundness of variable annuities. Two years later, it incorporated College Retirement Equities Fund, a companion company under joint management with Teachers Insurance, which, subject to regulation under the New York Insurance Law, commenced offering such annuity contracts in the teaching profession. 2 The first life insurance company to offer such contracts generally appears to have been the Participating Annuity Life Insurance Company, which since 1954 has been selling variable annuity policies under the supervision of the Arkansas insurance authorities. VALIC and EALIC entered the field in 1955 and 1956 respectively. </s> The characteristics of a typical variable annuity contract have been adumbrated by the majority. It is sufficient to note here that, as the majority concludes, as the two lower courts found, and as the SEC itself recognizes, it may fairly be said that variable annuity contracts contain both "insurance" and "securities" features. It is [359 U.S. 65, 96] certainly beyond question that the "mortality" aspect of these annuities - that is the assumption by the company of the entire risk of longevity - involves nothing other than classic insurance concepts and procedures, and I do not understand how that feature can be said to be "not substantial," determining as it does, apart from options, the commencement and duration of annuity payments to the policyholder. On the other hand it cannot be denied that the investment policies underlying these annuities, and the stake of the annuitants in their success or failure, place the insurance company in a position closely resembling that of a company issuing certificates in a periodic payment investment plan. Even so, analysis by fragmentization is at best a hazardous business, and in this instance has, in my opinion, led the Court to unsound legal conclusions. It is important to keep in mind that these are not cases where the label "annuity" has simply been attached to a securities scheme, or where the offering companies are traveling under false colors, in an effort to avoid federal regulation. The bona fides of this new development in the field of insurance is beyond dispute. </s> The Court's holding that these two companies are subject to SEC regulation stems from its preoccupation with a constricted "color matching" approach to the construction of the relevant federal statutes which fails to take adequate account of the historic congressional policy of leaving regulation of the business of insurance entirely to the States. It would be carrying coals to Newcastle to re-examine here the history of that policy which was fully canvassed in the several opinions of the Justices in United States v. South-Eastern Underwriters Assn., 322 U.S. 533 , and which was again implicitly recognized by this Court as recently as last Term when, in Federal Trade Comm'n v. National Casualty Co., 357 U.S. 560 , we declined to give a niggardly construction to the McCarran [359 U.S. 65, 97] Act. Suffice it to say that in consequence of this Court's decision 90 years ago in Paul v. Virginia, 8 Wall. 168, and the many cases following it, 3 there had come to be "widespread doubt" prior to the time the Securities and Investment Company Acts were passed "that the Federal Government could enter the field [of insurance regulation] at all." Wilburn Boat Co. v. Fireman's Fund Ins. Co., 348 U.S. 310, 318 ; see also Prudential Ins. Co. v. Benjamin, 328 U.S. 408, 414 . </s> I can find nothing in the history of the Securities Act of 1933 which savors in the slightest degree of a purpose to depart from or dilute this traditional federal "hands off" policy respecting insurance regulation. On the contrary, the exemption of insurance from that Act, which is couched in the broadest terms, reflected not merely adherence to tradition but also compliance with a supposed command of the Constitution. In a study of the proposed Act, the Department of Commerce concluded that the legislation could be bottomed on the federal power over commerce because securities did have the independent general commercial existence and value which the Paul decision had found lacking in insurance policies. See A Study of the Economic and Legal Aspects of the Proposed Federal Securities Act, reprinted in Hearings before Senate Committee on Banking and Currency on S. 875, 73d Cong., 1st Sess. 312, at 330, and in Hearings before House Committee on Interstate and Foreign Commerce on H. R. 4314, 73d Cong., 1st Sess. 87, at 105. This distinction between securities and insurance, mistaken or not, underlay the passage of the final bill. When the proposed act was considered by the Senate and House Committees, it did not contain an express exemption of [359 U.S. 65, 98] insurance. The House Committee explained that the exemption in the final bill ( 3 (a) (8) of the Act): </s> "makes clear what is already implied in the act, namely, that insurance policies are not to be regarded as securities subject to the provisions of the act. The insurance policy and like contracts are not regarded in the commercial world as securities offered to the public for investment purposes. The entire tenor of the act would lead, even without this specific exemption, to the exclusion of insurance policies from the provisions of the act, but the specific exemption is included to make misinterpretation impossible." H. R. Rep. No. 85, 73d Cong., 1st Sess. 15. </s> That this distinction stemmed from the feared implications of the Paul decision appears from the House debates. See 73d Cong., 1st Sess., 77 Cong. Rec. 2936, 2937, 2938, 2946. Moreover, two days after the Senate began consideration of the proposed act, Senator Robinson introduced a resolution (S. J. Res. 51) calling for a constitutional amendment because, in his view, "the National Government at present has no authority whatever over insurance companies." 73d Cong., 1st Sess., 77 Cong. Rec. 3109. </s> Similarly, I can find nothing in the history of the Investment Company Act of 1940 which points in any way to a change in federal policy on this score. Here tradition, perhaps more than constitutional doubt, explains the exemption of insurance companies from the Act. In hearings before the House Committee, Commissioner Healy of the SEC discussed the "face-amount installment certificates" issued by certain investment companies and often "sold on the basis of the comparison with savings bank deposits and insurance policies." The major factor appearing to distinguish these investment [359 U.S. 65, 99] companies from insurance companies for purposes of federal control was the strict state regulation present over insurance policies but absent over investment certificates. Hearings before House Committee on Interstate and Foreign Commerce on H. R. 10065, 76th Cong., 3d Sess. 61-62. Likewise, in the Senate debates, preservation of state regulation over insurance companies appears as the crucial factor distinguishing them from investment trusts. 76th Cong., 3d Sess., 86 Cong. Rec. 10070. Stating that "the bill has nothing to do with the regulation of insurance companies," Senator Byrnes went on to say: "The platforms of both political parties have urged supervision of insurance by the several States, but not regulation by the Federal Government." Id., at 10071. See also United States v. South-Eastern Underwriters Assn., supra, at 584, 591-592, n. 12 (dissenting opinion). </s> In 1944, this Court removed the supposed constitutional basis for exemption of insurance by holding, in United States v. South-Eastern Underwriters Assn., supra, that the business of insurance was subject to federal regulation under the commerce power. Congress was quick to respond. It forthwith enacted the McCarran Act, 59 Stat. 33, 15 U.S.C. 1011-1015, which on its face demonstrates the purpose "broadly to give support to the existing and future state systems for regulating and taxing the business of insurance," Prudential Ins. Co. v. Benjamin, supra, at 429, and "to assure that existing state power to regulate insurance would continue." Wilburn Boat Co. v. Fireman's Fund Ins. Co., supra, at 319. Thus, rather than encouraging Congress to enter the field of insurance, the South-Eastern decision spurred reiteration of its undeviating policy of abstention. </s> In this framework of history the course for us in these cases seems to me plain. We should decline to admit the SEC into this traditionally state regulatory domain. [359 U.S. 65, 100] </s> Admittedly the variable annuity was not in the picture when the Securities and Investment Company Acts were passed. It is a new development combining both substantial insurance and securities features in an experiment designed to accommodate annuity insurance coverage to contingencies of the present day economic climate. 4 This, however, should not be allowed to obscure the fact that Congress intended when it enacted these statutes to leave the future regulation of the business of insurance wholly with the States. This intent, repeatedly expressed in a history of which the Securities and Investment Company Acts were only a part, in my view demands that bona fide experiments in the insurance field, even though a particular development may also have securities aspects, be classed within the federal exemption of insurance, and not within the federal regulation of securities. 5 Certainly these statutes breathe no notion of concurrent regulation by the SEC and state insurance authorities. The fact that they do not serves to reinforce the view that the congressional exemption of insurance was but another manifestation of the historic federal policy leaving regulation of the business of insurance exclusively to the States. 6 </s> It is asserted that state regulation, as it existed when the Securities and Investment Company Acts were passed, [359 U.S. 65, 101] was inadequate to protect annuitants against the risks inherent in the variable annuity and that therefore such contracts should be considered within the orbit of SEC regulation. The Court is agreed that we should not "freeze" the concept of insurance as it then existed. By the same token we should not proceed on the assumption that the thrust of state regulation is frozen. As the insurance business develops new concepts the States adjust and develop their controls. This is in the tradition of state regulation and federal abstention. If the innovation of federal control is nevertheless to be desired, it is for the Congress, not this Court, to effect. </s> I would affirm. </s> [Footnote 1 Since the trial VALIC has also qualified in Alabama and New Mexico, and EALIC in North Dakota. </s> [Footnote 2 By the end of 1956 the College Retirement Fund had issued such annuities to more than 31,000 individuals, and the value of its annuity units had increased from $10 to $18.51. </s> [Footnote 3 The cases are collected in United States v. South-Eastern Underwriters Assn., supra, at 544, n. 18. </s> [Footnote 4 See Morrissey, Dispute Over the Variable Annuity, 35 Harv. Bus. Rev. 75 (1957). </s> [Footnote 5 It is worth observing that in reporting the proposed Securities Act of 1933 the House Committee stated that insurance policies "and like contracts" were to be exempt from federal regulation. See ante, p. 98. </s> [Footnote 6 In contrast, 18 of the Securities Act, 48 Stat. 74, 85, 15 U.S.C. 77r, provides that the Act shall not affect the jurisdiction of state securities commissions, thus recognizing a system of dual regulation where the exemptive provisions are not applicable. The Investment Company Act has a similar provision, 50. 54 Stat. 789, 846, 15 U.S.C. 80a-49. </s> [359 U.S. 65, 102]

United States Supreme Court LEVIN v. MISSISSIPPI RIVER CORP.(1967) No. 352 Argued: January 19, 1967Decided: February 27, 1967 </s> [Footnote * Together with No. 359, Alleghany Corp. et al. v. Mississippi River Fuel Corp. et al., also on certiorari to the same court. </s> The capital stock of the Missouri Pacific Railroad Company (MoPac), a Missouri corporation, consists of two classes, A and B. Class A, with 1,849,576 shares outstanding, is preferentially entitled to noncumulative dividends not to exceed $5 a share annually, and its equity is limited to $100 a share. Class B, with 39,731 shares outstanding, is entitled to the earnings and equity in excess of the Class A preferences, and its equity is currently valued at about $6,500 a share. MoPac's corporate charter provides that each share of each class is entitled to one vote, with the proviso that a separate vote of each class is required on any proposal affecting the preferences or relative rights of either class. Section 5 (11) of the Interstate Commerce Act requires for ICC approval of a voluntary railroad merger the assent of the majority of the shares entitled to vote " unless a different vote is required under applicable State law." Missouri law applicable to mergers provides for approval by at least a two-thirds vote of all outstanding shares (Mo. Rev. Stat. 351.425). Another section of state law provides for class voting where a corporation's charter so requires ( 351.270). A plan to consolidate MoPac and a subsidiary railroad was approved by their boards of directors and submitted for ICC approval, including provision for an exchange of each MoPac share, without regard to class, for four shares of the new corporation. The proposed plan was to be passed on by the stockholders voting collectively rather than by class. Charging that the proposed exchange was unfair in view of the far greater value of the Class B stock than that of the Class A stock, appellants, Class B stockholders, brought this suit for declaratory relief. The District Court upheld appellants' contention that the collective voting plan would violate MoPac's corporate charter and both state and federal law. The Court of Appeals reversed on the ground that, despite Missouri law, the " plenary character of 5 (11) . . . with its consequent preemptive nature" compelled a contrary result. Held: In a consolidation such as that proposed here, Missouri law [386 U.S. 162, 163] applies, and 351.270 of that law requires application of the corporate charter provision, which in turn requires a majority assent of the stockholders on a separate class-vote basis. Pp. 167-170. </s> 359 F.2d 106, reversed and remanded. </s> John Lowenthal argued the cause for petitioner in No. 352. With him on the briefs was Maxwell Brandwen. </s> Breck P. McAllister argued the cause for petitioners in No. 359. With him on the briefs was William E. Haudek. </s> Robert H. McRoberts argued the cause for respondents Mississippi River Fuel Corp. et al. in both cases. With him on the brief was John H. Hendren. Dennis G. Lyons argued the cause for respondent Missouri Pacific Railroad Co. in both cases. With him on the brief was Daniel A. Rezneck. </s> MR. JUSTICE CLARK delivered the opinion of the Court. </s> The ultimate issue in these cases is whether the holders of the Class B stock of the Missouri Pacific Railroad Company (MoPac) are entitled to vote separately, as a class, on the proposed plan of consolidation of MoPac and Texas and Pacific Railway Company (T & P) into the newly formed Texas and Missouri Pacific Railroad Company (T & M). An application has been filed with the Interstate Commerce Commission requesting permission to effect a plan of consolidation under 5 (2) and 5 (11) of the Interstate Commerce Act, as amended, 54 Stat. 905, 908 (1940), 49 U.S.C. 5 (2) and 5 (11). MoPac's Board of Directors has announced that its Class B shareholders are not entitled to vote on the plan separately and apart from its Class A shareholders, and that it intends to submit the plan only to the collective vote of the Class A and Class B shareholders. </s> Three separate declaratory judgment actions were filed by different Class B shareholders seeking a declaration [386 U.S. 162, 164] that the plan requires the separate approval of the holders of the Class B shares by majority vote. Upon a limited consolidation of the cases, the District Court held that MoPac's Articles of Association prohibited the consolidation unless class voting was observed and that 5 (11) 1 of the Interstate Commerce Act, by adopting state law, required the separate approval of each class of shareholders. 233 F. Supp. 747. The Court of Appeals reversed on the ground that, despite Missouri law, the " plenary character of 5 (11) . . . with its consequent preemptive nature" compelled a contrary result. 359 F.2d 106, at 119. We granted certiorari. 385 U.S. 814 . We have concluded that Missouri law, as provided by 5 (11), is controlling on the point and that the judgment must, therefore, be reversed. </s> I. </s> Background of the Parties and the Litigation. </s> MoPac, a Missouri corporation, is an interstate common carrier railroad. It had been in reorganization proceedings under 77 of the Bankruptcy Act, as amended, [386 U.S. 162, 165] 11 U.S.C. 205, until January 1, 1955. 2 After those proceedings terminated, the corporation's preferred and common stock was replaced by two classes of $100 stated capital no par voting shares: Class A, which is preferentially entitled to noncumulative dividends not to exceed $5 per share annually, and Class B, which is entitled to all the earnings and the equity in excess of the Class A preferences. MoPac's Articles of Association, Art. VII, D (3), provide that class voting shall not be required save as to four types of corporate change, none of which shall be effected without the separate consent of the record holders of a majority of the Class A and the Class B shares. The four specified changes are: (1) the issuance of additional shares; (2) the creation or issuance of any MoPac obligation or security convertible into or exchangeable for MoPac shares; (3) an alteration or change in " the preferences, qualifications, limitations, restrictions and special or relative rights of the Class A Stock or of the Class B Stock" ; and, finally, (4) the amendment or elimination of any of the foregoing requirements. </s> MoPac has 1,849,576 shares of Class A stock and 39,731 shares of Class B stock outstanding. T & P was incorporated by an Act of Congress in 1871 and is also an interstate railroad of which MoPac owns 82.86% of the outstanding shares of stock. Mississippi River Fuel Corporation (Mississippi) is a Delaware corporation and owns a majority (57.95%) of the Class A shares of the stock of MoPac. Alleghany Corporation (Alleghany) is a Maryland corporation and owns a majority (51%) of the Class B stock of MoPac, subject to a voting trust. T & M is a Delaware corporation organized for the [386 U.S. 162, 166] purpose of being the consolidated company upon the merger of MoPac and T & P. </s> The agreement and plan of consolidation were approved by the Board of Directors of MoPac and T & P in December of 1963. The plan provided for an exchange of each MoPac share (without regard to class) for four shares of the new corporation and for an exchange of the T & P stock (other than that owned by MoPac) on a basis of one share of T & P for 4.8 shares of the new company. In January of 1964, the three companies filed a joint application with the Interstate Commerce Commission for an order under 5 (2) of the Act authorizing the consolidation and the issuance of securities by T & M under 20a. In this application MoPac advised that it would submit the proposed plan to its stockholders, for approval, by May of 1964 on the basis of a collective, rather than class, vote. </s> There are a total of six individual petitioners, each of whom owns only a nominal number of Class B shares, and Alleghany which owns, as aforesaid, a majority of those shares. The respondents are MoPac, T & P, Mississippi, and some of their directors or officers, only one of whom owns any Class B stock of MoPac. The first of the three suits which this cause involves was filed prior to the submission of the plan to the Commission; the second and third subsequent thereto. Each of the suits attacks the plans of consolidation, alleging, among other things, that the Class B stock has a much greater value than that of the Class A and that the exchange is unfair; that the collective voting plan would violate the Articles of Association, the law of Missouri (and, therefore, 5 (11) of the Act) and would result in irreparable injury to the Class B shareholders. Each complaint prays for a declaration that the plan of consolidation requires the separate vote of each class of stock. At trial the parties agreed that the court should [386 U.S. 162, 167] first pass upon the voting rights question. The District Court held that class voting was required and certified the issue to the Court of Appeals which permitted an interlocutory appeal under 28 U.S.C. 1292 (b). Further proceedings in the District Court were stayed. </s> As we have indicated, the Court of Appeals held that, even though MoPac's Articles of Association required a class vote on consolidation and Missouri law, therefore, demanded such a vote, it nevertheless was " impressed with the significance of the national transportation policy and its emphasis on railroad consolidation, with the stated exclusive and plenary character of 5 (11), and with its consequent preemptive nature." 359 F.2d, at 119. The Court felt that, by virtue of the federal statute, it was compelled to conclude that it should apply the general standard as to voting rights, i. e., the majority of all voting shares, rather than honor the exception, i. e., class voting, as provided under Missouri law. </s> II. </s> Conclusion. </s> We believe the Court of Appeals erred in so construing 5 (11) of the Act. That section specifically provides that voluntary consolidations of railroads must have the assent " of a majority [vote of all shares], unless a different vote is required under applicable State law, in which case the number so required shall assent, of the votes of the holders of the shares entitled to vote . . . ." As the Court of Appeals held, this section " bows in the direction of state law." 359 F.2d, at 114. Both the District Court and the Court of Appeals decided that Mo. Rev. Stat. c. 351 was " the applicable state law." As both courts found, 351.055 (3) authorizes the issuance of classes of shares of stock and 351.270 provides that where " the articles of incorporation require the vote or concurrence of the holders of a greater portion of the shares, or of any [386 U.S. 162, 168] class or series thereof, than required by this chapter with respect to such action, the provisions of the articles of incorporation shall control this section." But the Court of Appeals concluded that since 351.425 3 permitted the plan to be approved by the vote of at least two-thirds of all the outstanding shares, 5 (11) required that it control, rather than 351.270. We think not. In using the language " required under applicable State law," 5 (11) embraced all state law, as the Court of Appeals held. This included the exception of 351.270 as to those corporations whose articles of incorporation required class voting. The national transportation policy and the provisions of 5 (11), rather than permitting the result the Court of Appeals reached, require that " the articles of incorporation shall control . . . ." It follows that if a consolidation comes within the requirements of D (3) of the articles of association, the approval by the separate vote of each class of stock is required. The District Court found that the plan of consolidation did come within D (3). It is clear that the Court of Appeals did not disturb this finding, although it is not precisely clear what the court found on the question. At one point, it appears to say that " the articles seem to require" separate class voting, while it later assumes that they do so. Subsequently the opinion notes that the court is " not persuaded . . . that MoPac's Articles call for a class vote on a consolidation . . . ." 359 F.2d, at 119. In any event, we agree with the trial court that the articles do require a separate class vote on the plan. We believe that the provision that the company " shall not . . . (c) alter or change the preferences, qualifications, limitations, [386 U.S. 162, 169] restrictions and special or relative rights of the Class A Stock or of the Class B Stock" would clearly include the plan of consolidation here. MoPac, by consolidating the two railroads that it already controls, will change its Class A stock from voting shares preferentially entitled to noncumulative dividends of not to exceed $5 per share annually to shares that participate equally in all of the earnings of the company. The Class B stock which now enjoys all of the earnings and the equity in excess of the present Class A preferences would lose those special features. As the Court of Appeals found, the effectuation of the plan would " result in the present Class B holdings being engulfed by the larger number of Class A holdings." 359 F.2d, at 110. It is apropos to note here that while the equity of each Class A share remains limited to $100, the value of the equity of the Class B shares is approximately $6,500 per share. The plan proposes to exchange four shares of stock of T & M for one share of MoPac Class B, which, under such values, is like exchanging four rabbits for one horse. Moreover, the final proviso of D (3) requires a separate class vote where any amendment or elimination of any of the provisions of the section itself is proposed. Under the plan this section would be entirely eliminated on the basis of a collective vote rather than a separate class one. But MoPac argues that this would not be " company action." We cannot agree. The boards of directors of MoPac and T & P, which it controls, drew up the plan and now request its approval by the Interstate Commerce Commission. This certainly is " company action" within the terms of the Articles. 4 Indeed, [386 U.S. 162, 170] this point is so clear that we see no occasion for remanding the issue to the Court of Appeals for its consideration of the point, even though it be assumed that its opinion does not decide it. Effective judicial administration requires that we dispose of the matter here. </s> We do not, of course, reach the merits of the proposed plan which is the concern of the Commission in the first instance. Any reference to the effect of the plan is not to be construed as in any way passing upon its merits. With reference to voting rights, we hold only that in a consolidation as proposed here, Missouri law must be applied and that 351.270 of that law requires the application of the Articles of Association of MoPac, which in turn, require the assent of the majority of the shareholders on a separate class-vote basis. </s> The judgment is, therefore, reversed and the cause remanded for further proceedings consistent with this opinion. </s> It is so ordered. </s> MR. JUSTICE FORTAS took no part in the consideration or decision of these cases. </s> [Footnote 1 Section 5 (11): " The authority conferred by this section shall be exclusive and plenary, and any carrier or corporation participating in or resulting from any transaction approved by the Commission thereunder, shall have full power (with the assent, in the case of a purchase and sale, a lease, a corporate consolidation, or a corporate merger, of a majority, unless a different vote is required under applicable State law, in which case the number so required shall assent, of the votes of the holders of the shares entitled to vote of the capital stock of such corporation at a regular meeting of such stockholders, the notice of such meeting to include such purpose, or at a special meeting thereof called for such purpose) to carry such transaction into effect and to own and operate any properties and exercise any control or franchises acquired through said transaction without invoking any approval under State authority . . . ." </s> [Footnote 2 See Missouri Pac. R. Co. Reorganization, 290 I. C. C. 477 (1954); In re Missouri Pac. R. Co., 129 F. Supp. 392 (D.C. E. D. Mo. 1955), aff'd sub nom. Missouri Pac. R. Co. 5 1/4% S. S. B. C. v. Thompson, 225 F.2d 761 (C. A. 8th Cir. 1955). </s> [Footnote 3 Mo. Rev. Stat. 351.425 provides, in pertinent part: " . . . The plan of merger or consolidation shall be approved upon receiving the affirmative vote of the holders of at least two-thirds of the outstanding shares entitled to vote at such meeting, of each of such corporations." </s> [Footnote 4 It is interesting to note that the Interstate Commerce Commission itself required that Art. VII, D (3) be inserted in MoPac's Articles of Association. The Commission's order provided: " The certificate of incorporation [of the reorganized corporation] shall permit the authorization from time to time of additional shares of common stock of either class, but shall specifically provide that [386 U.S. 162, 170] the new company shall not alter or change the rights of holders of either class of stock or authorize the issuance of additional shares of either class or of any other class or of participating or convertible preferred stock, without the consent of the holders of not less than a majority of the number of shares of common stock of each class at the time outstanding." 290 I. C. C. 477, at 665. </s> [386 U.S. 162, 171]

United States Supreme Court NEW YORK STATE LIQUOR AUTHORITY v. BELLANCA(1981) No. 80-813 Argued: Decided: June 22, 1981 </s> Held: </s> A provision of New York's Alcoholic Beverage Control Law prohibiting nude dancing in establishments licensed by the State to sell liquor for on-premises consumption is not unconstitutional as violating the First Amendment on the alleged ground that it prohibits nonobscene topless dancing, but instead is valid as being within the State's broad power under the Twenty-first Amendment to regulate the sale of liquor within its boundaries. Cf. California v. LaRue, 409 U.S. 109 . The State's power to ban the sale of alcoholic beverages entirely includes the lesser power to ban the sale of liquor on premises where topless dancing occurs. Whatever artistic or communicative value may attach to topless dancing is overcome by the State's exercise of its broad power under the Twenty-first Amendment. </s> Certiorari granted; 50 N. Y. 2d 524, 407 N. E. 2d 460, reversed and remanded. </s> PER CURIAM. </s> The question presented in this case is the power of a State to prohibit topless dancing in an establishment licensed by the State to serve liquor. In 1977, the State of New York amended its Alcoholic Beverage Control Law to prohibit nude dancing in establishments licensed by the State to sell liquor for on-premises consumption. N. Y. Alco. Bev. Cont. Law, 106, subd. 6-a (McKinney Supp. 1980-1981). 1 The statute [452 U.S. 714, 715] does not provide for criminal penalties, but its violation may cause an establishment to lose its liquor license. </s> Respondents, owners of nightclubs, bars, and restaurants which had for a number of years offered topless dancing, brought a declaratory judgment action in state court, alleging that the statute violates the First Amendment of the United States Constitution insofar as it prohibits all topless dancing in all licensed premises. The New York Supreme Court declared the statute unconstitutional, and the New York Court of Appeals affirmed by a divided vote. 50 N. Y. 2d 524, 407 N. E. 2d 460. It reasoned that topless dancing was a form of protected expression under the First Amendment and that the State had not demonstrated a need for prohibiting "licensees from presenting nonobscene topless dancing performances to willing customers . . . ." Id., at 529, 407 N. E. 2d, at 463. The dissent contended that the statute was well within the State's power, conferred by the Twenty-first Amendment, to regulate the sale of liquor within its boundaries. 2 We agree with the reasoning of the dissent and now reverse the decision of the New York Court of Appeals. </s> This Court has long recognized that a State has absolute power under the Twenty-first Amendment to prohibit totally the sale of liquor within its boundaries. Ziffrin, Inc. v. Reeves, 308 U.S. 132, 138 (1939). It is equally well established that a State has broad power under the Twenty-first Amendment to regulate the times, places, and circumstances under which liquor may be sold. In California v. LaRue, 409 U.S. 109 (1972), we upheld the facial constitutionality of a statute prohibiting acts of "gross sexuality," including the display of the genitals and live or filmed performances of sexual acts, in establishments licensed by the State to serve [452 U.S. 714, 716] liquor. Although we recognized that not all of the prohibited acts would be found obscene and were therefore entitled to some measure of First Amendment protection, we reasoned that the statute was within the State's broad power under the Twenty-first Amendment to regulate the sale of liquor. </s> In Doran v. Salem Inn, Inc., 422 U.S. 922 (1975), we considered a First Amendment challenge to a local ordinance which prohibited females from appearing topless not just in bars, but "any public place." Though we concluded that the District Court had not abused its discretion in granting a preliminary injunction against enforcement of the ordinance, that decision does not limit our holding in LaRue. First, because Doran arose in the context of a preliminary injunction, we limited our standard of review to whether the District Court abused its discretion in concluding that plaintiffs were likely to prevail on the merits of their claim, not whether the ordinance actually violated the First Amendment. Thus, the decision may not be considered a "final judicial decision based on the actual merits of the controversy." University of Texas v. Camenisch, 451 U.S. 390, 396 (1981). Second, the ordinance was far broader than the ordinance involved either in LaRue or here, since it proscribed conduct at "any public place," a term that "`could include the theater, town hall, opera place, as well as a public market place, street or any place of assembly, indoors or outdoors.'" 422 U.S., at 933 (quoting Salem Inn, Inc. v. Frank, 364 F. Supp. 478, 483 (EDNY 1973)). Here, in contrast, the State has not attempted to ban topless dancing in "any public place": As in LaRue, the statute's prohibition applies only to establishments which are licensed by the State to serve liquor. Indeed, we explicitly recognized in Doran that a more narrowly drawn statute would survive judicial scrutiny: </s> "Although the customary `barroom' type of nude dancing may involve only the barest minimum of protected expression, we recognized in California v. LaRue, [452 U.S. 714, 717] 409 U.S. 109, 118 (1972), that this form of entertainment might be entitled to First and Fourteenth Amendment protection under some circumstances. In LaRue, however, we concluded that the broad powers of the States to regulate the sale of liquor, conferred by the Twenty-first Amendment, outweighed any First Amendment interest in nude dancing and that a State could therefore ban such dancing as part of its liquor license control program." 422 U.S., at 932 -933. </s> Judged by the standards announced in LaRue and Doran, the statute at issue here is not unconstitutional. What the New York Legislature has done in this case is precisely what this Court in Doran has said a State may do. Pursuant to its power to regulate the sale of liquor within its boundaries, it has banned topless dancing in establishments granted a license to serve liquor. The State's power to ban the sale of alcoholic beverages entirely includes the lesser power to ban the sale of liquor on premises where topless dancing occurs. </s> Respondents nonetheless insist that LaRue is distinguishable from this case, since the statute there prohibited acts of "gross sexuality" and was well supported by legislative findings demonstrating a need for the rule. They argue that the statute here is unconstitutional as applied to topless dancing because there is no legislative finding that topless dancing poses anywhere near the problem posed by acts of "gross sexuality." But even if explicit legislative findings were required to uphold the constitutionality of this statute as applied to topless dancing, those findings exist in this case. The purposes of the statute have been set forth in an accompanying legislative memorandum, New York State Legislative Annual 150 (1977). </s> "Nudity is the kind of conduct that is a proper subject for legislative action as well as regulation by the State Liquor Authority as a phase of liquor licensing. It has long been held that sexual acts and performances [452 U.S. 714, 718] may constitute disorderly behavior within the meaning of the Alcoholic Beverage Control Law . . . . </s> "Common sense indicates that any form of nudity coupled with alcohol in a public place begets undesirable behavior. This legislation prohibiting nudity in public will once and for all, outlaw conduct which is now quite out of hand." </s> In short, the elected representatives of the State of New York have chosen to avoid the disturbances associated with mixing alcohol and nude dancing by means of a reasonable restriction upon establishments which sell liquor for on-premises consumption. Given the "added presumption in favor of the validity of the state regulation" conferred by the Twenty-first Amendment, California v. LaRue, 409 U.S., at 118 , we cannot agree with the New York Court of Appeals that the statute violates the United States Constitution. Whatever artistic or communicative value may attach to topless dancing is overcome by the State's exercise of its broad powers arising under the Twenty-first Amendment. Although some may quarrel with the wisdom of such legislation and may consider topless dancing a harmless diversion, the Twenty-first Amendment makes that a policy judgment for the state legislature, not the courts. </s> Accordingly, the petition for certiorari is granted, the judgment of the New York Court of Appeals is reversed, and the case is remanded for further proceedings not inconsistent with this opinion. It is so ordered. </s> JUSTICE MARSHALL concurs in the judgment. </s> JUSTICE BRENNAN dissents from the summary disposition and would set the case for oral argument. </s> Footnotes [Footnote 1 The statute provides: </s> "No retail licensee for on premises consumption shall suffer or permit any person to appear on licensed premises in such manner or attire as to expose to view any portion of the public area, anus, vulva or genitals, or any simulation thereof, nor shall suffer or permit any female to appear on licensed premises in such manner or attire as to expose to view any portion of the breast below the top of the areola, or any simulation thereof." </s> [Footnote 2 The Twenty-first Amendment provides in relevant part that "[t]he transportation or importation into any State, Territory, or possession of the United States for delivery or use therein of intoxicating liquors, in violation of the laws thereof, is hereby prohibited." </s> JUSTICE STEVENS, dissenting. </s> Although the Court has written several opinions implying that nude or partially nude dancing is a form of expressive [452 U.S. 714, 719] activity protected by the First Amendment, the Court has never directly confronted the question. 1 Today the Court construes the Twenty-first Amendment as a source of power permitting the State to prohibit such presumably protected activities in establishments which serve liquor. The Court relies on California v. LaRue, 409 U.S. 109 , for that construction of the Twenty-first Amendment. The rationale of today's decision however, is not the same as the explanation the Court gave for its holding in that case. The syllogism supporting today's conclusion includes the premise that the State's Twenty-first Amendment power to ban the sale of alcoholic beverages entirely includes the lesser power to ban the sale of liquor on premises where activity assumed to be protected by the First Amendment occurs. 2 If that reasoning is sound, then a State may ban any protected activity on such premises, no matter how innocuous or, more importantly, how clearly protected. 3 </s> In California v. LaRue, instead of relying on the simplistic reasoning employed by the Court today, the majority analyzed the issue by balancing the State's interests in preventing specifically identified social harms against the minimal interest in protected expression implicated by nude dancing. 4 </s> [452 U.S. 714, 720] The opinion reflected the view that the degree of protection afforded by the First Amendment is a variable, and that the slight interest in free expression implicated by naked and lewd dancing was plainly outweighed by the State's interest - supported by explicit legislative findings - in maintaining order and decency. 5 The Twenty-first Amendment provided the Court with an "added presumption," 409 U.S., at 118 , to tip the scales in the direction of law and order, 6 but the opinion's [452 U.S. 714, 721] evaluation of the conflicting interests would surely have led to the same result without that makeweight. 7 </s> The explicit legislative findings on which the Court heavily relied in LaRue have no counterpart in this case. The 1977 amendment to the New York Alcoholic Beverage Control Law left in place the prohibition against nude dancing that had been in effect for some time. Prior to 1977, topless dancing had been permitted subject to regulation that required the performer to dance on a stage that was inaccessible to patrons. 8 The State has not indicated that the New York Legislature was presented with any evidence to the effect that this regulated form of entertainment had produced any undesirable consequences. A memorandum in the New York State Legislative Annual (1977), see ante, at 717-718, notes that nudity had "long been held" to constitute disorderly behavior within the meaning of the law as it then existed, but that [452 U.S. 714, 722] memorandum sheds no light whatever on the decision to prohibit topless dancing as well as nudity. 9 The New York Court of Appeals stated that this law "was not prompted by hearings or any legislative awareness of deficiencies in the prior regulation permitting topless dancing subject to restrictions and the continued supervision of the State Liquor Authority." 50 N. Y. 2d 524, 530, 407 N. E. 2d 460, 464. </s> I therefore believe that we must assume that the pre-1977 regulation adequately avoided the kind of "gross sexuality" that gave rise to the regulation challenged in LaRue. Although the emphasis on the legislative findings in this Court's opinion in LaRue may have merely disguised the Court's real holding, the Court is quite wrong today when it implies that the factors that supported the holding in LaRue are also present in this case. This case does not involve "gross sexuality" or any legislative explanation for the 1977 change in the law to prohibit topless dancing. </s> Having said this, I must confess that if the question whether a State may prohibit nude or partially nude dancing [452 U.S. 714, 723] in commercial establishments were squarely confronted on its merits, I might well conclude that this is the sort of question that may be resolved by the elected representatives of a community. Sooner or later that issue will be briefed and argued on its own merits. 10 I dissent in this case because I believe the Court should not continue to obscure that issue with irrelevancies such as its mischievous suggestion that the Twenty-first Amendment gives States power to censor free expression in places where liquor is served. 11 Neither the language 12 nor the history of that Amendment provides any [452 U.S. 714, 724] support for that suggestion. 13 Nor does LaRue justify it. 14 Without any aid from the Twenty-first Amendment, the [452 U.S. 714, 725] State's ordinary police powers are adequate to support the prohibition of nuisances in taverns or elsewhere. Cf. Young v. American Mini Theaters, Inc., 427 U.S. 50 . </s> Although I voted to deny certiorari and allow the decision of the highest court of the State of New York to stand, certiorari having been granted, I dissent from the Court's disposition of the case on the basis of a blatantly incorrect reading of the Twenty-first Amendment. </s> [Footnote 1 See Doran v. Salem, Inn., Inc., 422 U.S. 922 ; Southeastern Promotions, Ltd. v. Conrad, 420 U.S. 546, 557 -558; California v. LaRue, 409 U.S. 109, 118 ; Schad v. Mount Ephraim, ante, p. 61. </s> [Footnote 2 "The State's power to ban the sale of alcoholic beverages entirely includes the lesser power to ban the sale of liquor on premises where topless dancing occurs." Ante, at 717. </s> [Footnote 3 Rejecting this reasoning, the New York Court of Appeals noted that "it would be most difficult to sustain a law prohibiting political discussions in places where alcohol is sold by the drink, even though the record may show, conclusively, that political discussions in bars often lead to disorderly behavior, assaults and even homicide." 50 N. Y. 2d 524, 531 n. 7, 407 N. E. 2d 460, 464, n. 7. </s> [Footnote 4 The Court's opinion in LaRue recounted in explicit detail the undesirable consequences - described in evidence adduced at public hearings - [452 U.S. 714, 720] resulting from the performance of lewd or naked dancing and entertainment in bars and cocktail lounges. See 409 U.S., at 111 -112. After emphasizing the State's interests in eliminating those consequences, the Court turned to a discussion of the First Amendment and stated that "as the mode of expression moves from the printed page to the commission of public acts that may themselves violate valid penal statutes, the scope of permissible state regulations significantly increases." Id., at 117. </s> [Footnote 5 In minimizing the First Amendment interests in nude dancing and recognizing the State's interest in regulating such behavior, the Court stated: </s> "The substance of the regulations struck down prohibits licensed bars or nightclubs from displaying, either in the form of movies or live entertainment, `performances' that partake more of gross sexuality than of communication. . . . </s> ". . . [W]e conceive the State's authority in this area to be somewhat broader than did the District Court. This is not to say that all such conduct and performance are without the protection of the First and Fourteenth Amendments. But we would poorly serve both the interest for which the State may validly seek vindication and the interests protected by the First and Fourteenth Amendments were we to insist that the sort of bacchanalian revelries that the Department sought to prevent by these liquor regulations were the constitutional equivalent of a performance by a scantily clad ballet troupe in a theater." Id., at 118. </s> [Footnote 6 The Court recognized that the Twenty-first Amendment confers "something more than the normal state authority over public health, welfare, and morals." Id., at 114. In discussing decisions construing the Twenty-first Amendment, however, the Court noted that "[t]hese decisions did not go so far as to hold or say that the Twenty-first Amendment supersedes all other provisions of the United States Constitution in the area of liquor regulations." Id., at 115. </s> [Footnote 7 In discussing the Twenty-first Amendment, the Court recognized that the States, "vested as they are with general police power, require no specific grant of authority in the Federal Constitution to legislate with respect to matters traditionally within the scope of the police power . . . ." Id., at 114. The Court held that the Department of Alcoholic Beverage Control's "conclusion . . . that certain sexual performances and the dispensation of liquor by the drink ought not to occur at premises that have licenses was not an irrational one. Given the added presumption in favor of the validity of the state regulation in this area that the Twenty-first Amendment requires, we cannot hold that the regulations on their face violate the Federal Constitution." Id., at 118-119. </s> [Footnote 8 The pre-1977 regulation prohibited the licensee from permitting "any female to appear on licensed premises" so as "to expose to view any portion of the breast below the top of the areola" but contained an exception for "any female entertainer performing on a stage or platform which is at least 18 inches above the immediate floor level and which is removed by at least six feet from the nearest patron." See 50 N. Y. 2d, at 526, n. 2, 407 N. E. 2d, at 461-462, n. 2. The 1977 amendment incorporated the general prohibition of topless dancing but did not incorporate the exception. See N. Y. Alco. Bev. Cont. Law 106, subd. 6-a (McKinney Supp. 1980-1981). </s> [Footnote 9 The New York Court of Appeals recognized the difference between nude and topless dancing and emphasized the limited nature of respondents' challenge: </s> "In the case now before us the plaintiffs do not claim a right to offer performances of explicit sexual acts, live or filmed, real or simulated. Nor are we concerned with nude dancing. There is no contention that the plaintiffs should have a right to present their dancers entirely unclothed, and thus they do not challenge that portion of the statute which prohibits nudity. Nor do they contest the statute insofar as it would prohibit women other than dancers from appearing barebreasted on their premises. Similarly the plaintiffs do not contest the State's right to place some restriction on topless dancing performances as the Liquor Authority's regulations have done in the past. Finally, of course, the plaintiffs do not claim that they are exempted from the obscenity laws or that topless dancing should always be allowed no matter how, or where performed. The only question before us is whether the statute is constitutional to the extent that it absolutely prohibits liquor licensees from presenting nonobscene topless dancing performances to willing customers under all circumstances." 50 N. Y. 2d, at 529, 407 N. E. 2d, at 463. </s> [Footnote 10 If topless dancing is entitled to First Amendment protection, it would seem to me that the places where it should most appropriately be conducted are places where alcoholic beverages are served. A holding that a state liquor board may prohibit its licensees from allowing such dancing on their premises may therefore be the practical equivalent of a holding that the activity is not protected by the First Amendment. </s> [Footnote 11 In Hostetter v. Idlewild Liquor Corp., 377 U.S. 324 , the Court recognized the effect of the Twenty-first Amendment on the Commerce Clause but included a reminder that is pertinent here: </s> "Both the Twenty-first Amendment and the Commerce Clause are parts of the same Constitution. Like other provisions of the Constitution, each must be considered in the light of the other, and in the context of the issues and interests at stake in any concrete case." Id., at 332. </s> That admonition is even more important in the context presented by the instant case, inasmuch as the drafters of the Twenty-first Amendment clearly intended the Amendment to have some impact on the Commerce Clause. That conclusion, contrary to the Court's reasoning, is totally unsupported with respect to the First Amendment. </s> [Footnote 12 In California Liquor Dealers Assn. v. Midcal Aluminum, Inc., 445 U.S. 97, 106 -107, the Court rejected a claim that the Twenty-first Amendment prohibited the application of the Sherman Act to California's system of wine pricing and pointed out that in "determining state powers under the Twenty-first Amendment, the Court has focused primarily on the language of the provision . . . ." The difference between the Court's interpretation of the Twenty-first Amendment and its plain language is quite dramatic. The pertinent section of that Amendment provides: </s> "The transportation or importation into any State, Territory, or possession of the United States for delivery or use therein of intoxicating liquors, in violation of the laws thereof, is hereby prohibited." </s> [Footnote 13 In Craig v. Boren, 429 U.S. 190, 206 , the Court stated that "[t]his Court's decisions . . . have confirmed that the Amendment primarily created an exception to the normal operation of the Commerce Clause." The Court then unequivocally rejected the Twenty-first Amendment as a basis for sustaining state liquor regulations that otherwise violated the Equal Protection Clause: </s> "Once passing beyond consideration of the Commerce Clause, the relevance of the Twenty-first Amendment to other constitutional provisions becomes increasingly doubtful. As one commentator has remarked: `Neither the text nor the history of the Twenty-first Amendment suggests that it qualifies individual rights protected by the Bill of Rights and the Fourteenth Amendment where the sale or use of liquor is concerned.' P. Brest, Processes of Constitutional Decisionmaking, Cases and Materials, 258 (1975). Any departures from this historical view have been limited and sporadic." Ibid. </s> Cf. Wisconsin v. Constantineau, 400 U.S. 433 . Surely the First Amendment is entitled to a status equal to the Fourteenth Amendment. </s> [Footnote 14 Ironically, today the Court adopts an argument that the appellant expressly disclaimed during the oral argument in LaRue: </s> "QUESTION: Mr. Porter, in your argument here, is it based at all on the Twenty-First Amendment, dealing with the State authority over regulation of alcoholic beverages? </s> "MR. PORTER: Based to the extent that if we are in the First Amendment area, then as far as balancing the State's interests, we submit that both the traditional power that a State has had over the conditions surrounding the sale of alcoholic beverages and the power given to the States under the Twenty-First Amendment must be considered in balancing the State interests, that these are substantial and important State interests, where we're talking about the conditions surrounding the sale and consumption of alcoholic beverages. </s> "We have never argued, nor would we ever argue, that the Twenty-First Amendment would automatically override the First Amendment, or any other part of the Constitution. We only urge that - </s> "QUESTION: Well, it has been held that the Twenty-First Amendment overrode a great deal of the commerce clause, hasn't it? </s> "MR. PORTER: Well, - </s> "QUESTION: And it does, by its terms. </s> "MR. PORTER: That's correct, but I - </s> "QUESTION: And it has been held that the Twenty-First Amendment [452 U.S. 714, 725] overrode a good deal of the equal protection clause of the Fourteenth Amendment, hasn't it? It was in the Younger case. </s> "MR. PORTER: Yes, but I would submit that - or I would, myself, attempt to temper that somewhat, to the extent I think it shows an overriding State interest in weighing between the commerce clause and the Twenty-First Amendment, where you get up in equal protection, where you get up into the First Amendment or some so-called, alleged, preferred amendments of the Constitution. </s> "As I said, we do not argue that it overrides the First Amendment. If we're dealing in a First Amendment area, that great weight should be given to the State's interest and power under the Twenty-First Amendment, in balancing and weighing, the State interest outweigh[s] the State interest to be protected under the First Amendment." Tr. of Oral Arg. in California v. LaRue, O. T. 1972, No. 71-36, pp. 10-12. </s> [452 U.S. 714, 726]

United States Supreme Court GRANNY GOOSE FOODS, INC. v. TEAMSTERS(1974) No. 72-1566 Argued: January 8, 1974Decided: March 4, 1974 </s> Petitioner employers brought suit in California state court alleging that respondent Union was engaging in a strike in breach of collective-bargaining agreements. The court issued a temporary restraining order on May 18, 1970. Two days later the case was removed to federal court, and on June 4 the District Court denied the Union's motion to dissolve the restraining order. Strike activity then stopped and the labor dispute remained dormant until the Union, after the petitioners had refused to bargain, resumed its strike on November 30, 1970. Two days later the District Court, on petitioners' motion, held the Union in criminal contempt for violating the restraining order. The Court of Appeals reversed on the ground that the order had expired long before November 30, 1970, reasoning that under both state law and Fed. Rule Civ. Proc. 65 (b) the order expired no later than June 7, 1970, 20 days after its issuance, and rejecting petitioners' contention that the life of the order was indefinitely prolonged by 28 U.S.C. 1450 "until dissolved or modified by the district court." Held: </s> 1. Whether state law or Rule 65 (b) is controlling, the restraining order expired long before the date of the alleged contempt, since under the State Code of Civil Procedure a temporary restraining order is returnable no later than 15 days from its date, 20 days if good cause is shown, and must be dissolved unless the party obtaining it proceeds to submit its case for a preliminary injunction, and similarly, under Rule 65 (b), such an order must expire by its own terms within 10 days after entry, 20 days if good cause is shown. Pp. 431-433. [415 U.S. 423, 424] </s> 2. Section 1450 was not intended to give state court injunctions greater effect after removal to federal court than they would have had if the case had remained in state court, and it should be construed in a manner consistent with the time limitations of Rule 65 (b). Pp. 434-440. </s> (a) Once a case has been removed to federal court, federal law, including the Federal Rules of Civil Procedure, controls the future course of proceedings, notwithstanding state court orders issued prior to removal. The underlying purpose of 1450 (to ensure that no lapse in a state court temporary restraining order will occur simply by removing the case to federal court) and the policies reflected in the time limitations of Rule 65 (b) (stringent restrictions on the availability of ex parte restraining orders) can be accommodated by applying the rule that such a state court pre-removal order remains in force after removal no longer than it would have remained in effect under state law, but in no event longer than the Rule 65 (b) time limitations, measured from the date of removal. Pp. 435-440. </s> (b) Accordingly, the order expired by its terms on May 30, 1970, under the 10-day limitation of Rule 65 (b) applied from the date of removal; hence no order was in effect on November 30, 1970, and the Union violated no order when it resumed its strike at that time. P. 440. </s> 3. The District Court's denial of the Union's motion to dissolve the restraining order did not effectively convert the order into a preliminary injunction of unlimited duration. Pp. 440-445. </s> (a) That the Union may have had the opportunity to be heard on the merits of the preliminary injunction when it moved to dissolve the restraining order is not the controlling factor, since under Rule 65 (b) the burden was on petitioners to show that they were entitled to a preliminary injunction, not on the Union to show that they were not. Pp. 442-443. </s> (b) Where a court intends to supplant a temporary restraining order, which under Rule 65 (b) expires by its own terms within 10 days of issuance, with a preliminary injunction of unlimited duration pending a final decision on the merits or further order of the court, it should issue an order clearly saying so, and where it has not done so, a party against whom a temporary restraining order has issued may reasonably assume that the order has expired within Rule 65 (b)'s time limits. Here, since the only orders entered were a temporary restraining order and an order denying a motion to dissolve the temporary order, the Union had [415 U.S. 423, 425] no reason to believe that a preliminary injunction of unlimited duration had been issued. Pp. 443-445. </s> 472 F.2d 764, affirmed. </s> MARSHALL, J., delivered the opinion of the Court, in which DOUGLAS, BRENNAN, WHITE, and BLACKMUN, JJ., joined. REHNQUIST, J., filed an opinion concurring in the judgment, in which BURGER, C. J., and STEWART and POWELL, JJ., joined, post, p. 445. </s> George J. Tichy II argued the cause for petitioners. With him on the briefs was Wesley J. Fastiff. </s> Duane B. Beeson argued the cause for respondent. With him on the brief were Victor J. Van Bourg and Bernard Dunau. </s> MR. JUSTICE MARSHALL delivered the opinion of the Court. </s> This case concerns the interpretation of 28 U.S.C. 1450, 1 which provides in pertinent part: "Whenever any action is removed from a State court to a district court of the United States . . . [a]ll injunctions, orders, and other proceedings had in such action prior to its removal shall remain in full force and effect until dissolved or modified by the district court." The District Court held respondent Union in criminal contempt for [415 U.S. 423, 426] violating a temporary restraining order issued by the California Superior Court on May 18, 1970, prior to the removal of the case from the Superior Court to the District Court. The Court of Appeals reversed, one judge dissenting, on the ground that the temporary restraining order had expired long before November 30, 1970, the date of the alleged contempt. 472 F.2d 764 (CA9 1973). The court reasoned that under both 527 of the California Code of Civil Procedure and Fed. Rule Civ. Proc. 65 (b), the temporary restraining order must have expired no later than June 7, 1970, 20 days after its issuance. The court rejected petitioners' contention that the life of the order was indefinitely prolonged by 1450 "until dissolved or modified by the district court," holding that the purpose of that statute "is to prevent a break in the force of an injunction or a restraining order that could otherwise occur when jurisdiction is being shifted," 472 F.2d, at 767, not to "create a special breed of temporary restraining orders that survive beyond the life span imposed by the state law from which they spring and beyond the life that the district court could have granted them had the orders initiated from the federal court." Id., at 766. </s> As this understanding of the statute was in conflict with decisions of two other Circuits interpreting 1450 to preclude the automatic termination of state court temporary restraining orders, 2 we granted certiorari. 414 U.S. 816 (1973). Finding ourselves in substantial agreement with the analysis of the Ninth Circuit in the present case, we affirm. [415 U.S. 423, 427] </s> I </s> On May 15, 1970, petitioners Granny Goose Foods, Inc., and Sunshine Biscuits, Inc., filed a complaint in the Superior Court of California for the county of Alameda alleging that respondent, a local Teamsters Union, and its officers and agents, were engaging in strike activity in breach of national and local collective-bargaining agreements recently negotiated by multiunion-multiemployer bargaining teams. Although the exact nature of the underlying labor dispute is unclear, its basic contours are as follows: The Union was unwilling to comply with certain changes introduced in the new contracts; it believed it was not legally bound by the new agreements because it had not been a part of the multiunion bargaining units that negotiated the contracts; 3 and it [415 U.S. 423, 428] wanted to negotiate separate contracts with petitioner employers. </s> The same day the complaint was filed; the Superior Court issued a temporary restraining order enjoining all existing strike activity and ordering the defendants to show cause on May 26, 1970, why a preliminary injunction should not issue during the pendency of the suit. An amended complaint adding petitioner Standard Brands, Inc., was filed on May 18, and a modified temporary restraining order was issued that same day adding a prohibition against strike activities directed toward that employer. </s> On May 19, 1970, after having been served with the May 15 restraining order but before the scheduled hearing on the order to show cause, the Union and the individual defendants removed the proceeding to the District Court on the ground that the action arose under 301 of the Labor Management Relations Act, 1947, 61 Stat. 156, 29 U.S.C. 185. 4 On May 20, 1970, an amended removal petition was filed to take into account the modified temporary restraining order of May 18. </s> Simultaneously with the filing of the removal petition, the defendants filed a motion in the District Court to dissolve the temporary restraining order. The sole ground alleged in support of the motion was that the District Court lacked jurisdiction to maintain the restraining order under this Court's decision in Sinclair Refining Co. v. Atkinson, 370 U.S. 195 (1962), where [415 U.S. 423, 429] the Court held that notwithstanding 301's grant of jurisdiction to federal courts over suits between employers and unions for breach of collective-bargaining agreements, 4 of the Norris-La Guardia Act, 47 Stat. 70, 29 U.S.C. 104, barred federal courts from issuing an injunction against a strike allegedly in violation of a collective-bargaining agreement containing a no-strike clause. </s> The employers then filed a motion to remand the case to the Superior Court, alleging that the defendants had waived their right to removal by submitting to the jurisdiction of the state court. The Union's motion to dissolve and the employers' motion to remand came on for a hearing on May 27, 1970. The motion to remand was denied from the bench. With respect to the motion to dissolve, the employers brought to the attention of the District Court our grant of certiorari in Boys Markets v. Retail Clerks Union, 396 U.S. 1000 (1970), which was interpreted as an indication that the Court would re-examine its holding in Sinclair. As Boys Markets had been argued here in April 1970, the District Court refrained from taking any action on the motion to dissolve until it received further guidance from this Court. On June 1, 1970, we handed down our decision in Boys Markets v. Retail Clerks Union, 398 U.S. 235 , overruling Sinclair and holding that a district court could enjoin a strike in breach of a no-strike clause in a collective-bargaining agreement and order arbitration under the agreement. Three days later, on June 4, 1970, the District Court entered a brief order denying the motion to dissolve the state court temporary restraining order, citing Boys Markets. </s> Evidently picketing and strike activity stopped and the labor dispute remained dormant after June 4. The flame was rekindled, however, when on November 9, [415 U.S. 423, 430] 1970, the Union sent the employers telegrams requesting bargaining to arrive at a collective-bargaining agreement and expressing the Union's continued belief that it was not bound by the national and local agreements negotiated by the multiunion-multiemployer groups. The employers answered that there was no need to bargain because, in their view, the Union was bound by the national and local agreements. The conflict remained unresolved, and on November 30, 1970, the Union commenced its strike activity once again. </s> The next day the employers moved the District Court to hold the Union, its agents, and officers in contempt of the modified temporary restraining order issued by the Superior Court on May 18. A hearing was held on the motion the following day. The Union's argument that the temporary restraining order had long since expired was rejected by the District Court on two grounds. First, the court concluded that its earlier action denying the motion to dissolve the temporary restraining order gave the order continuing force and effect. Second, the court found that 1450 itself served to continue the restraining order in effect until affirmatively dissolved or modified by the court. Concluding after the hearing that the Union had willfully violated the restraining order, the District Court held it in criminal contempt and imposed a fine of $200,000. 5 </s> [415 U.S. 423, 431] </s> II </s> Leaving aside for the moment the question whether the order denying the motion to dissolve the temporary restraining order was effectively the grant of a preliminary injunction, it is clear that whether California law or Rule 65 (b) is controlling, the temporary restraining order issued by the Superior Court expired long before the date of the alleged contempt. Section 527 of the California Code of Civil Procedure, 6 under which the [415 U.S. 423, 432] order was issued, provides that temporary restraining orders must be returnable no later than 15 days from the date of the order, 20 days if good cause is shown, and unless the party obtaining the order then proceeds to submit its case for a preliminary injunction, the temporary restraining order must be dissolved. 7 Similarly, [415 U.S. 423, 433] under Rule 65 (b), 8 temporary restraining orders must expire by their own terms within 10 days after entry, 20 days if good cause is shown. [415 U.S. 423, 434] </s> Petitioners argue, however, that notwithstanding the time limitations of state law, 1450 keeps all state court injunctions, including ex parte temporary restraining [415 U.S. 423, 435] orders, in full force and effect after removal until affirmatively dissolved or modified by the district court. To the extent this reading of 1450 is inconsistent with the time limitations of Rule 65 (b), petitioners contend the statute must control. </s> In our view, however, 1450 can and should be interpreted in a manner which fully serves its underlying purposes, yet at the same time places it in harmony with the important congressional policies reflected in the time limitations in Rule 65 (b). </s> At the outset, we can find no basis for petitioners' argument that 1450 was intended to turn ex parte state court temporary restraining orders of limited duration into federal court injunctions of unlimited duration. Section 1450 was simply designed to deal with the unique problem of a shift in jurisdiction in the middle of a case which arises whenever cases are removed from state to federal court. In this respect two basic purposes are served. Judicial economy is promoted by providing that proceedings had in state court shall have force and effect in federal court, so that pleadings filed [415 U.S. 423, 436] in state court, for example, need not be duplicated in federal court. 9 In addition, the statute ensures that interlocutory orders entered by the state court to protect various rights of the parties will not lapse upon removal. Thus attachments, sequestrations, bonds, undertakings, securities, injunctions, and other orders obtained in state court all remain effective after the case is removed to federal court. </s> But while Congress clearly intended to preserve the effectiveness of state court orders after removal, there is no basis for believing that 1450 was designed to give injunctions or other orders greater effect after removal to federal court than they would have had if the case had remained in state court. After removal, the federal court "takes the case up where the State court left it off." Duncan v. Gegan, 101 U.S. 810, 812 (1880). The "full force and effect" provided state court orders after removal of the case to federal court was not intended to be more than the force and effect the orders would have had in state court. 10 </s> [415 U.S. 423, 437] </s> More importantly, once a case has been removed to federal court, it is settled that federal rather than state law governs the future course of proceedings, notwithstanding state court orders issued prior to removal. Section 1450 implies as much by recognizing the district court's authority to dissolve or modify injunctions, orders, and all other proceedings had in state court prior to removal. This Court resolved this issue long ago in Ex parte Fisk, 113 U.S. 713 (1885). There it was argued that an order to take the deposition of a witness issued by the state court prior to removal was binding in federal court and could not be reconsidered by the federal court, notwithstanding its inconsistency with certain federal statutes governing procedure in federal courts. The Court rejected this contention, and said that the predecessor of 1450 </s> "declares orders of the State court, in a case afterwards removed, to be in force until dissolved or modified by the Circuit Court. This fully recognizes the power of the latter court over such orders. And it was not intended to enact that an order made [415 U.S. 423, 438] in the State court, which affected or might affect the mode of trial yet to be had, could change or modify the express directions of an act of Congress on that subject. </s> . . . . . </s> "The petitioner having removed his case into the Circuit Court has a right to have its further progress governed by the law of the latter court, and not by that of the court from which it was removed; and if one of the advantages of this removal was an escape from this examination, he has a right to that benefit if his case was rightfully removed." Id., at 725-726. </s> See also King v. Worthington, 104 U.S. 44 (1881); Freeman v. Bee Machine Co., 319 U.S. 448 (1943). </s> By the same token, respondent Union had a right to the protections of the time limitation in Rule 65 (b) once the case was removed to the District Court. The Federal Rules of Civil Procedure, like other provisions of federal law, govern the mode of proceedings in federal court after removal. See Fed. Rule Civ. Proc. 81 (c). 11 In addition, we may note that although the durational limitations imposed on ex parte restraining orders are now codified in a federal rule, they had their origin in 17 of the Clayton Act of 1914, 38 Stat. 737. As the House Report recommending its enactment emphasized, the durational and other limitations imposed on temporary restraining orders were thought necessary to cure a serious problem of "ill-considered injunctions without notice." 12 The stringent restrictions imposed by 17, [415 U.S. 423, 439] and now by Rule 65, 13 on the availability of ex parte temporary restraining orders reflect the fact that our entire jurisprudence runs counter to the notion of court action taken before reasonable notice and an opportunity to be heard has been granted both sides of a dispute. Ex parte temporary restraining orders are no doubt necessary in certain circumstances, cf. Carroll v. President and Comm'rs of Princess Anne, 393 U.S. 175, 180 (1968), but under federal law they should be restricted to serving their underlying purpose of preserving the status quo and preventing irreparable harm just so long as is necessary to hold a hearing, and no longer. 14 </s> We can find no indication that Congress intended 1450 as an exception to its broader, longstanding policy of restricting the duration of ex parte restraining orders. The underlying purpose of 1450 - ensuring that no lapse in a state court temporary restraining order will occur simply by removing the case to federal court - and the policies reflected in Rule 65 (b) can easily be accommodated by applying the following rule: An ex parte temporary restraining order issued by a state court prior to removal remains in force after removal no longer than it would have remained in effect under state law, but in no event does the order remain in force [415 U.S. 423, 440] longer than the time limitations imposed by Rule 65 (b), measured from the date of removal. 15 </s> Applying our holding to the present case is simple. The temporary restraining order was issued by the Superior Court on May 18, 1970, and would have remained in effect in the state court no longer than 15 days, or until June 2. The case was removed to federal court on May 20, 1970. The temporary restraining order therefore expired on May 30, 1970, applying the 10-day limitation of Rule 65 (b) from the date of removal. Accordingly, no order was in effect on November 30, 1970, and the Union violated no order when it resumed its strike at that time. </s> III </s> We now turn to petitioners' argument that, apart from the operation of 1450, the District Court's denial of the Union's motion to dissolve the temporary restraining order effectively converted the order into a preliminary injunction of unlimited duration. The Court of Appeals rejected this argument out of hand, stating that "[t]he Union's unsuccessful effort to dissolve the order before it died a natural death did not convert the temporary restraining order into a preliminary injunction or estop it from relying on the death certificate." 472 F.2d, at 767. We reach essentially the same conclusion. [415 U.S. 423, 441] </s> As indicated earlier, once a case has been removed to federal court, its course is to be governed by federal law, including the Federal Rules of Civil Procedure. Rule 65 (b) establishes a procedure whereby the party against whom a temporary restraining order has issued can move to dissolve or modify the injunction, upon short notice to the party who obtained the order. Situations may arise where the parties, at the time of the hearing on the motion to dissolve the restraining order, find themselves in a position to present their evidence and legal arguments for or against a preliminary injunction. In such circumstances, of course, the court can proceed with the hearing as if it were a hearing on an application for a preliminary injunction. At such hearing, as in any other hearing in which a preliminary injunction is sought, the party seeking the injunction would bear the burden of demonstrating the various factors justifying preliminary injunctive relief, such as the likelihood of irreparable injury to it if an injunction is denied and its likelihood of success on the merits. 16 </s> On the other hand, situations might arise where the parties are not prepared and do not intend at the hearing on the motion to dissolve or modify the temporary restraining order to present their cases for or against a preliminary injunction. In such circumstances, the appropriate procedure would be for the district court to deal with the issues raised in the motion to dissolve or modify the restraining order, but to postpone for a later hearing, still within the time limitations of Rule 65 (b), the application for a preliminary injunction. See generally C. Wright & A. Miller, Federal Practice & Procedure: Civil 2954, p. 523 (1973 ed.). [415 U.S. 423, 442] </s> In the present case we think it plain that the hearing on the Union's motion to dissolve the restraining order cannot be considered to be a hearing on a preliminary injunction, and that the District Court's order denying the motion to dissolve cannot reasonably be construed as the grant of a preliminary injunction. There is no indication in the record that either party or the District Court itself treated the May 27 hearing as a hearing on an application for a preliminary injunction. The employers made no attempt at that time to present their case for a preliminary injunction. Likewise, the Union made no attempt at that time to present its defense that it was not bound by the new national and local agreements because it had made a timely withdrawal from the multiunion bargaining unit negotiating said contracts. See n. 3, supra. The court itself did not indicate that it was undertaking a hearing on a preliminary injunction. As far as we can tell, it never addressed itself at the hearing to the various equitable factors involved in considering a preliminary injunction, but only considered the employers' argument that the case should be remanded to the state court because the right to remove had been waived by the Union's appearing in the state proceeding and the Union's argument that the temporary restraining order should be dissolved for want of jurisdiction under the Sinclair holding. </s> We cannot accept petitioners' argument that the controlling factor is that the Union had the opportunity to be heard on the merits of the preliminary injunction when it moved in the District Court to dissolve the temporary restraining order. Rule 65 (b) does not place upon the party against whom a temporary restraining order has issued the burden of coming forward and presenting its case against a preliminary injunction. To the contrary, the Rule provides that "[i]n case a temporary [415 U.S. 423, 443] restraining order is granted without notice, the motion for a preliminary injunction shall be set down for hearing at the earliest possible time . . . and when the motion comes on for hearing the party who obtained the temporary restraining order shall proceed with the application for a preliminary injunction and, if he does not do so, the court shall dissolve the temporary restraining order." The burden was on the employers to show that they were entitled to a preliminary injunction, not on the Union to show that they were not. </s> Even were we to assume that the District Court had intended by its June 4 order to grant a preliminary injunction, its intention was not manifested in an appropriate form. Where a hearing on a preliminary injunction has been held after issuance of a temporary restraining order, and where the District Court decides to grant the preliminary injunction, the appropriate procedure is not simply to continue in effect the temporary restraining order, but rather to issue a preliminary injunction, accompanied by the necessary findings of fact and conclusions of law. 17 As stated by the Second Circuit: </s> "The fact that notice is given and a hearing held cannot serve to extend indefinitely beyond the period limited by [Rule 65 (b)] the time during which a temporary restraining order remains effective. The [Rule] contemplates that notice and hearing shall result in an appropriate adjudication, [415 U.S. 423, 444] i. e., the issuance or denial of a preliminary injunction, not in extension of the temporary stay." Pan American World Airways v. Flight Engineers' Assn., 306 F.2d 840, 842 (1962) (footnotes omitted). </s> See also Sims v. Greene, 160 F.2d 512 (CA3 1947). </s> As the fine imposed in this case exemplifies, serious penalties can befall those who are found to be in contempt of court injunctions. Accordingly, one basic principle built into Rule 65 is that those against whom an injunction is issued should receive fair and precisely drawn notice of what the injunction actually prohibits. 18 </s> "The judicial contempt power is a potent weapon. When it is founded upon a decree too vague to be understood, it can be a deadly one. Congress responded to that danger by requiring that a federal court frame its orders so that those who must obey them will know what the court intends to require and what it means to forbid . . . . The most fundamental postulates of our legal order forbid the imposition of a penalty for disobeying a command that defies comprehension." International Longshoremen's Assn. v. Philadelphia Marine Trade Assn., 389 U.S. 64, 76 (1967). </s> It would be inconsistent with this basic principle to countenance procedures whereby parties against whom an injunction is directed are left to guess about its intended duration. Rule 65 (b) provides that temporary restraining orders expire by their own terms within 10 days of their issuance. Where a court intends to supplant such an order with a preliminary [415 U.S. 423, 445] injunction of unlimited duration pending a final decision on the merits or further order of the court, it should issue an order clearly saying so. And where it has not done so, a party against whom a temporary restraining order has issued may reasonably assume that the order has expired within the time limits imposed by Rule 65 (b). Here, since the only orders entered were a temporary restraining order of limited duration and an order denying a motion to dissolve the temporary order, the Union had no reason to believe that a preliminary injunction of unlimited duration had been issued. </s> Since neither 1450 nor the District Court's denial of the Union's motion to dissolve the temporary restraining order effectively converted that order into a preliminary injunction, no order was in effect on November 30, 1970, over six months after the temporary restraining order was issued. 19 There being no order to violate, the District Court erred in holding the Union in contempt, and the judgment of the Court of Appeals reversing the District Court's adjudication of contempt must be </s> Affirmed. </s> Footnotes [Footnote 1 Title 28 U.S.C. 1450: </s> "Whenever any action is removed from a State court to a district court of the United States, any attachment or sequestration of the goods or estate of the defendant in such action in the State court shall hold the goods or estate to answer the final judgment or decree in the same manner as they would have been held to answer final judgment or decree had it been rendered by the State court. </s> "All bonds, undertakings, or security given by either party in such action prior to its removal shall remain valid and effectual notwithstanding such removal. </s> "All injunctions, orders, and other proceedings had in such action prior to its removal shall remain in full force and effect until dissolved or modified by the district court." </s> [Footnote 2 See Appalachian Volunteers, Inc. v. Clark, 432 F.2d 530 (CA6 1970), cert. denied, 401 U.S. 939 (1971); Morning Telegraph v. Powers, 450 F.2d 97 (CA2 1971), cert. denied, 405 U.S. 954 (1972). See also The Herald Co. v. Hopkins, 325 F. Supp. 1232 (NDNY 1971); Peabody Coal Co. v. Barnes, 308 F. Supp. 902 (ED Mo. 1969). </s> [Footnote 3 This dispute was also the subject of a proceeding before the National Labor Relations Board. See Airco Industrial Gases, 195 N. L. R. B. 676 (1972). From the findings of fact in that proceeding, it appears that since 1964 it has been the practice in the trucking industry for representatives of a group of the various Teamsters locals and a group of various trucking employers to negotiate national agreements and supplemental agreements covering local areas. Agreements covering the 1967-1970 period had expired on March 31, 1970. Negotiations between the negotiating committees of the multiunion and multiemployer groups toward a contract for the 1970-1973 period began in January 1970 and continued in February and April. On April 29, the Teamsters negotiating committee approved the national and various supplemental agreements and on April 30, two representatives from each of the Teamsters locals in the multiunion group approved the agreements. Some time thereafter a nationwide referendum vote of all Teamsters members was conducted and it was determined that the employees had ratified the agreements. </s> The Union claimed it was not bound by the new agreements because it had made a timely withdrawal from the multiunion-multiemployer bargaining unit in a letter of January 28, 1970, to various employers, informing them of the Union's intention to negotiate a separate agreement from the national and supplemental [415 U.S. 423, 428] agreement. The Board ultimately determined that the Union's withdrawal was not timely because negotiations had begun on January 7, 1970, prior to the attempted withdrawal. We, of course, express no view on this issue. </s> [Footnote 4 In Avco Corp. v. Aero Lodge No. 735, 390 U.S. 557 (1968), we held that 301 (a) suits initially brought in state courts may be removed to the designated federal forum under the federal-question removal jurisdiction delineated in 28 U.S.C. 1441. </s> [Footnote 5 Three-fourths of the fine was conditioned on the Union's failure to end the strike within 24 hours of the court's order, one-half on failure to end the strike within 48 hours, and one-fourth on failure to end the strike within 72 hours. </s> Although we do not rest our decision on this point, there seems to be much evidence in the record suggesting that even if the restraining order remained in effect and had been violated, the violation was not willful. A finding that the violation was willful obviously presupposes knowledge on the part of the Union that the order was still in effect. Whether or not the order in fact [415 U.S. 423, 431] remained in effect on November 30, the Union evidently believed it had expired. Prior to commencing its strike in November, the Union informed the employers through its attorney that it did "not understand from the file that there is presently in effect any order which forbids Local 70 from bargaining with the employer, or from pressing its position that it has a right to bargain for a separate contract. A motion to dissolve a temporary restraining order against economic action was denied by the federal court, but that temporary restraining order has long since become ineffective by virtue of the statutory limitation on its duration, and there has been no application for a preliminary injunction. </s> "Accordingly, the federal court case is pending, but there are no outstanding orders which affect the assertion by Local 70 of rights which it claims . . . ." App. 67. </s> [Footnote 6 Section 527 (Supp. 1974) provides: </s> "An injunction may be granted at any time before judgment upon a verified complaint, or upon affidavits if the complaint in the one case, or the affidavits in the other, show satisfactorily that sufficient grounds exist therefor. A copy of the complaint or of the affidavits, upon which the injunction was granted, must, if not previously served, be served therewith. </s> "No preliminary injunction shall be granted without notice to the opposite party; nor shall any temporary restraining order be granted without notice to the opposite party, unless it shall appear from facts shown by affidavit or by the verified complaint that great or irreparable injury would result to the applicant before the matter can be heard on notice. In case a temporary restraining order shall be granted without notice, in the contingency above specified, the matter shall be made returnable on an order requiring cause to be shown why the injunction should not be granted, on the earliest day [415 U.S. 423, 432] that the business of the court will admit of, but not later than 15 days or, if good cause appears to the court, 20 days from the date of such order. When the matter first comes up for hearing the party who obtained the temporary restraining order must be ready to proceed and must have served upon the opposite party at least two days prior to such hearing, a copy of the complaint and of all affidavits to be used in such application and a copy of his points and authorities in support of such application; if he be not ready, or if he shall fail to serve a copy of his complaint, affidavits and points and authorities, as herein required, the court shall dissolve the temporary restraining order. The defendant, however, shall be entitled, as of course, to one continuance for a reasonable period, if he desire it, to enable him to meet the application for the preliminary injunction. The defendant may in response to such order to show cause, present affidavits relating to the granting of the preliminary injunction, and if such affidavits are served on the applicant at least two days prior to the hearing, the applicant shall not be entitled to any continuance on account thereof. On the day upon which such order is made returnable, such hearing shall take precedence of all other matters on the calendar of said day, except older matters of the same character, and matters to which special precedence may be given by law. When the cause is at issue it shall be set for trial at the earliest possible date and shall take precedence of all other cases, except older matters of the same character, and matters to which special precedence may be given by law." </s> [Footnote 7 The time limitation of 527 has been strictly construed by the California courts. See, e. g., Smith v. Superior Court, 64 Cal. App. 722, 222 P. 857 (1923); Sharpe v. Brotzman, 145 Cal. App. 2d 354, 302 P.2d 668 (1956); Oksner v. Superior Court, 229 Cal. App. 2d 672, 40 Cal. Rptr. 621 (1964); Agricultural Prorate Comm'n v. Superior Court, 30 Cal. App. 2d 154, 85 P.2d 898 (1938). </s> Petitioners argue that the time limitation of 527 is not applicable here because it is operative only with respect to orders [415 U.S. 423, 433] granted without notice to the adverse party. In the present case, petitioners indicate, telephonic notice was given to the Union's counsel on May 15, the day the employers first sought the restraining order, counsel was served with all documents prior to a hearing arranged that day, and counsel was present in the courtroom and presented argument on behalf of the Union at that hearing. </s> We think it clear from 527, however, that this kind of informal notice and hearing does not convert the temporary restraining order into a preliminary injunction of unlimited duration under state law. Section 527 provides that when a case comes up for a hearing on a preliminary injunction, the party seeking the injunction "must have served upon the opposite party at least two days prior to such hearing, a copy of the complaint and of all affidavits to be used in such application and a copy of his points and authorities in support of such application . . . ." (Emphasis added.) In providing that no preliminary injunction shall be granted without notice to the opposite party, we think the statute thus contemplates notice of at least two days, with a meaningful opportunity to prepare for the hearing, rather than the kind of informal, same-day notice that was given in this case. </s> This interpretation of state law is supported on the facts of this case. Even though the Superior Court held some sort of hearing, with Union counsel attending, before granting the temporary restraining order, the court obviously felt that the hearing was not a sufficient basis for ruling on the preliminary injunction. Accordingly, in the same order granting the temporary restraining order, the court set the case for a hearing on the application for a preliminary injunction within the 15-day limit imposed by 527. </s> In any event, we need not rest our holding on this interpretation of state law, for even if this restraining order could have had unlimited duration under California law, it was subject to the time limitations of Rule 65 (b) after the case was removed to federal court. See infra, at 437-440. Although by its terms Rule 65 (b), like 527, only limits the duration of restraining orders issued without notice, we think it applicable to the order in this case even though informal notice was given. The 1966 Amendments to Rule 65 (b), [415 U.S. 423, 434] requiring the party seeking a temporary restraining order to certify to the court in writing the efforts, if any, which have been made to give either written or oral notice to the adverse party or his attorney, were adopted in recognition of the fact that informal notice and a hastily arranged hearing are to be preferred to no notice or hearing at all. See Advisory Committee's Note, 28 U.S.C. App. 7831. But this informal, same-day notice, desirable though it may be before a restraining order is issued, is no substitute for the more thorough notice requirements which must be satisfied to obtain a preliminary injunction of potentially unlimited duration. The notice required by Rule 65 (a) before a preliminary injunction can issue implies a hearing in which the defendant is given a fair opportunity to oppose the application and to prepare for such opposition. Sims v. Greene, 161 F.2d 87 (CA3 1947). The same-day notice provided in this case before the temporary restraining order was issued does not suffice. See Bailey v. Transportation-Communication Employees Union, 45 F. R. D. 444 (ND Miss. 1968). See also C. Wright & A. Miller, Federal Practice & Procedure: Civil 2949, p. 468 (1973 ed.), reading into Rule 65 (a) a five-day-notice requirement based on Fed. Rule Civ. Proc. 6 (d). </s> [Footnote 8 Rule 65 (b) provides: </s> "(b) Temporary Restraining Order; Notice; Hearing; Duration. </s> "A temporary restraining order may be granted without written or oral notice to the adverse party or his attorney only if (1) it clearly appears from specific facts shown by affidavit or by the verified complaint that immediate and irreparable injury, loss, or damage will result to the applicant before the adverse party or his attorney can be heard in opposition, and (2) the applicant's attorney certifies to the court in writing the efforts, if any, which have been made to give the notice and the reasons supporting his claim that notice should not be required. Every temporary restraining order granted without notice shall be indorsed with the date and hour of issuance; shall be filed forthwith in the clerk's office and entered of record; shall define the injury and state why it is irreparable and why the order was granted without notice; and shall expire by its terms within such time after entry, not to exceed 10 days, as the court fixes, unless within the time so fixed the order, [415 U.S. 423, 435] for good cause shown, is extended for a like period or unless the party against whom the order is directed consents that it may be extended for a longer period. The reasons for the extension shall be entered of record. In case a temporary restraining order is granted without notice, the motion for a preliminary injunction shall be set down for hearing at the earliest possible time and takes precedence of all matters except older matters of the same character; and when the motion comes on for hearing the party who obtained the temporary restraining order shall proceed with the application for a preliminary injunction and, if he does not do so, the court shall dissolve the temporary restraining order. On 2 days' notice to the party who obtained the temporary restraining order without notice or on such shorter notice to that party as the court may prescribe, the adverse party may appear and move its dissolution or modification and in that event the court shall proceed to hear and determine such motion as expeditiously as the ends of justice require." </s> [Footnote 9 See, e. g., Madron v. Thomas, 38 F. R. D. 177 (ED Tenn. 1965); Murphy v. E. I. du Pont de Nemours & Co., 26 F. Supp. 999 (WD Pa. 1939); Borton v. Connecticut Gen. Life Ins. Co., 25 F. Supp. 579 (Neb. 1938). Of course, repleading may be required by the district court in appropriate cases. See, e. g., Foust v. Baltimore & O. R. Co., 91 F. Supp. 817 (SD Ohio 1950); Shell Petroleum Corp. v. Stueve, 25 F. Supp. 879 (Minn. 1938). </s> [Footnote 10 We note that 1450 expressly provides that attachments or sequestrations effected by the state court prior to removal "shall hold the goods or estate to answer the final judgment or decree in the same manner as they would have been held to answer final judgment or decree had it been rendered by the State court." Petitioners argue that since post-removal treatment of an attachment effected in the state court was expressly made dependent on the provisions of state law, while no such express provision was made with respect to injunctions issued by the state court prior to removal, [415 U.S. 423, 437] Congress must have intended that injunction orders not be controlled after removal by the durational limitations of state law. </s> As we view the matter, the express provision in 1450 that state law governs attachments after removal is simply an additional statement of long-settled federal law providing that in all cases in federal court, whether or not removed from state court, state law is incorporated to determine the availability of prejudgment remedies for the seizure of person or property to secure satisfaction of the judgment ultimately entered. See Fed. Rule Civ. Proc. 64. Section 1450 makes it clear that this settled rule of federal law applies to removed cases as well. If anything, therefore, it supports our conclusion that the other procedural requirements of federal law, including the time limitations of Rule 65 (b), must be applied to state court temporary restraining orders after the case has been removed to federal court. See infra, at 437-440. </s> [Footnote 11 See generally Wright & Miller, supra, n. 7, 1024, at 108-110, and cases there cited. </s> [Footnote 12 See H. R. Rep. No. 627, 63d Cong., 2d Sess., 25 (1914). </s> [Footnote 13 Section 17 of the Clayton Act was codified as 28 U.S.C. 381 (1940 ed.), and was repealed by the Judicial Code Revision Act of 1948, 62 Stat. 997, for the stated reason that it was covered by Rule 65. See H. R. Rep. No. 308, 80th Cong., 1st Sess., A236 (1947). </s> [Footnote 14 See, e. g., Pan American World Airways v. Flight Engineers' Assn., 306 F.2d 840 (CA2 1962); Smotherman v. United States, 186 F.2d 676 (CA10 1950); Sims v. Greene, 161 F.2d 87 (CA3 1947). This basic purpose is implicit in Rule 65 (b)'s requirement that after a temporary restraining order is granted without notice, "the motion for a preliminary injunction shall be set down for hearing at the earliest possible time and takes precedence of all matters except older matters of the same character . . . ." </s> [Footnote 15 The following two illustrations should suffice to clarify this holding. Where the state court issues a temporary restraining order of 15 days' duration on Day 1 and the case is removed to federal court on Day 13, the order will expire on Day 15 in federal court just as it would have expired on Day 15 in state court. Where, however, a state court issues a temporary restraining order of 15 days' duration on Day 1 and the case is removed to the federal court on Day 2, the restraining order will expire on Day 12, applying the 10-day time limitation of Rule 65 (b) measured from the date of removal. Of course, in either case, the district court could extend the restraining order for up to an additional 10 days, for good cause shown, under Rule 65 (b). </s> [Footnote 16 See, e. g., Robert W. Stark, Jr., Inc. v. New York Stock Exchange, 466 F.2d 743 (CA2 1972); Crowther v. Seaborg, 415 F.2d 437 (CA10 1969); Garlock, Inc. v. United Seal, Inc., 404 F.2d 256 (CA6 1968). </s> [Footnote 17 Fed. Rule Civ. Proc. 52 (a) provides that "in granting or refusing interlocutory injunctions the court shall . . . set forth the findings of fact and conclusions of law which constitute the grounds of its action." Where a temporary restraining order has been continued beyond the time limits permitted under Rule 65 (b), and where the required findings of fact and conclusions of law have not been set forth, the order is invalid. See, e. g., National Mediation Bd. v. Air Line Pilots Assn., 116 U.S. App. D.C. 300, 323 F.2d 305 (1963); Sims v. Greene, 160 F.2d 512 (CA3 1947). </s> [Footnote 18 Rule 65 (d) provides: </s> "Every order granting an injunction and every restraining order . . . shall be specific in terms; shall describe in reasonable detail, and not by reference to the complaint or other document, the act or acts sought to be restrained . . . ." </s> [Footnote 19 In view of our disposition of the case, we need not and do not reach respondent's argument that notwithstanding Boys Markets v. Retail Clerks Union, 398 U.S. 235 (1970), the temporary restraining order issued in this case should be governed by the 5-day limit of 7 of the Norris-La Guardia Act, 29 U.S.C. 107. </s> MR. JUSTICE REHNQUIST, with whom THE CHIEF JUSTICE, MR. JUSTICE STEWART, and MR. JUSTICE POWELL join, concurring in the judgment. </s> I agree with the Court that the judgment of the Court of Appeals for the Ninth Circuit in this case should be affirmed, since there was no injunctive order in effect at the time that respondent's allegedly contemptuous conduct occurred. But I do not join that portion of the Court's opinion which lays down a "rule" for all cases [415 U.S. 423, 446] involving 28 U.S.C. 1450, 1 the statute which all parties agree is controlling in the case before us. In my view, the announcement of this "rule" is neither necessary to the decision of this case nor consistent with the provisions of the statute itself. </s> The Court persuasively demonstrates in its opinion that the temporary restraining order issued by the California Superior Court had expired by its own terms long before the alleged contempt occurred. And I see nothing in the language or legislative history of 28 U.S.C. 1450, providing that "[a]ll injunctions, orders, and other proceedings had in such action prior to its removal shall remain in full force and effect until dissolved or modified by the district court," which would indefinitely extend the Superior Court's restraining order beyond the time of its normal expiration under state law. Since the temporary restraining order, had the case remained in state court, concededly would have expired in early June, respondent's actions in November and December could not have constituted a contempt of that order. </s> The Court also persuasively demonstrates that none of the proceedings occurring after removal of the case to the United States District Court had the effect of converting the subsisting state court temporary restraining order into a preliminary injunction of indefinite duration. Those proceedings addressed markedly different issues and certainly did not give the state court order a new, independent federal existence. </s> Having said this much, the Court has disposed of the case before it. The opinion then goes on, however, to devise a "rule" that </s> "[a]n ex parte temporary restraining order issued by [415 U.S. 423, 447] a state court prior to removal remains in force after removal no longer than it would have remained in effect under state law, but in no event does the order remain in force longer than the time limitations imposed by Rule 65 (b), measured from the date of removal." Ante, at 439-440. (Footnote omitted.) </s> But the determination that mere removal of a case to a federal district court does not extend the duration of a previously issued state court order past its original termination date makes quite unnecessary to this case any further discussion about time limitations contained in Fed. Rule Civ. Proc. 65 (b). More importantly, the second clause of the "rule" devised by the Court seems quite contrary to the specific language of 28 U.S.C. 1450. </s> The Court apparently bases this latter clause of the "rule" upon the observation that "respondent Union had a right to the protections of the time limitation in Rule 65 (b) once the case was removed to the District Court." While this premise probably has a good deal to recommend it as a matter of practicality or of common sense, the language of the statute gives no hint that rules of practice governing issuance of federal injunctions in the first instance were automatically to be incorporated in applying its terms. The statute says that the state court's temporary restraining order "shall remain in full force and effect until dissolved or modified by the district court." This Court's "rule," however, says that it shall not remain in full force and effect, even though not dissolved or modified by the District Court, if it would have a life beyond the time limitations imposed by Rule 65 (b). </s> I think it likely that the interest in limiting the duration of temporary restraining orders which is exemplified in Rule 65 (b) can be fully protected in cases removed [415 U.S. 423, 448] to the district court by an application to modify or dissolve a state court restraining order which is incompatible with those terms. 2 Such a procedure would be quite consistent with 1450, which specifically contemplates dissolution or modification by the district court upon an appropriate showing, in a way that the "rule" devised by the Court in this case is not. It is unlikely that many orders issued under rules of state procedure, primarily designed, after all, to provide suitable procedures for state courts rather than to frustrate federal procedural rules in removed actions, would by their terms remain in effect for a period of time far longer than that contemplated by the comparable Federal Rule of Civil Procedure. But in the rare case where such a condition obtains, it is surely not asking too much of a litigant in a removed case to comply with 1450 and affirmatively move for appropriate modification of the state order. </s> Therefore, although I cannot subscribe to the rule which the Court fashions to govern cases of this type, I concur in its conclusion that respondent's activity in November and December 1970 did not violate any injunctive order which was in force at that time. 3 </s> [Footnote 1 The relevant provision of 28 U.S.C. 1450 reads: </s> "All injunctions, orders, and other proceedings had in such action prior to its removal shall remain in full force and effect until dissolved or modified by the district court." </s> [Footnote 2 Indeed, respondent's motion to dissolve the state court order because of the prohibitions contained in the Norris-LaGuardia Act, 29 U.S.C. 104, was just such a motion. That motion was denied by the District Court, however, and respondent made no further effort to obtain a modification or dissolution of the state restraining order prior to its expiration. </s> [Footnote 3 I see no occasion for the Court's rather casual speculation, contained in n. 5 of its opinion, that the respondent's violation of the order, even were it effective at the time of its later conduct, may not have been "willful." The Court has concluded that the order was not effective at that later time, and it can serve no useful purpose to speculate about the sufficiency of the evidence with respect to violation of a defunct order. </s> [415 U.S. 423, 449]

United States Supreme Court GOLDEN STATE TRANSIT CORP. v. LOS ANGELES(1986) No. 84-1644 Argued: December 4, 1985Decided: April 1, 1986 </s> While petitioner's application to renew its franchise to operate taxicabs in respondent city of Los Angeles was pending, petitioner's drivers went on strike. The City Council then conditioned renewal of the franchise on settlement of the labor dispute by a certain date. When the dispute was not settled by that date, the franchise expired. Petitioner filed suit in Federal District Court, alleging, inter alia, that the city's action was pre-empted by the National Labor Relations Act (NLRA). The District Court granted summary judgment for the city, and the Court of Appeals affirmed. </s> Held: </s> The city's action in conditioning petitioner's franchise renewal on the settlement of the labor dispute is pre-empted by the NLRA. Pp. 613-620. </s> (a) The NLRA pre-emption principle precluding state and municipal regulation concerning conduct that Congress intended to be unregulated, Machinists v. Wisconsin Employment Relations Comm'n, 427 U.S. 132 , is applicable here. Under this principle, States and municipalities are prohibited from imposing restrictions on economic weapons of self-help, unless such restrictions were contemplated by Congress. Pp. 613-615. </s> (b) Both the language of the NLRA and its legislative history demonstrate that the city's action contravened congressional intent. Pp. 615-619. </s> (c) The settlement condition imposed by the City Council destroyed the balance of power designed by Congress in the NLRA, and frustrated Congress' decision to leave open the use of economic weapons. Pp. 619-620. </s> 754 F.2d 830, reversed and remanded. </s> BLACKMUN, J., delivered the opinion of the Court, in which BURGER, C. J., and BRENNAN, WHITE, MARSHALL, POWELL, STEVENS, and O'CONNOR, JJ., joined. REHNQUIST, J., filed a dissenting opinion, post, p. 620. </s> Zachary D. Fasman argued the cause for petitioner. With him on the briefs was Clifton S. Elgarten. [475 U.S. 608, 609] </s> John F. Haggerty argued the cause and filed a brief for respondent. * </s> [Footnote * Peter G. Nash, Dixie L. Atwater, and Stephen A. Bokat filed a brief for the Chamber of Commerce of the United States as amicus curiae urging reversal. </s> Briefs of amici curiae urging affirmance were filed for the National League of Cities et al. by Rex E. Lee, Benjamin W. Heineman, Jr., Carter G. Phillips, Benna Ruth Solomon, and Joyce Holmes Benjamin; and for the National Institute of Municipal Law Officers by George Agnost, Roy D. Bates, Benjamin L. Brown, J. Lamar Shelley, John W. Witt, and Roger F. Cutler. </s> Briefs of amici curiae were filed for the National Labor Relations Board by Acting Solicitor General Fried, Deputy Solicitor General Wallace, Bruce N. Kuhlik, Norton J. Come, Linda Sher, and Robert C. Bell, Jr.; and for the American Federation of Labor and Congress of Industrial Organizations by David Silberman and Laurence Gold. </s> JUSTICE BLACKMUN delivered the opinion of the Court. </s> The city of Los Angeles, Cal., refused to renew Golden State Transit Corporation's taxicab franchise after the company's drivers went on strike. We are asked to decide whether, under Machinists v. Wisconsin Employment Relations Comm'n, 427 U.S. 132 (1976), the city's action is pre-empted by the National Labor Relations Act (NLRA), 29 U.S.C. 151 et seq. </s> I </s> In 1980, Golden State, which operated taxicabs under the Yellow Cab name, applied to the city for a renewal of its operating franchise eventually scheduled to lapse on March 31, 1981. That franchise had first been acquired in 1977. On September 4, 1980, the city's Board of Transportation Commissioners recommended the renewal of Golden State's franchise - the largest, with approximately 400 cabs, of companies operating in Los Angeles - along with the franchises of 12 other taxi companies. </s> In October, while the franchise renewal application was pending, Golden State's labor contract with its drivers expired. The company and the drivers, represented by Local [475 U.S. 608, 610] 572 of the International Brotherhood of Teamsters, signed a short-term contract in order that operations would continue while negotiation and mediation proceeded. This interim contract was to expire at midnight February 10, 1981, the day before the City Council was scheduled to consider action on the franchise renewals. </s> On February 2, the Council's Transportation and Traffic Committee endorsed franchise renewals recommended by the Board of Transportation Commissioners. The Committee's report stated that Golden State and other companies were "in compliance with all terms and conditions of their franchise[s]." App. 39. </s> On February 11, the drivers struck Golden State, halting its operations. At the Council meeting that day, Teamster representatives argued against renewal of Golden State's franchise because of the pendency of the labor dispute. The Council postponed decision on Golden State's application until February 17, but, with possibly one exception, approved all other franchise renewal applications. At the February 17 meeting, when the union again opposed the renewal, the Council voted to extend Golden State's franchise from March 31 to April 30, but only if the Council expressly found, on or before March 27, that the extension was in the best interests of the city. </s> At its March 23 meeting, the Council held a short public hearing on whether it should grant the limited extension. By this time, the labor dispute and the franchise renewal issue had become clearly intertwined. The Teamsters opposed any extension of the Yellow Cab franchise, stating that such action would simply lengthen the strike and keep the drivers out of work. It preferred to see the franchise terminated, and to have the drivers seek jobs from Golden State's successor or from other franchise holders. As other spoke, the discussion turned to whether there was even a need for Yellow Cab, in light of the services performed by the other 12 franchised taxi companies. There were comments regarding [475 U.S. 608, 611] an excess of cabs; the city's policy at the time, however, was not to limit the number of taxi companies or the number of taxis in each fleet. Id., at 81-82. </s> The strike was central to the discussion. One Council member charged Golden State with negotiating unreasonably, id., at 71, while another accused the company of trying to "brea[k] the back of the union." Id., at 66. The sympathies of the Council members who spoke lay with the union. But rather than defeat the renewal outright, the council reached a consensus for rejection of the extension with a possibility for reopening the issue if the parties settled their labor dispute before the franchise expired the following week. Four Council members endorsed this approach, and the Assistant City Attorney said that he clearly had informed the parties that this was the city's position. Id., at 68. The Council President said: "I find that it will be very difficult to get this ordinance past (sic) to extend this franchise if the labor dispute is not settled by the end of this week." Id., at 75. He added: "I just think that this kind of information should be put out in the open, so everybody understands it." Ibid. The Council, by a vote of 11 to 1, defeated the motion to extend the franchise and it expired by its terms on March 31. </s> II </s> Golden State filed this action in the United States District Court for the Central District of California, alleging that the city's action was pre-empted by the NLRA and violated the company's rights to due process and equal protection. It sought declaratory and injunctive relief and damages. The District Court found that it was "undisputed that the sole basis for refusing to extend [Golden State's] franchise was its labor dispute with its Teamster drivers," 520 F. Supp. 191, 193 (1981); that the Council had "threaten[ed] to allow Yellow Cab's franchise to terminate unless it entered into a collective bargaining agreement with the Teamsters," id., at 194; and that the Council had denied the company an essential weapon [475 U.S. 608, 612] of economic strength - the ability to wait out a strike. On the basis of the pre-emption claim, the District Court granted Golden State's motion for a preliminary injunction to preserve the franchise. Ibid. The Court of Appeals for the Ninth Circuit found "ample evidence" in the record to support the District Court's finding, but nevertheless vacated the injunction. 686 F.2d 758, 759, 762 (1982). The court reasoned that Golden State had little chance of prevailing on its pre-emption claim or on the other grounds it asserted. This Court denied Golden State's petition for certiorari. 459 U.S. 1105 (1983). </s> Following litigation on unrelated issues, 1 and with the company having abandoned its equal protection claim, the District Court granted summary judgment for the city. App. to Pet. for Cert. 11a. Golden State had not moved for summary judgment in its favor. The Court of Appeals affirmed, holding that the city's action was not pre-empted. 754 F.2d 830 (1985). The court felt that, when the activity regulated is only a peripheral or incidental concern of labor policy, traditional municipal regulation is not pre-empted. The court found nothing in the record to suggest that the city's nonrenewal decision "was not concerned with transportation." Id., at 833. Moreover, to avoid undue restriction of local regulation, "only actions seeking to directly alter the substantive outcome of a labor dispute should be pre-empted." Here, the city had not attempted to dictate the terms of the agreement, but had "merely insisted upon resolution of the dispute as a condition to franchise renewal." Ibid. The Court of Appeals also rejected Golden State's due [475 U.S. 608, 613] process claim. Id., at 833-834. 2 Because of our concern about the propriety of the grant of summary judgment for the city in this factual and labor context, we granted certiorari. 472 U.S. 1016 (1985). 3 </s> III </s> A </s> Last Term, in Metropolitan Life Ins. Co. v. Massachusetts, 471 U.S. 724 (1985), we again noted: "The Court has articulated two distinct NLRA pre-emption principles." Id., at 748. See also Belknap, Inc. v. Hale, 463 U.S. 491, 498 -499 (1983). The first, the so-called Garmon pre-emption, see San Diego Building Trades Council v. Garmon, 359 U.S. 236 (1959), prohibits States from regulating "activity that the NLRA protects, prohibits, or arguably protects or prohibits." Wisconsin Dept. of Industry v. Gould Inc., ante, at 286. The Garmon rule is intended to preclude state interference with the National Labor Relations Board's interpretation and active enforcement of the "integrated scheme of regulation" established by the NLRA. [475 U.S. 608, 614] Ante, at 289. See Metropolitan Life Ins. Co. v. Massachusetts, 471 U.S., at 748 , and n. 26. </s> This case, however, concerns the second pre-emption principle, the so-called Machinists pre-emption. 4 See Machinists v. Wisconsin Employment Relations Comm'n, 427 U.S. 132 (1976). This precludes state and municipal regulation "concerning conduct that Congress intended to be unregulated." Metropolitan Life Ins. Co. v. Massachusetts, 471 U.S., at 749 . 5 Although the labor-management relationship is structured by the NLRA, certain areas intentionally have been left "`to be controlled by the free play of economic forces.'" Machinists, 427 U.S., at 140 , quoting NLRB v. Nash-Finch Co., 404 U.S. 138, 144 (1971). The Court recognized in Machinists that "`Congress has been rather specific when it has come to outlaw particular economic weapons,'" 427 U.S., at 143 , quoting NLRB v. Insurance Agents, 361 U.S. 477, 498 (1960), and that Congress' decision to prohibit certain forms of economic pressure while leaving others unregulated represents an intentional balance "`between the uncontrolled power of management and labor to further their respective interests.'" Machinists, 427 U.S., at 146 , quoting Teamsters v. Morton, 377 U.S. 252, 258 -259 (1964). States are therefore prohibited from imposing additional restrictions on economic weapons of self-help, [475 U.S. 608, 615] such as strikes or lockouts, see 427 U.S., at 147 , unless such restrictions presumably were contemplated by Congress. "Whether self-help economic activities are employed by employer or union, the crucial inquiry regarding pre-emption is the same: whether `the exercise of plenary state authority to curtail or entirely prohibit self-help would frustrate effective implementation of the Act's processes.'" Id., at 147-148, quoting Railroad Trainmen v. Jacksonville Terminal Co., 394 U.S. 369, 380 (1969). </s> B </s> There is no question that the Teamsters and Golden State employed permissible economic tactics. The drivers were entitled to strike - and to time the strike to coincide with the Council's decision - in an attempt to apply pressure on Golden State. See NLRB v. Insurance Agents, 361 U.S., at 491 , 496. And Golden State was entirely justified in using its economic power to withstand the strike in an attempt to obtain bargaining concessions from the union. See Belknap, Inc. v. Hale, 463 U.S., at 493 , 500 (employer has power to hire replacements during an economic strike); American Ship Building Co. v. NLRB, 380 U.S. 300, 318 (1965) (at bargaining impasse employer may use lockout solely to bring economic pressure on union). </s> The parties' resort to economic pressure was a legitimate part of their collective-bargaining process. Machinists, 427 U.S., at 144 . But the bargaining process was thwarted when the city in effect imposed a positive durational limit on the exercise of economic self-help. The District Court found that the Council had conditioned the franchise on a settlement of the labor dispute by March 31. We agree with the Court of Appeals that this finding is amply supported by the record. 6 The city's insistence on a settlement is pre-empted [475 U.S. 608, 616] if the city "`[entered] into the substantive aspects of the bargaining process to an extent Congress has not countenanced.'" Machinists, 427 U.S., at 149 , quoting NLRB v. Insurance Agents, 361 U.S., at 498 . </s> That such a condition - by a city or the National Labor Relations Board - contravenes congressional intent is demonstrated by the language of the NLRA and its legislative history. The NLRA requires an employer and a union to bargain in good faith, but it does not require them to reach agreement. 8(d), as amended, 29 U.S.C. 158(d) (duty to bargain in good faith "does not compel either party to agree to a proposal or require the making of a concession"); NLRB v. Jones & Laughlin Steel Corp., 301 U.S. 1, 45 (1937) ("The theory of the Act is that free opportunity for negotiation . . . may bring about the adjustments and agreements which the Act in itself does not attempt to compel"). </s> The Act leaves the bargaining process largely to the parties. See H. K. Porter Co. v. NLRB, 397 U.S. 99, 103 (1970). It does not purport to set any time limits on negotiations or economic struggle. Instead, the Act provides a framework for the negotiations; it "is concerned primarily with establishing an equitable process for determining terms and conditions of employment." Metropolitan Life Ins. Co. v. Massachusetts, 471 U.S., at 753 . See also 1, as amended, of the NLRA, 29 U.S.C. 151 (Act achieves [475 U.S. 608, 617] national policy "by encouraging the practice and procedure of collective bargaining"). </s> The legislative history, too, makes clear that the Act and the National Labor Relations Board were intended to facilitate bargaining between the parties. The Senate Report states: "Disputes about wages, hours of work, and other working conditions should continue to be resolved by the play of competitive forces . . . . This bill in no respect regulates or even provides for supervision of wages or hours, nor does it establish any form of compulsory arbitration." S. Rep. No. 573, 74th Cong., 1st Sess., 2 (1935). Senator Wagner, sponsor of the NLRA, said that the Board would not usurp the role of free collective action. See 79 Cong. Rec. 6184 (1935). See also id., at 7574 (Sen. Wagner affirming that the Act encourages "voluntary settlement of industrial disputes"). </s> Protecting the free use of economic weapons during the course of negotiations was the rationale for this Court's findings of pre-emption in Machinists and in its predecessor, Teamsters v. Morton, 377 U.S. 252 (1964). In some areas of labor relations that the NLRA left unregulated, we have concluded that Congress contemplated state regulation. See Metropolitan Life Ins. Co. v. Massachusetts, 471 U.S., at 754 -758; New York Tel. Co. v. New York Labor Dept., 440 U.S. 519, 540 -544 (1979) (plurality opinion); id., at 547 and 549 (opinions concurring in result and concurring in judgment). Los Angeles, however, has pointed to no evidence of such congressional intent with respect to the conduct at issue in this case. 7 </s> Instead, the city argues that it is somehow immune from labor pre-emption solely because of the nature of its conduct. 8 </s> [475 U.S. 608, 618] The city contends it was not regulating labor, but simply exercising a traditional municipal function in issuing taxicab franchises. We recently rejected a similar argument to the effect that a State's spending decisions are not subject to pre-emption. See Wisconsin Dept. of Industry v. Gould Inc., ante, at 287-288. Cf. Metropolitan Life Ins. Co. v. Massachusetts, 471 U.S., at 754 -758. Similarly, in the transportation area, a State may not ensure uninterrupted service to the public by prohibiting a strike by the unionized employees of a privately owned local transit company. See Bus Employees v. Missouri, 374 U.S. 74 (1963); cf. Bus Employees v. Wisconsin Employment Relations Board, 340 U.S. 383, 391 -392 (1951). Nor in this case may a city restrict a transportation employer's ability to resist a strike. Although in each Bus Employees case the employees' right to strike was protected by 7, as amended, of the NLRA, 29 U.S.C. 157, "`[r]esort to economic weapons should more peaceful measures not avail' is the right of the employer as well as the employee," and "the State may not prohibit the use of such weapons . . . any more than in the case of employees." Machinists v. Wisconsin Employment Relations Comm'n, 427 U.S., at 147 , quoting American Ship Building Co. v. NLRB, 380 U.S., at 317 . "[F]ederal law intended to leave the employer and the union free to use their economic weapons against one another." Belknap, Inc. v. Hale, 463 U.S., at 500 . We hold, therefore, that the city was pre-empted from conditioning Golden State's franchise renewal on the settlement of the labor dispute. [475 U.S. 608, 619] </s> The city, however, contends that it was in a no-win situation: having not renewed the franchise and thus permitting it to lapse, it stands accused of favoring the union; had it granted the renewal, it would have been accused of favoring the employer. But the question is not whether the city's action favors one side or the other. Our holding does not require a city to renew or to refuse to renew any particular franchise. We hold only that a city cannot condition a franchise renewal in a way that intrudes into the collective-bargaining process. </s> C </s> "Free collective bargaining is the cornerstone of the structure of labor-management relations carefully designed by Congress when it enacted the NLRA." New York Tel. Co. v. New York Labor Dept., 440 U.S., at 551 (POWELL, J., dissenting). Even though agreement is sometimes impossible, government may not step in and become a party to the negotiations. See H. K. Porter Co. v. NLRB, 397 U.S., at 103 -104. A local government, as well as the National Labor Relations Board, lacks the authority to "`introduce some standard of properly "balanced" bargaining power' . . . or to define `what economic sanctions might be permitted negotiating parties in an "ideal" or "balanced" state of collective bargaining.'" Machinists v. Wisconsin Employment Relations Comm'n, 427 U.S., at 149 -150, quoting NLRB v. Insurance Agents, 361 U.S. 477, 497 -500 (1960). The settlement condition imposed by the Los Angeles City Council, as we read the summary-judgment record before us, destroyed the balance of power designed by Congress, and frustrated Congress' decision to leave open the use of economic weapons. </s> In this case, the District Court and the Court of Appeals found that the city had conditioned the renewal of Golden State's franchise on the company's reaching a labor agreement with the Teamsters, but held that the city's action was not pre-empted by Machinists. This was error as a matter of law. Whether summary judgment should have been entered [475 U.S. 608, 620] for Golden State is a matter we do not decide, for petitioner made no motion for summary judgment on the issue of pre-emption. </s> The Court of Appeals' judgment affirming the summary judgment entered for the city is reversed, and the case is remanded for further proceedings consistent with this opinion. </s> It is so ordered. </s> Footnotes [Footnote 1 Antitrust claims were asserted in a second amended complaint filed by Golden State. The District Court granted the city partial summary judgment as to these claims, 563 F. Supp. 169 (CD Cal. 1983), and the Court of Appeals affirmed. 726 F.2d 1430 (CA9 1984). We again denied certiorari. 471 U.S. 1003 (1985). </s> [Footnote 2 One judge concurred in the majority's due process analysis but otherwise concurred only in the judgment. As to pre-emption, he would have granted summary judgment for the city on the ground that Golden State had failed to provide evidence of the city's motive or of the economic impact on Golden State. 754 F.2d, at 834. </s> [Footnote 3 The city contends that the case is moot because the franchise, if renewed, would have expired on March 31, 1985. But if petitioner's franchise renewal had been granted in 1981, petitioner would have faced a renewal procedure in 1985 rather than the more onerous task of obtaining a franchise through competitive bidding. See Tr. of Oral Arg. 25-26. But for the nonrenewal in 1981, Golden State would be more likely to have an operating franchise now. At oral argument, counsel for Golden State said the company was ready to resume operations, even though it was in Chapter 11 bankruptcy. Id., at 5. It therefore cannot be said that "[i]ntervening events have . . . `irrevocably eradicated the effects of the alleged violation.'" Los Angeles v. Lyons, 461 U.S. 95, 101 (1983), quoting County of Los Angeles v. Davis, 440 U.S. 625, 631 (1979). We conclude, therefore, that the case is not moot. </s> [Footnote 4 We do not reach the question whether the city's action in this case is pre-empted under Garmon, because Golden State and its supporting amici, including the NLRB, rely exclusively on the Machinists doctrine, and we find their argument persuasive. </s> [Footnote 5 Our pre-emption analysis is not affected by the fact that we are reviewing a city's actions rather than those of a State. See Fisher v. Berkeley, ante, at 265. And the fact that the city acted through franchise procedures rather than a court order or a general law also is irrelevant to our analysis. "[J]udicial concern has necessarily focused on the nature of the activities which the States have sought to regulate, rather than on the method of regulation adopted." San Diego Building Trades Council v. Garmon, 359 U.S. 236, 243 (1959). See Wisconsin Dept. of Industry v. Gould Inc., ante, p. 282. </s> [Footnote 6 The District Court's finding is supported by objective factors such as what the city - through the Council and the Assistant City Attorney - told the parties, and its schedule of Council meetings. At the meeting of March 23, 1981, four Council members without contradiction pointedly [475 U.S. 608, 616] conveyed the settlement condition to the parties as the Council's "bottom line" on the issue. The condition also was announced to the parties by the Council's agent, the Assistant City Attorney, revealing that the condition was city policy. Moreover, the condition was evident from the schedule on which the Council considered the question. Golden State's franchise issue was deferred from February 11 to the 17th, from February 17 to March 23, and from March 23 to the 31st. Only Golden State, among the franchise applicants, was subjected to a conditional 1-month extension of its franchise. The only plausible reason for these repeated short extensions is that the city was giving the franchise holder additional time to comply with a particular requirement. Yet Golden State was in compliance with all the terms of the franchise except the Council's desire for a settlement. </s> [Footnote 7 There is no issue here that, rather than regulating the relationship between the employer and the union, the city's action protected innocent third parties from the employer. See Belknap, Inc. v. Hale, 463 U.S. 491, 500 (1983) (third parties hired as strike replacements based on misrepresentations by the employer had state-law causes of action). </s> [Footnote 8 The Court of Appeals, in holding that the city's action was not pre-empted, reasoned that what the city did involved merely a peripheral concern of federal labor law. The idea that state action may be upheld under such circumstances is part of the Garmon analysis. See Belknap, Inc. v. Hale, 463 U.S., at 498 -499. Because we hold that the city directly interfered with the bargaining process - a central concern of the NLRA - we need not reach the question whether this exception applies to a Machinists case. But see Metropolitan Life Ins. Co. v. Massachusetts, 471 U.S. 724, 754 -758 (1985). </s> JUSTICE REHNQUIST, dissenting. </s> The city of Los Angeles refused to renew Golden State's taxicab franchise unless it settled a labor dispute with its drivers. The Court of Appeals for the Ninth Circuit stated that "[n]othing in the record indicates that the City's refusal to renew or extend Golden State's franchise until an agreement was reached and operations resumed was not concerned with transportation." 754 F.2d 830, 833 (1985). Nonetheless, the Court today holds that "a city cannot condition a franchise renewal in a way that intrudes into the collective-bargaining process." Ante, at 619. The extraordinary breadth of the Court's holding is best illustrated by comparing it to this Court's initial cases involving federal labor pre-emption. </s> In Bethlehem Steel Co. v. New York State Labor Relations Board, 330 U.S. 767 (1947), this Court addressed the permissible scope of state regulation of labor disputes by examining New York's so-called Little Wagner Act, under which foremen were permitted to unionize. The status of foremen under the federal Act had been a matter of dispute at the time that New York asserted its right to supervise the organization of a union of foremen at the Bethlehem Steel Company plant in that State. See id., at 770. The State argued that its labor relations machinery could operate at least until similar benefits for foremen were sought by the union under the federal Act. See id., at 771. This Court held that the federal law pre-empted the state law on this point; both dealt with exactly the same subject matter and [475 U.S. 608, 621] whether or not they were the same or different with respect to the permissibility of organizing foremen made no difference. Id., at 775. If they were the same, the procedures were duplicative. Id., at 776. If they were different, they were potentially antagonistic. Ibid. </s> Six years later, in Garner v. Teamsters, 346 U.S. 485 (1953), the Court was presented with a claim of pre-emption under the Taft-Hartley Act, which imposed regulations and duties on labor correlative to the those imposed on management by the Wagner Act. The case involved unionized drivers who had engaged in conduct clearly prohibited by the Taft-Hartley Act, which might have made them subject to a cease-and-desist order by the National Labor Relations Board. See id., at 486-487. But instead of resorting to the federal agency, the employer successfully sought an injunction against the prohibited picketing from a Pennsylvania state court. See id., at 487. This Court held that state duplication of remedies provided by the National Labor Relations Act was pre-empted even though the state remedy was provided by a court rather than a state labor agency. See id., at 487, 499-501. </s> The opinions in both Bethlehem Steel and Garner observed that Congress had furnished no guidance to the Court as to whether or not state regulation should be pre-empted: </s> "Congress has not seen fit to lay down even the most general of guides to construction of the Act, as it sometimes does, by saying that its regulation either shall or shall not exclude state action." Bethlehem Steel, supra, at 771. </s> "The national Labor Management Relations Act, as we have before pointed out, leaves much to the states, though Congress has refrained from telling us how much." Garner, supra, at 488 (footnote omitted). </s> The Court stated in both that it was forced simply to divine the will of Congress by implication: [475 U.S. 608, 622] </s> "[The] exclusion of state action may be implied from the nature of the legislation and the subject matter although express declaration of such result is wanting." Bethlehem Steel, supra, at 772. </s> "We must spell out from conflicting indications of congressional will the area in which state action is still permissible." Garner, supra, at 488. </s> From the acorns of these two very sensible decisions has grown the mighty oak of this Court's labor pre-emption doctrine, which sweeps ever outward though still totally uninformed by any express directive from Congress. The National Labor Relations Board, organized management, and organized labor have vied with each other in urging the Court to sweep into the maw of labor relations law concerns that would have been regarded as totally peripheral to that body of law by the Congresses which enacted the Wagner Act and the Taft-Hartley Act. </s> Today we are told that a city, not seeking to place its weight on one side or the other of the scales of economic warfare, may not condition the renewal of a taxicab franchise on the settlement of a labor dispute. The settlement of that dispute would have enabled the company to put its taxis back on the streets where the franchise presumably contemplated they would be. The Court says that since the Labor Board may not structure an ideal balance of collective-bargaining weapons, the city may not consider the existence of a labor dispute in deciding whether to renew a franchise. See ante, at 619-620. We are further told that because a State may not legislate to provide uninterrupted service to the public by prohibiting a strike of public utility employees, a city may not act upon its views of sound transportation policy to refuse to renew a taxi franchise unless the franchisee settles a labor dispute and returns its cabs to the purpose for which the franchise exists. See ante, at 617-618. Such sweeping generalizations commend themselves neither to common sense nor to whatever hypothetical "intent of Congress" as can be [475 U.S. 608, 623] discerned in an area so remote from the core concerns of labor-management relations addressed by federal labor law. </s> Federal pre-emption of state law is a matter of congressional intent, presumed or expressed. Because Congress cannot foresee the various ways in which state laws might rub up against the operation of federal statutes, the Court in a multitude of cases has held state regulation pre-empted even when Congress has not expressed any intent to pre-empt because of the danger that the existence of federal and state regulations side by side will interfere with the achievement of the objectives of the federal legislation. The entire body of this Court's labor law pre-emption doctrine has been built on a series of implications as to congressional intent in the face of congressional silence, so that we now have an elaborate pre-emption doctrine traceable not to any expression of Congress, but only to statements by this Court in its previous opinions of what Congress must have intended. </s> The Court today doffs its hat to the legislative history of the Wagner Act and comes up with the following three items: </s> "1. The Senate Report states: `Disputes about wages, hours of work, and other working conditions should continue to be resolved by the play of competitive forces . . . . This bill in no respect regulates or even provides for supervision of wages or hours, nor does it establish any form of compulsory arbitration.' </s> "2. Senator Wagner, sponsor of the NLRA, said that the Board would not usurp the role of free collective action. </s> "3. Senator Wagner affirm[ed] that the Act encourages `voluntary settlement of industrial disputes.'" Ante, at 617 (citations omitted). </s> These three bits of legislative history furnish absolutely no support for the result the Court reaches today. The observations that the Wagner Act leaves it to the parties to resolve their disputes by the play of competitive forces, that the Labor Board would not usurp the role of free collective [475 U.S. 608, 624] action, and that the Act encourages voluntary settlement of industrial disputes, simply do not speak to the question whether a city may condition the renewal of a taxicab franchise on the settlement of a labor dispute. I do not believe that Congress intended the labor law net to be cast this far, and I therefore dissent. </s> [475 U.S. 608, 625]

United States Supreme Court CSX TRANSPORTATION, INC. v. GEORGIA STATE BOARD OF EQUALIZATION ET AL.(2007) No. 06-1287 Argued: November 5, 2007Decided: December 4, 2007 </s> Under Georgia law, most commercial and industrial property is valued locally by county boards for tax purposes, but public utilities such as petitioner railroad (CSX) are initially valued by the State. In 2002, respondent Georgia state board used a different combination of methodologies than it had in 2001 to determine that the market value of CSX's in-state real property had increased 47 percent, resulting in a significantly higher advalorem tax levy. CSX filed suit under the Railroad Revitalization and Regulatory Reform Act of 1976 (4-R Act or Act), which bars States from, inter alia, "[a]ssess[ing] rail transportation property at a value that has a higher ratio to the [property's] true market value ... than the ratio" between the assessed and true market values of other commercial and industrial property in the same taxing jurisdiction, 49 U.S.C. §11501(b)(1), and authorizes the federal district court to enjoin the tax if the railroad ratio exceeds the ratio for other property by at least five percent, §11501(c). CSX alleged that Georgia had grossly overestimated the market value of its in-state rail property while accurately valuing other commercial and industrial property in the State, so that CSX's property was taxed at a ratio of assessed-to-market value considerably more than 5 percent greater than the same ratio for the other in-state property. Ruling that Georgia had not discriminated against CSX in violation of the 4-R Act because the State had used widely accepted valuation methods to arrive at its 2002 estimate of true market value, the District Court declared that the Act does not allow a railroad to challenge a State's chosen methodology if it is rational and not motivated by discriminatory intent. The Eleventh Circuit panel affirmed, reasoning that the Act does not clearly state that railroads may challenge valuation methodologies, and that such a clear statement was required in light of the intrusion on state taxing prerogatives. Held:The 4-R Act allows a railroad to attempt to show that state methods for determining the value of railroad property result in a discriminatory determination of true market value. Pp.5-12. (a)The Act's language is clear. States may not tax railroad property at a ratio of assessed-to-true-market value higher than the ratio for other commercial and industrial property in the same jurisdiction. To apply the Act, district courts must calculate the true market value of in-state railroad property. A court cannot undertake the comparison of ratios the statute requires without that figure at hand, see Burlington Northern R. Co. v. Oklahoma Tax Comm'n, 481 U.S. 454, 461, and the determination of true market value may be affected by the State's choice of valuation methods. Georgia's argument that valuation methodologies must be distinguished from their application, and that the Act allows courts to question only the latter, is rejected. There is no distinction between method and application in the Act's language and no passage limiting district court factfinding as the State proposes. Georgia's position is untenable given the way market value is calculated. Valuation is not a matter of mathematics, but an applied science, even a craft. Most appraisers estimate market value by employing not one methodology but a combination because no one approach is entirely accurate, at least in the absence of an established market for the type of property at issue. The individual methods yield sometimes more, sometimes less reliable results depending on the peculiar features of the property evaluated. Given the extent to which the chosen methods can affect the determination of value, preventing courts from scrutinizing state valuation methodologies would render §11501 a largely empty command, forcing district courts to accept as "true" the market value estimate of the State, one of the parties to the litigation. States, in turn, would be free to employ appraisal techniques that routinely overestimate the market worth of railroad assets. By then levying taxes based on those overestimates, States could implement the very discriminatory taxation Congress sought to eradicate. Courts would be powerless to stop them, and the Act would ultimately guarantee railroads nothing more than mathematically accurate discriminatory taxation. </s> The State's warning that allowing railroads to introduce their own valuation estimates based on different methodologies will inevitably lead to a futile clash of experts, which courts will have no reasonable way to settle, is not compelling, given that Congress was not similarly troubled. Rather, Congress directed courts to find true market value, however elusive, making that value the objective benchmark for courts' evaluation. Property valuation, though admittedly complex, is at bottom just "an issue of fact about possible market prices," Suitum v. Tahoe Regional Planning Agency, 520 U.S. 725, 741, an issue district courts are used to addressing. In light of the statute's directive making true market value a factual question to be determined by the district court, what Georgia really seeks is to limit the types of evidence courts may consider as part of their factual inquiry. Had Congress intended to impose such a limit, it could easily have included language insulating the State's chosen methodologies from judicial scrutiny. It did not. Pp.5-9. </s> (b)The State argues that any interpretation of the Act allowing courts to question state valuation methods ignores the background principles of federalism against which the statute was enacted. Even if important state policy questions are intertwined with the selection of a valuation methodology, however, Congress clearly permitted courts to question such methodologies when it banned discriminatory assessment ratios and made true market value a question to be litigated in federal court. Department of Revenue of Ore. v. ACF Industries, Inc., 510 U.S. 332, 343-344, distinguished. The Court also disagrees with Georgia's claim that the Court's interpretation will destroy the States' discretion to choose their own valuation methodologies. A State may use whatever method it likes, so long as the result is not discriminatory in violation of the Act. Pp.9-12. 472 F.3d 1281, reversed. Roberts, C.J., delivered the opinion for a unanimous Court. </s> CSX TRANSPORTATION, INC., PETITIONER v.GEORGIA STATE BOARD OFEQUALIZATION etal. on writ of certiorari to the united states court of appeals for the eleventh circuit [December 4, 2007] </s> Chief Justice Roberts delivered the opinion of the Court. </s> The Railroad Revitalization and Regulatory Reform Act prohibits States from discriminating against railroads by taxing railroad property more heavily than other commercial property in the State. Two decades ago, we held that this statute permits an aggrieved railroad to challenge a State's valuation of its property for tax purposes. Burlington Northern R.Co. v. Oklahoma Tax Comm'n, 481 U.S. 454, 462 (1987). Because the railroad in that case challenged only the State's application of its valuation methods, we expressly reserved the question whether a railroad may challenge the State's methods themselves. We answer that question today, and hold that railroads may challenge state methods for determining the value of railroad property, as well as how those methods are applied. The statute provides for nothing less. I </s> Congress enacted the Railroad Revitalization and Regulatory Reform Act in 1976. 90 Stat. 31.1 Called the "4-R Act" for brevity, the law aimed to halt the economic decline of the rail industry by, among other means, barring "discriminatory state taxation of railroad property." Burlington Northern, supra, at 457; see also Department of Revenue of Ore. v. ACF Industries, Inc., 510 U.S. 332, 336 (1994). The 4-R Act prohibits four separate forms of discriminatory state taxation of railroads.2 Only the first is at issue here: States, the Act provides, may not "[a]ssess rail transportation property at a value that has a higher ratio to the [property's] true market value . . . than the ratio" between the assessed and true market values of other commercial and industrial property in the same taxing jurisdiction. 49 U.S.C. §11501(b)(1). If the railroad ratio exceeds the ratio for other property by at least five percent, the district court may enjoin the tax. §11501(c).3 Petitioner CSX Transportation, Inc., is a freight rail carrier with multiple routes across the State of Georgia. As a consequence, it is subject to Georgia's ad valorem tax on real property. Under Georgia law, most commercial and industrial property is valued locally by county boards. Public utilities such as railroads, however, are initially valued by the State, which then certifies the proposed valuations to the county boards for adoption or alteration. In 2001, Georgia's State Board of Equalization, a respondent here, put CSX's ad valorem tax liability at $4.6 million. A year later, the State's appraiser used a different combination of methodologies to determine the market value of CSX's in-state property.4 The result was a significantly higher tax levy. The State estimated the railroad's 2002 market value at approximately $7.8 billion, 472 F.3d 1281, 1285 (CA11 2006), a 47 percent increase over the previous year. That brought the assessed value of CSX's Georgia property to $514.9 million, for a final property tax bill of $6.5 million. Brief for Petitioner 15. </s> CSX filed suit in the United States District Court for the Northern District of Georgia, contending that the State's 2002 tax assessment violated the 4-R Act. The railroad alleged that Georgia had grossly overestimated the market value of its in-state property while accurately valuing other commercial and industrial property in the State. The result, according to CSX, was that its rail property was taxed at a ratio of assessed-to-market value considerably more than 5 percent greater than the same ratio for the other property in the State. </s> To make its case, CSX submitted the testimony of its own expert appraiser, who relied on a combination of valuation methods different from those used by the appraiser for Georgia. The CSX appraiser calculated the 2002 market value of the railroad's property to be $6 billion, not the $7.8 billion figure used by the State. 472 F.3d, at 1285-1286. CSX maintained that the state appraiser's valuation methodologies were flawed, and urged the District Court to accept the market value estimated by its expert as more accurate. </s> The District Court refused to do so. Following a bench trial, the court ruled Georgia had not discriminated against CSX in violation of the 4-R Act because the State had used widely accepted valuation methods to arrive at its estimate of true market value. 448 F.Supp. 2d 1330, 1341 (ND Ga. 2005). In the judgment of the District Court, the Act "does not generally allow a railroad to challenge the state's chosen methodology," as long as the State's methods are rational and not motivated by discriminatory intent. Ibid. </s> A divided panel of the Court of Appeals for the Eleventh Circuit affirmed. 472 F.3d 1281 (2006). The majority reasoned that the "text of the Act does not clearly state that railroads may challenge valuation methodologies," and that such a clear statement was required in light of the intrusion on state taxing prerogatives. Id., at 1289. Judge Fay dissented. Id., at 1292. Recognizing the division on this question among the Circuits, compare Consolidated Rail Corp. v. Hyde Park, 47 F. 3d 473, 481-482 (CA2 1995) (a railroad may challenge a State's valuation methodology), and Burlington Northern R.Co. v. Department of Revenue of Wash., 23 F. 3d 239, 240-241 (CA9 1994) (same), with Chesapeake Western Ry. v. Forst, 938 F. 2d 528, 531 (CA4 1991) (a railroad may not challenge a State's valuation methodology), and 472 F.3d, at 1289 (decision below), we granted certiorari, 550 U.S. ___ (2007), and now reverse. II </s> "[T]he language of §1150[1] plainly declares the congressional purpose." Burlington Northern, 481 U.S., at 461. States may not tax railroad property at a ratio of assessed-to-true-market value higher than the ratio for other commercial and industrial property in the same jurisdiction. In order to apply the Act, district courts must calculate the true market value of in-state railroad property. A court cannot undertake the comparison of ratios the statute requires without that figure at hand. We said as much in Burlington Northern: "It is clear from [the Act's] language that in order to compare the actual assessment ratios, it is necessary to determine what the 'true market values' are." Ibid. We do not see how a court can go about determining true market value if it may not look behind the State's choice of valuation methods. Georgia insists there is a clear and important distinction between valuation methodologies and their application. As the State would have it, the statute allows courts to question only the latter. We find no distinction between method and application in the language of the Act, and see no passage limiting district court factfinding in the manner the State proposes. The total lack of textual support for Georgia's position is not surprising. The dichotomy the State presses would eviscerate the statute by forcing courts to defer to the valuation estimate of the State, when discriminatory taxation by States was the very evil the Act aimed to ban. </s> Georgia's position is untenable given the way market value is calculated. Valuation is not a matter of mathematics, as if the district court could prevent discriminatory taxation simply by doublechecking the State's assessment equations. Rather, the calculation of true market value is an applied science, even a craft. Most appraisers estimate market value by employing not one methodology but a combination. These various methods generate a range of possible market values which the appraiser uses to derive what he considers to be an accurate estimate of market value, based on careful scrutiny of all the data available. Appraisal Institute, The Appraisal of Real Estate 49 (12th ed. 2001). </s> Georgia's appraiser in the instant case, for example, used three different valuation techniques--the discounted cashflow approach, a market multiple approach, and a stock and debt approach. He derived five values from these three methods, ranging from $8.126 billion to $12.346 billion. After selecting a number at the low end of the range and then subtracting another $400 million to account for intangible property not subject to ad valorem taxation, he settled on $7.8 billion as his final estimate of the true market value. 472 F.3d, at 1284-1285. </s> Appraisers typically employ a combination of methods because no one approach is entirely accurate, at least in the absence of an established market for the type of property at issue. The individual methods yield sometimes more, sometimes less reliable results depending on the peculiar features of the property evaluated. As the variation in the state appraiser's market-value range reveals, different methods can produce substantially different estimates. W. Kinnard, Income Property Valuation: Principles and Techniques of Appraising Income-Producing Real Estate 52 (1971). </s> Given the extent to which the chosen methods can affect the determination of value, preventing courts from scrutinizing state valuation methodologies would render §11501 a largely empty command. It would force district courts to accept as "true" the market value estimated by the State, one of the parties to the litigation. States, in turn, would be free to employ appraisal techniques that routinely overestimate the market worth of railroad assets. By then levying taxes based on those overestimates, States could implement the very discriminatory taxation Congress sought to eradicate. On Georgia's reading of the statute, courts would be powerless to stop them, and the Act would ultimately guarantee railroads nothing more than mathematically accurate discriminatory taxation. We do not find this interpretation compelling. Instead, we agree with Judge Fay in dissent below: "Since the objective of any methodology is a determination of true market value, a railroad should be allowed to challenge the method[s] used [by the State] in an attempt to prove that the result ... was not the true market value of its property." 472 F.3d, at 1294. </s> The State agrees that it may not be possible to fix true market value with any precision. But it draws a different conclusion from this premise. Because any number of estimates are plausible, Georgia argues, the court is as likely to get an accurate result by verifying the application of the State's methods--so long as they are broadly reasonable--as it is by employing another method altogether. The State warns that allowing railroads to introduce their own valuation estimates based on different methodologies will inevitably lead to a futile clash of experts, which courts will have no reasonable way to settle. At least one of the Courts of Appeals shares this concern. See Chesapeake Western, 938 F.2d, at 532 ("There is no absolute way to test the assertions of competing valuations . . ." (internal quotation marks and brackets omitted)). </s> Congress was not similarly troubled. It directed courts to find true market value, however elusive. It made that value the objective benchmark for courts' evaluation of state taxes on railroad property. True market value may well not be a single, precise number, but Congress obviously believed it was susceptible to judicial inquiry and that some approximations were better than others. </s> Georgia's grim prophecies notwithstanding, the inquiry the statute mandates is not unfamiliar to courts. Valuation of property, though admittedly complex, is at bottom just "an issue of fact about possible market prices," Suitum v. Tahoe Regional Planning Agency, 520 U.S. 725, 741 (1997), an issue district courts are used to addressing. Railroad property is not frequently sold, but "determinations of market value are routinely made in judicial proceedings without the benefit of a market transaction." Id., at 742. The District Court in this case made clear that it knew how to find true market value: "In a more typical case, the court would look at both [the railroad expert's] appraisal and [the State's] appraisal to determine the true market value of [the railroad]." 448 F.Supp. 2d, at 1338, n.8. It refused to do so not because true market value is inherently elusive, but because it believed the Act did not allow it to question the State's methods. </s> In light of the statute's directive making true market value a factual question to be determined by the district court, what Georgia is really asking for is a limitation on the types of evidence courts may consider as part of their factual inquiry. If Congress had wanted to impose such a limit by reserving to States the prerogative of selecting which valuation methods may be used, it surely could have done so. Out of deference to the States, for example, §11501(c) provides that "[t]he burden of proof in determining . . . true market value [shall be] governed by State law." Congress could easily have included similar language insulating the State's chosen methodologies from judicial scrutiny. It did not. Like Oklahoma's argument in Burlington Northern, Georgia's position in this case ultimately "depends upon the addition of words to a statutory provision which is complete as it stands." 481 U.S., at 463. We decline to find distinctions in the statute where they do not exist, especially where, as here, those distinctions would thwart the law's operation. III </s> Considering the clarity of the statute, we are tempted to leave the discussion at that. "When we find the terms of a statue unambiguous, judicial inquiry is complete . . . ." Rubin v. United States, 449 U.S. 424, 430 (1981). Georgia, however, lodges two objections to our interpretation, each of which merits a reply. First, the State argues that any interpretation of the Act allowing courts to question state valuation methods ignores the background principles of federalism against which the statute was enacted. The majority below expressed a similar concern. "The selection of a valuation methodology," it ruled, "is part of th[e] fundamental power of a state [to tax]," 472 F.3d, at 1288, and should not be limited absent a clear statement from Congress. We have long held that the means States adopt to collect their taxes "should be interfered with as little as possible." Dows v. Chicago, 11 Wall. 108, 110 (1871). But we are persuaded that allowing railroads to challenge a State's valuation methodologies has been clearly authorized by the terms of the 4-R Act. As an initial matter, we question Georgia's contention that its selection of valuation methodologies is an important state policy choice intimately connected to its tax power. Georgia does not prescribe any particular methodology as a matter of state law. Its appraisers use different methodologies in different combinations, as they see fit. See 472 F.3d, at 1284-1285 (explaining that the state appraiser employed multiple methods and selected a value according to his best judgment). This suit, in fact, is the result of an individual appraiser's decision to employ a different combination of assessment techniques than that used by his immediate predecessors. The methods he selected were his choice, not the dictate of any state statute or regulation. Ibid. </s> But even if important questions of state policy are, as the Eleventh Circuit believed, "intertwined with the selection of a valuation methodology," id., at 1288, judicial scrutiny of those methodologies is authorized by the 4-R Act's clear command to find true market value. As we explained above, the power to calculate true market value necessarily includes the power to look behind a State's valuation methods. That the statute should vest this authority in the Nation's courts is hardly surprising, given Congress's conclusion that the States were assessing railroad property unfairly. </s> Our decision in Department of Revenue of Ore. v. ACF Industries, Inc., 510 U.S. 332 (1994), is not to the contrary. That case concerned a different provision of the 4-R Act--namely, the command in §11501(b)(4) preventing a State from "[i]mpos[ing] another tax that discriminates against a rail carrier providing transportation" in the taxing jurisdiction. This bar on facially discriminatory taxes, we held, did not prevent a State from exempting certain nonrailroad property from otherwise generally applicable ad valorem taxes. ACF Industries, 510 U.S., at 343. At the time the 4-R Act was adopted, a majority of States exempted one or more classes of business property from ad valorem taxation, "including business inventories, raw materials used in textile manufacturing, . . . and mechanics tools," to name just a few. Id., at 344. The States had provided such property tax exemptions for years. In the face of this widespread and historical practice, we declined to read the 4-R Act to prohibit a type of tax exemption the text did not expressly mention. Ibid. </s> By contrast, we pointedly noted that the Act "prohibit[s] discriminatory tax rates and assessment ratios in no uncertain terms . . . and set[s] forth precise standards for judicial scrutiny of challenged rate and assessment practices." Id., at 343. Georgia's claim that court review of state valuation methodologies is not authorized by a clear statement in the Act ignores the statute's explicit prohibition of discriminatory assessment ratios. A district court cannot accurately calculate or compare those ratios without determining true market value. Congress clearly permitted courts to question state valuation methodologies when it banned discriminatory assessment ratios and made true market value a question to be litigated in federal court. </s> Georgia also protests that our interpretation will destroy the States' discretion to choose their own valuation methodologies. We disagree. A State may use whatever method or methods it likes, so long as the result is not discriminatory. The Act does not prohibit the use of any valuation methodology. It prohibits discrimination. Far from requiring States to follow a particular method, we hold only that nothing in the statute prevents a railroad from attempting to show that the methods chosen by the State result in a discriminatory determination of true market value. </s> The judgment of the Court of Appeals for the Eleventh Circuit is reversed. It is so ordered. </s> FOOTNOTESFootnote 1The portion of the Act that concerns us here, Section 306, was originally codified at 49 U.S.C. §26c (1976 ed.). In 1978, Congress recodified it at 49 U.S.C. §11503 (1976 ed., Supp. II). Congress recodified it again in 1995, without substantive change, this time as §11501. For convenience, all references to the statute are to the text of §11501. Footnote 2Section 11501 reads, in relevant part: </s> "(b) The following acts unreasonably burden and discriminate against interstate commerce, and a State, subdivision of a State, or authority acting for a State or subdivision of a State may not do any of them: </s> "(1) Assess rail transportation property at a value that has a higher ratio to the true market value of the rail transportation property than the ratio that the assessed value of other commercial and industrial property in the same assessment jurisdiction has to the true market value of the other commercial and industrial property. </s> "(2) Levy or collect a tax on an assessment that may not be made under paragraph (1) of this subsection. </s> "(3) Levy or collect an advalorem property tax on rail transportation property at a tax rate that exceeds the tax rate applicable to commercial and industrial property in the same assessment jurisdiction. </s> "(4) Impose another tax that discriminates against a rail carrier providing transportation subject to the jurisdiction of the Board under this part." Footnote 3Section 11501(c) provides: </s> "Notwithstanding section 1341 of title 28 and without regard to the amount in controversy or citizenship of the parties, a district court of the United States has jurisdiction, concurrent with other jurisdiction of courts of the United States and the States, to prevent a violation of subsection (b) of this section. Relief may be granted under this subsection only if the ratio of assessed value to true market value of rail transportation property exceeds by at least 5 percent the ratio of assessed value to true market value of other commercial and industrial property in the same assessment jurisdiction. The burden of proof in determining assessed value and true market value is governed by State law. If the ratio of the assessed value of other commercial and industrial property in the assessment jurisdiction to the true market value of all other commercial and industrial property cannot be determined to the satisfaction of the district court through the random-sampling method known as a sales assessment ratio study (to be carried out under statistical principles applicable to such a study), the court shall find, as a violation of this section-- </s> "(1) an assessment of the rail transportation property at a value that has a higher ratio to the true market value of the rail transportation property than the assessed value of all other property subject to a property tax levy in the assessment jurisdiction has to the true market value of all other commercial and industrial property; and </s> "(2) the collection of an advalorem property tax on the rail transportation property at a tax rate that exceeds the tax ratio rate applicable to taxable property in the taxing district." Footnote 4Georgia assesses public utilities using the "unit rule." Under this rule, "an appraiser first determines the value of all assets of an entity, regardless of location," then multiplies "by the percentage of the entity located within [the State] to determine what portion of the value of the company should be allocated to the state." 472 F.3d 1281, 1283 (CA11 2006). The parties agree the unit rule is the appropriate rule for valuing CSX's property. There are, however, numerous methods available to value property under the unit rule, and many of these methods themselves have multiple variations. See id., at 1284.

United States Supreme Court MINE WORKERS v. ARKANSAS FLOORING CO.(1956) No. 227 Argued: January 23, 1956Decided: April 23, 1956 </s> In the case of an employer subject to the National Labor Relations Act, as amended, a state court may not enjoin peaceful picketing of the employer's premises, undertaken by its employees and their union for the purpose of obtaining recognition of the union as the employees' bargaining representative, when the union holds cards authorizing such representation concededly signed by a majority of the employees eligible to be represented - even though the union has not filed with the Secretary of Labor any of the financial or organizational data described in 9 (f) and (g) of the Act, nor with the National Labor Relations Board any of the non-Communist affidavits described in 9 (h) of the Act. Pp. 63-76. </s> (a) By its noncompliance with 9 (f), (g) and (h), a union makes itself ineligible for certain advantages and services offered by the Act; but it does not exempt itself from other applicable provisions of the Act. Pp. 69-70. </s> (b) Section 8 (a) (5) declares it to be an unfair labor practice for an employer "to refuse to bargain collectively with the representatives of his employees, subject to the provisions of" 9 (a); but the latter section does not make it a condition that the representative shall have complied with 9 (f), (g) or (h), or shall be certified by the Board, or even be eligible for such certification. Pp. 70-72. </s> (c) Likewise, 7, which deals with the employees' rights to self-organization and representation, makes no reference to any need that the employees' chosen representative must have complied with 9 (f), (g) or (h). Pp. 72-73. </s> (d) Subsections (f), (g) and (h) of 9 merely describe certain advantages that may be gained by compliance with their conditions, and the express provision for the loss of these advantages implies that no other consequences shall result from noncompliance. P. 73. </s> (e) In this case, noncompliance of the union with 9 (f), (g) and (h) precludes any right of the union to seek certification of its status [351 U.S. 62, 63] by the Board; but the employer, employees and union are controlled by the applicable provisions of the Act, and all courts, state and federal, are bound by them. Pp. 73-74. </s> (f) Under 7 and 9 (a), and by virtue of the conceded majority designation of the union, the employer is obligated to recognize the union, and the union can take lawful action, such as striking and peaceful picketing, to induce the employer to do so. Pp. 74-75. </s> (g) That being so, the State cannot enjoin the peaceful picketing here practiced. P. 75. </s> 227 La. 1109, 81 So.2d 413, reversed and remanded. </s> Crampton Harris argued the cause for petitioners. With him on the brief were James I. McCain, Yelverton Cowherd and Alfred D. Treherne. </s> John L. Pitts argued the cause for respondent. With him on the brief were Grove Stafford and Richard C. Keenan. </s> Solicitor General Sobeloff, Theophil C. Kammholz, David P. Findling, Dominick L. Manoli and Norton J. Come filed a brief for the National Labor Relations Board, as amicus curiae, urging reversal. </s> MR. JUSTICE BURTON delivered the opinion of the Court. </s> The question before us is whether, in the case of an employer subject to the National Labor Relations Act, as amended, a state court may enjoin peaceful picketing of the employer's premises, undertaken by its employees and their union for the purpose of obtaining recognition of that union as the employees' bargaining representative, when the union holds cards authorizing such representation concededly signed by a majority of the employees eligible to be represented, but has filed none of the data or affidavits described in 9 (f), (g) and (h) of that [351 U.S. 62, 64] Act, as amended. 1 For the reasons hereafter stated, our answer is in the negative. </s> In 1953, the respondent, Arkansas Oak Flooring Company, a Delaware corporation with its main office in Pine [351 U.S. 62, 65] Bluff, Arkansas, owned and operated a sawmill and flooring plant in Alexandria, Louisiana. The company was there engaged in interstate commerce and subject to the National Labor Relations Act, as amended. At the same [351 U.S. 62, 66] time, District 50, United Mine Workers of America, here called the "union," was an unincorporated labor organization which undertook to organize the company's eligible employees at its Alexandria plant. The union, however, did not file with the Secretary of Labor any of the financial or organizational data described in 9 (f) and (g) of the National Labor Relations Act, as amended, nor, with the National Labor Relations Board, any of the non-Communist affidavits described in 9 (h) of that Act. It contended that the company, nevertheless, should recognize it as the collective-bargaining representative of the Alexandria plant employees because it was authorized by more than a majority of such employees to represent them. </s> Although for four years there had been no labor organization representing the plant employees, this union, by February 24, 1954, held applications for membership from 174 of the 225 eligible employees. Such applicants had elected officers and stewards and had authorized the union organizer to request the company to recognize the union as their collective-bargaining representative. On February 24, the organizer, accordingly, presented that request to the assistant superintendent of the plant. The latter, in the absence of any higher officer of the company, replied that the union was not recognized either by the National Labor Relations Board or by him, and that, if negotiations were desired, the union organizer should call the company's office at Pine Bluff. [351 U.S. 62, 67] </s> On March 1, the petitioning employees struck for recognition of the union and set up a peaceful picket line of three employees. Two were placed in front of the plant and one at the side. They carried signs stating "This Plant is on Strike" or "We want Recognition, District 50 UMWA." </s> On March 2, respondent sought a restraining order and injunction in the Ninth Judicial District for the Parish of Rapides, Louisiana. That court promptly issued an order restraining the above-described picketing by 11 named employees, the union and its organizer. The order was obeyed but the strike continued. On March 12 and 15, evidence was introduced, including, by that date, 179 applications for membership in the union, each of which authorized the union to represent the signer in negotiations and in the making of agreements as to wages, hours and conditions of work. The parties to the proceeding stipulated that each of those applications was signed by an employee of respondent. In the face of that record, the court nevertheless converted its restraining order into a temporary injunction and the defendants, who are the petitioners herein, appealed to the Supreme Court of Louisiana. While that appeal was pending, the trial court, on the same record, made its injunction permanent. Petitioners appealed that decision to the Supreme Court of Louisiana and the two appeals were consolidated. There the permanent injunction was sustained, one judge concurring specially and another dissenting, in part, on an issue not material here. 227 La. 1109, 81 So.2d 413. </s> The State Supreme Court's ground for sustaining the injunction was that the union, which sought to be recognized, had failed to file with the Secretary of Labor the financial and other data required by 9 (f) and (g), and had failed to file with the Labor Board the non-Communist affidavits required by 9 (h). The court held that the union, by failing to comply with 9 (f), (g) and (h), [351 U.S. 62, 68] had precluded its certification by the Board, and that, accordingly, neither the employees nor the union had a right to picket the plant to induce the company to recognize the noncomplying union. The court, agreeing with respondent's theory, took the position that such recognition would be illegal and that picketing to secure it, therefore, was subject to restraint by a state court. 2 Rehearing was denied. </s> Because of the significance of that decision in relation to the National Labor Relations Act, as amended, we granted certiorari and invited the Solicitor General to file a brief setting forth the views of the National Labor Relations Board. 350 U.S. 860 . Such a brief was filed favoring a reversal. </s> There is no doubt that, if the union had filed the data and affidavits required by 9 (f), (g) and (h), the complaint, under the circumstances of this case, would have had to be dismissed by the state court for lack of jurisdiction, and that, if an injunction were sought through the National Labor Relations Board, the request would have had to be denied on the merits. Under those circumstances, the Board would have had jurisdiction of the issue to the exclusion of the state court. Garner v. Teamsters [351 U.S. 62, 69] Union, 346 U.S. 485 , and see Weber v. Anheuser-Busch, Inc., 348 U.S. 468 . In the absence of any bona fide dispute as to the existence of the required majority of eligible employees, the employer's denial of recognition of the union would have violated 8 (a) (5) of the Act. 3 </s> The issue before us thus turns upon the effect of the union's choice not to file the information and affidavits described in 9 (f), (g) and (h). The state court misconceived that effect. The union's failure to file was not a confession of guilt of anything. It was merely a choice not to make public certain information. The Act prescribes no fine or penalty, in the ordinary sense, for failure to file the specified data and affidavits. The Act does not even direct that they be filed. The nearest to such a direction in the Act is the statement, in 9 (g), that it shall be "the obligation" of all labor organizations to file annual reports "bringing up to date the information required to be supplied in the initial filing by subsection (f) (A) of this section, and to file with the Secretary of Labor and furnish to its members annually financial reports in the form and manner prescribed in subsection (f) (B) of 9 requires any initial filing to be made. Each merely describes what is required to be filed in the event that a labor organization elects to seek the advantages offered by subsection (f). </s> Congress seeks to induce labor organizations to file the described data and affidavits by making various benefits of the Act strictly contingent upon such filing. See New [351 U.S. 62, 70] Jersey Carpet Mills, Inc., 92 N. L. R. B. 604, 610. In particular, Congress makes the services of the Labor Board available to labor organizations only upon their filing of the specified data and affidavits. 4 By its noncompliance with 9 (f), (g) and (h), a union does not exempt itself from other applicable provisions of the Act. 5 </s> What, then, is the precise status of a labor organization that elects not to file some or all of the data or affidavits in question? It is significant that the effect of noncompliance is the same whether one or more of the filings are omitted. Accordingly, it simplifies the issue to assume a situation where a union has filed the non-Communist affidavits specified in 9 (h), but has chosen not [351 U.S. 62, 71] to disclose the information called for by 9 (f) (A) (2) and (3) as to the salaries of its officers, or the manner in which they have been elected. There is no provision stating that, under those circumstances, the union may not represent an appropriate unit of employees if a majority of those employees give it authority so to do. Likewise, there is no statement precluding their employer from voluntarily recognizing such a noncomplying union as their bargaining representative. Section 8 (a) (5) 6 declares it to be an unfair labor practice for an employer "to refuse to bargain collectively with the representatives of his employees, subject to the provisions of section 9 (a)." (Emphasis supplied.) Section 9 (a), 7 which deals expressly with employee representation, says nothing as to how the employees' representative shall be chosen. See Lebanon Steel Foundry v. Labor Board, 76 U.S. App. D.C. 100, 103, 130 F.2d 404, 407. It does not make it a condition that the representative shall have complied [351 U.S. 62, 72] with 9 (f), (g) or (h), or shall be certified by the Board, or even be eligible for such certification. 8 </s> Likewise, 7, which deals with the employees' rights to self-organization and representation, makes no reference to any need that the employees' chosen representative must have complied with 9 (f), (g) or (h). 9 Section 7 provides - </s> "Employees shall have the right to self-organization, to form, join, or assist labor organizations, to bargain collectively through representatives of their own choosing, and to engage in other concerted activities [351 U.S. 62, 73] for the purpose of collective bargaining or other mutual aid or protection, and shall also have the right to refrain from any or all of such activities except to the extent that such right may be affected by an agreement requiring membership in a labor organization as a condition of employment as authorized in section 8 (a) (3)." 61 Stat. 140, 29 U.S.C. 157. 10 </s> Subsections (f), (g) and (h) of 9 merely describe advantages that may be gained by compliance with their conditions. The very specificity of the advantages to be gained and the express provision for the loss of these advantages imply that no consequences other than those so listed shall result from noncompliance. 11 </s> The noncompliance of the union with 9 (f), (g) and (h) in the instant case precludes any right of the union to seek certification of its status by the Labor Board. 12 </s> [351 U.S. 62, 74] Such elimination of the Board does not, however, eliminate the applicability of the National Labor Relations Act, as amended, and does not settle the issue as to the right of the state court to enjoin the employees and their union from peacefully picketing the employer's plant for the purpose of securing recognition. </s> The industrial relations between the company and its employees nonetheless affect interstate commerce and come within the field occupied by the National Labor Relations Act, as amended. The Labor Board is but an agency through which Congress has authorized certain industrial relations to be supervised and enforced. The Act goes further. The instant employer, employees and union are controlled by its applicable provisions and all courts, state as well as federal, are bound by them. </s> Section 7 recognizes the right of the instant employees "to bargain collectively through representatives of their own choosing" and leaves open the manner of choosing such representatives when certification does not apply. The employees have exercised that right through the action of substantially more than a majority of them authorizing the instant union to represent them. </s> Section 9 (a) provides that representatives "designated or selected for the purposes of collective bargaining by the majority of the employees in a unit appropriate for such purposes, shall be the exclusive representatives of all the employees in such unit for the purposes of collective bargaining in respect to rates of pay, wages, hours of employment, or other conditions of employment: . . . ." That fits this situation precisely. It does not require the designated labor organization to disclose [351 U.S. 62, 75] the salaries of its officers, or even to file non-Communist affidavits. </s> Under those sections and by virtue of the conceded majority designation of the union, the employer is obligated to recognize the designated union. Upon the employer's refusal to do so, the union, because of its noncompliance with 9 (f), (g) and (h), cannot resort to the Labor Board. It can, however, take other lawful action such as that engaged in here. </s> The company can, if it so wishes, lawfully recognize the union as the employees' representative. That being so, there is no reason why the employees, and their union under their authorization, may not, under 13, strike, 13 and, under 7, peacefully picket the premises of their employer to induce it thus to recognize their chosen representative. See West Texas Utilities Co. v. Labor Board, 87 U.S. App. D.C. 179, 185, 184 F.2d 233, 239, and the other cases cited in note 6, supra. 14 </s> Such being the case, the state court is governed by the federal law which has been applied to industrial relations, like these, affecting interstate commerce and the state court erred in enjoining the peaceful picketing here practiced. A "State may not prohibit the exercise of rights which the federal Acts protect." Weber v. Anheuser-Busch, Inc., 348 U.S. 468, 474 , and see Garner v. Teamsters Union, 346 U.S. 485, 494 . [351 U.S. 62, 76] </s> The judgment of the Supreme Court of Louisiana, accordingly, is reversed and the case is remanded to it for further proceedings not inconsistent with this opinion. </s> Reversed and remanded. </s> MR. JUSTICE HARLAN took no part in the consideration or decision of this case. </s> Footnotes [Footnote 1 "SEC. 9. (a) Representatives designated or selected for the purposes of collective bargaining by the majority of the employees in a unit appropriate for such purposes, shall be the exclusive representatives of all the employees in such unit for the purposes of collective bargaining in respect to rates of pay, wages, hours of employment, or other conditions of employment: . . . . . . . . . "(f) No investigation shall be made by the Board of any question affecting commerce concerning the representation of employees, raised by a labor organization under subsection (c) of this section, and no complaint shall be issued pursuant to a charge made by a labor organization under subsection (b) of section 10, unless such labor organization and any national or international labor organization of which such labor organization is an affiliate or constituent unit (A) shall have prior thereto filed with the Secretary of Labor copies of its constitution and bylaws and a report, in such form as the Secretary may prescribe, showing - "(1) the name of such labor organization and the address of its principle place of business; "(2) the names, titles, and compensation and allowances of its three principle officers and of any of its other officers or agents whose aggregate compensation and allowances for the preceding year exceeded $5,000, and the amount of the compensation and allowances paid to each such officer or agent during such year; "(3) the manner in which the officers and agents referred to in clause (2) were elected, appointed, or otherwise selected; "(4) the initiation fee or fees which new members are required to pay on becoming members of such labor organization; "(5) the regular dues or fees which members are required to pay in order to remain members in good standing of such labor organization; "(6) a detailed statement of, or reference to provisions of its constitution and bylaws showing the procedure followed with respect to, (a) qualification for or restrictions on membership, (b) election of officers and stewards, (c) calling of regular and special meetings, (d) levying of assessments, (e) imposition of [351 U.S. 62, 65] fines, (f) authorization for bargaining demands, (g) ratification of contract terms, (h) authorization for strikes, (i) authorization for disbursement of union funds, (j) audit of union financial transactions, (k) participation in insurance or other benefit plans, and (l) expulsion of members and the grounds therefor; "and (B) can show that prior thereto it has - "(1) filed with the Secretary of Labor, in such form as the Secretary may prescribe, a report showing all of (a) its receipts of any kind and the sources of such receipts, (b) its total assets and liabilities as of the end of its last fiscal year, (c) the disbursements made by it during such fiscal year, including the purposes for which made; and "(2) furnished to all of the members of such labor organization copies of the financial report required by paragraph (1) hereof to be filed with the Secretary of Labor. "(g) It shall be the obligation of all labor organizations to file annually with the Secretary of Labor, in such form as the Secretary of Labor may prescribe, reports bringing up to date the information required to be supplied in the initial filing by subsection (f) (A) of this section, and to file with the Secretary of Labor and furnish to its members annually financial reports in the form and manner prescribed in subsection (f) (B). No labor organization shall be eligible for certification under this section as the representative of any employees, and no complaint shall issue under section 10 with respect to a charge filed by a labor organization unless it can show that it and any national or international labor organization of which it is an affiliate or constituent unit has complied with its obligation under this subsection. "(h) No investigation shall be made by the Board of any question affecting commerce concerning the representation of employees, raised by a labor organization under subsection (c) of this section, and no complaint shall be issued pursuant to a charge made by a labor organization under subsection (b) of section 10, unless there is on file with the Board an affidavit executed contemporaneously or within the preceding twelve-month period by each officer of such labor organization and the officers of any national or international [351 U.S. 62, 66] labor organization of which it is an affiliate or constituent unit that he is not a member of the Communist Party or affiliated with such party, and that he does not believe in, and is not a member of or supports any organization that believes in or teaches, the overthrow of the United States Government by force or by any illegal or unconstitutional methods. The provisions of section 35 A of the Criminal Code shall be applicable in respect to such affidavits." 61 Stat. 143, 145-146, 65 Stat. 602, 29 U.S.C. 159 (a), (f), (g) and (h). </s> [Footnote 2 Respondent also had sought the injunction on the alternative ground that the request for recognition of the union was being made in the absence of a selection of the union by the majority of respondent's employees. The Supreme Court of Louisiana did not pass upon this contention. The record upon which the temporary and the permanent injunctions were granted contained concededly genuine applications for union membership and authorizations of representation from 179 of the 225 eligible employees. Accordingly, we do not now consider the questions that would have been presented if the union or the pickets had represented less than a majority of the eligible employees, or if there had been a bona fide dispute as to the existence of authorization from a majority of the eligible employees. </s> [Footnote 3 "SEC. 8. (a) It shall be an unfair labor practice for an employer - . . . . . "(5) to refuse to bargain collectively with the representatives of his employees, subject to the provisions of section 9 (a)." 61 Stat. 140, 141, 29 U.S.C. 158 (a) (5). For the material portion of 9 (a), see note 1, supra. </s> [Footnote 4 Congress seeks "to stop the use of the Labor Board" by noncomplying unions. Labor Board v. Dant, 344 U.S. 375, 385 . For example, the following benefits are available to labor organizations only upon their voluntary compliance with the conditions prescribed in the statutory provisions listed below: (1) The Board's investigations of questions, raised by labor organizations, concerning representation, on compliance with 9 (f) and (h); (2) labor organizations' eligibility for certification as representatives, on compliance with 9 (g) and (h); (3) the Board's issuance of complaints pursuant to charges by labor organizations, on compliance with 9 (f) and (g); (4) privilege of making a union-shop agreement, see 8 (a) (3); (5) labor organizations' right to obtain redress from Board for unfair labor practices, see 8; (6) limited right to engage in boycott when seeking recognition, see 8 (b) (4) (B); (7) limited right to strike for assignment of work, see 8 (b) (4) (D); and (8) limited protection for a certified representative against a strike for recognition of a rival organization, see 8 (b) (4) (C). </s> [Footnote 5 The Board may provide relief in case of a refusal by a noncomplying union to bargain in good faith, as required by 8 (b) (3). See Chicago Typographical Union No. 16, 86 N. L. R. B. 1041, 1048, and n. 16; National Maritime Union, 78 N. L. R. B. 971, 987-988. As to decertification of a noncomplying union under 9 (c) (1) (A) (ii), see Harris Foundry & Machine Co., 76 N. L. R. B. 118. For the effect of noncompliance with 9 (h), see generally American Communications Assn. v. Douds, 339 U.S. 382, 390 . </s> [Footnote 6 See note 3, supra. When a majority of an employer's eligible employees have authorized a noncomplying union to represent them and such union later has complied with the statutory filing requirements, the union, under appropriate circumstances, has been permitted to invoke the Board's processes to remedy the consequences of the employer's prior refusal to bargain with the union. ". . . Congress has not made compliance with the filing requirements of 9 (f), (g) and (h) a condition precedent to the obligation of an employer under 8 (a) (5) to bargain collectively with the chosen representative of the employees; such compliance is merely made a condition precedent to invoking the machinery of the Act for the investigation of a question concerning representation, or for the issuance of a complaint charging the commission of unfair labor practices." Labor Board v. Reed & Prince Mfg. Co., 205 F.2d 131, 133-134. See also, Labor Board v. Pecheur Lozenge Co., 209 F.2d 393, 402-403; Labor Board v. Tennessee Egg Co., 201 F.2d 370; West Texas Utilities Co. v. Labor Board, 87 U.S. App. D.C. 179, 185, 184 F.2d 233, 239. </s> [Footnote 7 See note 1, supra. </s> [Footnote 8 A Board election is not the only method by which an employer may satisfy itself as to the union's majority status. See, e. g., Labor Board v. Bradford Dyeing Assn., 310 U.S. 318, 338 -339; Labor Board v. Knickerbocker Plastic Co., 218 F.2d 917, 921-922; Labor Board v. Parma Water Lifter Co., 211 F.2d 258, 261; Labor Board v. Indianapolis Newspapers, Inc., 210 F.2d 501, 503-504; Labor Board v. Kobritz, 193 F.2d 8, 14; Brookville Glove Co., 114 N. L. R. B. 213, 214, n. 4, 36 L. R. R. M. 1548, 1549, n.4. </s> [Footnote 9 ". . . The Act does not proscribe bargaining with a noncomplying union; indeed, consonant with public policy, an employer may voluntarily recognize and deal with such a union. If Congress had intended the Act to have the effect urged by the Respondents, it easily could have inserted an express provision in the statute to accomplish such result. This, Congress did not do." Brookville Glove Co., supra, at 1549. The Board there held that the employer committed an unfair labor practice ( 8 (a) (3)) when it discharged employees who struck to induce their employer to recognize as their bargaining representative the same noncomplying union (United Mine Workers) which is a petitioner here. There also the union had been designated as their chosen representative by a majority of the eligible employees. See also, Rubin Bros. Footwear, Inc., 99 N. L. R. B. 610, 619; Labor Board v. Coal Creek Coal Co., 204 F.2d 579, 581; Labor Board v. Electronics Equipment Co., 194 F.2d 650, 651, n. 1; Labor Board v. Pratt, Read & Co., 191 F.2d 1006, 1008. Cf. Ohio Ferro-Alloys Corp. v. Labor Board, 213 F.2d 646; Stewart-Warner Corp. v. Labor Board, 194 F.2d 207. </s> [Footnote 10 The cross reference to 8 (a) (3) has to do only with an exception in favor of union shops. </s> [Footnote 11 For example, 9 (f) prescribes that, unless the labor organization files the required material, "No investigation shall be made by the Board of any question affecting commerce concerning the representation of employees, raised by a labor organization under subsection (c) of this section . . . ." (Emphasis supplied.) Subsection (c) of 9 so referred to relates to elections of collective-bargaining representatives under supervision of the Board. Section 9 (f) also prescribes that, unless the labor organization files the required material, "no complaint shall be issued [by the Board] pursuant to a charge made by a labor organization under subsection (b) of section 10 . . . ." (Emphasis supplied.) Subsection (b) of 10 so referred to relates to complaints by the Board, so that here again that which is cut off by noncompliance is only that which the Act has added. Subsections (g) and (h) of 9 contain like provisions. </s> [Footnote 12 For the Board's conclusion that an employer may not have recourse to the Board to verify, by certification, the union's status or lack of status as the exclusive representative of the eligible employees, [351 U.S. 62, 74] see Herman Loewenstein, Inc., 75 N. L. R. B. 377; Sigmund Cohn Mfg. Co., 75 N. L. R. B. 177, 180, n. 2; National Maritime Union v. Herzog, 78 F. Supp. 146, 156, aff'd 334 U.S. 854 ; Fay v. Douds, 172 F.2d 720, 724-726. </s> [Footnote 13 "SEC. 13. Nothing in this Act, except as specifically provided for herein, shall be construed so as either to interfere with or impede or diminish in any way the right to strike, or to affect the limitations or qualifications on that right." 61 Stat. 151, 29 U.S.C. 163. See also, Labor Board v. Rice Milling Co., 341 U.S. 665, 673 , and cases cited in note 6, supra. </s> [Footnote 14 "Present law in no way limits the primary strike for recognition except in the face of another union's certification." Report of the Joint Committee on Labor-Management Relations, No. 986, Pt. 3, 80th Cong., 2d Sess. 71; S. Rep. No. 105, 80th Cong., 1st Sess. 22; H. R. Conf. Rep. No. 510, 80th Cong., 1st Sess. 43. </s> MR. JUSTICE FRANKFURTER, dissenting. </s> Although my doubts are not shared by others, they have not been overcome, and the nature of the problem raised by this case makes it not inappropriate to express them. </s> The problem is the recurring difficulty of determining when a federal enactment bars the exercise of what otherwise would clearly be within the scope of a State's lawmaking power. There is, of course, no difficulty when Congress explicitly displaces state power. The perplexity arises in a situation like the present, where such displacement by the controlling federal power is attributed to implications or radiations of a federal statute. </s> The various aspects in which this problem comes before the Court are seldom easy of solution. Decisions ultimately depend on judgment in balancing overriding considerations making for the requirement of an exclusive nation-wide regime in a particular field of legal control and respect for the allowable area within which the forty-eight States may enforce their diverse notions of policy. The Court has heretofore adverted to the uncertainties in the accommodation of these interests of the Nation and the States in regard to industrial relations affecting interstate commerce - uncertainties inevitable in the present state of federal legislation. </s> Proper accommodation is dependent on an empiric process, on case-to-case determinations. Abstract propositions and unquestioned generalities do not furnish answers. [351 U.S. 62, 77] </s> In this case, the Court concludes that Louisiana law must yield to the dominance of the National Labor Relations Act. Presumably, what Louisiana has decreed in the judgment now reversed would be within Louisiana's power were it not for the argumentatively derived withdrawal of that power by the National Labor Relations Act, as amended. Over the years, the Court has found such withdrawal of state power from reasonable implications of what Congress wrote in the National Labor Relations Act in some cases and not in others. Withdrawal has been found to exist in at least two types of situations: (1) where state law interferes with federal rights conferred on employees by 7 of the National Labor Relations Act, e. g., Hill v. Florida, 325 U.S. 538 ; (2) where state law makes inroads on the primary jurisdiction with which Congress has invested the National Labor Relations Board, e. g., Weber v. Anheuser-Busch, Inc., 348 U.S. 468 . Here we are not concerned with the Board's primary jurisdiction. The issue is whether Louisiana, by enjoining, according to its law, a strike calculated to coerce respondent to bargain with a union which has not complied with the non-Communist and other reporting provisions, 9 (f), (g) and (h) of the Taft-Hartley Act, interferes with the protection afforded by 7 of that Act, where that union may represent a majority of employees. </s> Section 7 grants employees the federal right to engage in concerted activities in furtherance of collective bargaining. A strike accompanied by peaceful picketing is a typical expression of such authorized concerted activity. Instances of special situations that are clearly outside of this protection are (1) where the aspect that the strike action takes constitutes a union unfair labor practice interdicted by the Taft-Hartley Act, or (2) where the strike is in violation of the federal criminal law. See Southern S. S. Co. v. Labor Board, 316 U.S. 31 . It [351 U.S. 62, 78] would be self-contradictory for federal law to protect conduct which federal law brands as illegal. That is not this situation. A non-complying union, such as the petitioner, however vigorously it may assert non-compliance as a matter of principle, is not under condemnation of illegality by the Taft-Hartley Act, or any other federal law, if it employs economic pressure to achieve its goal. The explicit consequence which that Act attaches to non-compliance is that such a union is denied the advantages of the National Labor Relations Board - it cannot utilize that Board's machinery to obtain certification as the bargaining representative or to secure redress against unfair labor practices by an employer. </s> The policy of 9 is that of Congress and the wisdom of the policy is not our concern. But just as all fair implications must be given to 7, so it is equally incumbent to give to the scope of the non-Communist affidavit and other reporting requirements of 9 the reasonable direction of their meaning and purpose. So far as its own law-enforcement machinery for protecting the interests of employees is concerned, Congress designed to hamper non-conforming unions and to discriminate against them by denying them rights deemed of the utmost importance to trade unions. This being so, I find it rather difficult to conclude that, while visiting such consequences upon a non-conforming union in the federal domain of law enforcement, the Congress has impliedly withdrawn from the States the power to regulate such a union. In balancing these considerations, the weight of my judgment tips in favor of not finding in 7 of the Taft-Hartley Act an implied limitation upon power exercised by Louisiana in the circumstances of this case. </s> [351 U.S. 62, 79]

United States Supreme Court UNITED STATES v. ENERGY RESOURCES CO.(1990) No. 89-255 Argued: March 19, 1990Decided: May 29, 1990 </s> The Internal Revenue Code requires employers to withhold from their employees' paychecks money representing the employees' personal income and Social Security taxes. 26 U.S.C. 3102(a), 3402(a). Because employers must hold these funds in "trust for the United States," 7501(a), the taxes are commonly called "trust fund" taxes. Should an employer fail to pay such taxes, 6672 authorizes the Government to collect an equivalent sum directly from the employer's officers or employees who are responsible for collecting the tax and are thus commonly referred to as "responsible" individuals. Newport Offshore, Ltd., and Energy Resources Co., Inc., filed separate petitions for reorganization under Chapter 11 of the Bankruptcy Code. In conjunction with reorganization plans which they had approved, both Bankruptcy Courts authorized payments on the federal tax liabilities of the reorganized corporations to be applied to extinguish their trust fund debts before paying off the nontrust fund portions of the liabilities. The Internal Revenue Service (IRS) appealed both cases to the appropriate Federal District Courts, which, respectively, reversed as to Newport Offshore and affirmed as to Energy Resources. Consolidating the two cases, the Court of Appeals in turn reversed the former but affirmed the latter. </s> Held: </s> A bankruptcy court has the authority to order the IRS to treat tax payments made by Chapter 11 debtor corporations as trust fund payments where the court determines that this designation is necessary for the success of a reorganization plan. Although the Bankruptcy Code does not explicitly authorize such a court to approve reorganization plans designating tax payments as either trust fund or nontrust fund, the orders at issue are wholly consistent with the court's broad authority under the Code to approve plans including "any . . . appropriate provision not inconsistent with . . . this title," 11 U.S.C. 1123(b)(5), and to "issue any order . . . necessary or appropriate to carry out the [Code's] provisions," 105. Other Bankruptcy Code provisions protecting the Government's ability to collect delinquent taxes do not preclude the court from issuing such orders, since those restrictions do not address the court's ability to designate whether tax payments are to be applied to trust fund or non-trust-fund liabilities or assure the Government that its [495 U.S. 545, 546] taxes will be paid even if the court is incorrect in its judgment that the reorganization plan will succeed. Nor do the orders at issue contravene 6672 of the Internal Revenue Code - the "responsible" individuals provision - which remains both during and after the corporate Chapter 11 filing as an alternative source for collecting trust fund taxes. By its terms, that section does not protect against the eventuality that, if the IRS cannot designate a debtor corporation's tax payments as nontrust fund, the debtor might be able to pay only the trust fund debt, leaving the Government at risk for non-trust-fund taxes. Pp. 549-551. </s> 871 F.2d 223, affirmed. </s> WHITE, J., delivered the opinion of the Court, in which REHNQUIST, C. J., and BRENNAN, MARSHALL, STEVENS, O'CONNOR, SCALIA, and KENNEDY, JJ., joined. BLACKMUN, J., dissented. </s> Alan I. Horowitz argued the cause for the United States. With him on the briefs were Solicitor General Starr, Assistant Attorney General Peterson, Deputy Solicitor General Wallace, Gary D. Gray, and Linda E. Mosakowski. </s> Guy B. Moss argued the cause for respondents. With him on the brief were Matthew J. McGowan and Martin S. Allen. * </s> [Footnote * Mark Bernsley filed a brief for GLK, Inc., as amicus curiae urging affirmance. </s> JUSTICE WHITE delivered the opinion of the Court. </s> In this case, we decide that a bankruptcy court has the authority to order the Internal Revenue Service (IRS) to treat tax payments made by Chapter 11 debtor corporations as trust fund payments where the bankruptcy court determines that this designation is necessary for the success of a reorganization plan. </s> I </s> The Internal Revenue Code requires employers to withhold from their employees' paychecks money representing employees' personal income taxes and Social Security taxes. 26 U.S.C. 3102(a), 3402(a). Because federal law requires employers to hold these funds in "trust for the United [495 U.S. 545, 547] States," 26 U.S.C. 7501(a), these taxes are commonly referred to as "trust fund" taxes. Slodov v. United States, 436 U.S. 238, 242 -243 (1978). Should employers fail to pay trust fund taxes, the Government may collect an equivalent sum directly from the officers or employees of the employer who are responsible for collecting the tax. 26 U.S.C. 6672. These individuals are commonly referred to as "responsible" individuals. Slodov, supra, at 244-245. </s> This case involves corporations that have filed petitions for reorganization under Chapter 11 of the Bankruptcy Code, 11 U.S.C. 1101-1174. Newport Offshore, Ltd., filed a petition for reorganization on November 13, 1985; the Bankruptcy Court approved a reorganization plan in June 1986, creating Newport Oil Offshore, Inc. Over the IRS' objection, that plan included a provision stating that the reorganized Newport Offshore would pay its tax debts (totaling about $300,000) over a period of about six years and that the payments would be applied to extinguish all trust fund tax debts "`prior to the commencement of payment of the nontrust fund portion'" of the tax debts owed. In re Energy Resources Co., 871 F.2d 223, 226 (CA1 1989). The IRS appealed to the United States District Court for the District of Rhode Island, which reversed in an unpublished opinion. The debtor then sought review in the Court of Appeals for the First Circuit. </s> Energy Resources Co., Inc., petitioned for reorganization under Chapter 11 in January 1983. In September 1984, the Bankruptcy Court confirmed a reorganization plan that created a special trust which, among other things, was to pay Energy Resources' federal tax debt of approximately $1 million over roughly five years. In November 1985, the trustee of the special trust sent approximately $358,000 in payment to the IRS. The trustee asked the IRS to apply the money to Energy Resources' trust fund tax debt. After the IRS refused to do so, the trustee successfully petitioned the Bankruptcy Court to order the IRS to apply the money to the [495 U.S. 545, 548] trust fund tax liabilities. Id., at 226-227. The IRS appealed this order to the United States District Court for the District of Massachusetts, which affirmed the Bankruptcy Court in an oral opinion. The Government then appealed to the First Circuit. </s> Consolidating the two cases, the First Circuit reversed in In re Newport Offshore Ltd. and affirmed in In re Energy Resources Co. Id., at 234. The court first considered whether a tax payment made pursuant to a Chapter 11 reorganization plan is "voluntary" or "involuntary" as those terms are used in the IRS' own rules. IRS policy permits taxpayers who "voluntarily" submit payments to the IRS to designate the tax liability to which the payment will apply. See id., at 227, citing Rev. Rul. 79-284, 1979-2 Cum. Bull. 83, modifying Rev. Rul. 73-305, 1973-2 Cum. Bull. 43, superseding Rev. Rul. 58-239, 1958-1 Cum. Bull. 94. The taxpayer corporations argued that tax payments within a Chapter 11 reorganization are best characterized as "voluntary" and therefore that the IRS' own rules bind the agency to respect the debtors' designation of the tax payments. Granting deference to the agency's interpretation of its own rules, the First Circuit accepted the IRS' view that payments made pursuant to the Chapter 11 plan are involuntary for purposes of the IRS' rules. 871 F.2d, at 230. The First Circuit concluded, however, that even if the payments were properly characterized as involuntary under the IRS' regulations, the Bankruptcy Courts nevertheless had the authority to order the IRS to apply an "involuntary" payment made by a Chapter 11 debtor to trust fund tax liabilities if the Bankruptcy Court concluded that this designation was necessary to ensure the success of the reorganization. Id., at 230-234. </s> We granted certiorari because the First Circuit's conclusion on this issue conflicts with decisions in other Circuits. 493 U.S. 963 (1989); see, e. g., In re Ribs-R-Us, Inc., 828 F.2d 199 (CA3 1987). We affirm the judgment below, for whether or not the payments at issue are rightfully considered [495 U.S. 545, 549] to be involuntary, a bankruptcy court has the authority to order the IRS to apply the payments to trust fund liabilities if the bankruptcy court determines that this designation is necessary to the success of a reorganization plan. </s> II </s> The Bankruptcy Code does not explicitly authorize the bankruptcy courts to approve reorganization plans designating tax payments as either trust fund or nontrust fund. The Code, however, grants the bankruptcy courts residual authority to approve reorganization plans including "any . . . appropriate provision not inconsistent with the applicable provisions of this title." 11 U.S.C. 1123(b)(5); see also 1129. The Code also states that bankruptcy courts may "issue any order, process, or judgment that is necessary or appropriate to carry out the provisions" of the Code. 105 (a). These statutory directives are consistent with the traditional understanding that bankruptcy courts, as courts of equity, have broad authority to modify creditor-debtor relationships. See Pepper v. Litton, 308 U.S. 295, 303 -304 (1939); United States National Bank v. Chase National Bank, 331 U.S. 28, 36 (1947); Katchen v. Landy, 382 U.S. 323, 327 (1966). </s> The Government suggests that, in this case, the Bankruptcy Courts have transgressed one of the limitations on their equitable power. Specifically, the Government contends that the orders conflict with the Code's provisions protecting the Government's ability to collect delinquent taxes. As the Government points out, the Code provides a priority for specified tax claims, including those at issue in this case, and makes those tax debts nondischargeable. See 11 U.S.C. 507(a)(7), 523(a)(1)(A). The Code, moreover, requires a bankruptcy court to assure itself that reorganization will succeed, 1129(a)(11), and therefore that the IRS, in all likelihood, will collect the tax debt owed. The tax debt must be paid off within six years. 1129(a)(9)(C). [495 U.S. 545, 550] </s> It is evident that these restrictions on a bankruptcy court's authority do not preclude the court from issuing orders of the type at issue here, for those restrictions do not address the bankruptcy court's ability to designate whether tax payments are to be applied to trust fund or non-trust-fund tax liabilities. The Government is correct that, if it can apply a debtor corporation's tax payments to non-trust-fund liability before trust fund liability, it stands a better chance of debt discharge because the debt that is not guaranteed will be paid off before the guaranteed debt. While this result might be desirable from the Government's standpoint, it is an added protection not specified in the Code itself: Whereas the Code gives it the right to be assured that its taxes will be paid in six years, the Government wants an assurance that its taxes will be paid even if the reorganization fails - i. e., even if the bankruptcy court is incorrect in its judgment that the reorganization plan will succeed. </s> Even if consistent with the Code, however, a bankruptcy court order might be inappropriate if it conflicted with another law that should have been taken into consideration in the exercise of the court's discretion. The Government maintains that the orders at issue here contravene 6672 of the Internal Revenue Code, the provision permitting the IRS to collect unpaid trust fund taxes directly from the personal assets of "responsible" individuals. The Government contends that 6672 reflects a congressional decision to protect the Government's tax revenues by ensuring an additional source from which trust fund taxes might be collected. It is true that 6672 provides that, if the Government is unable to collect trust fund taxes from a corporate taxpayer, the Government has an alternative source for this revenue. Here, however, the Bankruptcy Courts' orders do not prevent the Government from collecting trust fund revenue; to the contrary, the orders require the Government to collect trust fund payments before collecting non-trust-fund payments. As the Government concedes, 6672 remains both during and [495 U.S. 545, 551] after the corporate Chapter 11 filing as an alternative collection source for trust fund taxes. </s> The Government nevertheless contends that the Bankruptcy Courts' orders contravene 6672 because, if the IRS cannot designate a debtor corporation's tax payments as nontrust-fund, the debtor might be able to pay only the guaranteed debt, leaving the Government at risk for non-trust-fund taxes. This may be the case, but 6672, by its terms, does not protect against this eventuality. That section plainly does not require us to hold that the orders at issue here, otherwise wholly consistent with a bankruptcy court's authority under the Bankruptcy Code, were nonetheless improvident. </s> III </s> In this case, the Bankruptcy Courts have not transgressed any limitation on their broad power. We therefore hold that they may order the IRS to apply tax payments to offset trust fund obligations where it concludes that this action is necessary for a reorganization's success. The judgment of the Court of Appeals is therefore </s> Affirmed. </s> JUSTICE BLACKMUN dissents. </s> [495 U.S. 545, 552]

United States Supreme Court UNITED STATES v. WADE(1967) No. 334 Argued: February 16, 1967Decided: June 12, 1967 </s> Several weeks after respondent's indictment for robbery of a federally insured bank and for conspiracy, respondent, without notice to his appointed counsel, was placed in a lineup in which each person wore strips of tape on his face, as the robber allegedly had done, and on direction repeated words like those the robber allegedly had used. Two bank employees identified respondent as the robber. At the trial when asked if the robber was in the courtroom, they identified respondent. The prior lineup identifications were elicited on cross-examination. Urging that the conduct of the lineup violated his Fifth Amendment privilege against self-incrimination and his Sixth Amendment right to counsel, respondent filed a motion for judgment of acquittal or, alternatively, to strike the courtroom identifications. The trial court denied the motions and respondent was convicted. The Court of Appeals reversed, holding that though there was no Fifth Amendment deprivation the absence of counsel at the lineup denied respondent his right to counsel under the Sixth Amendment and required the grant of a new trial at which the in-court identifications of those who had made lineup identifications would be excluded. Held: </s> 1. Neither the lineup itself nor anything required therein violated respondent's Fifth Amendment privilege against self-incrimination since merely exhibiting his person for observation by witnesses and using his voice as an identifying physical characteristic involved no compulsion of the accused to give evidence of a testimonial nature against himself which is prohibited by that Amendment. Pp. 221-223. </s> 2. The Sixth Amendment guarantees an accused the right to counsel not only at his trial but at any critical confrontation by the prosecution at pretrial proceedings where the results might well determine his fate and where the absence of counsel might derogate from his right to a fair trial. Pp. 223-227. </s> 3. The post-indictment lineup (unlike such preparatory steps as analyzing fingerprints and blood samples) was a critical prosecutive stage at which respondent was entitled to the aid of counsel. Pp. 227-239. [388 U.S. 218, 219] </s> (a) There is a great possibility of unfairness to the accused at that point, (1) because of the manner in which confrontations for identification are frequently conducted, (2) because of dangers inherent in eyewitness identification and suggestibility inherent in the context of the confrontations, and (3) because of the likelihood that the accused will often be precluded from reconstructing what occurred and thereby obtaining a full hearing on the identification issue at trial. Pp. 229-235. </s> (b) This case illustrates the potential for improper influence on witnesses through the lineup procedure, since the bank employees were allowed to see respondent in the custody of FBI agents before the lineup began. Pp. 233-234. </s> (c) The presence of counsel at the lineup will significantly promote fairness at the confrontation and a full hearing at trial on the issue of identification. Pp. 236-238. </s> 4. In-court identification by a witness to whom the accused was exhibited before trial in the absence of counsel must be excluded unless it can be established that such evidence had an independent origin or that error in its admission was harmless. Since it is not clear that the Court of Appeals applied the prescribed rule of exclusion, and since the nature of the in-court identifications here was not an issue in the trial and cannot be determined on the record, the case must be remanded to the District Court for resolution of these issues. Pp. 239-243. </s> 358 F.2d 557, vacated and remanded. </s> Beatrice Rosenberg argued the cause for the United States. With her on the brief were Acting Solicitor General Spritzer, Assistant Attorney General Vinson, Nathan Lewin and Ronald L. Gainer. </s> Weldon Holcomb argued the cause and filed a brief for respondent. </s> MR. JUSTICE BRENNAN delivered the opinion of the Court. </s> The question here is whether courtroom identifications of an accused at trial are to be excluded from evidence because the accused was exhibited to the witnesses before trial at a post-indictment lineup conducted for [388 U.S. 218, 220] identification purposes without notice to and in the absence of the accused's appointed counsel. </s> The federally insured bank in Eustace, Texas, was robbed on September 21, 1964. A man with a small strip of tape on each side of his face entered the bank, pointed a pistol at the female cashier and the vice president, the only persons in the bank at the time, and forced them to fill a pillowcase with the bank's money. The man then drove away with an accomplice who had been waiting in a stolen car outside the bank. On March 23, 1965, an indictment was returned against respondent, Wade, and two others for conspiring to rob the bank, and against Wade and the accomplice for the robbery itself. Wade was arrested on April 2, and counsel was appointed to represent him on April 26. Fifteen days later an FBI agent, without notice to Wade's lawyer, arranged to have the two bank employees observe a lineup made up of Wade and five or six other prisoners and conducted in a courtroom of the local county courthouse. Each person in the line wore strips of tape such as allegedly worn by the robber and upon direction each said something like "put the money in the bag," the words allegedly uttered by the robber. Both bank employees identified Wade in the lineup as the bank robber. </s> At trial, the two employees, when asked on direct examination if the robber was in the courtroom, pointed to Wade. The prior lineup identification was then elicited from both employees on cross-examination. At the close of testimony, Wade's counsel moved for a judgment of acquittal or, alternatively, to strike the bank officials' courtroom identifications on the ground that conduct of the lineup, without notice to and in the absence of his appointed counsel, violated his Fifth Amendment privilege against self-incrimination and his Sixth Amendment right to the assistance of counsel. The motion was denied, and Wade was convicted. The [388 U.S. 218, 221] Court of Appeals for the Fifth Circuit reversed the conviction and ordered a new trial at which the in-court identification evidence was to be excluded, holding that, though the lineup did not violate Wade's Fifth Amendment rights, "the lineup, held as it was, in the absence of counsel, already chosen to represent appellant, was a violation of his Sixth Amendment rights . . . ." 358 F.2d 557, 560. We granted certiorari, 385 U.S. 811 , and set the case for oral argument with No. 223, Gilbert v. California, post, p. 263, and No. 254, Stovall v. Denno, post, p. 293, which present similar questions. We reverse the judgment of the Court of Appeals and remand to that court with direction to enter a new judgment vacating the conviction and remanding the case to the District Court for further proceedings consistent with this opinion. </s> I. </s> Neither the lineup itself nor anything shown by this record that Wade was required to do in the lineup violated his privilege against self-incrimination. We have only recently reaffirmed that the privilege "protects an accused only from being compelled to testify against himself, or otherwise provide the State with evidence of a testimonial or communicative nature . . . ." Schmerber v. California, 384 U.S. 757, 761 . We there held that compelling a suspect to submit to a withdrawal of a sample of his blood for analysis for alcohol content and the admission in evidence of the analysis report were not compulsion to those ends. That holding was supported by the opinion in Holt v. United States, 218 U.S. 245 , in which case a question arose as to whether a blouse belonged to the defendant. A witness testified at trial that the defendant put on the blouse and it had fit him. The defendant argued that the admission of the testimony was error because compelling him to put on the blouse was a violation of his privilege. The Court [388 U.S. 218, 222] rejected the claim as "an extravagant extension of the Fifth Amendment," Mr. Justice Holmes saying for the Court: </s> "[T]he prohibition of compelling a man in a criminal court to be witness against himself is a prohibition of the use of physical or moral compulsion to extort communications from him, not an exclusion of his body as evidence when it may be material." 218 U.S., at 252 -253. </s> The Court in Holt, however, put aside any constitutional questions which might be involved in compelling an accused, as here, to exhibit himself before victims of or witnesses to an alleged crime; the Court stated, "we need not consider how far a court would go in compelling a man to exhibit himself." Id., at 253. 1 </s> We have no doubt that compelling the accused merely to exhibit his person for observation by a prosecution witness prior to trial involves no compulsion of the accused to give evidence having testimonial significance. It is compulsion of the accused to exhibit his physical characteristics, not compulsion to disclose any knowledge he might have. It is no different from compelling Schmerber to provide a blood sample or Holt to wear the blouse, and, as in those instances, is not within the cover of the privilege. Similarly, compelling Wade to speak within hearing distance of the witnesses, even to utter words purportedly uttered by the robber, was not compulsion to utter statements of a "testimonial" nature; he was required to use his voice as an identifying [388 U.S. 218, 223] physical characteristic, not to speak his guilt. We held in Schmerber, supra, at 761, that the distinction to be drawn under the Fifth Amendment privilege against self-incrimination is one between an accused's "communications" in whatever form, vocal or physical, and "compulsion which makes a suspect or accused the source of `real or physical evidence,'" Schmerber, supra, at 764. We recognized that "both federal and state courts have usually held that . . . [the privilege] offers no protection against compulsion to submit to fingerprinting, photography, or measurements, to write or speak for identification, to appear in court, to stand, to assume a stance, to walk, or to make a particular gesture." Id., at 764. None of these activities becomes testimonial within the scope of the privilege because required of the accused in a pretrial lineup. </s> Moreover, it deserves emphasis that this case presents no question of the admissibility in evidence of anything Wade said or did at the lineup which implicates his privilege. The Government offered no such evidence as part of its case, and what came out about the lineup proceedings on Wade's cross-examination of the bank employees involved no violation of Wade's privilege. </s> II. </s> The fact that the lineup involved no violation of Wade's privilege against self-incrimination does not, however, dispose of his contention that the courtroom identifications should have been excluded because the lineup was conducted without notice to and in the absence of his counsel. Our rejection of the right to counsel claim in Schmerber rested on our conclusion in that case that "[n]o issue of counsel's ability to assist petitioner in respect of any rights he did possess is presented." 384 U.S., at 766 . In contrast, in this case it is urged that the assistance of counsel at the lineup was indispensable [388 U.S. 218, 224] to protect Wade's most basic right as a criminal defendant his right to a fair trial at which the witnesses against him might be meaningfully cross-examined. </s> The Framers of the Bill of Rights envisaged a broader role for counsel than under the practice then prevailing in England of merely advising his client in "matters of law," and eschewing any responsibility for "matters of fact." 2 The constitutions in at least 11 of the 13 States expressly or impliedly abolished this distinction. Powell v. Alabama, 287 U.S. 45, 60 -65; Note, 73 Yale L. J. 1000, 1030-1033 (1964). "Though the colonial provisions about counsel were in accord on few things, they agreed on the necessity of abolishing the facts-law distinction; the colonists appreciated that if a defendant were forced to stand alone against the state, his case was foredoomed." 73 Yale L. J., supra, at 1033-1034. This background is reflected in the scope given by our decisions to the Sixth Amendment's guarantee to an accused of the assistance of counsel for his defense. When the Bill of Rights was adopted, there were no organized police forces as we know them today. 3 The accused confronted the prosecutor and the witnesses against him, and the evidence was marshalled, largely at the trial itself. In contrast, today's law enforcement machinery involves critical confrontations of the accused by the prosecution at pretrial proceedings where the results might well settle the accused's fate and reduce the trial itself to a mere formality. In recognition of these realities of modern criminal prosecution, our cases have construed the Sixth Amendment guarantee to apply to "critical" stages of the proceedings. The guarantee reads: "In all criminal [388 U.S. 218, 225] prosecutions, the accused shall enjoy the right . . . to have the Assistance of Counsel for his defence." (Emphasis supplied.) The plain wording of this guarantee thus encompasses counsel's assistance whenever necessary to assure a meaningful "defence." </s> As early as Powell v. Alabama, supra, we recognized that the period from arraignment to trial was "perhaps the most critical period of the proceedings . . .," id., at 57, during which the accused "requires the guiding hand of counsel . . .," id., at 69, if the guarantee is not to prove an empty right. That principle has since been applied to require the assistance of counsel at the type of arraignment for example, that provided by Alabama where certain rights might be sacrificed or lost: "What happens there may affect the whole trial. Available defenses may be irretrievably lost, if not then and there asserted . . . ." Hamilton v. Alabama, 368 U.S. 52, 54 . See White v. Maryland, 373 U.S. 59 . The principle was also applied in Massiah v. United States, 377 U.S. 201 , where we held that incriminating statements of the defendant should have been excluded from evidence when it appeared that they were overheard by federal agents who, without notice to the defendant's lawyer, arranged a meeting between the defendant and an accomplice turned informant. We said, quoting a concurring opinion in Spano v. New York, 360 U.S. 315, 326 , that "[a]nything less . . . might deny a defendant `effective representation by counsel at the only stage when legal aid and advice would help him.'" 377 U.S., at 204 . </s> In Escobedo v. Illinois, 378 U.S. 478 , we drew upon the rationale of Hamilton and Massiah in holding that the right to counsel was guaranteed at the point where the accused, prior to arraignment, was subjected to secret interrogation despite repeated requests to see his lawyer. We again noted the necessity of counsel's presence [388 U.S. 218, 226] if the accused was to have a fair opportunity to present a defense at the trial itself: </s> "The rule sought by the State here, however, would make the trial no more than an appeal from the interrogation; and the `right to use counsel at the formal trial [would be] a very hollow thing [if], for all practical purposes, the conviction is already assured by pretrial examination' . . . . `One can imagine a cynical prosecutor saying: "Let them have the most illustrious counsel, now. They can't escape the noose. There is nothing that counsel can do for them at the trial."'" 378 U.S., at 487 -488. </s> Finally in Miranda v. Arizona, 384 U.S. 436 , the rules established for custodial interrogation included the right to the presence of counsel. The result was rested on our finding that this and the other rules were necessary to safeguard the privilege against self-incrimination from being jeopardized by such interrogation. </s> Of course, nothing decided or said in the opinions in the cited cases links the right to counsel only to protection of Fifth Amendment rights. Rather those decisions "no more than reflect a constitutional principle established as long ago as Powell v. Alabama . . . ." Massiah v. United States, supra, at 205. It is central to that principle that in addition to counsel's presence at trial, 4 the accused is guaranteed that he need not stand alone against the State at any stage of the prosecution, formal or informal, in court or out, where counsel's absence might derogate from the accused's right to a fair trial. 5 The security of that right is as much the aim of the right to counsel as it is of the other guarantees of the [388 U.S. 218, 227] Sixth Amendment the right of the accused to a speedy and public trial by an impartial jury, his right to be informed of the nature and cause of the accusation, and his right to be confronted with the witnesses against him and to have compulsory process for obtaining witnesses in his favor. The presence of counsel at such critical confrontations, as at the trial itself, operates to assure that the accused's interests will be protected consistently with out adversary theory of criminal prosecution. Cf. Pointer v. Texas, 380 U.S. 400 . </s> In sum, the principle of Powell v. Alabama and succeeding cases requires that we scrutinize any pretrial confrontation of the accused to determine whether the presence of his counsel is necessary to preserve the defendant's basic right to a fair trial as affected by his right meaningfully to cross-examine the witnesses against him and to have effective assistance of counsel at the trial itself. It calls upon us to analyze whether potential substantial prejudice to defendant's rights inheres in the particular confrontation and the ability of counsel to help avoid that prejudice. </s> III. </s> The Government characterizes the lineup as a mere preparatory step in the gathering of the prosecution's evidence, not different for Sixth Amendment purposes from various other preparatory steps, such as systematized or scientific analyzing of the accused's fingerprints, blood sample, clothing, hair, and the like. We think there are differences which preclude such stages being characterized as critical stages at which the accused has the right to the presence of his counsel. Knowledge of the techniques of science and technology is sufficiently available, and the variables in techniques few enough, that the accused has the opportunity for a meaningful confrontation of the Government's case at [388 U.S. 218, 228] trial through the ordinary processes of cross-examination of the Government's expert witnesses and the presentation of the evidence of his own experts. The denial of a right to have his counsel present at such analyses does not therefore violate the Sixth Amendment; they are not critical stages since there is minimal risk that his counsel's absence at such stages might derogate from his right to a fair trial. </s> IV. </s> But the confrontation compelled by the State between the accused and the victim or witnesses to a crime to elicit identification evidence is peculiarly riddled with innumerable dangers and variable factors which might seriously, even crucially, derogate from a fair trial. The vagaries of eyewitness identification are well-known; the annals of criminal law are rife with instances of mistaken identification. 6 Mr. Justice Frankfurter once said: "What is the worth of identification testimony even when uncontradicted? The identification of strangers is proverbially untrustworthy. The hazards of such testimony are established by a formidable number of instances in the records of English and American trials. These instances are recent not due to the brutalities of ancient criminal procedure." The Case of Sacco and Vanzetti 30 (1927). A major factor contributing to the high incidence of miscarriage of justice from mistaken identification has been the degree of suggestion inherent in the manner in which the prosecution presents the suspect to witnesses for pretrial identification. A commentator [388 U.S. 218, 229] has observed that "[t]he influence of improper suggestion upon identifying witnesses probably accounts for more miscarriages of justice than any other single factor perhaps it is responsible for more such errors than all other factors combined." Wall, Eye-Witness Identification in Criminal Cases 26. Suggestion can be created intentionally or unintentionally in many subtle ways. 7 And the dangers for the suspect are particularly grave when the witness' opportunity for observation was insubstantial, and thus his susceptibility to suggestion the greatest. </s> Moreover, "[i]t is a matter of common experience that, once a witness has picked out the accused at the line-up, he is not likely to go back on his word later on, so that in practice the issue of identity may (in the absence of other relevant evidence) for all practical purposes be determined there and then, before the trial." 8 </s> The pretrial confrontation for purpose of identification may take the form of a lineup, also known as an "identification parade" or "showup," as in the present case, or presentation of the suspect alone to the witness, as in Stovall v. Denno, supra. It is obvious that risks of suggestion attend either form of confrontation and increase the dangers inhering in eyewitness identification. 9 But [388 U.S. 218, 230] as is the case with secret interrogations, there is serious difficulty in depicting what transpires at lineups and other forms of identification confrontations. "Privacy results in secrecy and this in turn results in a gap in our knowledge as to what in fact goes on . . . ." Miranda v. Arizona, supra, at 448. For the same reasons, the defense can seldom reconstruct the manner and mode of lineup identification for judge or jury at trial. Those participating in a lineup with the accused may often be police officers; 10 in any event, the participants' names are rarely recorded or divulged at trial. 11 The impediments to an objective observation are increased when the victim is the witness. Lineups are prevalent in rape and robbery prosecutions and present a particular hazard that a victim's understandable outrage may excite vengeful or spiteful motives. 12 In any event, neither witnesses nor lineup participants are apt to be alert for conditions prejudicial to the suspect. And if they were, it would likely be of scant benefit to the suspect since neither witnesses nor lineup participants are likely to be schooled in the detection of suggestive influences. 13 Improper influences [388 U.S. 218, 231] may go undetected by a suspect, guilty or not, who experiences the emotional tension which we might expect in one being confronted with potential accusers. 14 Even when he does observe abuse, if he has a criminal record he may be reluctant to take the stand and open up the admission of prior convictions. Moreover, any protestations by the suspect of the fairness of the lineup made at trial are likely to be in vain; 15 the jury's choice is between the accused's unsupported version and that of the police officers present. 16 In short, the accused's [388 U.S. 218, 232] inability effectively to reconstruct at trial any unfairness that occurred at the lineup may deprive him of his only opportunity meaningfully to attack the credibility of the witness' courtroom identification. </s> What facts have been disclosed in specific cases about the conduct of pretrial confrontations for identification illustrate both the potential for substantial prejudice to the accused at that stage and the need for its revelation at trial. A commentator provides some striking examples: </s> "In a Canadian case . . . the defendant had been picked out of a line-up of six men, of which he was the only Oriental. In other cases, a black-haired suspect was placed among a group of light-haired persons, tall suspects have been made to stand with short non-suspects, and, in a case where the perpetrator of the crime was known to be a youth, a suspect under twenty was placed in a line-up with five other persons, all of whom were forty or over." 17 </s> Similarly state reports, in the course of describing prior identifications admitted as evidence of guilt, reveal [388 U.S. 218, 233] numerous instances of suggestive procedures, for example, that all in the lineup but the suspect were known to the identifying witness, 18 that the other participants in a lineup were grossly dissimilar in appearance to the suspect, 19 that only the suspect was required to wear distinctive clothing which the culprit allegedly wore, 20 that the witness is told by the police that they have caught the culprit after which the defendant is brought before the witness alone or is viewed in jail, 21 that the suspect is pointed out before or during a lineup, 22 and that the participants in the lineup are asked to try on an article of clothing which fits only the suspect. 23 </s> The potential for improper influence is illustrated by the circumstances, insofar as they appear, surrounding the prior identifications in the three cases we decide today. In the present case, the testimony of the identifying [388 U.S. 218, 234] witnesses elicited on cross-examination revealed that those witnesses were taken to the courthouse and seated in the courtroom to await assembly of the lineup. The courtroom faced on a hallway observable to the witnesses through an open door. The cashier testified that she saw Wade "standing in the hall" within sight of an FBI agent. Five or six other prisoners later appeared in the hall. The vice president testified that he saw a person in the hall in the custody of the agent who "resembled the person that we identified as the one that had entered the bank." 24 </s> The lineup in Gilbert, supra, was conducted in an auditorium in which some 100 witnesses to several alleged state and federal robberies charged to Gilbert made wholesale identifications of Gilbert as the robber in each other's presence, a procedure said to be fraught with dangers of suggestion. 25 And the vice of suggestion created by the identification in Stovall, supra, was the presentation to the witness of the suspect alone handcuffed to police officers. It is hard to imagine a situation more clearly conveying the suggestion to the witness that the one presented is believed guilty by the police. See Frankfurter, The Case of Sacco and Vanzetti 31-32. </s> The few cases that have surfaced therefore reveal the existence of a process attended with hazards of serious unfairness to the criminal accused and strongly suggest the plight of the more numerous defendants who are unable to ferret out suggestive influences in the [388 U.S. 218, 235] secrecy of the confrontation. We do not assume that these risks are the result of police procedures intentionally designed to prejudice an accused. Rather we assume they derive from the dangers inherent in eyewitness identification and the suggestibility inherent in the context of the pretrial identification. Williams & Hammelmann, in one of the most comprehensive studies of such forms of identification, said, "[T]he fact that the police themselves have, in a given case, little or no doubt that the man put up for identification has committed the offense, and that their chief pre-occupation is with the problem of getting sufficient proof, because he has not `come clean,' involves a danger that this persuasion may communicate itself even in a doubtful case to the witness in some way . . . ." Identification Parades, Part I, 1963. Crim. L. Rev. 479, 483. </s> Insofar as the accused's conviction may rest on a courtroom identification in fact the fruit of a suspect pretrial identification which the accused is helpless to subject to effective scrutiny at trial, the accused is deprived of that right of cross-examination which is an essential safeguard to his right to confront the witnesses against him. Pointer v. Texas, 380 U.S. 400 . And even though cross-examination is a precious safeguard to a fair trial, it cannot be viewed as an absolute assurance of accuracy and reliability. Thus in the present context, where so many variables and pitfalls exist, the first line of defense must be the prevention of unfairness and the lessening of the hazards of eyewitness identification at the lineup itself. The trial which might determine the accused's fate may well not be that in the courtroom but that at the pretrial confrontation, with the State aligned against the accused, the witness the sole jury, and the accused unprotected against the overreaching, intentional or unintentional, and with little or no [388 U.S. 218, 236] effective appeal from the judgment there rendered by the witness "that's the man." </s> Since it appears that there is grave potential for prejudice, intentional or not, in the pretrial lineup, which may not be capable of reconstruction at trial, and since presence of counsel itself can often avert prejudice and assure a meaningful confrontation at trial, 26 there can be [388 U.S. 218, 237] little doubt that for Wade the post-indictment lineup was a critical stage of the prosecution at which he was "as much entitled to such aid [of counsel] . . . as at the trial itself." Powell v. Alabama, 287 U.S. 45, 57 . Thus both Wade and his counsel should have been notified of the impending lineup, and counsel's presence should have been a requisite to conduct of the lineup, absent an "intelligent waiver." See Carnley v. Cochran, 369 U.S. 506 . No substantial countervailing policy considerations have been advanced against the requirement of the presence of counsel. Concern is expressed that the requirement will forestall prompt identifications and result in obstruction of the confrontations. As for the first, we note that in the two cases in which the right to counsel is today held to apply, counsel had already been appointed and no argument is made in either case that notice to counsel would have prejudicially delayed the confrontations. Moreover, we leave open the question whether the presence of substitute counsel might not suffice where notification and presence of the suspect's own counsel would result in prejudicial delay. 27 And to refuse to recognize the right to counsel for fear that counsel will obstruct the course of justice is contrary to the [388 U.S. 218, 238] basic assumptions upon which this Court has operated in Sixth Amendment cases. We rejected similar logic in Miranda v. Arizona concerning presence of counsel during custodial interrogation, 384 U.S., at 480 -481: </s> "[A]n attorney is merely exercising the good professional judgment he has been taught. This is not cause for considering the attorney a menace to law enforcement. He is merely carrying out what he is sworn to do under his oath to protect to the extent of his ability the rights of his client. In fulfilling this responsibility the attorney plays a vital role in the administration of criminal justice under our Constitution." </s> In our view counsel can hardly impede legitimate law enforcement; on the contrary, for the reasons expressed, law enforcement may be assisted by preventing the infiltration of taint in the prosecution's identification evidence. 28 That result cannot help the guilty avoid conviction but can only help assure that the right man has been brought to justice. 29 </s> [388 U.S. 218, 239] </s> Legislative or other regulations, such as those of local police departments, which eliminate the risks of abuse and unintentional suggestion at lineup proceedings and the impediments to meaningful confrontation at trial may also remove the basis for regarding the stage as "critical." 30 But neither Congress nor the federal authorities have seen fit to provide a solution. What we hold today "in no way creates a constitutional strait-jacket which will handicap sound efforts at reform, nor is it intended to have this effect." Miranda v. Arizona, supra, at 467. </s> V. </s> We come now to the question whether the denial of Wade's motion to strike the courtroom identification by the bank witnesses at trial because of the absence of his counsel at the lineup required, as the Court of Appeals held, the grant of a new trial at which such evidence is [388 U.S. 218, 240] to be excluded. We do not think this disposition can be justified without first giving the Government the opportunity to establish by clear and convincing evidence that the in-court identifications were based upon observations of the suspect other than the lineup identification. See Murphy v. Waterfront Commission, 378 U.S. 52, 79 , n. 18. 31 Where, as here, the admissibility of evidence of the lineup identification itself is not involved, a per se rule of exclusion of courtroom identification would be unjustified. 32 See Nardone v. United States, 308 U.S. 338, 341 . A rule limited solely to the exclusion of testimony concerning identification at the lineup itself, without regard to admissibility of the courtroom identification, would render the right to counsel an empty one. The lineup is most often used, as in the present case, to crystallize the witnesses' identification of the defendant for future reference. We have already noted that the lineup identification will have that effect. The State may then rest upon the witnesses' unequivocal courtroom identification, and not mention the pretrial identification as part of the State's case at trial. Counsel is then in the predicament in which Wade's counsel found himself realizing that possible unfairness at the lineup may be the sole means of attack upon the unequivocal courtroom identification, and having to probe in the dark [388 U.S. 218, 241] in an attempt to discover and reveal unfairness, while bolstering the government witness' courtroom identification by bringing out and dwelling upon his prior identification. Since counsel's presence at the lineup would equip him to attack not only the lineup identification but the courtroom identification as well, limiting the impact of violation of the right to counsel to exclusion of evidence only of identification at the lineup itself disregards a critical element of that right. </s> We think it follows that the proper test to be applied in these situations is that quoted in Wong Sun v. United States, 371 U.S. 471, 488 , "`[W]hether, granting establishment of the primary illegality, the evidence to which instant objection is made has been come at by exploitation of that illegality or instead by means sufficiently distinguishable to be purged of the primary taint.' Maguire, Evidence of Guilt 221 (1959)." See also Hoffa v. United States, 385 U.S. 293, 309 . Application of this test in the present context requires consideration of various factors; for example, the prior opportunity to observe the alleged criminal act, the existence of any discrepancy between any pre-lineup description and the defendant's actual description, any identification prior to lineup of another person, the identification by picture of the defendant prior to the lineup, failure to identify the defendant on a prior occasion, and the lapse of time between the alleged act and the lineup identification. It is also relevant to consider those facts which, despite the absence of counsel, are disclosed concerning the conduct of the lineup. 33 </s> [388 U.S. 218, 242] </s> We doubt that the Court of Appeals applied the proper test for exclusion of the in-court identification of the two witnesses. The court stated that "it cannot be said with any certainty that they would have recognized appellant at the time of trial if this intervening lineup had not occurred," and that the testimony of the two witnesses "may well have been colored by the illegal procedure [and] was prejudicial." 358 F.2d, at 560. Moreover, the court was persuaded, in part, by the "compulsory verbal responses made by Wade at the instance of the Special Agent." Ibid. This implies the erroneous holding that Wade's privilege against self-incrimination was violated so that the denial of counsel required exclusion. </s> On the record now before us we cannot make the determination whether the in-court identifications had an independent origin. This was not an issue at trial, although there is some evidence relevant to a determination. That inquiry is most properly made in the District Court. We therefore think the appropriate procedure to be followed is to vacate the conviction pending a hearing to determine whether the in-court identifications had an independent source, or whether, in any event, the introduction of the evidence was harmless error, Chapman v. California, 386 U.S. 18 , and for the District Court to reinstate the conviction or order a new trial, as may be proper. See United States v. Shotwell Mfg. Co., 355 U.S. 233, 245 -246. [388 U.S. 218, 243] </s> The judgment of the Court of Appeals is vacated and the case is remanded to that court with direction to enter a new judgment vacating the conviction and remanding the case to the District Court for further proceedings consistent with this opinion. </s> It is so ordered. </s> THE CHIEF JUSTICE joins the opinion of the Court except for Part I, from which he dissents for the reasons expressed in the opinion of MR. JUSTICE FORTAS. </s> MR. JUSTICE DOUGLAS joins the opinion of the Court except for Part I. On that phase of the case he adheres to the dissenting views in Schmerber v. California, 384 U.S. 757, 772 -779, since he believes that compulsory lineup violates the privilege against self-incrimination contained in the Fifth Amendment. </s> Footnotes [Footnote 1 Holt was decided before Weeks v. United States, 232 U.S. 383 , fashioned the rule excluding illegally obtained evidence in a federal prosecution. The Court therefore followed Adams v. New York, 192 U.S. 585 , in holding that, in any event, "when he is exhibited, whether voluntarily or by order, and even if the order goes too far, the evidence, if material, is competent." 218 U.S., at 253 . </s> [Footnote 2 See Powell v. Alabama, 287 U.S. 45, 60 -65; Beaney, Right to Counsel in American Courts 8-26. </s> [Footnote 3 See Note, 73 Yale L. J. 1000, 1040-1042 (1964); Comment, 53 Calif. L. Rev. 337, 347-348 (1965). </s> [Footnote 4 See, e. g., Powell v. Alabama, 287 U.S. 45 ; Hamilton v. Alabama, 368 U.S. 52 ; White v. Maryland, 373 U.S. 59 ; Escobedo v. Illinois, 378 U.S. 478 ; Massiah v. United States, 377 U.S. 201 . </s> [Footnote 5 See cases cited n. 4, supra; Avery v. Alabama, 308 U.S. 444, 446 . </s> [Footnote 6 Borchard, Convicting the Innocent; Frank & Frank, Not Guilty; Wall, Eye-Witness Identification in Criminal Cases; 3 Wigmore, Evidence 786a (3d ed. 1940); Rolph, Personal Identity; Gross, Criminal Investigation 47-54 (Jackson ed. 1962); Williams, Proof of Guilt 83-98 (1955); Wills, Circumstantial Evidence 192-205 (7th ed. 1937); Wigmore, The Science of Judicial Proof 250-253 (3d ed. 1937). </s> [Footnote 7 See Wall, supra, n. 6, at 26-65; Murray, The Criminal Lineup at Home and Abroad, 1966 Utah L. Rev. 610; Napley, Problems of Effecting the Presentation of the Case for a Defendant, 66 Col. L. Rev. 94, 98-99 (1966); Williams, Identification Parades, 1955. Crim. L. Rev. (Eng.) 525; Paul, Identification of Accused Persons, 12 Austl. L. J. 42 (1938); Houts, From Evidence to Proof 25; Williams & Hammelmann, Identification Parades, Parts I & II, 1963. Crim. L. Rev. 479-490, 545-555; Gorphe, Showing Prisoners to Witnesses for Identification, 1 Am. J. Police Sci. 79 (1930); Wigmore, The Science of Judicial Proof, supra, n. 6, at 253; Devlin, The Criminal Prosecution in England 70; Williams, Proof of Guilt 95-97. </s> [Footnote 8 Williams & Hammelmann, Identification Parades, Part I, 1963. Crim. L. Rev. 479, 482. </s> [Footnote 9 Williams & Hammelmann, Identification Parades, Part I, supra, n. 7. </s> [Footnote 10 See Wall, supra, n. 6, at 57-59; see, e. g., People v. Boney, 28 Ill. 2d 505, 192 N. E. 2d 920 (1963); People v. James, 218 Cal. App. 2d 166, 32 Cal. Rptr. 283 (1963). </s> [Footnote 11 See Rolph, Personal Identity 50: "The bright burden of identity, at these parades, is lifted from the innocent participants to hover about the suspect, leaving the rest featureless and unknown and without interest." </s> [Footnote 12 See Williams & Hammelmann, Identification Parades, Part II, 1963. Crim. L. Rev. 545, 546; Borchard, Convicting the Innocent 367. </s> [Footnote 13 An additional impediment to the detection of such influences by participants, including the suspect, is the physical conditions often surrounding the conduct of the lineup. In many, lights shine on the stage in such a way that the suspect cannot see the witness. See Gilbert v. United States, 366 F.2d 923 (C. A. 9th Cir. 1966). In some a one-way mirror is used and what is said on the witness' [388 U.S. 218, 231] side cannot be heard. See Rigney v. Hendrick, 355 F.2d 710, 711, n. 2 (C. A. 3d Cir. 1965); Aaron v. State, 273 Ala. 337, 139 So.2d 309 (1961). </s> [Footnote 14 Williams & Hammelmann, Part I, supra, n. 7, at 489; Napley, supra, n. 7, at 99. </s> [Footnote 15 See In re Groban, 352 U.S. 330, 340 (BLACK, J., dissenting). The difficult position of defendants in attempting to protest the manner of pretrial identification is illustrated by the many state court cases in which contentions of blatant abuse rested on their unsupportable allegations, usually controverted by the police officers present. See, e. g., People v. Shields, 70 Cal. App. 2d 628, 634-635, 161 P.2d 475, 478-479 (1945); People v. Hicks, 22 Ill. 2d 364, 176 N. E. 2d 810 (1961); State v. Hill, 193 Kan. 512, 394 P.2d 106 (1964); Redmon v. Commonwealth, 321 S. W. 2d 397 (Ky. Ct. App. 1959); Lubinski v. State, 180 Md. 1, 8, 22 A. 2d 455, 459 (1941). For a striking case in which hardly anyone agreed upon what occurred at the lineup, including who identified whom, see Johnson v. State, 237 Md. 283, 206 A. 2d 138 (1965). </s> [Footnote 16 An instructive example of the defendant's predicament may be found in Proctor v. State, 223 Md. 394, 164 A. 2d 708 (1960). A prior identification is admissible in Maryland only under the salutary rule that it cannot have been made "under conditions of unfairness or unreliability." Id., at 401, 164 A. 2d, at 712. Against the defendant's contention that these conditions had not been met, the Court stated: </s> "In the instant case, there are no such facts as, in our judgment, would call for a finding that the identification . . . was made under conditions of unfairness or unreliability. The relatively large number of persons put into the room together for [the victim] to look at [388 U.S. 218, 232] is one circumstance indicating fairness, and the fact that the police officer was unable to remember the appearances of the others and could not recall if they had physical characteristics similar to [the defendant's] or not is at least suggestive that they were not of any one type or that they all differed markedly in looks from the defendant. There is no evidence that the Police Sergeant gave the complaining witness any indication as to which of the thirteen men was the defendant; the Sergeant's testimony is simply that he asked [the victim] if he could identify [the defendant] after having put the thirteen men in the courtroom." </s> [Footnote 17 Wall, Eye-Witness Identification in Criminal Cases 53. For other such examples see Houts, From Evidence to Proof 25; Frankfurter, The Case of Sacco and Vanzetti 12-14, 30-32; 3 Wigmore, Evidence 786a, at 164, n. 2 (3d ed. 1940); Paul, Identification of Accused Persons, 12 Austl. L. J. 42, 44 (1938); Rolph, Personal Identity 34-43. </s> [Footnote 18 See People v. James, 218 Cal. App. 2d 166, 170-171, 32 Cal. Rptr. 283, 286 (1963); People v. Boney, 28 Ill. 2d 505, 192 N. E. 2d 920 (1963). </s> [Footnote 19 See Fredericksen v. United States, 105 U.S. App. D.C. 262, 266 F.2d 463 (1959); People v. Adell, 75 Ill. App. 2d 385, 221 N. E. 2d 72 (1966); State v. Hill, 193 Kan. 512, 394 P.2d 106 (1964); People v. Seppi, 221 N. Y. 62, 116 N. E. 793 (1917); State v. Duggan, 215 Ore. 151, 162, 333 P.2d 907, 912 (1958). </s> [Footnote 20 See People v. Crenshaw, 15 Ill. 2d 458, 460, 155 N. E. 2d 599, 602 (1959); Presley v. State, 224 Md. 550, 168 A. 2d 510 (1961); State v. Ramirez, 76 N. M. 72, 412 P.2d 246 (1966); State v. Bazemore, 193 N.C. 336, 137 S. E. 172 (1927); Barrett v. State, 190 Tenn. 366, 229 S. W. 2d 516 (1950). </s> [Footnote 21 See Aaron v. State, 273 Ala. 337, 139 So.2d 309 (1961); Bishop v. State, 236 Ark. 12, 364 S. W. 2d 676 (1963); People v. Thompson, 406 Ill. 555, 94 N. E. 2d 349 (1950); People v. Berne, 384 Ill. 334, 51 N. E. 2d 578 (1943); People v. Martin, 304 Ill. 494, 136 N. E. 711 (1922); Barrett v. State, 190 Tenn. 366, 229 S. W. 2d 516 (1950). </s> [Footnote 22 See People v. Clark, 28 Ill. 2d 423, 192 N. E. 2d 851 (1963); Gillespie v. State, 355 P.2d 451, 454 (Okla. Cr. 1960). </s> [Footnote 23 See People v. Parham, 60 Cal. 2d 378, 384 P.2d 1001 (1963). </s> [Footnote 24 See Wall, supra, n. 6, at 48; Napley, supra, n. 7, at 99: "[W]hile many identification parades are conducted by the police with scrupulous regard for fairness, it is not unknown for the identifying witness to be placed in a position where he can see the suspect before the parade forms . . . ." </s> [Footnote 25 Williams & Hammelmann, Part I, supra, n. 7, at 486; Burtt, Applied Psychology 254-255. </s> [Footnote 26 One commentator proposes a model statute providing not only for counsel, but other safeguards as well: </s> "Most, if not all, of the attacks on the lineup process could be averted by a uniform statute modeled upon the best features of the civilian codes. Any proposed statute should provide for the right to counsel during any lineup or during any confrontation. Provision should be made that any person, whether a victim or a witness, must give a description of the suspect before he views any arrested person. A written record of this description should be required, and the witness should be made to sign it. This written record would be available for inspection by defense counsel for copying before the trial and for use at the trial in testing the accuracy of the identification made during the lineup and during the trial. </s> "This ideal statute would require at least six persons in addition to the accused in a lineup, and these persons would have to be of approximately the same height, weight, coloration of hair and skin, and bodily types as the suspect. In addition, all of these men should, as nearly as possible, be dressed alike. If distinctive garb was used during the crime, the suspect should not be forced to wear similar clothing in the lineup unless all of the other persons are similarly garbed. A complete written report of the names, addresses, descriptive details of the other persons in the lineup, and of everything which transpired during the identification would be mandatory. This report would include everything stated by the identifying witness during this step, including any reasons given by him as to what features, etc., have sparked his recognition. </s> "This statute should permit voice identification tests by having each person in the lineup repeat identical innocuous phrases, and it would be impermissible to force the use of words allegedly used during a criminal act. </s> "The statute would enjoin the police from suggesting to any viewer that one or more persons in the lineup had been arrested as a suspect. If more than one witness is to make an identification, each [388 U.S. 218, 237] witness should be required to do so separately and should be forbidden to speak to another witness until all of them have completed the process. </s> "The statute could require the use of movie cameras and tape recorders to record the lineup process in those states which are financially able to afford these devices. Finally, the statute should provide that any evidence obtained as the result of a violation of this statute would be inadmissible." Murray, The Criminal Lineup at Home and Abroad, 1966 Utah L. Rev. 610, 627-628. </s> [Footnote 27 Although the right to counsel usually means a right to the suspect's own counsel, provision for substitute counsel may be justified on the ground that the substitute counsel's presence may eliminate the hazards which render the lineup a critical stage for the presence of the suspect's own counsel. </s> [Footnote 28 Concern is also expressed that the presence of counsel will force divulgence of the identity of government witnesses whose identity the Government may want to conceal. To the extent that this is a valid or significant state interest there are police practices commonly used to effect concealment, for example, masking the face. </s> [Footnote 29 Many other nations surround the lineup with safeguards against prejudice to the suspect. In England the suspect must be allowed the presence of his solicitor or a friend, Napley, supra, n. 7, at 98-99; Germany requires the presence of retained counsel; France forbids the confrontation of the suspect in the absence of his counsel; Spain, Mexico, and Italy provide detailed procedures prescribing the conditions under which confrontation must occur under the supervision of a judicial officer who sees to it that the proceedings are officially recorded to assure adequate scrutiny at trial. Murray, The Criminal Lineup at Home and Abroad, 1966 Utah L. Rev. 610, 621-627. </s> [Footnote 30 Thirty years ago Wigmore suggested a "scientific method" of pretrial identification "to reduce the risk of error hitherto inherent in such proceedings." Wigmore, The Science of Judicial Proof 541 (3d ed. 1937). Under this approach, at least 100 talking films would be prepared of men from various occupations, races, etc. Each would be photographed in a number of stock movements, with and without hat and coat, and would read aloud a standard passage. The suspect would be filmed in the same manner. Some 25 of the films would be shown in succession in a special projection room in which each witness would be provided an electric button which would activate a board backstage when pressed to indicate that the witness had identified a given person. Provision would be made for the degree of hesitancy in the identification to be indicated by the number of presses. Id., at 540-541. Of course, the more systematic and scientific a process or proceeding, including one for purposes of identification, the less the impediment to reconstruction of the conditions bearing upon the reliability of that process or proceeding at trial. See discussion of fingerprint and like tests, Part III, supra, and of handwriting exemplars in Gilbert v. California, supra. </s> [Footnote 31 See Goldstein v. United States, 316 U.S. 114, 124 , n. 1 (Murphy, J., dissenting). "[A]fter an accused sustains the initial burden, imposed by Nardone v. United States, 308 U.S. 338 , of proving to the satisfaction of the trial judge in the preliminary hearing that wire-tapping was unlawfully employed, as petitioners did here, it is only fair that the burden should then shift to the Government to convince the trial judge that its proof had an independent origin." </s> [Footnote 32 We reach a contrary conclusion in Gilbert v. California, supra, as to the admissibility of the witness' testimony that he also identified the accused at the lineup. </s> [Footnote 33 Thus it is not the case that "[i]t matters not how well the witness knows the suspect, whether the witness is the suspect's mother, brother, or long-time associate, and no matter how long or well the witness observed the perpetrator at the scene of the crime." Such factors will have an important bearing upon the true basis of [388 U.S. 218, 242] the witness' in-court identification. Moreover, the State's inability to bolster the witness' courtroom identification by introduction of the lineup identification itself, see Gilbert v. California, supra, will become less significant the more the evidence of other opportunities of the witness to observe the defendant. Thus where the witness is a "kidnap victim who has lived for days with his abductor" the value to the State of admission of the lineup identification is indeed marginal, and such identification would be a mere formality. </s> MR. JUSTICE CLARK, concurring. </s> With reference to the lineup point involved in this case I cannot, for the life of me, see why a lineup is not a critical stage of the prosecution. Identification of the suspect a prerequisite to establishment of guilt occurs at this stage, and with Miranda v. Arizona, 384 U.S. 436 (1966), on the books, the requirement of the presence of counsel arises, unless waived by the suspect. I dissented in Miranda but I am bound by it now, as we all are. Schmerber v. California, 384 U.S. 757 (1966), precludes petitioner's claim of self-incrimination. I therefore join the opinion of the Court. </s> MR. JUSTICE BLACK, dissenting in part and concurring in part. </s> On March 23, 1965, respondent Wade was indicted for robbing a bank; on April 2, he was arrested; and on April 26, the court appointed a lawyer to represent him. [388 U.S. 218, 244] Fifteen days later, while Wade was still in custody, an FBI agent took him and several other prisoners into a room at the courthouse, directed each to participate in a lineup wearing strips of tape on his face and to speak the words used by the robber at the bank. This was all done in order to let the bank employee witnesses look at Wade for identification purposes. Wade's lawyer was not notified of or present at the lineup to protect his client's interests. At Wade's trial, two bank employees identified him in the courtroom. Wade objected to this testimony, when, on cross-examination, his counsel elicited from these witnesses the fact that they had seen Wade in the lineup. He contended that by forcing him to participate in the lineup, wear strips of tape on his face, and repeat the words used by the robber, all without counsel, the Government had (1) compelled him to be a witness against himself in violation of the Fifth Amendment, and (2) deprived him of the assistance of counsel for his defense in violation of the Sixth Amendment. </s> The Court in Part I of its opinion rejects Wade's Fifth Amendment contention. From that I dissent. In Parts II-IV of its opinion, the Court sustains Wade's claim of denial of right to counsel in the out-of-court lineup, and in that I concur. In Part V, the Court remands the case to the District Court to consider whether the courtroom identification of Wade was the fruit of the illegal lineup, and, if it was, to grant him a new trial unless the court concludes that the courtroom identification was harmless error. I would reverse the Court of Appeals' reversal of Wade's conviction, but I would not remand for further proceedings. Since the prosecution did not use the out-of-court lineup identification against Wade at his trial, I believe the conviction should be affirmed. [388 U.S. 218, 245] </s> I. </s> In rejecting Wade's claim that his privilege against self-incrimination was violated by compelling him to appear in the lineup wearing the tape and uttering the words given him by the police, the Court relies on the recent holding in Schmerber v. California, 384 U.S. 757 . In that case the Court held that taking blood from a man's body against his will in order to convict him of a crime did not compel him to be a witness against himself. I dissented from that holding, 384 U.S., at 773 , and still dissent. The Court's reason for its holding was that the sample of Schmerber's blood taken in order to convict him of crime was neither "testimonial" nor "communicative" evidence. I think it was both. It seems quite plain to me that the Fifth Amendment's Self-incrimination Clause was designed to bar the Government from forcing any person to supply proof of his own crime, precisely what Schmerber was forced to do when he was forced to supply his blood. The Government simply took his blood against his will and over his counsel's protest for the purpose of convicting him of crime. So here, having Wade in its custody awaiting trial to see if he could or would be convicted of crime, the Government forced him to stand in a lineup, wear strips on his face, and speak certain words, in order to make it possible for government witnesses to identify him as a criminal. Had Wade been compelled to utter these or any other words in open court, it is plain that he would have been entitled to a new trial because of having been compelled to be a witness against himself. Being forced by the Government to help convict himself and to supply evidence against himself by talking outside the courtroom is equally violative of his constitutional right not to be compelled to be a witness against himself. Consequently, because of this violation of the Fifth Amendment, [388 U.S. 218, 246] and not because of my own personal view that the Government's conduct was "unfair," "prejudicial," or "improper," I would prohibit the prosecution's use of lineup identification at trial. </s> II. </s> I agree with the Court, in large part because of the reasons it gives, that failure to notify Wade's counsel that Wade was to be put in a lineup by government officers and to be forced to talk and wear tape on his face denied Wade the right to counsel in violation of the Sixth Amendment. Once again, my reason for this conclusion is solely the Sixth Amendment's guarantee that "the accused shall enjoy the right . . . to have the Assistance of Counsel for his defence." As this Court's opinion points out, "[t]he plain wording of this guarantee thus encompasses counsel's assistance whenever necessary to assure a meaningful `defence.'" And I agree with the Court that a lineup is a "critical stage" of the criminal proceedings against an accused, because it is a stage at which the Government makes use of his custody to obtain crucial evidence against him. Besides counsel's presence at the lineup being necessary to protect the defendant's specific constitutional rights to confrontation and the assistance of counsel at the trial itself, the assistance of counsel at the lineup is also necessary to protect the defendant's in-custody assertion of his privilege against self-incrimination, Miranda v. Arizona, 384 U.S. 436 , for, contrary to the Court, I believe that counsel may advise the defendant not to participate in the lineup or to participate only under certain conditions. </s> I agree with the Court that counsel's presence at the lineup is necessary to protect the accused's right to a "fair trial," only if by "fair trial" the Court means a trial in accordance with the "Law of the Land" as specifically set out in the Constitution. But there are [388 U.S. 218, 247] implications in the Court's opinion that by a "fair trial" the Court means a trial which a majority of this Court deems to be "fair" and that a lineup is a "critical stage" only because the Court, now assessing the "innumerable dangers" which inhere in it, thinks it is such. That these implications are justified is evidenced by the Court's suggestion that "[l]egislative or other regulations . . . which eliminate the risks of abuse . . . at lineup proceedings . . . may also remove the basis for regarding the stage as `critical.'" And it is clear from the Court's opinion in Gilbert v. California, post, p. 263, that it is willing to make the Sixth Amendment's guarantee of right to counsel dependent on the Court's own view of whether a particular stage of the proceedings though "critical" in the sense of the prosecution's gathering of evidence is "critical" to the Court's own view of a "fair trial." I am wholly unwilling to make the specific constitutional right of counsel dependent on judges' vague and transitory notions of fairness and their equally transitory, though thought to be empirical, assessment of the "risk that . . . counsel's absence . . . might derogate from . . . [a defendant's] right to a fair trial." Ante, at 228. See Pointer v. Texas, 380 U.S. 400, 412 (concurring opinion of Goldberg, J.). </s> III. </s> I would reverse Wade's conviction without further ado had the prosecution at trial made use of his lineup identification either in place of courtroom identification or to bolster in a harmful manner crucial courtroom identification. But the prosecution here did neither of these things. After prosecution witnesses under oath identified Wade in the courtroom, it was the defense, and not the prosecution, which brought out the prior lineup identification. While stating that "a per se rule of exclusion of courtroom identification would be unjustified," the Court, nevertheless, remands this case for "a [388 U.S. 218, 248] hearing to determine whether the in-court identifications had an independent source," or were the tainted fruits of the invalidly conducted lineup. From this holding I dissent. </s> In the first place, even if this Court has power to establish such a rule of evidence, I think the rule fashioned by the Court is unsound. The "tainted fruit" determination required by the Court involves more than considerable difficulty. I think it is practically impossible. How is a witness capable of probing the recesses of his mind to draw a sharp line between a courtroom identification due exclusively to an earlier lineup and a courtroom identification due to memory not based on the lineup? What kind of "clear and convincing evidence" can the prosecution offer to prove upon what particular events memories resulting in an in-court identification rest? How long will trials be delayed while judges turn psychologists to probe the subconscious minds of witnesses? All these questions are posed but not answered by the Court's opinion. In my view, the Fifth and Sixth. Amendments are satisfied if the prosecution is precluded from using lineup identification as either an alternative to or corroboration of courtroom identification. If the prosecution does neither and its witnesses under oath identify the defendant in the courtroom, then I can find no justification for stopping the trial in midstream to hold a lengthy "tainted fruit" hearing. The fact of and circumstances surrounding a prior lineup identification might be used by the defense to impeach the credibility of the in-court identifications, but not to exclude them completely. </s> But more important, there is no constitutional provision upon which I can rely that directly or by implication gives this Court power to establish what amounts to a constitutional rule of evidence to govern, not only the Federal Government, but the States in their trial of state [388 U.S. 218, 249] crimes under state laws in state courts. See Gilbert v. California, supra. The Constitution deliberately reposed in the States very broad power to create and to try crimes according to their own rules and policies. Spencer v. Texas, 385 U.S. 554 . Before being deprived of this power, the least that they can ask is that we should be able to point to a federal constitutional provision that either by express language or by necessary implication grants us the power to fashion this novel rule of evidence to govern their criminal trials. Cf. Berger v. New York, ante, p. 70 (BLACK, J., dissenting). Neither Nardone v. United States, 308 U.S. 338 , nor Wong Sun v. United States, 371 U.S. 471 , both federal cases and both decided "in other contexts," supports what the Court demands of the States today. </s> Perhaps the Court presumes to write this constitutional rule of evidence on the basis of the Fourteenth Amendment's Due Process Clause. This is not the time or place to consider that claim. Suffice it for me to say briefly that I find no such authority in the Due Process Clause. It undoubtedly provides that a person must be tried in accordance with the "Law of the Land." Consequently, it violates due process to try a person in a way prohibited by the Fourth, Fifth, or Sixth Amendments of our written Constitution. But I have never been able to subscribe to the dogma that the Due Process Clause empowers this Court to declare any law, including a rule of evidence, unconstitutional which it believes is contrary to tradition, decency, fundamental justice, or any of the other wide-meaning words used by judges to claim power under the Due Process Clause. See, e. g., Rochin v. California, 342 U.S. 165 . I have an abiding idea that if the Framers had wanted to let judges write the Constitution on any such day-to-day beliefs of theirs, they would have said so instead of so carefully defining their grants and prohibitions in a written constitution. [388 U.S. 218, 250] With no more authority than the Due Process Clause I am wholly unwilling to tell the state or federal courts that the United States Constitution forbids them to allow courtroom identification without the prosecution's first proving that the identification does not rest in whole or in part on an illegal lineup. Should I do so, I would feel that we are deciding what the Constitution is, not from what it says, but from what we think it would have been wise for the Framers to put in it. That to me would be "judicial activism" at its worst. I would leave the States and Federal Government free to decide their own rules of evidence. That, I believe, is their constitutional prerogative. </s> I would affirm Wade's conviction. </s> MR. JUSTICE WHITE, whom MR. JUSTICE HARLAN and MR. JUSTICE STEWART join, dissenting in part and concurring in part. </s> The Court has again propounded a broad constitutional rule barring use of a wide spectrum of relevant and probative evidence, solely because a step in its ascertainment or discovery occurs outside the presence of defense counsel. This was the approach of the Court in Miranda v. Arizona, 384 U.S. 436 . I objected then to what I thought was an uncritical and doctrinaire approach without satisfactory factual foundation. I have much the same view of the present ruling and therefore dissent from the judgment and from Parts II, IV, and V of the Court's opinion. </s> The Court's opinion is far-reaching. It proceeds first by creating a new per se rule of constitutional law: a criminal suspect cannot be subjected to a pretrial identification process in the absence of his counsel without violating the Sixth Amendment. If he is, the State may not buttress a later courtroom identification of the witness by any reference to the previous identification. Furthermore, the courtroom identification is not admissible [388 U.S. 218, 251] at all unless the State can establish by clear and convincing proof that the testimony is not the fruit of the earlier identification made in the absence of defendant's counsel admittedly a heavy burden for the State and probably an impossible one. To all intents and purposes, courtroom identifications are barred if pretrial identifications have occurred without counsel being present. </s> The rule applies to any lineup, to any other techniques employed to produce an identification and a fortiori to a face-to-face encounter between the witness and the suspect alone, regardless of when the identification occurs, in time or place, and whether before or after indictment or information. It matters not how well the witness knows the suspect, whether the witness is the suspect's mother, brother, or long-time associate, and no matter how long or well the witness observed the perpetrator at the scene of the crime. The kidnap victim who has lived for days with his abductor is in the same category as the witness who has had only a fleeting glimpse of the criminal. Neither may identify the suspect without defendant's counsel being present. The same strictures apply regardless of the number of other witnesses who positively identify the defendant and regardless of the corroborative evidence showing that it was the defendant who had committed the crime. </s> The premise for the Court's rule is not the general unreliability of eyewitness identifications nor the difficulties inherent in observation, recall, and recognition. The Court assumes a narrower evil as the basis for its rule improper police suggestion which contributes to erroneous identifications. The Court apparently believes that improper police procedures are so widespread that a broad prophylactic rule must be laid down, requiring the presence of counsel at all pretrial identifications, in [388 U.S. 218, 252] order to detect recurring instances of police misconduct. 1 I do not share this pervasive distrust of all official investigations. None of the materials the Court relies upon supports it. 2 Certainly, I would bow to solid fact, but the Court quite obviously does not have before it any reliable, comprehensive survey of current police practices on which to base its new rule. Until it does, the Court should avoid excluding relevant evidence from state criminal trials. Cf. Washington v. Texas, ante, p. 14. </s> The Court goes beyond assuming that a great majority of the country's police departments are following improper practices at pretrial identifications. To find the lineup a "critical" stage of the proceeding and to exclude identifications made in the absence of counsel, the Court must also assume that police "suggestion," if it occurs at all, leads to erroneous rather than accurate identifications and that reprehensible police conduct will have an unavoidable and largely undiscoverable impact on the trial. This in turn assumes that there is now no adequate source from which defense counsel can learn about the circumstances of the pretrial identification in order to place before the jury all of the considerations which should enter into an appraisal of courtroom identification [388 U.S. 218, 253] evidence. But these are treacherous and unsupported assumptions, 3 resting as they do on the notion that the defendant will not be aware, that the police and the witnesses will forget or prevaricate, that defense counsel will be unable to bring out the truth and that neither jury, judge, nor appellate court is a sufficient safeguard against unacceptable police conduct occurring at a pretrial identification procedure. I am unable to share the Court's view of the willingness of the police and the ordinary citizen-witness to dissemble, either with respect to the identification of the defendant or with respect to the circumstances surrounding a pretrial identification. </s> There are several striking aspects to the Court's holding. First, the rule does not bar courtroom identifications where there have been no previous identifications in the presence of the police, although when identified in the courtroom, the defendant is known to be in custody and charged with the commission of a crime. Second, the Court seems to say that if suitable legislative standards were adopted for the conduct of pretrial identifications, thereby lessening the hazards in such confrontations, [388 U.S. 218, 254] it would not insist on the presence of counsel. But if this is true, why does not the Court simply fashion what it deems to be constitutionally acceptable procedures for the authorities to follow? Certainly the Court is correct in suggesting that the new rule will be wholly inapplicable where police departments themselves have established suitable safeguards. </s> Third, courtroom identification may be barred, absent counsel at a prior identification, regardless of the extent of counsel's information concerning the circumstances of the previous confrontation between witness and defendant apparently even if there were recordings or sound-movies of the events as they occurred. But if the rule is premised on the defendant's right to have his counsel know, there seems little basis for not accepting other means to inform. A disinterested observer, recordings, photographs any one of them would seem adequate to furnish the basis for a meaningful cross-examination of the eyewitness who identifies the defendant in the courtroom. </s> I share the Court's view that the criminal trial, at the very least, should aim at truthful factfinding, including accurate eyewitness identifications. I doubt, however, on the basis of our present information, that the tragic mistakes which have occurred in criminal trials are as much the product of improper police conduct as they are the consequence of the difficulties inherent in eyewitness testimony and in resolving evidentiary conflicts by court or jury. I doubt that the Court's new rule will obviate these difficulties, or that the situation will be measurably improved by inserting defense counsel into the investigative processes of police departments everywhere. </s> But, it may be asked, what possible state interest militates against requiring the presence of defense counsel at lineups? After all, the argument goes, he may do some good, he may upgrade the quality of identification evidence in state courts and he can scarcely do any [388 U.S. 218, 255] harm. Even if true, this is a feeble foundation for fastening an ironclad constitutional rule upon state criminal procedures. Absent some reliably established constitutional violation, the processes by which the States enforce their criminal laws are their own prerogative. The States do have an interest in conducting their own affairs, an interest which cannot be displaced simply by saying that there are no valid arguments with respect to the merits of a federal rule emanating from this Court. </s> Beyond this, however, requiring counsel at pretrial identifications as an invariable rule trenches on other valid state interests. One of them is its concern with the prompt and efficient enforcement of its criminal laws. Identifications frequently take place after arrest but before an indictment is returned or an information is filed. The police may have arrested a suspect on probable cause but may still have the wrong man. Both the suspect and the State have every interest in a prompt identification at that stage, the suspect in order to secure his immediate release and the State because prompt and early identification enhances accurate identification and because it must know whether it is on the right investigative track. Unavoidably, however, the absolute rule requiring the presence of counsel will cause significant delay and it may very well result in no pretrial identification at all. Counsel must be appointed and a time arranged convenient for him and the witnesses. Meanwhile, it may be necessary to file charges against the suspect who may then be released on bail, in the federal system very often on his own recognizance, with neither the State nor the defendant having the benefit of a properly conducted identification procedure. </s> Nor do I think the witnesses themselves can be ignored. They will now be required to be present at the convenience of counsel rather than their own. Many may be much less willing to participate if the identification [388 U.S. 218, 256] stage is transformed into an adversary proceeding not under the control of a judge. Others may fear for their own safety if their identity is known at an early date, especially when there is no way of knowing until the lineup occurs whether or not the police really have the right man. 4 </s> Finally, I think the Court's new rule is vulnerable in terms of its own unimpeachable purpose of increasing the reliability of identification testimony. </s> Law enforcement officers have the obligation to convict the guilty and to make sure they do not convict the innocent. They must be dedicated to making the criminal trial a procedure for the ascertainment of the true facts surrounding the commission of the crime. 5 To this extent, our so-called adversary system is not adversary at all; nor should it be. But defense counsel has no comparable obligation to ascertain or present the truth. Our system assigns him a different mission. He must [388 U.S. 218, 257] be and is interested in preventing the conviction of the innocent, but, absent a voluntary plea of guilty, we also insist that he defend his client whether he is innocent or guilty. The State has the obligation to present the evidence. Defense counsel need present nothing, even if he knows what the truth is. He need not furnish any witnesses to the police, or reveal any confidences of his client, or furnish any other information to help the prosecution's case. If he can confuse a witness, even a truthful one, or make him appear at a disadvantage, unsure or indecisive, that will be his normal course. 6 Our interest in not convicting [388 U.S. 218, 258] the innocent permits counsel to put the State to its proof, to put the State's case in the worst possible light, regardless of what he thinks or knows to be the truth. Undoubtedly there are some limits which defense counsel must observe 7 but more often than not, defense counsel will cross-examine a prosecution witness, and impeach him if he can, even if he thinks the witness is telling the truth, just as he will attempt to destroy a witness who he thinks is lying. In this respect, as part of our modified adversary system and as part of the duty imposed on the most honorable defense counsel, we countenance or require conduct which in many instances has little, if any, relation to the search for truth. </s> I would not extend this system, at least as it presently operates, to police investigations and would not require counsel's presence at pretrial identification procedures. Counsel's interest is in not having his client placed at the scene of the crime, regardless of his whereabouts. Some counsel may advise their clients to refuse to make any [388 U.S. 218, 259] movements or to speak any words in a lineup or even to appear in one. To that extent the impact on truthful factfinding is quite obvious. Others will not only observe what occurs and develop possibilities for later cross-examination but will hover over witnesses and begin their cross-examination then, menacing truthful factfinding as thoroughly as the Court fears the police now do. Certainly there is an implicit invitation to counsel to suggest rules for the lineup and to manage and produce it as best he can. I therefore doubt that the Court's new rule, at least absent some clearly defined limits on counsel's role, will measurably contribute to more reliable pretrial identifications. My fears are that it will have precisely the opposite result. It may well produce fewer convictions, but that is hardly a proper measure of its long-run acceptability. In my view, the State is entitled to investigate and develop its case outside the presence of defense counsel. This includes the right to have private conversations with identification witnesses, just as defense counsel may have his own consultations with these and other witnesses without having the prosecutor present. </s> Whether today's judgment would be an acceptable exercise of supervisory power over federal courts is another question. But as a constitutional matter, the judgment in this case is erroneous and although I concur in Parts I and III of the Court's opinion I respectfully register this dissent. </s> [Footnote 1 Yet in Stovall v. Denno, post, p. 293, the Court recognizes that improper police conduct in the identification process has not been so widespread as to justify full retroactivity for its new rule. </s> [Footnote 2 In Miranda v. Arizona, 384 U.S. 436, 449 , the Court noted that O'Hara, Fundamentals of Criminal Investigation (1956) is a text that has enjoyed extensive use among law enforcement agencies and among students of police science. The quality of the work was said to rest on the author's long service as observer, lecturer in police science, and work as a federal crime investigator. O'Hara does not suggest that the police should or do use identification machinery improperly; instead he argues for techniques that would increase the reliability of eyewitness identifications, and there is no reason to suggest that O'Hara's views are not shared and practiced by the majority of police departments throughout the land. </s> [Footnote 3 The instant case and its companions, Gilbert v. California, post, p. 263, and Stovall v. Denno, post, p. 293, certainly lend no support to the Court's assumptions. The police conduct deemed improper by the Court in the three cases seems to have come to light at trial in the ordinary course of events. One can ask what more counsel would have learned at the pretrial identifications that would have been relevant for truth determination at trial. When the Court premises its constitutional rule on police conduct so subtle as to defy description and subsequent disclosure it deals in pure speculation. If police conduct is intentionally veiled, the police will know about it, and I am unwilling to speculate that defense counsel at trial will be unable to reconstruct the known circumstances of the pretrial identification. And if the "unknown" influence on identifications is "innocent," the Court's general premise evaporates and the problem is simply that of the inherent shortcomings of eyewitness testimony. </s> [Footnote 4 I would not have thought that the State's interest regarding its sources of identification is any less than its interest in protecting informants, especially those who may aid in identification but who will not be used as witnesses. See McCray v. Illinois, 386 U.S. 300 . </s> [Footnote 5 "The United States Attorney is the representative not of an ordinary party to a controversy, but of a sovereignty whose obligation to govern impartially is as compelling as its obligation to govern at all; and whose interest, therefore, in a criminal prosecution is not that it shall win a case, but that justice shall be done. As such, he is in a peculiar and very definite sense the servant of the law, the twofold aim of which is that guilt shall not escape or innocence suffer. He may prosecute with earnestness and vigor indeed, he should do so. But, while he may strike hard blows, he is not at liberty to strike foul ones. It is as much his duty to refrain from improper methods calculated to produce a wrongful conviction as it is to use every legitimate means to bring about a just one." Berger v. United States, 295 U.S. 78, 88 . See also Mooney v. Holohan, 294 U.S. 103 ; Pyle v. Kansas, 317 U.S. 213 ; Alcorta v. Texas, 355 U.S. 28 ; Napue v. Illinois, 360 U.S. 264 ; Brady v. Maryland, 373 U.S. 83 ; Giles v. Maryland, 386 U.S. 66 ; Miller v. Pate, 386 U.S. 1 . </s> [Footnote 6 One point of view about the role of the courtroom lawyer appears in Frank, Courts on Trial 82-83. "What is the role of the lawyers in bringing the evidence before the trial court? As you may learn by reading any one of a dozen or more handbooks on how to try a law-suit, an experienced lawyer uses all sorts of stratagems to minimize the effect on the judge or jury of testimony disadvantageous to his client, even when the lawyer has no doubt of the accuracy and honesty of that testimony. . . . If such a witness happens to be timid, frightened by the unfamiliarity of court-room ways, the lawyer, in his cross-examination, plays on that weakness, in order to confuse the witness and make it appear that he is concealing significant facts. Longenecker, in his book Hints On The Trial of a Law Suit (a book endorsed by the great Wigmore), in writing of the `truthful, honest, over-cautious' witness, tells how `a skilful advocate by a rapid cross-examination may ruin the testimony of such a witness.' The author does not even hint any disapproval of that accomplishment. Longenecker's and other similar books recommend that a lawyer try to prod an irritable but honest `adverse' witness into displaying his undesirable characteristics in their most unpleasant form, in order to discredit him with the judge or jury. `You may,' writes Harris, `sometimes destroy the effect of an adverse witness by making him appear more hostile than he really is. You may make him exaggerate or unsay something and say it again.' Taft says that a clever cross-examiner, dealing with an honest but egotistic witness, will `deftly tempt the witness to indulge in his propensity for exaggeration, so as to make him "hang himself." `And thus,' adds Taft, `it may happen that not only is the value of his testimony lost, but the side which produces him [388 U.S. 218, 258] suffers for seeking aid from such a source' although, I would add, that may be the only source of evidence of a fact on which the decision will turn. </s> "`An intimidating manner in putting questions,' writes Wigmore, `may so coerce or disconcert the witness that his answers do not represent his actual knowledge on the subject. So also, questions which in form or subject cause embarrassment, shame or anger in the witness may unfairly lead him to such demeanor or utterances that the impression produced by his statements does not do justice to its real testimonial value.'" </s> [Footnote 7 See the materials collected in c. 3 of Countryman & Finman, The Lawyer in Modern Society; Joint Committee on Continuing Legal Education of American Law Institute and the American Bar Association, The Problem of a Criminal Defense 1-46 (1961); Stovall, Aspects of the Advocate's Dual Responsibility, 22 The Alabama Lawyer 66; Gold, Split Loyalty: An Ethical Problem for the Criminal Defense Lawyer, 14 Clev.-Mar. L. Rev. 65; Symposium on Professional Ethics, 64 Mich. L. Rev. 1469-1498. </s> MR. JUSTICE FORTAS, with whom THE CHIEF JUSTICE and MR. JUSTICE DOUGLAS join, concurring in part and dissenting in part. </s> 1. I agree with the Court that the exhibition of the person of the accused at a lineup is not itself a violation of the privilege against self-incrimination. In itself, it is no more subject to constitutional objection [388 U.S. 218, 260] than the exhibition of the person of the accused in the courtroom for identification purposes. It is an incident of the State's power to arrest, and a reasonable and justifiable aspect of the State's custody resulting from arrest. It does not require that the accused take affirmative, volitional action, but only that, having been duly arrested he may be seen for identification purposes. It is, however, a "critical stage" in the prosecution, and I agree with the Court that the opportunity to have counsel present must be made available. </s> 2. In my view, however, the accused may not be compelled in a lineup to speak the words uttered by the person who committed the crime. I am confident that it could not be compelled in court. It cannot be compelled in a lineup. It is more than passive, mute assistance to the eyes of the victim or of witnesses. It is the kind of volitional act the kind of forced cooperation by the accused which is within the historical perimeter of the privilege against compelled self-incrimination. </s> Our history and tradition teach and command that an accused may stand mute. The privilege means just that; not less than that. According to the Court, an accused may be jailed indefinitely until he is willing to say, for an identifying audience, whatever was said in the course of the commission of the crime. Presumably this would include, "Your money or your life" or perhaps, words of assault in a rape case. This is intolerable under our constitutional system. </s> I completely agree that the accused must be advised of and given the right to counsel before a lineup and I join in that part of the Court's opinion; but this is an empty right unless we mean to insist upon the accused's fundamental constitutional immunities. One of these is that the accused may not be compelled to speak. To compel him to speak would violate the privilege [388 U.S. 218, 261] against self-incrimination, which is incorporated in the Fifth Amendment. </s> This great privilege is not merely a shield for the accused. It is also a prescription of technique designed to guide the State's investigation. History teaches us that self-accusation is an unreliable instrument of detection, apt to inculpate the innocent-but-weak and to enable the guilty to escape. But this is not the end of the story. The privilege historically goes to the roots of democratic and religious principle. It prevents the debasement of the citizen which would result from compelling him to "accuse" himself before the power of the state. The roots of the privilege are deeper than the rack and the screw used to extort confessions. They go to the nature of a free man and to his relationship to the state. </s> An accused cannot be compelled to utter the words spoken by the criminal in the course of the crime. I thoroughly disagree with the Court's statement that such compulsion does not violate the Fifth Amendment. The Court relies upon Schmerber v. California, 384 U.S. 757 (1966), to support this. I dissented in Schmerber, but if it were controlling here, I should, of course, acknowledge its binding effect unless we were prepared to overrule it. But Schmerber, which authorized the forced extraction of blood from the veins of an unwilling human being, did not compel the person actively to cooperate to accuse himself by a volitional act which differs only in degree from compelling him to act out the crime, which, I assume, would be rebuffed by the Court. It is the latter feature which places the compelled utterance by the accused squarely within the history and noble purpose of the Fifth Amendment's commandment. </s> To permit Schmerber to apply in any respect beyond its holding is, in my opinion, indefensible. To permit [388 U.S. 218, 262] its insidious doctrine to extend beyond the invasion of the body, which it permits, to compulsion of the will of a man, is to deny and defy a precious part of our historical faith and to discard one of the most profoundly cherished instruments by which we have established the freedom and dignity of the individual. We should not so alter the balance between the rights of the individual and of the state, achieved over centuries of conflict. </s> 3. While the Court holds that the accused must be advised of and given the right to counsel at the lineup, it makes the privilege meaningless in this important respect. Unless counsel has been waived or, being present, has not objected to the accused's utterance of words used in the course of committing the crime, to compel such an utterance is constitutional error. * </s> Accordingly, while I join the Court in requiring vacating of the judgment below for a determination as to whether the identification of respondent was based upon factors independent of the lineup, I would do so not only because of the failure to offer counsel before the lineup but also because of the violation of respondent's Fifth Amendment rights. </s> [Footnote * While it is conceivable that legislation might provide a meticulous lineup procedure which would satisfy constitutional requirements, I do not agree with the Court that this would "remove the basis for regarding the [lineup] stage as `critical.'" </s> [388 U.S. 218, 263]

United States Supreme Court COLUMBIA BROADCASTING v. DEMOCRATIC COMM.(1973) No. 71-863 Argued: October 16, 1972Decided: May 29, 1973 </s> The Democratic National Committee requested a declaratory ruling from the Federal Communications Commission (FCC) that the Communications Act or the First Amendment precluded a licensee from having a general policy of refusing to sell time to "responsible entities" to present their views on public issues. The Business Executives' Move for Vietnam Peace filed a complaint with the FCC, alleging that a broadcaster had violated the First Amendment by refusing to sell it time to broadcast spot announcements expressing the group's views on the Vietnam conflict and that the station's coverage of antiwar views did not meet the requirements of the Fairness Doctrine. The FCC rejected the Fairness Doctrine challenge and ruled that a broadcaster was not prohibited from having a policy of refusing to accept paid editorial advertisements by individuals and organizations like respondents. The Court of Appeals reversed, holding that "a flat ban on paid public issue announcements is in violation of the First Amendment, at least when other sorts of paid announcements are accepted," and remanded the causes to the FCC to develop regulations governing which, and how many, editorial announcements would be aired. Held: Neither the Communications Act nor the First Amendment requires broadcasters to accept paid editorial advertisements. Pp. 101-114; 121-170. </s> 146 U.S. App. D.C. 181, 450 F.2d 642, reversed. </s> MR. CHIEF JUSTICE BURGER delivered the opinion of the Court with respect to Parts I, II, and IV, finding that: </s> 1. The basic criterion governing use of broadcast frequencies is the right of the public to be informed; the manner by which this [412 U.S. 94, 95] interest is best served is dispositive of the respondents' statutory and First Amendment contentions. Pp. 101-114. </s> (a) In evaluating respondents' claims, great weight must be afforded the decisions of Congress and the experience of the FCC. Pp. 101-103. </s> (b) Congress has consistently rejected efforts to impose on broadcasters a "common carrier" right of access for all persons wishing to speak out on public issues. Instead, it reposed in the FCC regulatory authority by which the Fairness Doctrine was evolved to require that the broadcaster's coverage of important public issues must be adequate and must fairly reflect differing viewpoints; thus, no private individual or group has a right to command the use of broadcast facilities. Pp. 103-114. </s> 2. The "public interest" standard of the Communications Act, which incorporates First Amendment principles, does not require broadcasters to accept editorial advertisements. Pp. 121-131. </s> (a) The FCC was justified in concluding that the public interest in having access to the marketplace of "ideas and experiences" would not be served by ordering a right of access to advertising time. There is substantial risk that such a system would be monopolized by those who could and would pay the costs, that the effective operation of the Fairness Doctrine itself would be undermined, and that the public accountability which now rests with the broadcaster would be diluted. Pp. 121-125. </s> (b) The difficult problems involved in implementing an absolute right of access would inevitably implicate the FCC in a case-by-case determination of who should be heard and when, thus enlarging the involvement of the Government in broadcasting operations. The FCC could properly take into account the fact that listeners and viewers constitute a kind of "captive audience" and that the public interest requires that a substantial degree of journalistic discretion must remain with broadcasters. Pp. 126-130. </s> THE CHIEF JUSTICE, joined by MR. JUSTICE STEWART and MR. JUSTICE REHNQUIST, concluded, in Part III, that a broadcast licensee's refusal to accept a paid editorial advertisement does not constitute "governmental action" for First Amendment purposes. The Government is neither a "partner" to the action complained of nor engaged in a "symbiotic relationship" with the licensee. Pp. 114-121. </s> (a) Under the Communications Act a broadcast licensee is vested with substantial journalistic discretion in deciding how to meet its statutory obligations as a "public trustee." Pp. 114-117. [412 U.S. 94, 96] </s> (b) The licensee's policy against accepting editorial advertising is compatible with the Communications Act and with the broadcaster's obligation to provide a balanced treatment of controversial questions. Pp. 118-121. </s> (c) The FCC has not fostered the licensee policy against accepting editorial advertisements; it has merely declined to command acceptance because the subject was a matter within the area of journalistic discretion. P. 118. </s> BURGER, C. J., announced the Court's judgment and delivered an opinion of the Court with respect to Parts I, II, and IV, in which WHITE, BLACKMUN, POWELL, and REHNQUIST, JJ., joined, and in which as to Parts I, II, and III STEWART and REHNQUIST, JJ., joined. STEWART, J., filed an opinion concurring in Parts I, II, and III, post, p. 132. WHITE. J., filed an opinion concurring in Parts I, II, and IV, post, p. 146. BLACKMUN, J., filed an opinion concurring in Parts I, II, and IV, in which POWELL, J., joined, post, p. 147. DOUGLAS, J., filed an opinion concurring in the judgment, post, p. 148. BRENNAN, J., filed a dissenting opinion, in which MARSHALL, J., joined, post, p. 170. </s> [Footnote * Together with Nos. 71-864, Federal Communications Commission et al. v. Business Executives' Move for Vietnam Peace et al.; 71-865, Post-Newsweek Stations, Capital Area, Inc. v. Business Executives' Move for Vietnam Peace; and 71-866, American Broadcasting Cos., Inc. v. Democratic National Committee, also on certiorari to the same court. </s> J. Roger Wollenberg argued the cause for petitioner in No. 71-863. With him on the briefs were Lloyd N. Cutler, Timothy B. Dyk, Daniel Marcus, Robert V. Evans, John D. Appel, and Joseph DeFranco. Solicitor General Griswold argued the cause for petitioners in No. 71-864. With him on the brief were Acting Assistant Attorney General Comegys, Howard E. Shapiro, and John W. Pettit. Ernest W. Jennes argued the cause for petitioner in No. 71-865. With him on the briefs were Charles A. Miller and Michael Boudin. Vernon L. Wilkinson argued the cause for petitioner in No. 71-866. With him on the brief were James A. McKenna, Jr., and Carl R. Ramey. </s> Joseph A. Califano, Jr., argued the cause for respondent Democratic National Committee in Nos. 71-863, 71-864, and 71-866. With him on the brief was John G. Kester. Thomas R. Asher argued the cause for respondent Business [412 U.S. 94, 97] Executives' Move for Vietnam Peace in Nos. 71-864 and 71-865. With him on the brief was Albert H. Kramer.Fn </s> Fn [412 U.S. 94, 97] Floyd Abrams and Corydon B. Dunham filed a brief for National Broadcasting Co., Inc., as amicus curiae urging reversal. J. Albert Woll, Laurence Gold, and Thomas E. Harris filed a brief for the American Federation of Labor and Congress of Industrial Organizations as amicus curiae urging affirmance. </s> MR. CHIEF JUSTICE BURGER delivered the opinion of the Court (Parts I, II, and IV) together with an opinion (Part III), in which MR. JUSTICE STEWART and MR. JUSTICE REHNQUIST joined. </s> We granted the writs of certiorari in these cases to consider whether a broadcast licensee's general policy of not selling advertising time to individuals or groups wishing to speak out on issues they consider important violates the Federal Communications Act of 1934, 48 Stat. 1064, as amended, 47 U.S.C. 151 et seq., or the First Amendment. </s> In two orders announced the same day, the Federal Communications Commission ruled that a broadcaster who meets his public obligation to provide full and fair coverage of public issues is not required to accept editorial advertisements. Democratic National Committee, 25 F. C. C. 2d 216; Business Executives' Move for Vietnam Peace, 25 F. C. C. 2d 242. A divided Court of Appeals reversed the Commission, holding that a broadcaster's fixed policy of refusing editorial advertisements violates the First Amendment; the court remanded the cases to the Commission to develop procedures and guidelines for administering a First Amendment right of access. Business Executives' Move For Vietnam Peace v. FCC, 146 U.S. App. D.C. 181, 450 F.2d 642 (1971). </s> The complainants in these actions are the Democratic [412 U.S. 94, 98] National Committee (DNC) and the Business Executives' Move for Vietnam Peace (BEM), a national organization of businessmen opposed to United States involvement in the Vietnam conflict. In January 1970, BEM filed a complaint with the Commission charging that radio station WTOP in Washington, D.C., had refused to sell it time to broadcast a series of one-minute spot announcements expressing BEM views on Vietnam. WTOP, in common with many, but not all, broadcasters, followed a policy of refusing to sell time for spot announcements to individuals and groups who wished to expound their views on controversial issues. WTOP took the position that since it presented full and fair coverage of important public questions, including the Vietnam conflict, it was justified in refusing to accept editorial advertisements. WTOP also submitted evidence showing that the station had aired the views of critics of our Vietnam policy on numerous occasions. BEM challenged the fairness of WTOP's coverage of criticism of that policy, but it presented no evidence in support of that claim. </s> Four months later, in May 1970, DNC filed with the Commission a request for a declaratory ruling: </s> "That under the First Amendment to the Constitution and the Communications Act, a broadcaster may not, as a general policy, refuse to sell time to responsible entities, such as the DNC, for the solicitation of funds and for comment on public issues." </s> DNC claimed that it intended to purchase time from radio and television stations and from the national networks in order to present the views of the Democratic Party and to solicit funds. Unlike BEM, DNC did not object to the policies of any particular broadcaster but claimed that its prior "experiences in this area make it [412 U.S. 94, 99] clear that it will encounter considerable difficulty - if not total frustration of its efforts - in carrying out its plans in the event the Commission should decline to issue a ruling as requested." DNC cited Red Lion Broadcasting Co. v. FCC, 395 U.S. 367 (1969), as establishing a limited constitutional right of access to the airwaves. </s> In two separate opinions, the Commission rejected respondents' claims that "responsible" individuals and groups have a right to purchase advertising time to comment on public issues without regard to whether the broadcaster has complied with the Fairness Doctrine. The Commission viewed the issue as one of major significance in administering the regulatory scheme relating to the electronic media, one going "to the heart of the system of broadcasting which has developed in this country . . . ." 25 F. C. C. 2d, at 221. After reviewing the legislative history of the Communications Act, the provisions of the Act itself, the Commission's decisions under the Act, and the difficult problems inherent in administering a right of access, the Commission rejected the demands of BEM and DNC. </s> The Commission also rejected BEM's claim that WTOP had violated the Fairness Doctrine by failing to air views such as those held by members of BEM; the Commission pointed out that BEM had made only a "general allegation" of unfairness in WTOP's coverage of the Vietnam conflict and that the station had adequately rebutted the charge by affidavit. The Commission did, however, uphold DNC's position that the statute recognized a right of political parties to purchase broadcast time for the purpose of soliciting funds. The Commission noted that Congress has accorded special consideration for access by political parties, see 47 U.S.C. 315 (a), and that solicitation of funds by political parties is both [412 U.S. 94, 100] feasible and appropriate in the short space of time generally allotted to spot advertisements. 1 </s> A majority of the Court of Appeals reversed the Commission, holding that "a flat ban on paid public issue announcements is in violation of the First Amendment, at least when other sorts of paid announcements are accepted." 146 U.S. App. D.C., at 185, 450 F.2d, at 646. Recognizing that the broadcast frequencies are a scarce resource inherently unavailable to all, the court nevertheless concluded that the First Amendment mandated an "abridgeable" right to present editorial advertisements. The court reasoned that a broadcaster's policy of airing commercial advertisements but not editorial advertisements constitutes unconstitutional discrimination. The court did not, however, order that either BEM's or DNC's proposed announcements must be accepted by the broadcaster; rather, it remanded the cases to the Commission to develop "reasonable procedures and regulations determining which and how many `editorial advertisements' will be put on the air." Ibid. </s> Judge McGowan dissented; in his view, the First Amendment did not compel the Commission to undertake the task assigned to it by the majority: </s> "It is presently the obligation of a licensee to advance the public's right to know by devoting a substantial amount of time to the presentation of controversial views on issues of public importance, striking a balance which is always subject to redress by reference to the fairness doctrine. Failure to do so puts continuation of the license at risk - a sanction of tremendous potency, and one which the Commission is under increasing pressure to employ. [412 U.S. 94, 101] </s> "This is the system which Congress has, wisely or not, provided as the alternative to public ownership and operation of radio and television communications facilities. This approach has never been thought to be other than within the permissible limits of constitutional choice." 146 U.S. App. D.C., at 205, 450 F.2d, at 666. </s> Judge McGowan concluded that the court's decision to overrule the Commission and to remand for development and implementation of a constitutional right of access put the Commission in a "constitutional straitjacket" on a highly complex and far-reaching issue. </s> I </s> MR. JUSTICE WHITE'S opinion for the Court in Red Lion Broadcasting Co. v. FCC, 395 U.S. 367 (1969), makes clear that the broadcast media pose unique and special problems not present in the traditional free speech case. Unlike other media, broadcasting is subject to an inherent physical limitation. Broadcast frequencies are a scarce resource; they must be portioned out among applicants. All who possess the financial resources and the desire to communicate by television or radio cannot be satisfactorily accommodated. The Court spoke to this reality when, in Red Lion, we said "it is idle to posit an unabridgeable First Amendment right to broadcast comparable to the right of every individual to speak, write, or publish." Id., at 388. </s> Because the broadcast media utilize a valuable and limited public resource, there is also present an unusual order of First Amendment values. Red Lion discussed at length the application of the First Amendment to the broadcast media. In analyzing the broadcasters' claim that the Fairness Doctrine and two of its component rules violated their freedom of expression, we [412 U.S. 94, 102] held that "[n]o one has a First Amendment right to a license or to monopolize a radio frequency; to deny a station license because `the public interest' requires it `is not a denial of free speech.'" Id., at 389. Although the broadcaster is not without protection under the First Amendment, United States v. Paramount Pictures, Inc., 334 U.S. 131, 166 (1948), "[i]t is the right of the viewers and listeners, not the right of the broadcasters, which is paramount. . . . It is the right of the public to receive suitable access to social, political, esthetic, moral, and other ideas and experiences which is crucial here. That right may not constitutionally be abridged either by Congress or by the FCC." Red Lion, supra, at 390. </s> Balancing the various First Amendment interests involved in the broadcast media and determining what best serves the public's right to be informed is a task of a great delicacy and difficulty. The process must necessarily be undertaken within the framework of the regulatory scheme that has evolved over the course of the past half century. For, during that time, Congress and its chosen regulatory agency have established a delicately balanced system of regulation intended to serve the interests of all concerned. The problems of regulation are rendered more difficult because the broadcast industry is dynamic in terms of technological change; solutions adequate a decade ago are not necessarily so now, and those acceptable today may well be outmoded 10 years hence. </s> Thus, in evaluating the First Amendment claims of respondents, we must afford great weight to the decisions of Congress and the experience of the Commission. Professor Chafee aptly observed: </s> "Once we get away from the bare words of the [First] Amendment, we must construe it as part of a Constitution which creates a government for the purpose of performing several very important tasks. [412 U.S. 94, 103] The [First] Amendment should be interpreted so as not to cripple the regular work of the government. A part of this work is the regulation of interstate and foreign commerce, and this has come in our modern age to include the job of parceling out the air among broadcasters, which Congress has entrusted to the FCC. Therefore, every free-speech problem in the radio has to be considered with reference to the satisfactory performance of this job as well as to the value of open discussion. Although free speech should weigh heavily in the scale in the event of conflict, still the Commission should be given ample scope to do its job." 2 Z. Chafee, Government and Mass Communications 640-641 (1947). </s> The judgment of the Legislative Branch cannot be ignored or undervalued simply because one segment of the broadcast constituency casts its claims under the umbrella of the First Amendment. That is not to say we "defer" to the judgment of the Congress and the Commission on a constitutional question, or that we would hesitate to invoke the Constitution should we determine that the Commission has not fulfilled its task with appropriate sensitivity to the interests in free expression. The point is, rather, that when we face a complex problem with many hard questions and few easy answers we do well to pay careful attention to how the other branches of Government have addressed the same problem. Thus, before confronting the specific legal issues in these cases, we turn to an examination of the legislative and administrative development of our broadcast system over the last half century. </s> II </s> This Court has on numerous occasions recounted the origins of our modern system of broadcast regulation. See, e. g., Red Lion, supra, at 375-386; National Broadcasting [412 U.S. 94, 104] Co. v. United States, 319 U.S. 190, 210 -217 (1943); FCC v. Sanders Brothers Radio Station, 309 U.S. 470, 474 (1940); FCC v. Pottsville Broadcasting Co., 309 U.S. 134, 137 -138 (1940). We have noted that prior to the passage of the Radio Act of 1927, 44 Stat. 1162, broadcasting was marked by chaos. The unregulated and burgeoning private use of the new media in the 1920's had resulted in an intolerable situation demanding congressional action: </s> "It quickly became apparent that broadcast frequencies constituted a scarce resource whose use could be regulated and rationalized only by the Government. Without government control, the medium would be of little use because of the cacaphony of competing voices, none of which could be clearly and predictably heard." Red Lion, supra, at 376. </s> But, once it was accepted that broadcasting was subject to regulation, Congress was confronted with a major dilemma: how to strike a proper balance between private and public control. Cf. Farmers Union v. WDAY, 360 U.S. 525, 528 (1959). </s> One of the earliest and most frequently quoted statements of this dilemma is that of Herbert Hoover, when he was Secretary of Commerce. While his Department was making exploratory attempts to deal with the infant broadcasting industry in the early 1920's, he testified before a House Committee: </s> "We can not allow any single person or group to place themselves in [a] position where they can censor the material which shall be broadcasted to the public, nor do I believe that the Government should ever be placed in the position of censoring this material." Hearings on H. R. 7357 before the House Committee on the Merchant Marine and Fisheries, 68th Cong., 1st Sess., 8 (1924). [412 U.S. 94, 105] That statement foreshadowed the "tightrope" aspects of Government regulation of the broadcast media, a problem the Congress, the Commission, and the courts have struggled with ever since. Congress appears to have concluded, however, that of these two choices - private or official censorship - Government censorship would be the most pervasive, the most self-serving, the most difficult to restrain and hence the one most to be avoided. </s> The legislative history of the Radio Act of 1927, the model for our present statutory scheme, see FCC v. Pottsville Broadcasting Co., supra, at 137, reveals that in the area of discussion of public issues Congress chose to leave broad journalistic discretion with the licensee. Congress specifically dealt with - and firmly rejected - the argument that the broadcast facilities should be open on a nonselective basis to all persons wishing to talk about public issues. Some members of Congress - those whose views were ultimately rejected - strenuously objected to the unregulated power of broadcasters to reject applications for service. See, e. g., H. R. Rep. No. 404, 69th Cong., 1st Sess., 18 (minority report). They regarded the exercise of such power to be "private censorship," which should be controlled by treating broadcasters as public utilities. 2 The provision that came closest to imposing an unlimited right of access to broadcast time was part of the bill reported to the Senate by the Committee on Interstate Commerce. The [412 U.S. 94, 106] bill that emerged from the Committee contained the following provision: </s> "[I]f any licensee shall permit a broadcasting station to be used . . . by a candidate or candidates for any public office, or for the discussion of any question affecting the public, he shall make no discrimination as to the use of such broadcasting station, and with respect to said matters the licensee shall be deemed a common carrier in interstate commerce: Provided, that such licensee shall have no power to censor the material broadcast." 67 Cong. Rec. 12503 (1926) (emphasis added). </s> When the bill came to the Senate floor, the principal architect of the Radio Act of 1927, Senator Dill, offered an amendment to the provision to eliminate the common carrier obligation and to restrict the right of access to candidates for public office. Senator Dill explained the need for the amendment: </s> "When we recall that broadcasting today is purely voluntary, and the listener-in pays nothing for it, that the broadcaster gives it for the purpose of building up his reputation, it seemed unwise to put the broadcaster under the hampering control of being a common carrier and compelled to accept anything and everything that was offered him so long as the price was paid." 67 Cong. Rec. 12502. </s> The Senators were also sensitive to the problems involved in legislating "equal opportunities" with respect to the discussion of public issues. Senator Dill stated: </s> "[`Public questions'] is such a general term that there is probably no question of any interest whatsoever that could be discussed but that the other side of it could demand time; and thus a radio station [412 U.S. 94, 107] would be placed in the position that the Senator from Iowa mentions about candidates, namely, that they would have to give all their time to that kind of discussion, or no public question could be discussed." Id., at 12504. </s> The Senate adopted Senator Dill's amendment. The provision finally enacted, 18 of the Radio Act of 1927, 44 Stat. 1170, was later re-enacted as 315 (a) of the Communications Act of 1934, 3 but only after Congress rejected another proposal that would have imposed a limited obligation on broadcasters to turn over their microphones to persons wishing to speak out on certain [412 U.S. 94, 108] public issues. 4 Instead, Congress after prolonged consideration adopted 3 (h), which specifically provides that "a person engaged in radio broadcasting shall not, [412 U.S. 94, 109] insofar as such person is so engaged, be deemed a common carrier." 5 </s> Other provisions of the 1934 Act also evince a legislative desire to preserve values of private journalism under a regulatory scheme which would insure fulfillment of certain public obligations. Although the Commission was given the authority to issue renewable three-year licenses to broadcasters 6 and to promulgate rules and regulations governing the use of those licenses, 7 both consistent [412 U.S. 94, 110] with the "public convenience, interest, or necessity," 326 of the Act specifically provides that: </s> "Nothing in this chapter shall be understood or construed to give the Commission the power of censorship over the radio communications or signals transmitted by any radio station, and no regulation or condition shall be promulgated or fixed by the Commission which shall interfere with the right of free speech by means of radio communication." 47 U.S.C. 326. </s> From these provisions it seems clear that Congress intended to permit private broadcasting to develop with the widest journalistic freedom consistent with its public obligations. Only when the interests of the public are found to outweigh the private journalistic interests of the broadcasters will government power be asserted within the framework of the Act. License renewal proceedings, in which the listening public can be heard, are a principal means of such regulation. See Office of Communication of United Church of Christ v. FCC, 123 U.S. App. D.C. 328, 359 F.2d 994 (1966), and 138 U.S. App. D.C. 112, 425 F.2d 543 (1969). </s> Subsequent developments in broadcast regulation illustrate how this regulatory scheme has evolved. Of particular importance, in light of Congress' flat refusal to impose a "common carrier" right of access for all persons wishing to speak out on public issues, is the Commission's "Fairness Doctrine," which evolved gradually over the years spanning federal regulation of the broadcast media. 8 Formulated under the Commission's power to [412 U.S. 94, 111] issue regulations consistent with the "public interest," the doctrine imposes two affirmative responsibilities on the broadcaster: coverage of issues of public importance must be adequate and must fairly reflect differing viewpoints. See Red Lion, 395 U.S., at 377 . In fulfilling the Fairness Doctrine obligations, the broadcaster must provide free time for the presentation of opposing views if a paid sponsor is unavailable, Cullman Broadcasting Co., 25 P & F Radio Reg. 895 (1963), and must initiate programming on public issues if no one else seeks to do so. See John J. Dempsey, 6 P & F Radio Reg. 615 (1950); Red Lion, supra, at 378. </s> Since it is physically impossible to provide time for all viewpoints, however, the right to exercise editorial judgment was granted to the broadcaster. The broadcaster, therefore, is allowed significant journalistic discretion in deciding how best to fulfill the Fairness Doctrine obligations, 9 although that discretion is bounded by rules designed to assure that the public interest in fairness is furthered. In its decision in the instant cases, the Commission described the boundaries as follows: </s> "The most basic consideration in this respect is that the licensee cannot rule off the air coverage of important issues or views because of his private ends or beliefs. As a public trustee, he must present [412 U.S. 94, 112] representative community views and voices on controversial issues which are of importance to his listeners. . . . This means also that some of the voices must be partisan. A licensee policy of excluding partisan voices and always itself presenting views in a bland, inoffensive manner would run counter to the 'profound national commitment that debate on public issues should be uninhibited, robust, and wide-open.' New York Times Co. v. Sullivan, 376 U.S. 254, 270 (1964); see also Red Lion Broadcasting Co., Inc., v. F. C. C., 395 U.S. 367, 392 (n. 18) (1969) . . . ." 25 F. C. C. 2d, at 222-223. </s> Thus, under the Fairness Doctrine broadcasters are responsible for providing the listening and viewing public with access to a balanced presentation of information on issues of public importance. 10 The basic principle underlying that responsibility is "the right of the public to be informed, rather than any right on the part of the [412 U.S. 94, 113] Government, any broadcast licensee or any individual member of the public to broadcast his own particular views on any matter . . . ." Report on Editorializing by Broadcast Licensees, 13 F. C. C. 1246, 1249 (1949). Consistent with that philosophy, the Commission on several occasions has ruled that no private individual or group has a right to command the use of broadcast facilities. 11 See, e. g., Dowie A. Crittenden, 18 F. C. C. 2d 499 (1969); Margaret Z. Scherbina, 21 F. C. C. 2d 141 (1969); Boalt Hall Student Assn., 20 F. C. C. 2d 612 (1969); Madalyn Murray, 40 F. C. C. 647 (1965); Democratic State Central Committee of California, 19 F. C. C. 2d 833 (1968); U.S. Broadcasting Corp., 2 F. C. C. 208 (1935). Congress has not yet seen fit to alter that policy, although since 1934 it has amended the Act on several occasions 12 and considered various [412 U.S. 94, 114] proposals that would have vested private individuals with a right of access. 13 </s> With this background in mind, we next proceed to consider whether a broadcaster's refusal to accept editorial advertisements is governmental action violative of the First Amendment. </s> III </s> That "Congress shall make no law . . . abridging the freedom of speech, or of the press" is a restraint on government action, not that of private persons. Public Utilities Comm'n v. Pollak, 343 U.S. 451, 461 (1952). The Court has not previously considered whether the action of a broadcast licensee such as that challenged here is "governmental action" for purposes of the First [412 U.S. 94, 115] Amendment. The holding under review thus presents a novel question, and one with far-reaching implications. See Jaffe, The Editorial Responsibility of the Broadcaster: Reflections on Fairness and Access, 85 Harv. L. Rev. 768, 782-787 (1972). </s> The Court of Appeals held that broadcasters are instrumentalities of the Government for First Amendment purposes, relying on the thesis, familiar in other contexts, that broadcast licensees are granted use of part of the public domain and are regulated as "proxies" or "`fiduciaries' of the people." 146 U.S. App. D.C., at 191, 450 F.2d, at 652. These characterizations are not without validity for some purposes, but they do not resolve the sensitive constitutional issues inherent in deciding whether a particular licensee action is subject to First Amendment restraints. 14 </s> In dealing with the broadcast media, as in other contexts, the line between private conduct and governmental action cannot be defined by reference to any general formula unrelated to particular exercises of governmental authority. When governmental action is alleged there must be cautious analysis of the quality and degree of Government relationship to the particular acts in question. "Only by sifting facts and weighing circumstances can the nonobvious involvement of the State in private conduct be attributed its true significance." Burton v. Wilmington Parking Authority, 365 U.S. 715, 722 (1961). [412 U.S. 94, 116] </s> In deciding whether the First Amendment encompasses the conduct challenged here, it must be kept in mind that we are dealing with a vital part of our system of communication. The electronic media have swiftly become a major factor in the dissemination of ideas and information. More than 7,000 licensed broadcast stations undertake to perform this important function. To a large extent they share with the printed media the role of keeping people informed. </s> As we have seen, with the advent of radio a half century ago, Congress was faced with a fundamental choice between total Government ownership and control of the new medium - the choice of most other countries - or some other alternative. Long before the impact and potential of the medium was realized, Congress opted for a system of private broadcasters licensed and regulated by Government. The legislative history suggests that this choice was influenced not only by traditional attitudes toward private enterprise, but by a desire to maintain for licensees, so far as consistent with necessary regulation, a traditional journalistic role. The historic aversion to censorship led Congress to enact 326 of the Act, which explicitly prohibits the Commission from interfering with the exercise of free speech over the broadcast frequencies. Congress pointedly refrained from divesting broadcasters of their control over the selection of voices; 3 (h) of the Act stands as a firm congressional statement that broadcast licensees are not to be treated as common carriers, obliged to accept whatever is tendered by members of the public. Both these provisions clearly manifest the intention of Congress to maintain a substantial measure of journalistic independence for the broadcast licensee. 15 </s> [412 U.S. 94, 117] </s> The regulatory scheme evolved slowly, but very early the licensee's role developed in terms of a "public trustee" charged with the duty of fairly and impartially informing the public audience. In this structure the Commission acts in essence as an "overseer," but the initial and primary responsibility for fairness, balance, and objectivity rests with the licensee. This role of the Government as an "overseer" and ultimate arbiter and guardian of the public interest and the role of the licensee as a journalistic "free agent" call for a delicate balancing of competing interests. The maintenance of this balance for more than 40 years has called on both the regulators and the licensees to walk a "tightrope" to preserve the First Amendment values written into the Radio Act and its successor, the Communications Act. </s> The tensions inherent in such a regulatory structure emerge more clearly when we compare a private newspaper with a broadcast licensee. The power of a privately owned newspaper to advance its own political, social, and economic views is bounded by only two factors: first, the acceptance of a sufficient number of readers - and hence advertisers - to assure financial success; and, second, the journalistic integrity of its editors and publishers. A broadcast licensee has a large measure of journalistic freedom but not as large as that exercised by [412 U.S. 94, 118] a newspaper. A licensee must balance what it might prefer to do as a private entrepreneur with what it is required to do as a "public trustee." To perform its statutory duties, the Commission must oversee without censoring. This suggests something of the difficulty and delicacy of administering the Communications Act - a function calling for flexibility and the capacity to adjust and readjust the regulatory mechanism to meet changing problems and needs. </s> The licensee policy challenged in this case is intimately related to the journalistic role of a licensee for which it has been given initial and primary responsibility by Congress. The licensee's policy against accepting editorial advertising cannot be examined as an abstract proposition, but must be viewed in the context of its journalistic role. It does not help to press on us the idea that editorial ads are "like" commercial ads, for the licensee's policy against editorial spot ads is expressly based on a journalistic judgment that 10- to 60-second spot announcements are ill-suited to intelligible and intelligent treatment of public issues; the broadcaster has chosen to provide a balanced treatment of controversial questions in a more comprehensive form. Obviously the licensee's evaluation is based on its own journalistic judgment of priorities and newsworthiness. </s> Moreover, the Commission has not fostered the licensee policy challenged here; it has simply declined to command particular action because it fell within the area of journalistic discretion. The Commission explicitly emphasized that "there is of course no Commission policy thwarting the sale of time to comment on public issues." 25 F. C. C. 2d, at 226. The Commission's reasoning, consistent with nearly 40 years of precedent, is that so long as a licensee meets its "public trustee" obligation to provide balanced coverage of issues and events, it has broad discretion to decide how that obligation will be [412 U.S. 94, 119] met. We do not reach the question whether the First Amendment or the Act can be read to preclude the Commission from determining that in some situations the public interest requires licensees to re-examine their policies with respect to editorial advertisements. The Commission has not yet made such a determination; it has, for the present at least, found the policy to be within the sphere of journalistic discretion which Congress has left with the licensee. </s> Thus, it cannot be said that the Government is a "partner" to the action of the broadcast licensee complained of here, nor is it engaged in a "symbiotic relationship" with the licensee, profiting from the invidious discrimination of its proxy. Compare Moose Lodge No. 107 v. Irvis, 407 U.S. 163, 174 -177 (1972), with Burton v. Wilmington Parking Authority, 365 U.S., at 723 -724. The First Amendment does not reach acts of private parties in every instance where the Congress or the Commission has merely permitted or failed to prohibit such acts. </s> Our conclusion is not altered merely because the Commission rejected the claims of BEM and DNC and concluded that the challenged licensee policy is not inconsistent with the public interest. It is true that in Public Utilities Comm'n v. Pollak, 343 U.S. 451 (1952), we found governmental action sufficient to trigger First Amendment protections on a record involving agency approval of the conduct of a public utility. Though we held that the decision of a District of Columbia bus company to install radio receivers in its public buses was within the reach of the First Amendment, there Congress had expressly authorized the agency to undertake plenary intervention into the affairs of the carrier and it was pursuant to that authorization that the agency investigated the challenged policy and approved it on public interest standards. Id., at 462. [412 U.S. 94, 120] </s> Here, Congress has not established a regulatory scheme for broadcast licensees as pervasive as the regulation of public transportation in Pollak. More important, as we have noted. Congress has affirmatively indicated in the Communications Act that certain journalistic decisions are for the licensee, subject only to the restrictions imposed by evaluation of its overall performance under the public interest standard. In Pollak there was no suggestion that Congress had considered worthy of protection the carrier's interest in exercising discretion over the content of communications forced on passengers. A more basic distinction, perhaps, between Pollak and this case is that Pollak was concerned with a transportation utility that itself derives no protection from the First Amendment. See United States v. Paramount Pictures, Inc., 334 U.S. 131, 166 (1948). </s> Were we to read the First Amendment to spell out governmental action in the circumstances presented here, few licensee decisions on the content of broadcasts or the processes of editorial evaluation would escape constitutional scrutiny. In this sensitive area so sweeping a concept of governmental action would go far in practical effect to undermine nearly a half century of unmistakable congressional purpose to maintain - no matter how difficult the task - essentially private broadcast journalism held only broadly accountable to public interest standards. To do this Congress, and the Commission as its agent, must remain in a posture of flexibility to chart a workable "middle course" in its quest to preserve a balance between the essential public accountability and the desired private control of the media. </s> More profoundly, it would be anomalous for us to hold, in the name of promoting the constitutional guarantees of free expression, that the day-to-day editorial decisions of broadcast licensees are subject to the kind of restraints urged by respondents. To do so in the name [412 U.S. 94, 121] of the First Amendment would be a contradiction. Journalistic discretion would in many ways be lost to the rigid limitations that the First Amendment imposes on Government. Application of such standards to broadcast licensees would be antithetical to the very ideal of vigorous, challenging debate on issues of public interest. Every licensee is already held accountable for the totality of its performance of public interest obligations. </s> The concept of private, independent broadcast journalism, regulated by Government to assure protection of the public interest, has evolved slowly and cautiously over more than 40 years and has been nurtured by processes of adjudication. That concept of journalistic independence could not co-exist with a reading of the challenged conduct of the licensee as governmental action. Nor could it exist without administrative flexibility to meet changing needs and swift technological developments. We therefore conclude that the policies complained of do not constitute governmental action violative of the First Amendment. See McIntire v. William Penn Broadcasting Co., 151 F.2d 597, 601 (CA3 1945), cert. denied, 327 U.S. 779 (1946); Massachusetts Universalist Convention v. Hildreth & Rogers Co., 183 F.2d 497 (CA1 1950); Post v. Payton, 323 F. Supp. 799, 803 (EDNY 1971). </s> IV </s> There remains for consideration the question whether the "public interest" standard of the Communications Act requires broadcasters to accept editorial advertisements or, whether, assuming governmental action, broadcasters are required to do so by reason of the First Amendment. In resolving those issues, we are guided by the "venerable principle that the construction of a statute by those charged with its execution should be followed unless there are compelling indications that it is wrong . . . ." Red Lion, 395 U.S., at 381 . Whether [412 U.S. 94, 122] there are "compelling indications" of error in these cases must be answered by a careful evaluation of the Commission's reasoning in light of the policies embodied by Congress in the "public interest" standard of the Act. Many of those policies, as the legislative history makes clear, were drawn from the First Amendment itself; the "public interest" standard necessarily invites reference to First Amendment principles. Thus, the question before us is whether the various interests in free expression of the public, the broadcaster, and the individuals require broadcasters to sell commercial time to persons wishing to discuss controversial issues. In resolving that issue it must constantly be kept in mind that the interest of the public is our foremost concern. With broadcasting, where the available means of communication are limited in both space and time, the admonition of Professor Alexander Meiklejohn that "[w]hat is essential is not that everyone shall speak, but that everything worth saying shall be said" is peculiarly appropriate. Political Freedom 26 (1948). </s> At the outset we reiterate what was made clear earlier that nothing in the language of the Communications Act or its legislative history compels a conclusion different from that reached by the Commission. As we have seen, Congress has time and again rejected various legislative attempts that would have mandated a variety of forms of individual access. That is not to say that Congress' rejection of such proposals must be taken to mean that Congress is opposed to private rights of access under all circumstances. Rather, the point is that Congress has chosen to leave such questions with the Commission, to which it has given the flexibility to experiment with new ideas as changing conditions require. In this case, the Commission has decided that on balance the undesirable effects of the right of access urged by respondents would outweigh the asserted benefits. The Court of [412 U.S. 94, 123] Appeals failed to give due weight to the Commission's judgment on these matters. </s> The Commission was justified in concluding that the public interest in providing access to the marketplace of "ideas and experiences" would scarcely be served by a system so heavily weighted in favor of the financially affluent, or those with access to wealth. Cf. Red Lion, supra, at 392. Even under a first-come-first-served system, proposed by the dissenting Commissioner in these cases, 16 the views of the affluent could well prevail over those of others, since they would have it within their power to purchase time more frequently. Moreover, there is the substantial danger, as the Court of Appeals acknowledged, 146 U.S. App. D.C., at 203, 450 F.2d, at 664, that the time allotted for editorial advertising could be monopolized by those of one political persuasion. </s> These problems would not necessarily be solved by applying the Fairness Doctrine, including the Cullman doctrine, to editorial advertising. If broadcasters were required to provide time, free when necessary, for the discussion of the various shades of opinion on the issue discussed in the advertisement, the affluent could still determine in large part the issues to be discussed. Thus, the very premise of the Court of Appeals' holding - that a right of access is necessary to allow individuals and groups the opportunity for self-initiated speech - would have little meaning to those who could not afford to purchase time in the first instance. 17 </s> [412 U.S. 94, 124] </s> If the Fairness Doctrine were applied to editorial advertising, there is also the substantial danger that the effective operation of that doctrine would be jeopardized. To minimize financial hardship and to comply fully with its public responsibilities a broadcaster might well be forced to make regular programming time available to those holding a view different from that expressed in an editorial advertisement; indeed, BEM has suggested as much in its brief. The result would be a further erosion of the journalistic discretion of broadcasters in the coverage of public issues, and a transfer of control over the treatment of public issues from the licensees who are accountable for broadcast performance to private individuals who are not. The public interest would no longer be "paramount" but, rather, subordinate to private whim especially since, under the Court of Appeals' decision, a broadcaster would be largely precluded from rejecting editorial advertisements that dealt with matters trivial or insignificant or already fairly covered by the broadcaster. 146 U.S. App. D.C., at 196 n. 36, 197, 450 F.2d, at 657 n. 36, 658. If the Fairness Doctrine and the Cullman doctrine were suspended to alleviate these problems, as respondents suggest might be appropriate, the question arises whether we would have abandoned more than we have gained. Under such a regime the congressional objective of balanced coverage of public issues would be seriously threatened. </s> Nor can we accept the Court of Appeals' view that every potential speaker is "the best judge" of what the listening public ought to hear or indeed the best judge of the merits of his or her views. All journalistic tradition and experience is to the contrary. For better or worse, editing is what editors are for; and editing is selection and choice of material. That editors - newspaper or broadcast - can and do abuse this power is beyond doubt, but that is no reason to deny the discretion Congress [412 U.S. 94, 125] provided. Calculated risks of abuse are taken in order to preserve higher values. The presence of these risks is nothing new; the authors of the Bill of Rights accepted the reality that these risks were evils for which there was no acceptable remedy other than a spirit of moderation and a sense of responsibility - and civility - on the part of those who exercise the guaranteed freedoms of expression. </s> It was reasonable for Congress to conclude that the public interest in being informed requires periodic accountability on the part of those who are entrusted with the use of broadcast frequencies, scarce as they are. In the delicate balancing historically followed in the regulation of broadcasting Congress and the Commission could appropriately conclude that the allocation of journalistic priorities should be concentrated in the licensee rather than diffused among many. This policy gives the public some assurance that the broadcaster will be answerable if he fails to meet its legitimate needs. No such accountability attaches to the private individual, whose only qualifications for using the broadcast facility may be abundant funds and a point of view. To agree that debate on public issues should be "robust, and wide-open" does not mean that we should exchange "public trustee" broadcasting, with all its limitations, for a system of self-appointed editorial commentators. </s> The Court of Appeals discounted those difficulties by stressing that it was merely mandating a "modest reform," requiring only that broadcasters be required to accept some editorial advertising. 146 U.S. App. D.C., at 202, 450 F.2d, at 663. The court suggested that broadcasters could place an "outside limit on the total amount of editorial advertising they will sell" and that the Commission and the broadcasters could develop "`reasonable regulations' designed to prevent domination by a few groups or a few viewpoints." Id., at 202. [412 U.S. 94, 126] 203, 450 F.2d, at 663, 664. If the Commission decided to apply the Fairness Doctrine to editorial advertisements and as a result broadcasters suffered financial harm, the court thought the "Commission could make necessary adjustments." Id., at 203, 450 F.2d, at 664. Thus, without providing any specific answers to the substantial objections raised by the Commission and the broadcasters, other than to express repeatedly its "confidence" in the Commission's ability to overcome any difficulties, the court remanded the cases to the Commission for the development of regulations to implement a constitutional right of access. </s> By minimizing the difficult problems involved in implementing such a right of access, the Court of Appeals failed to come to grips with another problem of critical importance to broadcast regulation and the First Amendment - the risk of an enlargement of Government control over the content of broadcast discussion of public issues. See, e. g., Fowler v. Rhode Island, 345 U.S. 67 (1953); Niemotko v. Maryland, 340 U.S. 268 (1951). This risk is inherent in the Court of Appeals' remand requiring regulations and procedures to sort out requests to be heard - a process involving the very editing that licensees now perform as to regular programming. Although the use of a public resource by the broadcast media permits a limited degree of Government surveillance, as is not true with respect to private media, see National Broadcasting Co. v. United States, 319 U.S., at 216 -219, the Government's power over licensees, as we have noted, is by no means absolute and is carefully circumscribed by the Act itself. 18 </s> Under a constitutionally commanded and Government supervised right-of-access system urged by respondents and mandated by the Court of Appeals, the Commission [412 U.S. 94, 127] would be required to oversee far more of the day-to-day operations of broadcasters' conduct, deciding such questions as whether a particular individual or group has had sufficient opportunity to present its viewpoint and whether a particular viewpoint has already been sufficiently aired. Regimenting broadcasters is too radical a therapy for the ailment respondents complain of. </s> Under the Fairness Doctrine the Commission's responsibility is to judge whether a licensee's overall performance indicates a sustained good-faith effort to meet the public interest in being fully and fairly informed. 19 The Commission's responsibilities under a right-of-access system would tend to draw it into a continuing case-by-case determination of who should be heard and when. Indeed, the likelihood of Government involvement is so great that it has been suggested that the accepted constitutional principles against control of speech content would need to be relaxed with respect to editorial advertisements. 20 To sacrifice First Amendment protections for so speculative a gain is not warranted, and it was well within the Commission's discretion to construe the Act so as to avoid such a result. 21 </s> The Commission is also entitled to take into account the reality that in a very real sense listeners and viewers constitute a "captive audience." Cf. Public Utilities Comm'n v. Pollak, 343 U.S., at 463 ; Kovacs v. Cooper, 336 U.S. 77 (1949). The "captive" nature of the broadcast audience was recognized as early as 1924, [412 U.S. 94, 128] when Commerce Secretary Hoover remarked at the Fourth National Radio Conference that "the radio listener does not have the same option that the reader of publications has - to ignore advertising in which he is not interested - and he may resent its invasion of his set." 22 As the broadcast media became more pervasive in our society, the problem has become more acute. In a recent decision upholding the Commission's power to promulgate rules regarding cigarette advertising, Judge Bazelon, writing for a unanimous Court of Appeals, noted some of the effects of the ubiquitous commercial: </s> "Written messages are not communicated unless they are read, and reading requires an affirmative act. Broadcast messages, in contrast, are `in the air.' In an age of omnipresent radio, there scarcely breathes a citizen who does not know some part of a leading cigarette jingle by heart. Similarly, an ordinary habitual television watcher can avoid these commercials only by frequently leaving the room, changing the channel, or doing some other such affirmative act. It is difficult to calculate the subliminal impact of this pervasive propaganda, which may be heard even if not listened to, but it may reasonably be thought greater than the impact of the written word." Banzhaf v. FCC, 132 U.S. App. D.C. 14, 32-33, 405 F.2d 1082, 1100-1101 (1968), cert. denied, 396 U.S. 842 (1969). </s> It is no answer to say that because we tolerate pervasive commercial advertisements we can also live with its political counterparts. </s> The rationale for the Court of Appeals' decision imposing a constitutional right of access on the broadcast media was that the licensee impermissibly discriminates [412 U.S. 94, 129] by accepting commercial advertisements while refusing editorial advertisements. The court relied on decisions holding that state-supported school newspapers and public transit companies were prohibited by the First Amendment from excluding controversial editorial advertisements in favor of commercial advertisements. 23 The court also attempted to analogize this case to some of our decisions holding that States may not constitutionally ban certain protected speech while at the same time permitting other speech in public areas. Cox v. Louisiana, 379 U.S. 536 (1965); Fowler v. Rhode Island, 345 U.S. 67 (1953); Niemotko v. Maryland, 340 U.S. 268 (1951). This theme of "invidious discrimination" against protected speech is echoed in the briefs of BEM and DNC to this Court. Respondents also rely on our recent decisions in Grayned v. City of Rockford, 408 U.S. 104 (1972), and Police Dept, of Chicago v. Mosley, 408 U.S. 92 (1972), where we held unconstitutional city ordinances that permitted "peaceful picketing of any school involved in a labor dispute," id., at 93, but prohibited demonstrations for any other purposes on the streets and sidewalks within 150 feet of the school. </s> Those decisions provide little guidance, however, in resolving the question whether the First Amendment requires the Commission to mandate a private right of access to the broadcast media. In none of those cases did the forum sought for expression have an affirmative and independent statutory obligation to provide full and fair coverage of public issues, such as Congress has imposed on [412 U.S. 94, 130] all broadcast licensees. In short, there is no "discrimination" against controversial speech present in this case. The question here is not whether there is to be discussion of controversial issues of public importance on the broadcast media, but rather who shall determine what issues are to be discussed by whom, and when. </s> The opinion of the Court of Appeals asserted that the Fairness Doctrine, insofar as it allows broadcasters to exercise certain journalistic judgments over the discussion of public issues, is inadequate to meet the public's interest in being informed. The present system, the court held, "conforms . . . to a paternalistic structure in which licensees and bureaucrats decide what issues are `important,' and how `fully' to cover them, and the format, time and style of the coverage." 146 U.S. App. D.C., at 195, 450 F.2d, at 656. The forced sale of advertising time for editorial spot announcements would, according to the Court of Appeals majority, remedy this deficiency. That conclusion was premised on the notion that advertising time, as opposed to programming time, involves a "special and separate mode of expression" because advertising content, unlike programming content, is generally prepared and edited by the advertiser. Thus, that court concluded, a broadcaster's policy against using advertising time for editorial messages "may well ignore opportunities to enliven and enrich the public's overall information." Id., at 197, 450 F.2d, at 658. The Court of Appeals' holding would serve to transfer a large share of responsibility for balanced broadcasting from an identifiable, regulated entity - the licensee - to unregulated speakers who could afford the cost. </s> We reject the suggestion that the Fairness Doctrine permits broadcasters to preside over a "paternalistic" regime. See Red Lion, 395 U.S., at 390 . That doctrine admittedly has not always brought to the public perfect or, indeed, even consistently high-quality treatment of all [412 U.S. 94, 131] public events and issues; but the remedy does not lie in diluting licensee responsibility. The Commission stressed that, while the licensee has discretion in fulfilling its obligations under the Fairness Doctrine, it is required to "present representative community views and voices on controversial issues which are of importance to [its] listeners," and it is prohibited from "excluding partisan voices and always itself presenting views in a bland, inoffensive manner . . . ." 25 F. C. C. 2d, at 222. A broadcaster neglects that obligation only at the risk of losing his license. </s> Conceivably at some future date Congress or the Commission - or the broadcasters - may devise some kind of limited right of access that is both practicable and desirable. Indeed, the Commission noted in these proceedings that the advent of cable television will afford increased opportunities for the discussion of public issues. In its proposed rules on cable television the Commission has provided that cable systems in major television markets </s> "shall maintain at least one specially designated, noncommercial public access channel available on a first-come, nondiscriminatory basis. The system shall maintain and have available for public use at least the minimal equipment and facilities necessary for the production of programming for such a channel." 37 Fed Reg. 3289, 76.251 (a) (4). </s> For the present, the Commission is conducting a wideranging study into the effectiveness of the Fairness Doctrine to see what needs to be done to improve the coverage and presentation of public issues on the broadcast media. Notice of Inquiry in Docket 19260, 30 F. C. C. 2d 26, 36 Fed. Reg. 11825. Among other things, the study will attempt to determine whether "there is any feasible method of providing access for discussion of public issues [412 U.S. 94, 132] outside the requirements of the fairness doctrine." 30 F. C. C. 2d, at 33. The Commission made it clear, however, that it does not intend to discard the Fairness Doctrine or to require broadcasters to accept all private demands for air time. 24 The Commission's inquiry on this score was announced prior to the decision of the Court of Appeals in this case and hearings are under way. </s> The problems perceived by the Court of Appeals majority are by no means new; as we have seen, the history of the Communications Act and the activities of the Commission over a period of 40 years reflect a continuing search for means to achieve reasonable regulation compatible with the First Amendment rights of the public and the licensees. The Commission's pending hearings are but one step in this continuing process. At the very least, courts should not freeze this necessarily dynamic process into a constitutional holding. See American Commercial Lines, Inc. v. Louisville & N. R. Co., 392 U.S. 571, 590 -593 (1968). </s> The judgment of the Court of Appeals is </s> Reversed. </s> Footnotes [Footnote 1 The Commission's rulings against BEM's Fairness Doctrine complaint and in favor of DNC's claim that political parties should be permitted to purchase air time for solicitation of funds were not appealed to the Court of Appeals and are not before us here. </s> [Footnote 2 Congressman Davis, for example, stated on the floor of the House the view that Congress found unacceptable: "I do not think any member of the committee will deny that it is absolutely inevitable that we are going to have to regulate the radio public utilities just as we regulate other public utilities. We are going to have to regulate the rates and the service, and to force them to give equal service and equal treatment to all." 67 Cong. Rec. 5483 (1926). See also id., at 5484. </s> [Footnote 3 Section 315 (a) now reads: "If any licensee shall permit any person who is a legally qualified candidate for any public office to use a broadcasting station, he shall afford equal opportunities to all other such candidates for that office in the use of such broadcasting station: Provided, That such licensee shall have no power of censorship over the material broadcast under the provisions of this section. No obligation is imposed under this subsection upon any licensee to allow the use of its station by any such candidate. Appearance by a legally qualified candidate on any - "(1) bona fide newscast, "(2) bona fide news interview, "(3) bona fide news documentary (if the appearance of the candidate is incidental to the presentation of the subject or subjects covered by the news documentary), or "(4) on-the-spot coverage of bona fide news events (including but not limited to political conventions and activities incidental thereto), "shall not be deemed to be use of a broadcasting station within the meaning of this subsection. Nothing in the foregoing sentence shall be construed as relieving broadcasters, in connection with the presentation of newscasts, news interviews, news documentaries, and on-the-spot coverage of news events, from the obligation imposed upon them under this chapter to operate in the public interest and to afford reasonable opportunity for the discussion of conflicting views on issues of public importance." 47 U.S.C. 315 (a). </s> [Footnote 4 The Senate passed a provision stating that: "[I]f any licensee shall permit any person to use a broadcasting station in support of or in opposition to any candidate for public office, or in the presentation of views on a public question to be voted upon at an election, he shall afford equal opportunity to an equal number of other persons to use such station in support of an opposing candidate for such public office, or to reply to a person who has used such broadcasting station in support of or in opposition to a candidate, or for the presentation of opposite views on such public questions." See Hearings on S. 2910 before the Senate Committee on Interstate Commerce, 73d Cong., 2d Sess., 19 (1934) (emphasis added). The provision for discussion of public issues was deleted by the House-Senate Conference. See H. R. Conf. Rep. No. 1918 on S. 3285, 73d Cong., 2d Sess., 49. Also noteworthy are two bills offered in 1934 that would have restricted the control of broadcasters over the discussion of certain issues. Congressman McFadden proposed a bill that would have forbidden broadcasters to discriminate against programs sponsored by religious, charitable, or educational associations. H. R. 7986, 73d Cong., 2d Sess. The bill was not reported out of committee. And, during the debates on the 1934 Act, Senators Wagner and Hatfield offered an amendment that would have ordered the Commission to "reserve and allocate only to educational, religious, agricultural, labor, cooperative, and similar non-profit-making associations one-fourth of all the radio broadcasting facilities within its jurisdiction." 78 Cong. Rec. 8828. Senator Dill explained why the Committee had rejected the proposed amendment, indicating that the practical difficulties and the dangers of censorship were crucial: "MR. DILL. . . . If we should provide that 25 percent of time shall be allocated to nonprofit organizations, someone would have to determine - Congress or somebody else - how much of the 25 percent should go to education, how much of it to religion, and how much of it to agriculture, how much of it to labor, how much of it to fraternal organizations, and so forth. When we enter this [412 U.S. 94, 109] field we must determine how much to give to the Catholics probably and how much to the Protestants and how much to the Jews." 78 Cong. Rec. 8843. Senator Dill went on to say that the problem of determining the proper allocation of time for discussion of these subjects should be worked out by the Commission. Id., at 8844. The Senate rejected the amendment. Id., at 8846. </s> [Footnote 5 Section 3 (h) provides as follows: "`Common carrier' or `carrier' means any person engaged as a common carrier for hire, in interstate or foreign communication by wire or radio or in interstate or foreign radio transmission of energy, except where reference is made to common carriers not subject to this chapter; but a person engaged in radio broadcasting shall not, insofar as such person is so engaged, be deemed a common carrier." 48 Stat. 1066, as amended, 47 U.S.C. 153 (h). </s> [Footnote 6 48 Stat. 1083, as amended, 47 U.S.C. 307. </s> [Footnote 7 Section 303, 48 Stat. 1082, as amended, 47 U.S.C. 303, provides in relevant part: "Except as otherwise provided in this chapter, the Commission from time to time, as public convenience, interest, or necessity requires, shall - . . . . . "(b) Prescribe the nature of the service to be rendered by each class of licensed stations and each station within any class; . . . . . "(r) Make such rules and regulations and prescribe such restrictions and conditions, not inconsistent with law, as may be necessary to carry out the provisions of this chapter . . . ." </s> [Footnote 8 In 1959, Congress amended 315 of the Act to give statutory approval to the Fairness Doctrine. Act of Sept. 14, 1959, 1, 73 Stat. 557, 47 U.S.C. 315 (a). For a summary of the development and nature of the Fairness Doctrine, see Red Lion Broadcasting Co. v. FCC, 395 U.S. 367, 375 -386 (1969). </s> [Footnote 9 See Madalyn Murray, 5 P & F Radio Reg. 2d 263 (1965). Factors that the broadcaster must take into account in exercising his discretion include the following: "In determining whether to honor specific requests for time, the station will inevitably be confronted with such questions as whether the subject is worth considering, whether the viewpoint of the requesting party has already received a sufficient amount of broadcast time, or whether there may not be other available groups or individuals who might be more appropriate spokesmen for the particular point of view than the person [or group] making the request." Report on Editorializing by Broadcast Licensees, 13 F. C. C. 1246, 1251-1252 (1949). </s> [Footnote 10 The Commission has also adopted various component regulations under the Fairness Doctrine, the most notable of which are the "personal attack" and "political editorializing" rules which we upheld in Red Lion. The "personal attack" rule provides that "[w]hen, during the presentation of views on a controversial issue of public importance, an attack is made upon the honesty, character, integrity or like personal qualities of an identified person," the licensee must notify the person attacked and give him an opportunity to respond. E. g., 47 CFR 73.123. Similarly, the "political editorializing" rule provides that, when a licensee endorses a political candidate in an editorial, he must give other candidates or their spokesmen an opportunity to respond. E. g., id., 73.123. The Commission, of course, has taken other steps beyond the Fairness Doctrine to expand the diversity of expression on radio and television. The chain broadcasting and multiple ownership rules are established examples. E. g., id., 73.131, 73.240. More recently, the Commission promulgated rules limiting television network syndication practices and reserving 25% of prime time for non-network programs. Id., 73.658 (j), (k). </s> [Footnote 11 The Court of Appeals, respondents, and the dissent in this case have relied on dictum in United Broadcasting Co., 10 F. C. C. 515 (1945), as illustrating Commission approval of a private right to purchase air time for the discussion of controversial issues. In that case the complaint alleged, not only that the station had a policy of refusing to sell time for the discussion of public issues, but also that the station had applied its policy in a discriminatory manner, a factor not shown in the cases presently before us. Furthermore, the decision was handed down four years before the Commission had fully developed and articulated the Fairness Doctrine. See Report on Editorializing by Broadcast Licensees, 13 F. C. C. 1246 (1949). Thus, even if the decision is read without reference to the allegation of discrimination, it stands as merely an isolated statement, made during the period in which the Commission was still working out the problems associated with the discussion of public issues; the dictum has not been followed since and has been modified by the Fairness Doctrine. </s> [Footnote 12 In 1959, as noted earlier, Congress amended 315 (a) of the Act to give statutory approval to the Commission's Fairness Doctrine. Act of Sept. 14, 1959, 1, 73 Stat. 557, 47 U.S.C. 315 (a). Very recently, Congress amended 312 (a) of the 1934 Act to authorize the Commission to revoke a station license "for willful [412 U.S. 94, 114] or repeated failure to allow reasonable access to or to permit purchase of reasonable amounts of time for the use of a broadcasting station by a legally qualified candidate for Federal elective office on behalf of his candidacy." Campaign Communications Reform Act of 1972, Pub. L. 92-225, 86 Stat. 4. This amendment essentially codified the Commission's prior interpretation of 315 (a) as requiring broadcasters to make time available to political candidates. Farmers Union v. WDAY, 360 U.S. 525, 534 (1959). See FCC Memorandum on Second Sentence of Section 315 (a), in Political Broadcasts - Equal Time, Hearings before Subcommittee of the House Committee on Interstate and Foreign Commerce, 88th Cong., 1st Sess., on H. J. Res. 247, pp. 84-90. </s> [Footnote 13 See, e. g., H. R. 3595, 80th Cong., 1st Sess. (1947). A more recent proposal was offered by Senator Fulbright. His bill would have amended 315 of the Act to provide: "(d) Licensees shall provide a reasonable amount of public service time to authorized representatives of the Senate of the United States, and the House of Representatives of the United States, to present the views of the Senate and the House of Representatives on issues of public importance. The public service time required to be provided under this subsection shall be made available to each such authorized representative at least, but not limited to, four times during each calendar year." S. J. Res. 209, 91st Cong., 2d Sess. (1970). </s> [Footnote 14 The dissent offers the same analysis as the Court of Appeals. As one distinguished commentator has recognized, this line of reasoning "stretch[es] the concept of state action very far." Jaffe, The Editorial Responsibility of the Broadcaster: Reflections on Fairness and Access, 85 Harv. L. Rev. 768, 784 (1972). The notion that broadcasters are engaged in "governmental action" because they are licensed to utilize the "public" frequencies and because they are regulated is superficially appealing but, as Professor Jaffe observes, "not entirely satisfactory." Id., at 783. </s> [Footnote 15 The dissenting view would appear to "want to have it both ways" on the question of Government control of the broadcast media. In finding governmental action, the dissent stresses what is [412 U.S. 94, 117] perceived as an "elaborate statutory scheme governing virtually all aspects of the broadcast industry." "Indeed," the dissent suggests, "federal agency review and guidance of broadcaster conduct is automatic, continuing, and pervasive." Post, at 176-177. Yet later in the dissent, when discussing the constitutional need for a right of access, the dissent objects to the substantial independence afforded broadcasters in covering issues of public importance. Thus, it is said that "broadcasters retain almost exclusive control over the selection of issues and viewpoints to be covered, the manner of presentation and, perhaps most important, who shall speak." Post, at 187. </s> [Footnote 16 See 25 F. C. C. 2d 216, 230, 234-235 (Johnson, dissenting). </s> [Footnote 17 To overcome this inconsistency it has been suggested that a "submarket rate system" be established for those unable to afford the normal cost for air time. See Note, 85 Harv. L. Rev. 689, 695-696 (1972). That proposal has been criticized, we think justifiably, as raising "incredible administrative problems." Jaffe, The Editorial Responsibility of the Broadcaster: Reflections on Fairness and Access, 85 Harv. L. Rev. 768, 789 (1972). </s> [Footnote 18 See n. 8, supra. </s> [Footnote 19 See Report on Editorializing by Broadcast Licensees, 13 F. C. C., at 1251-1252. </s> [Footnote 20 See Note, 85 Harv. L. Rev. 689, 697 (1973). </s> [Footnote 21 DNC has urged in this Court that we at least recognize a right of our national parties to purchase air time for the purpose of discussing public issues. We see no principled means under the First Amendment of favoring access by organized political parties over other groups and individuals. </s> [Footnote 22 Reprinted in Hearings before the Senate Committee on Interstate Commerce on Radio Control, 69th Cong., 1st Sess., 54 (1926). </s> [Footnote 23 Lee v. Board of Regents of State Colleges, 306 F. Supp. 1097 (WD Wis. 1969), aff'd, 441 F.2d 1257 (CA7 1971): Zucker v. Panitz, 299 F. Supp. 102 (SDNY 1969); Kissinger v. New York City Transit Authority, 274 F. Supp. 438 (SDNY 1967); Hillside Community Church, Inc. v. City of Tacoma, 76 Wash. 2d 63, 455 P.2d 350 (1969); Wirta v. Alameda-Contra Costa Transit District, 68 Cal. 2d 51, 434 P.2d 982 (1967). </s> [Footnote 24 Subsequent to the announcement of the Court of Appeals' decision, the Commission expanded the scope of the inquiry to comply with the Court of Appeals' mandate. Further Notice of Inquiry in Docket 19260, 33 F. C. C. 2d 554, 37 Fed. Reg. 3383. After we granted certiorari and stayed the mandate of the Court of Appeals, the Commission withdrew that notice of an expanded inquiry and continued its study as originally planned. Order and Further Notice of Inquiry in Docket 19260, 33 F. C. C. 2d 798, 37 Fed. Reg. 4980. </s> MR. JUSTICE STEWART, concurring. </s> While I join Parts I and II of the Court's opinion, and the opinion in Part III, my views closely approach those expressed by MR. JUSTICE DOUGLAS concurring in the judgment. [412 U.S. 94, 133] </s> The First Amendment prohibits the Government from imposing controls upon the press. 1 Private broadcasters are surely part of the press. United States v. Paramount Pictures, Inc., 334 U.S. 131, 166 . Yet here the Court of Appeals held, and the dissenters today agree, that the First Amendment requires the Government to impose controls upon private broadcasters - in order to preserve First Amendment "values." The appellate court accomplished this strange convolution by the simple device of holding that private broadcasters are Government. This is a step along a path that could eventually lead to the proposition that private newspapers "are" Government. Freedom of the press would then be gone. In its place we would have such governmental controls upon the press as a majority of this Court at any particular moment might consider First Amendment "values" to require. It is a frightening specter. </s> I </s> There is some first-blush appeal in seeking out analogies from areas of the law where governmental involvement on the part of otherwise private parties has led the Court to hold that certain activities of those parties were tantamount to governmental action. 2 The evolution of the "state action" concept under the Fourteenth Amendment is one available analogy. 3 Another is the decision of this [412 U.S. 94, 134] Court in Public Utilities Comm'n v. Pollak, 343 U.S. 451 , where a policy of a privately owned but publicly regulated bus company that had been approved by the regulatory commission was held to activate First Amendment review. The First Amendment has also been held applicable where private parties control essentially public forums. Amalgamated Food Employees v. Logan Valley Plaza, 391 U.S. 308 , Marsh v. Alabama, 326 U.S. 501 ; cf. Lloyd Corp. v. Tanner, 407 U.S. 551 . </s> The problem before us, however, is too complex to admit of solution by simply analogizing to cases in very different areas. For we deal here with the electronic press, that is itself protected from Government by the First Amendment. 4 Before woodenly accepting analogies from cases dealing with quasi-public racial discrimination, regulated industries other than the press, or "company towns," we must look more closely at the structure of broadcasting and the limits of governmental regulation of licensees. </s> When Congress enacted the Radio Act of 1927, 44 Stat. 1162, and followed it with the Federal Communications Act of 1934, 48 Stat. 1064, 47 U.S.C. 151 et seq., it was responding to a then-evident need to regulate access to the public airwaves. Not every member of the public could broadcast over the air as he chose, since the scarcity [412 U.S. 94, 135] of frequencies made this a sure road to chaos. 5 The system selected by the Congress was a hybrid. The Federal Radio Commission (succeeded by the Federal Communications Commission), was to license broadcasters for no more than three-year periods. 47 U.S.C. 307 (d). The licensees, though subject to some public regulation, were to be private companies. </s> Scarcity meant more than a need to limit access. Because access was to be limited, it was thought necessary for the regulatory apparatus to take into account the public interest in obtaining "the best practicable service to the community reached by his [the licensee's] broadcasts." FCC v. Sanders Brothers Radio Station, 309 U.S. 470, 475 . Public regulation has not, then, been merely a matter of electromagnetic engineering for the sake of keeping signals clear. It has also included some regulation of programming. Writing in defense of Commission regulations regarding chain broadcasting, Mr. Justice Frankfurter said: "These provisions [of the Act], individually and in the aggregate, preclude the notion that the Commission is empowered to deal only with technical and engineering impediments to the `larger and more effective use of radio in the public interest.'" National Broadcasting Co. v. United States, 319 U.S. 190, 217 . </s> Over time, federal regulation of broadcasting in the public interest has been extensive, and, pro tanto, has rightly or wrongly been held to be tolerable under the First Amendment. We now have the Fairness Doctrine, with its personal-attack, editorial-reply, and fair-coverage-of-controversial-issue requirements. 6 In Red Lion Broadcasting [412 U.S. 94, 136] Co. v. FCC, 395 U.S. 367 , this Doctrine was held to constitute permissible governmental regulation of broadcasters, despite the First Amendment. The Court said: </s> "Where there are substantially more individuals who want to broadcast than there are frequencies to allocate, it is idle to posit an unabridgeable First Amendment right to broadcast comparable to the right of every individual to speak, write, or publish. . . . </s> . . . . . </s> ". . . Because of the scarcity of radio frequencies, the Government is permitted to put restraints on licensees in favor of others whose views should be expressed on this unique medium. But the people as a whole retain their interest in free speech by radio and their collective right to have the medium function consistently with the ends and purposes of the First Amendment. It is the right of the viewers and listeners, not the right of the broadcasters, which is paramount." Id., at 388, 390. </s> The Fairness Doctrine has been held applicable to paid advertising as well as to other programming, Banzhaf v. FCC, 132 U.S. App. D.C. 14, 405 F.2d 1082. And the public interest in broadcasting has been recognized as a rationale for liberalized standing on the part of listener [412 U.S. 94, 137] groups in Commission licensing proceedings. Office of Communication of United Church of Christ v. FCC, 123 U.S. App. D.C. 328. 359 F.2d 994. </s> Throughout this long history of regulation, however, it has been recognized that broadcasters retain important freedoms, and that the Commission's regulatory power has limits. Quite apart from what may be required by the First Amendment itself, the regulatory legislation makes clear what some of these freedoms are. Section 3 (h) of the Act, 47 U.S.C. 153 (h), provides that broadcasters are not to be treated as common carriers. Were broadcasters common carriers within the meaning of the Act, they would be subject to 47 U.S.C. 201, 202. Section 201 provides, in pertinent part, that: </s> "(a) It shall be the duty of every common carrier engaged in interstate or foreign communication by wire or radio to furnish such communication service upon reasonable request therefore . . . ." </s> Section 202 provides that: </s> "(a) It shall be unlawful for any common carrier to make any unjust or unreasonable discrimination in charges, practices, classifications, regulations, facilities, or services for or in connection with like communication service, directly or indirectly, by any means or device, or to make or give any undue or unreasonable preference or advantage to any particular person, class of persons, or locality, or to subject any particular person, class of persons, or locality to any undue or unreasonable prejudice or disadvantage." </s> The Act also specifically gives licensees "freedom of speech": </s> "Nothing in this chapter shall be understood or construed to give the Commission the power of censorship over the radio communications or signals [412 U.S. 94, 138] transmitted by any radio station, and no regulation or condition shall be promulgated or fixed by the Commission which shall interfere with the right of free speech by means of radio communication." 47 U.S.C. 326. </s> Thus, when examined as a whole, the Federal Communications Act establishes a system of privately owned broadcast licensees. These licensees, though regulated by the Commission under a fairly broad "public interest" standard, have, quite apart from whatever additional protections the First Amendment may provide, important statutory freedoms in conducting their programming. </s> In Red Lion, supra, this Court held that, despite the First Amendment, the Commission may impose a so-called Fairness Doctrine upon broadcasters, requiring them to present balanced coverage of various and conflicting views on issues of public importance. I agreed with the Court in Red Lion, although with considerable doubt, because I thought that that much Government regulation of program content was within the outer limits of First Amendment tolerability. Were the Commission to require broadcasters to accept some amount of editorial advertising as part of the public interest mandate upon which their licenses are conditional, the issue before us would be in the same posture as was the Fairness Doctrine itself in Red Lion, and we would have to determine whether this additional governmental control of broadcasters was consistent with the statute and tolerable under the First Amendment. Here, however, the Commission imposed no such requirement, but left private broadcasters free to accept or reject such advertising as they saw fit. The Court of Appeals held that the First Amendment compels the Commission to require broadcasters to accept such advertising, because it equated broadcaster action with governmental action. [412 U.S. 94, 139] This holding not only raises a serious statutory question under 3 (h) of the Act, which provides that broadcasters are not common carriers, but seems to me to reflect an extraordinarily odd view of the First Amendment. </s> The dissenting opinion today argues, in support of the decision of the Court of Appeals, that only a limited right of access is sought by the respondents and required by the First Amendment, and that such a limited right would not turn broadcasters into common carriers. The respondents argue, somewhat differently, that the Constitution requires that only "responsible" individuals and groups be given the right to purchase advertising. These positions are said to be arrived at by somehow balancing "competing First Amendment values." But if private broadcasters are Government, how can the First Amendment give only a limited right to those who would speak? Since when has the First Amendment given Government the right to silence all speakers it does not consider "responsible?" </s> The First Amendment protects the press from governmental interference; it confers no analogous protection on the Government. 7 To hold that broadcaster action is governmental action would thus simply strip broadcasters of their own First Amendment rights. They would be obligated to grant the demands of all citizens to be heard over the air, subject only to reasonable regulations as to "time, place and manner." Cf. Police Dept. of Chicago v. Mosley, 408 U.S. 92, 98 ; Cox v. Louisiana, [412 U.S. 94, 140] 379 U.S. 536, 554 ; Poulos v. New Hampshire, 345 U.S. 395 ; Cox v. New Hampshire, 312 U.S. 569 . If, as the dissent today would have it, the proper analogy is to public forums 8 - that is, if broadcasters are Government for First Amendment purposes - then broadcasters are inevitably drawn to the position of common carriers. For this is precisely the status of Government with respect to public forums - a status mandated by the First Amendment. 9 </s> To hold that broadcaster action is governmental action would thus produce a result wholly inimical to the broadcasters' own First Amendment rights, and wholly at odds with the broadcasting system established by Congress and with our many decisions 10 approving those legislative [412 U.S. 94, 141] provisions. 11 As Judge McGowan wrote, dissenting from the judgment of the Court of Appeals in these cases. </s> "This is the system which Congress has, wisely or not, provided as the alternative to public ownership and operation of radio and television communications facilities. This approach has never been thought to be other than within the permissible limits of constitutional choice." 146 U.S. App. D.C. 181, 205, 450 F.2d 642. 666. </s> II </s> Part IV of the Court's opinion, as I understand it, seems primarily to deal with the respondents' statutory argument - that the obligation of broadcasters to operate in the "public interest" supports the judgment of the Court of Appeals. Yet two of my concurring Brethren understand Part IV as a discussion of the First Amendment issue that would exist in these cases were the action of broadcasters to be equated with governmental action. So, according to my Brother BLACKMUN, "the governmental action issue does not affect the outcome of this case." Post, at 148. The Court of Appeals also conflated the constitutional and statutory issues in these cases. It reasoned that whether its decision "is styled as a `First Amendment decision' or as a decision interpreting the fairness and public interest requirements `in light of the First Amendment' matters little." 146 U.S. App. D.C., at 188, 450 F.2d. at 649. [412 U.S. 94, 142] </s> I find this reasoning quite wrong and wholly disagree with it, for the simple reason that the First Amendment and the public interest standard of the statute are not coextensive. The two are related in the sense that the Commission could not "in the public interest" place a requirement on broadcasters that constituted a violation of their First Amendment rights. The two are also related in the sense that both foster free speech. But we have held that the Commission can under the statute require broadcasters to do certain things "in the public interest" that the First Amendment would not require if the broadcasters were the Government. For example, the Fairness Doctrine is an aspect of the "public interest" regulation of broadcasters that would not be compelled or even permitted by the First Amendment itself if broadcasters were the Government. 12 </s> If the "public interest" language of the statute were intended to enact the substance of the First Amendment, a discussion of whether broadcaster action is governmental action would indeed be superfluous. For anything that Government could not do because of the First Amendment, the broadcasters could not do under the statute. But this theory proves far too much, since it would make the statutory scheme, with its emphasis on [412 U.S. 94, 143] broadcaster discretion and its proscription on interference with "the right of free speech by means of radio communication." a nullity. Were the Government really operating the electronic press, it would as my Brother DOUGLAS points out, be prevented by the First Amendment from selection of broadcast content and the exercise of editorial judgment. It would not be permitted in the name of "fairness" to deny time to any person or group on the grounds that their views had been heard "enough." Yet broadcasters perform precisely these functions and enjoy precisely these freedoms under the Act. The constitutional and statutory issues in these cases are thus quite different. </s> In evaluating the statutory claims, the starting point must be the "venerable principle that the construction of a statute by those charged with its execution should be followed unless there are compelling indications that it is wrong . . . ." Red Lion, 395 U.S., at 381 . </s> Though I have no doubt that the respondents here were attempting to communicate what they considered to be important messages, it does not follow that the Commission erred when it refused to require every broadcaster to communicate those messages. Contrary to what is said in dissent today, it is not the case that a seller of goods is granted instant access to the media, while someone "seeking to discuss war, peace, pollution, or the suffering of the poor is denied this right to speak." Post, at 200. There is no indication that the thousands of broadcasters regulated by the Commission have anything like a uniform policy of turning down "controversial" or "editorial" advertising. In the cases before us, the Business Executives' spot advertisements were rejected by a single radio station. Of the three television networks, only one turned down the Democratic National Committee's request for air time. We are told that many, if not most, broadcasters do accept advertising of [412 U.S. 94, 144] the type at issue here. This variation in broadcaster policy reflects the very kind of diversity and competition that best protects the free flow of ideas under a system of broadcasting predicated on private management. 13 </s> Even though it would be in the public interest for the respondents' advertisements to be heard, it does not follow that the public interest requires every broadcaster to broadcast them. And it certainly does not follow that the public interest would be served by forcing every broadcaster to accept any particular kind of advertising. In the light of these diverse broadcaster policies - and the serious First Amendment problem that a contrary ruling would have presented - there are surely no "compelling indications" that the Commission misunderstood its statutory responsibility. </s> III </s> There is never a paucity of arguments in favor of limiting the freedom of the press. The Court of Appeals concluded that greater Government control of press freedom is acceptable here because of the scarcity of frequencies for broadcasting. But there are many more broadcasting stations than there are daily newspapers. 14 And it [412 U.S. 94, 145] would require no great ingenuity to argue that newspapers too are Government. After all, newspapers get Government mail subsidies and a limited antitrust immunity. 15 The reasoning of the Court of Appeals would then lead to the conclusion that the First Amendment requires that newspapers, too, be compelled to open their pages to all comers. </s> Perhaps I overstate the logic of the opinion of the Court of Appeals. Perhaps its "balancing" of First Amendment "values" would require no more than that newspapers be compelled to give "limited" access to dissident voices, and then only if those voices were "responsible." And perhaps it would require that such access be compelled only when there was a single newspaper in a particular community. But it would be a close question for me which of these various alternative results would be more grossly violative of the First Amendment's guarantee of a free press. For that guarantee gives every newspaper the liberty to print what it chooses and reject what it chooses, free from the intrusive editorial thumb of Government. </s> I profoundly trust that no such reasoning as I have attributed to the Court of Appeals will ever be adopted by this Court. And if I have exaggerated, it is only to make clear the dangers that beset us when we lose sight of the First Amendment itself, and march forth in blind pursuit of its "values." </s> Those who wrote our First Amendment put their faith in the proposition that a free press is indispensable to a free society. They believed that "fairness" was far too fragile to be left for a Government bureaucracy to accomplish. [412 U.S. 94, 146] History has many times confirmed the wisdom of their choice. </s> This Court was persuaded in Red Lion to accept the Commission's view that a so-called Fairness Doctrine was required by the unique electronic limitations of broadcasting, at least in the then-existing state of the art. Rightly or wrongly, we there decided that broadcasters' First Amendment rights were "abridgeable." But surely this does not mean that those rights are nonexistent. And even if all else were in equipoise, and the decision of the issue before us were finally to rest upon First Amendment "values" alone, I could not agree with the Court of Appeals. For if those "values" mean anything. they should mean at least this: If we must choose whether editorial decisions are to be made in the free judgment of individual broadcasters, or imposed by bureaucratic fiat, the choice must be for freedom. </s> [Footnote 1 U.S. Const., Amdt. I, provides, in pertinent part, that "Congress shall make no law . . . abridging the freedom of speech, or of the press . . . ." </s> [Footnote 2 See Amalgamated Food Employees v. Logan Valley Plaza, 391 U.S. 308 ; Railway Employees' Dept. v. Hanson, 351 U.S. 225 ; Public Utilities Comm'n v. Pollak, 343 U.S. 451 ; Marsh v. Alabama, 326 U.S. 501 . </s> [Footnote 3 "Conduct that is formally `private' may become so entwined with governmental policies or so impregnated with a governmental [412 U.S. 94, 134] character as to become subject to the constitutional limitations placed upon state action." Evans v. Newton, 382 U.S. 296, 299 . Earlier, in Burton v. Wilmington Parking Authority, 365 U.S. 715 , the Court held that a privately owned restaurant located within a public parking garage was sufficiently involved with state authority to bring its racially discriminatory actions within the proscription of the Fourteenth Amendment. </s> [Footnote 4 See, e. g., United States v. Paramount Pictures, Inc., 334 U.S. 131, 166 . The Federal Communications Act also prohibits the Commission from interfering with "the right of free speech by means of radio communication." 47 U.S.C. 326. </s> [Footnote 5 For a history of regulatory legislation regarding broadcasters, see Red Lion Broadcasting Co. v. FCC, 395 U.S. 367, 375 -386; National Broadcasting Co. v. United States, 319 U.S. 190, 210 -214. </s> [Footnote 6 The personal-attack and editorial-reply rules appear at 47 CFR 73.123, 73.300, 73.598, 73.679. The public issue aspect of the [412 U.S. 94, 136] Fairness Doctrine requires the broadcaster to give adequate coverage to public issues, fairly reflecting divergent views. United Broadcasting Co., 10 F. C. C. 515; New Broadcasting Co., 6 P & F Radio Reg. 258; see generally Applicability of the Fairness Doctrine in the Handling of Controversial Issues of Public Importance, 29 Fed. Reg. 10415. This coverage must be provided at the broadcaster's own expense if necessary, Cullman Broadcasting Co., 25 P & F Radio Reg. 895, and the duty must be met by providing programming obtained at the licensee's own initiative if it is available from no other source. John J. Dempsey, 6 P & F Radio Reg. 615. </s> [Footnote 7 Government is not restrained by the First Amendment from controlling its own expression, cf. New York Times Co. v. United States, 403 U.S. 713, 728 -729 (STEWART, J., concurring). As Professor Thomas Emerson has written, "The purpose of the First Amendment is to protect private expression and nothing in the guarantee precludes the government from controlling its own expression or that of its agents." The System of Freedom of Expression 700 (1970). </s> [Footnote 8 "[T]he right to speak can flourish only if it is allowed to operate in an effective forum - whether it be a public park, a schoolroom, a town meeting hall, a soapbox, or a radio and television frequency." Post, at 193. </s> [Footnote 9 Professor Emerson has recognized the scope of the "access" argument: "The licensee therefore can only be considered as the agent of the government, or trustee of the public, in a process of further allocation. Hence the licensee would have no direct First Amendment rights of his own, except as to his own expression." Supra, n. 7, at 663. Though the licensee would be free to say what it wished during its own broadcasting, whatever that might mean, it seems clear that the licensee would have no special claim to broadcast time and would lose entirely the freedom to program and schedule according to its own judgment, values, and priorities. Cf. Police Dept. of Chicago v. Mosley, 408 U.S. 92, 98 ; Cox v. Louisiana, 379 U.S. 536, 554 ; Poulos v. New Hampshire, 345 U.S. 395 ; Cox v. New Hampshire, 312 U.S. 569 . Licensees would be forced to develop a procedurally fair and substantively nondiscriminatory system for controlling access, and in my view this is precisely what Congress intended to avoid through 3 (h) of the Act. </s> [Footnote 10 Red Lion Broadcasting Co. v. FCC, 395 U.S. 367 ; National Broadcasting Co. v. United States, 319 U.S. 190 ; FCC v. Sanders Brothers Radio Station, 309 U.S. 470 ; FCC v. Pottsville Broadcasting Co., 309 U.S. 134 . </s> [Footnote 11 None of this suggests any disagreement on my part with the evolution of "state action" under the Fourteenth Amendment. I recognize that if Moose Lodge No. 107 v. Irvis, 407 U.S. 163 , were relevant, the fact that the Commission considered and rejected a challenge to broadcaster policy might be sufficient to constitute "state action." This, in fact, was the basis of the Court's decision in Public Utilities Comm'n v. Pollak, 343 U.S. 451 . </s> [Footnote 12 The basis for a Fairness Doctrine is statutory, not constitutional. As the Court said in Red Lion: "In light of the fact that the `public interest' in broadcasting clearly encompasses the presentation of vigorous debate of controversial issues of importance and concern to the public; the fact that the FCC has rested upon that language from its very inception a doctrine that these issues must be discussed, and fairly; and the fact that Congress has acknowledged that the analogous provisions of 315 are not preclusive in this area, and knowingly preserved the FCC's complementary efforts, we think the fairness doctrine and its component personal attack and political editorializing regulations are a legitimate exercise of congressionally delegated authority." 395 U.S., at 385 . </s> [Footnote 13 The Democratic National Committee cited this very lack of uniformity as a reason for seeking a declaratory ruling from the Commission. There was too much diversity, it thought, for it to plan effectively an advertising campaign. In the DNC's request for a declaratory ruling before the Commission, it stated: "In addition to the three national commercial networks, as of April 1, 1970, there were, on the air, 509 commercial VHF television stations, 180 commercial UHF stations, 4,280 standard broadcast stations, and 2,111 commercial FM stations. While several of these stations have common owners, it does not necessarily follow that every station owned by an individual or group would follow the same policies." </s> [Footnote 14 There are 1,792 daily newspapers in the United States, Ayer Directory of Publications VIII (1973). Compare the number of broadcasters, n. 13, supra. </s> [Footnote 15 Newspapers and other periodicals receive a Government subsidy in the form of second-class postage rates, 39 CFR 132. An antitrust immunity is established by the Newspaper Preservation Act, 15 U.S.C. 1801 et seq. </s> MR. JUSTICE WHITE, concurring. </s> I join Parts I, II, and IV of the Court's opinion and its judgment. I do not, however, concur in the Part III opinion. </s> I do not suggest that the conduct of broadcasters must always, or even often, be considered that of a government for the purposes of the First Amendment. But it is at least arguable, and strongly so, that the Communications Act and the policies of the Commission, including the Fairness Doctrine, are here sufficiently implicated to require review of the Commission's orders under the First Amendment. For myself, the heart of the argument is simply stated. The claim in these cases was that the Communications Act and the First Amendment should be interpreted to confer a right of access on those who wished to buy time for editorial advertising and to raise political funds. The Commission rejected both the statutory and constitutional positions. To confer a right [412 U.S. 94, 147] of access, it said, would be contrary to the Communications Act and to the policies adopted by the Commission to implement that Act. Congress intended that the Fairness Doctrine be complied with, but it also intended that broadcasters have wide discretion with respect to the method of compliance. There is no requirement that broadcasters accept editorial ads; they could, instead, provide their own programs, with their own format, opinion and opinion sources. Congress intended that there be no right of access such as claimed in these cases; and, in the Commission's view, to recognize that right would require major revisions in statutory and regulatory policy. The Commission also ruled, contrary to the views of its dissenting member, that rejection of the asserted right of access was wholly consistent with the First Amendment. </s> In this context I am not ready to conclude, as is done in the Part III opinion, that the First Amendment may be put aside for lack of official action necessary to invoke its proscriptions. But, assuming, arguendo, as the Court does in Part IV of its opinion, that Congress or the Commission is sufficiently involved in the denial of access to the broadcasting media to require review under the First Amendment, I would reverse the judgment of the Court of Appeals. Given the constitutionality of the Fairness Doctrine, and accepting Part IV of the Court's opinion, I have little difficulty in concluding that statutory and regulatory recognition of broadcaster freedom and discretion to make up their own programs and to choose their method of compliance with the Fairness Doctrine is consistent with the First Amendment. </s> MR. JUSTICE BLACKMUN, with whom MR. JUSTICE POWELL joins, concurring. </s> In Part IV the Court determines "whether, assuming governmental action, broadcasters are required" to accept [412 U.S. 94, 148] editorial advertisements "by reason of the First Amendment." Ante, at 121. The Court concludes that the Court of Appeals erred when it froze the "continuing search for means to achieve reasonable regulation compatible with the First Amendment rights of the public and the licensees" into "a constitutional holding." Ante, at 132. The Court's conclusion that the First Amendment does not compel the result reached by the Court of Appeals demonstrates that the governmental action issue does not affect the outcome of this case. I therefore refrain from deciding it. </s> MR. JUSTICE DOUGLAS, concurring in the judgment. </s> While I join the Court in reversing the judgment below, I do so for quite different reasons. </s> My conclusion is that TV and radio stand in the same protected position under the First Amendment as do newspapers and magazines. The philosophy of the First Amendment requires that result, for the fear that Madison and Jefferson had of government intrusion is perhaps even more relevant to TV and radio than it is to newspapers and other like publications. That fear was founded not only on the spectre of a lawless government but of government under the control of a faction that desired to foist its views of the common good on the people. In popular terms that view has been expressed as follows: </s> "The ground rules of our democracy, as it has grown, require a free press, not necessarily a responsible or a temperate one. There aren't any halfway stages. As Aristophanes saw, democracy means that power is generally conferred on second-raters by third-raters, whereupon everyone else, from first-raters to fourth-raters, moves with great glee to try to dislodge them. It's messy but most politicians understand [412 U.S. 94, 149] that it can't very well be otherwise and still be a democracy." Stewart, reviewing Epstein, News From Nowhere: Television and the News (1972), Book World, Washington Post, March 25, 1973, pp. 4-5. </s> I </s> Public broadcasting, of course, raises quite different problems from those tendered by the TV outlets involved in this litigation. </s> Congress has authorized the creation of the Corporation for Public Broadcasting, whose Board of Directors is appointed by the President by and with the advice and consent of the Senate. 47 U.S.C. 396. A total of 223 television and 560 radio stations made up this nationwide public broadcasting system as of June 30, 1972. See 1972 Corporation for Public Broadcasting Annual Report. It is a nonprofit organization and by the terms of 396 (b) is said not to be "an agency or establishment of the United States Government." Yet, since it is a creature of Congress whose management is in the hands of a Board named by the President and approved by the Senate, it is difficult to see why it is not a federal agency engaged in operating a "press" as that word is used in the First Amendment. If these cases involved that Corporation, we would have a situation comparable to that in which the United States owns and manages a prestigious newspaper like the New York Times, Washington Post, or Sacramento Bee. The Government as owner and manager would not, as I see it, be free to pick and choose such news items as it desired. For by the First Amendment it may not censor or enact or enforce any other "law" abridging freedom of the press. Politics, ideological slants, rightist or leftist tendencies could play no part in its design of programs. See Markel, Will It be Public or Private TV?, World, Mar. 13, 1973, p. 57; [412 U.S. 94, 150] Shales, WGBH-TV: An Ultimatum Against "Improper" White House Influence, Washington Post, Apr. 27, 1973, p. E2. More specifically, the programs tendered by the respondents in the present cases could not then be turned down. </s> Governmental action may be evidenced by various forms of supervision or control of private activities. Burton v. Wilmington Parking Authority, 365 U.S. 715 . I have expressed the view that the activities of licensees of the government operating in the public domain are governmental actions, so far as constitutional duties and responsibilities are concerned. See Garner v. Louisiana, 368 U.S. 157, 183 -185 (concurring); Lombard v. Louisiana, 373 U.S. 267, 281 (concurring); Moose Lodge No. 107 v. Irvis, 407 U.S. 163, 179 (dissenting). It is somewhat the same idea expressed by the first Mr. Justice Harlan in his dissent in Plessy v. Ferguson, 163 U.S. 537, 554 . But that view has not been accepted. If a TV or radio licensee were a federal agency, the thesis of my Brother BRENNAN would inexorably follow. For a licensee of the Federal Government would be in precisely the situation of the Corporation for Public Broadcasting. A licensee, like an agency of the Government, would within limits of its time be bound to disseminate all views. For, being an arm of the Government, it would be unable by reason of the First Amendment to "abridge" some sectors of thought in favor of others. The Court does not, however, decide whether a broadcast licensee is a federal agency within the context of these cases. </s> II </s> If a broadcast licensee is not engaged in governmental action for purposes of the First Amendment, I fail to see how constitutionally we can treat TV and radio differently than we treat newspapers. It would come [412 U.S. 94, 151] as a surprise to the public as well as to publishers and editors of newspapers to be informed that a newly created federal bureau would hereafter provide "guidelines" for newspapers or promulgate rules that would give a federal agency power to ride herd on the publishing business to make sure that fair comment on all current issues was made. In 1970 Congressman Farbstein introduced a bill, 1 never reported out of the Committee, which provided that any newspaper of general circulation published in a city with a population greater than 25,000 and in which only one separately owned newspaper of general circulation is published "shall provide a reasonable opportunity for a balanced presentation of conflicting views on issues of public importance" and giving the Federal Communications Commission power to enforce the requirement. </s> Thomas I. Emerson, our leading First Amendment scholar, has stated that: </s> "[A]ny effort to solve the broader problems of a monopoly press by forcing newspapers to cover all `newsworthy' events and print all viewpoints, under the watchful eyes of petty public officials, is likely to undermine such independence as the press now shows without achieving any real diversity." The System of Freedom of Expression 671 (1970). </s> The sturdy people who fashioned the First Amendment would be shocked at that intrusion of Government into a field which in this Nation has been reserved for individuals, whatever part of the spectrum of opinion they represent. Benjamin Franklin, one of the Founders who was in the newspaper business, wrote in simple and graphic form what I had always assumed was the basic [412 U.S. 94, 152] American newspaper tradition that became implicit in the First Amendment. In our early history one view was that the publisher must open his columns </s> "to any and all controversialists, especially if paid for it. Franklin disagreed, declaring that his newspaper was not a stagecoach, with seats for everyone; he offered to print pamphlets for private distribution, but refused to fill his paper with private altercations." 2 F. Mott, American Journalism 55 (3d ed. 1962). </s> It is said that TV and radio have become so powerful and exert such an influence on the public mind that they must be controlled by Government. 3 Some [412 U.S. 94, 153] newspapers in our history have exerted a powerful - and some have thought - a harmful interest on the public mind. But even Thomas Jefferson, who knew how base and obnoxious the press could be, never dreamed of interfering. For he thought that government control of newspapers would be the greater of two evils. 4 </s> "I deplore . . . the putrid state into which our newspapers have passed, and the malignity, the vulgarity, and mendacious spirit of those who write them. . . . These ordures are rapidly depraving the public taste. </s> "It is however an evil for which there is no remedy, our liberty depends on the freedom of the press, and that cannot be limited without being lost." </s> Of course there is private censorship in the newspaper field. But for one publisher who may suppress a fact, there are many who will print it. But if the Government is the censor, administrative fiat, not freedom of choice, carries the day. </s> As stated recently by Harry Kalven, Jr.: </s> "It is an insufficiently noticed aspect of the First Amendment that it contemplates the vigorous use of self-help by the opponents of given doctrines, ideas, and political positions. It is not the theory that all ideas and positions are entitled to flourish under freedom of discussion. It is rather then that they must survive and endure against hostile criticism. There is perhaps a paradox in that the suppression of speech by speech is part and parcel of the principle of freedom of speech. Indeed, one big reason why policy dictates that government keep its hands off communication is that, in this area, self-help of criticism is singularly effective. . . . </s> "Free, robust criticism of government, its officers, and its policy is the essence of the democratic [412 U.S. 94, 154] dialectic - of `the belief,' again to quote Brandeis, `in the power of reason as applied through public discussion.' The government cannot reciprocally criticize the performance of the press, its officers, and its policies without its criticism carrying implications of power and coercion. The government simply cannot be another discussant of the press's performance. Whether it will it or not, it is a critic who carries the threat of the censor and more often than not it wills it. Nor is it at all clear that its voice will be needed; surely there will be others to champion its view of the performance of the press. </s> "The balance struck, then, is avowedly, and even enthusiastically, one-sided. The citizen may criticize the performance and motives of his government. The government may defend its performance and its policies, but it may not criticize the performance and motives of its critics." 6 The Center Magazine, No. 3, pp. 36-37 (May/June 1973). </s> Red Lion Broadcasting Co. v. FCC, 395 U.S. 367 , in a carefully written opinion that was built upon predecessor cases, put TV and radio under a different regime. I did not participate in that decision and, with all respect, would not support it. The Fairness Doctrine has no place in our First Amendment regime. It puts the head of the camel inside the tent and enables administration after administration to toy with TV or radio in order to serve its sordid or its benevolent ends. In 1973 - as in other years - there is clamoring to make TV and radio emit the messages that console certain groups. There are charges that these mass media are too slanted, too partisan, too hostile in their approach to candidates and the issues. </s> The same cry of protest has gone up against the newspapers and magazines. When Senator Joseph McCarthy [412 U.S. 94, 155] was at his prime, holding in his hand papers containing the names of 205 "Communists" in the State Department (R. Feuerlicht. Joe McCarthy and McCarthyism 54 (1972)), there were scarcely a dozen papers in this Nation that stood firm for the citizen's right to due process and to First Amendment protection. That, however, was no reason to put the saddle of the federal bureaucracy on the backs of publishers. Under our Bill of Rights people are entitled to have extreme ideas, silly ideas, partisan ideas. </s> The same is true, I believe, of TV and radio. At times they have a nauseating mediocrity. At other times they show the dazzling brilliance of a Leonard Bernstein; and they very often bring humanistic influences of faraway people into every home. </s> Both TV and radio news broadcasts frequently tip the news one direction or another and even try to turn a public figure into a character of disrepute. Yet so do the newspapers and the magazines and other segments of the press. The standards of TV, radio, newspapers, or magazines - whether of excellence or mediocrity - are beyond the reach of Government. Government - acting through courts - disciplines lawyers. Government makes criminal some acts of doctors and of engineers. But the First Amendment puts beyond the reach of Government federal regulation of news agencies save only business or financial practices which do not involve First Amendment rights. Conspicuous is Associated Press v. United States, 326 U.S. 1 , where enforcement of the antitrust laws against a news-gathering agency was held to be not inconsistent with First Amendment rights. </s> Government has no business in collating, dispensing, and enforcing, subtly or otherwise, any set of ideas on the press. Beliefs, proposals for change, clamor for controls, protests against any governmental regime are protected [412 U.S. 94, 156] by the First Amendment against governmental ban or control. </s> There has been debate over the meaning of the First Amendment as applied to the States by reason of the Fourteenth. Some have thought that at the state level the First Amendment was somewhat "watered down" and did not have the full vigor which it had as applied to the Federal Government. See Roth v. United States, 354 U.S. 476, 502 -503 (Harlan, J., concurring). So far, that has been the minority view. See Malloy v. Hogan, 378 U.S. 1, 10 . But it is quite irrelevant here, for the First Amendment, like other parts of the Bill of Rights, was at the outset applicable only to the Federal Government. 5 The First Amendment is written in terms that are absolute. Its command is that "Congress shall make no law. . . abridging the freedom of speech, or of the press. . . ." </s> That guarantee, can, of course, be changed by a constitutional amendment which can make all the press or segments of the press organs of Government and thus control the news and information which people receive. Such a restructuring of the First Amendment cannot be done by judicial fiat or by congressional action. The ban of "no" law that abridges freedom of the press is in my view total and complete. 6 The Alien and Sedition Acts, 1 Stat. 566, 570, 596, passed early in our history were [412 U.S. 94, 157] plainly unconstitutional, as Jefferson believed. Jefferson, indeed, said that by reason of the First Amendment </s> "libels, falsehood, and defamation, equally with heresy and false religion, are withheld from the cognizance of federal tribunals. That therefore the act of the Congress of the United States, passed on the 14th of July, 1798, entitled `An Act in Addition to the Act entitled "An Act for the Punishment of certain Crimes against the United States,"' which does abridge the freedom of the press, is not law, but is altogether void, and of no force." 4 J. Elliot's Debates on the Federal Constitution 541 (1876). </s> And see 15 Writings of Thomas Jefferson 214 (Memorial ed. 1904); 14 id., at 116; 11 id., at 43-44. </s> Those Acts had but a short life, and we never returned to them. We have, however, witnessed a slow encroachment by Government over that segment of the press that is represented by TV and radio licensees. Licensing is necessary for engineering reasons; the spectrum is limited and wavelengths must be assigned to avoid stations interfering 7 with each other. Red Lion Broadcasting Co. v. FCC, 395 U.S., at 388 . The Commission has a duty to encourage a multitude of voices but only in [412 U.S. 94, 158] a limited way, viz., by preventing monopolistic practices and by promoting technological developments that will open up new channels. 8 But censorship 9 or editing or the screening by Government of what licensees may broadcast goes against the grain of the First Amendment. </s> The Court in National Broadcasting Co. v. United States, 319 U.S. 190, 226 , said, "Unlike other modes of [412 U.S. 94, 159] expression, radio inherently is not available to all. That is its unique characteristic, and that is why, unlike other modes of expression, it is subject to governmental regulation." </s> That uniqueness is due to engineering and technical problems. But the press in a realistic sense is likewise not available to all. Small or "underground" papers appear and disappear; and the weekly is an established institution. But the daily papers now established are unique in the sense that it would be virtually impossible for a competitor to enter the field due to the financial exigencies of this era. The result is that in practical terms the newspapers and magazines, like TV and radio, are available only to a select few. Who at this time would have the folly to think he could combat the New York Times or Denver Post by building a new plant and becoming a competitor? That may argue for a redefinition of the responsibilities of the press in First Amendment terms. 10 But I do not think it gives us [412 U.S. 94, 160] carte blanche to design systems of supervision and control or empower Congress to read the mandate in the First Amendment that "Congress shall make no law . . . abridging the freedom . . . of the press" to mean that Congress may, acting directly or through any of its agencies such as the FCC make "some" laws "abridging" freedom of the press. </s> Powerful arguments, summarized and appraised in T. Emerson. The System of Freedom of Expression, cc. XVII and XVIII (1970), can be made for revamping or reconditioning the system. The present one may be largely aligned on the side of the status quo. The problem implicates our educational efforts which are bland and conformist and the pressures on the press, from political and from financial sources, to foist boilerplate points of view on our people rather than to display the diversities of ideologies and culture in a world which, as Buckminster Fuller said, has been "communized" by the radio. </s> What kind of First Amendment would best serve our needs as we approach the 21st century may be an open question. But the old-fashioned First Amendment that we have is the Court's only guideline; and one hard and fast principle which it announces is that Government [412 U.S. 94, 161] shall keep its hands off the press. That principle has served us through days of calm and eras of strife and I would abide by it until a new First Amendment is adopted. That means, as I view it, that TV and radio, as well as the more conventional methods for disseminating news, are all included in the concept of "press" as used in the First Amendment and therefore are entitled to live under the laissez-faire regime which the First Amendment sanctions. </s> The issues presented in these cases are momentous ones. TV and radio broadcasters have mined millions by selling merchandise, not in selling ideas across the broad spectrum of the First Amendment. But some newspapers have done precisely the same, loading their pages with advertisements; they publish, not discussions of critical issues confronting our society, but stories about murders, scandal, and slanderous matter touching the lives of public servants who have no recourse due to New York Times Co. v. Sullivan, 376 U.S. 254 . Commissioner Johnson of the FCC wrote in the present case a powerful dissent. He said: </s> "Although the First Amendment would clearly ban governmental censorship of speech content, government must be concerned about the procedural rules that control the public forums for discussion. If someone - a moderator, or radio-television licensee - applies rules that give one speaker, or viewpoint, less time (or none at all) to present a position, then a censorship exists as invidious as outright thought control. There is little doubt in my mind that for any given forum of speech the First Amendment demands rules permitting as many to speak and be heard as possible. And if this Commission does not enact them, then the courts must require them." 25 F. C. C. 2d 216, 232. [412 U.S. 94, 162] </s> But the prospect of putting Government in a position of control over publishers is to me an appalling one, even to the extent of the Fairness Doctrine. The struggle for liberty has been a struggle against Government. The essential scheme of our Constitution and Bill of Rights was to take Government off the backs of people. Separation of powers was one device. An independent judiciary was another device. The Bill of Rights was still another. And it is anathema to the First Amendment to allow Government any role of censorship over newspapers, magazines, books, art, music, TV, radio, or any other aspect of the press. There is unhappiness in some circles at the impotence of Government. But if there is to be a change, let it come by constitutional amendment. The Commission has an important role to play in curbing monopolistic practices, in keeping channels free from interference, in opening up new channels as technology develops. But it has no power of censorship. </s> It is said, of course, that Government can control the broadcasters because their channels are in the public domain in the sense that they use the airspace that is the common heritage of all the people. But parks are also in the public domain. Yet people who speak there do not come under Government censorship. Lovell v. Griffin, 303 U.S. 444, 450 -453; Hague v. CIO, 307 U.S. 496, 515 -516. It is the tradition of Hyde Park, not the tradition of the censor, that is reflected in the First Amendment. TV and radio broadcasters are a vital part of the press; and since the First Amendment allows no Government control over it. I would leave this segment of the press to its devices. </s> Licenses are, of course, restricted in time and while, in my view, Congress has the power to make each license limited to a fixed term and nonreviewable, there is no power to deny renewals for editorial or ideological reasons. [412 U.S. 94, 163] The reason is that the First Amendment gives no preference to one school of thought over others. 11 </s> The Court in today's decision by endorsing the Fairness Doctrine sanctions a federal saddle on broadcast licensees that is agreeable to the traditions of nations that never have known freedom of press 12 and that is tolerable in countries that do not have a written constitution containing prohibitions as absolute as those in the First Amendment. Indeed after these cases were argued the FCC instituted a "non-public" inquiry 13 to [412 U.S. 94, 164] determine whether any broadcaster or cablecaster has broadcast "`obscene, indecent or profane language' in violation of" 18 U.S.C. 1464. </s> In April 1973, the FCC fined Sonderling Broadcasting Corp., which operates station WGLD in Oak Park, Illinois, for allowing "obscene" conversations on a telephone "talk show." It used Roth v. United States, 354 U.S. 476 , Memoirs v. Massachusetts, 383 U.S. 413 , and Ginzburg v. United States, 383 U.S. 463 , as supplying the criteria for broadcasting. It fined the corporation $2,000 under 18 U.S.C. 1464, which reads, "Whoever utters any obscene, indecent, or profane language by means of radio communication shall be fined not more than $10,000 or imprisoned not more than two years, or both." </s> Commissioner Johnson dissented, saying that the FCC prefers "to sit as an omniscient programming review board, allegedly capable of deciding what is and is not good for the American public to see and hear"; and that when the FCC bars a particular program it casts "a pall over the entire broadcasting industry" for the reason that the licensees "fear the potential loss of their highly profitable broadcast licenses." That, he concluded, creates a "chilling effect" which has "enormous proportions" and reaches "all forms of broadcast expression." </s> We ourselves have, of course, made great inroads on the First Amendment of which obscenity is only one of the many examples. So perhaps we are inching slowly toward a controlled press. But the regime of federal supervision under the Fairness Doctrine is contrary to our constitutional mandate and makes the broadcast licensee an easy victim of political pressures and reduces him to a timid and submissive segment of the press whose measure of the public interest will now be echoes of the dominant political voice that emerges after every election. The affair with freedom of which we have been [412 U.S. 94, 165] proud will now bear only a faint likeness of our former robust days. </s> III </s> I said that it would come as a surprise to the public as well as to publishers and editors of newspapers to learn that they were under a newly created federal bureau. Perhaps I should have said that such an event should come as a surprise. In fact it might not in view of the retrogressive steps we have witnessed. </s> We have allowed ominous inroads to be made on the historic freedom of the newspapers. The effort to suppress the publication of the Pentagon Papers failed only by a narrow margin and actually succeeded for a brief spell in imposing prior restraint on our press for the first time in our history. See New York Times Co. v. United States, 403 U.S. 713 . </s> In recent years the admonition of Mr. Justice Black that the First Amendment gave the press freedom so that it might "serve the governed, not the governors" (id., at 717) has been disregarded. </s> "The Government's power to censor the press was abolished so that the press would remain forever free to censure the Government. The press was protected so that it could bare the secrets of government and inform the people. Only a free and unrestrained press can effectively expose deception in government. And paramount among the responsibilities of a free press is the duty to prevent any part of the government from deceiving the people and sending them off to distant lands to die of foreign fevers and foreign shot and shell." Ibid. </s> The right of the people to know has been greatly undermined by our decisions requiring, under pain of contempt, a reporter to disclose the sources of the information he comes across in investigative reporting. Branzburg v. Hayes, 408 U.S. 665 . [412 U.S. 94, 166] </s> The Boston Globe reports: 14 </s> "In the last two years at least 20 Federal Grand Juries have been used to investigate radical or antiwar dissent. With the power of subpoena, the proceedings secret, and not bound by the rules of evidence required in open court, they have a lot more leverage than, for example, the old House Un-American Activities Committee." </s> Many reporters have been put in jail, a powerful weapon against investigative reporting. As the Boston Globe states, "in reality what is being undermined here is press freedom itself." 15 </s> In the same direction is the easy use of the stamp "secret" or "top secret" which the Court recently approved in Environmental Protection Agency v. Mink, 410 U.S. 73 . That decision makes a shambles of the Freedom of Information Act. In tune with the other restraints on the press are provisions of the new proposed Rules of Evidence which the Court recently sent to Congress. Proposed Rule 509 (b) provides: </s> "The government has a privilege to refuse to give evidence and to prevent any person from giving evidence upon a showing of reasonable likelihood of danger that the evidence will disclose a secret of state or official information, as defined in this rule." </s> Under the statute if Congress does not act, 16 this new regime of secrecy will be imposed on the Nation and the [412 U.S. 94, 167] right of people to know will be further curtailed. The proposed code sedulously protects the Government; it does not protect newsmen. It indeed pointedly omits any mention of the privilege of newsmen to protect their confidential sources. </s> These growing restraints on newspapers have the same ominous message that the overtones of the present opinion have on TV and radio licensees. </s> The growing specter of governmental control and surveillance over all activities of people makes ominous the threat to liberty by those who hold the executive power. Over and over again, attempts have been made to use the Commission as a political weapon against the opposition, whether to the left or to the right. </s> Experience has shown that unrestrained power cannot be trusted to serve the public weal even though it be in governmental hands. The fate of the First Amendment should not be so jeopardized. 17 The constitutional mandate that the Government shall make "no law" abridging freedom of speech and the press is clear; the orders and rulings of the Commission are covered by that ban; and it must be carefully confined lest broadcasting - now our most powerful media - be used to subdue the minorities or help produce a Nation of people who walk submissively to the executive's notions of the public good. [412 U.S. 94, 168] </s> Mills v. Alabama, 384 U.S. 214 , involved a prosecution of a newspaper editor for publishing, contrary to a state statute, an editorial on election day urging the voters to vote against the existing city commission and to replace it with a mayor-council government. This Court, speaking through Mr. Justice Black, reversed the judgment saying: </s> "[T]he press serves and was designed to serve as a powerful antidote to any abuses of power by governmental officials and as a constitutionally chosen means for keeping officials elected by the people responsible to all the people whom they were selected to serve. Suppression of the right of the press to praise or criticize governmental agents and to clamor and contend for or against change, which is all that this editorial did, muzzles one of the very agencies the Framers of our Constitution thoughtfully and deliberately selected to improve our society and keep it free. The Alabama Corrupt Practices Act by providing criminal penalties for publishing editorials such as the one here silences the press at a time when it can be most effective. It is difficult to conceive of a more obvious and flagrant abridgment of the constitutionally guaranteed freedom of the press." Id., at 219. </s> I would apply the same test to TV or radio. 18 </s> [412 U.S. 94, 169] </s> What Walter Lippman wrote about President Coolidge's criticism of the press has present relevancy. Coolidge, he said, had </s> "`declared for peace, good-will, understanding moderation; disapproved of conquest, aggression, exploitation; pleaded for a patriotic press, for a free press; denounced a narrow and bigoted nationalism, and announced that he stood for law, order, protection of life, property, respect for sovereignty and principle of international law. Mr. Coolidge's catalog of the virtues was complete except for one virtue. . . . That is the humble realization that God has not endowed Calvin Coolidge with an infallible power to determine in each concrete case exactly what is right, what is just, what is patriotic. . . . Did he recognize this possibility he would not continue to lecture the press in such a way as to make it appear that when newspapers oppose him they are unpatriotic, and that when they support him they do so not because they think his case is good but because they blindly support him. Mr. Coolidge's notion . . . would if it were accepted by the American press reduce it to utter triviality.'" J. Luskin, Lippman, Liberty, and the Press 60 (1972). [412 U.S. 94, 170] </s> The same political appetite for oversight of most segments of the press has markedly increased since the bland days of Calvin Coolidge. </s> [Footnote 1 H. R. 18927, 91st Cong., 2d Sess. </s> [Footnote 2 Congress provided in 47 U.S.C. 153 (h) that "a person engaged in radio broadcasting shall not, insofar as such person is so engaged, be deemed a common carrier." </s> [Footnote 3 "To say that the media have great decisionmaking powers without defined legal responsibilities or any formal duties of public accountability is both to overestimate their power and to put forth a meaningless formula for reform. How shall we make the New York Times `accountable' for its anti-Vietnam policy? Require it to print letters to the editor in support of the war? If the situation is as grave as stated, the remedy is fantastically inadequate. But the situation is not that grave. The New York Times, the Chicago Tribune, NBC, ABC, and CBS play a role in policy formation, but clearly they were not alone responsible, for example, for Johnson's decision not to run for re-election, Nixon's refusal to withdraw the troops from Vietnam, the rejection of the two billion dollar New York bond issue, the defeat of Carswell and Haynsworth, or the Supreme Court's segregation, reapportionment and prayer decisions. The implication that the people of this country - except the proponents of the theory - are mere unthinking automatons manipulated by the media, without interests, conflicts, or prejudices is an assumption which I find quite maddening. The development of constitutional doctrine should not be based on such hysterical overestimation of media power and underestimation of the good sense of the American public." Jaffe, The Editorial Responsibility of the Broadcaster: Reflections on Fairness and Access, 85 Harv. L. Rev. 768, 786-787 (1972). </s> [Footnote 4 T. Jefferson, Democracy 150-151 (Padover ed. 1939). </s> [Footnote 5 Barron v. Mayor of Baltimore, 7 Pet. 243. </s> [Footnote 6 The press in this country, like that of Britain, was at one time subject to contempt for its comments on pending litigation. Toledo Newspaper Co. v. United States, 247 U.S. 402 . But that position was changed. See Bridges v. California, 314 U.S. 252, 267 . Federal habeas corpus, however, is available to give a man his freedom and the prosecution an opportunity for a new trial where the conduct of the press has resulted in an unfair trial. Sheppard v. Maxwell, 384 U.S. 333 . And change of venue may be had where the local atmosphere has saturated the community with prejudice. See Rideau v. Louisiana, 373 U.S. 723 . </s> [Footnote 7 The Senate Report which accompanied the bill that became the Radio Act of 1927, 44 Stat. 1162 stated: "If the channels of radio transmission were unlimited in number the importance of the regulatory body would be greatly lessened, but these channels are limited and restricted in number and the decision as to who shall be permitted to use them and on what terms and for what periods of time, together with the other questions connected with the situation, requires the exercise of a high order of discretion and the most careful application of the principles of equitable treatment to all the classes and interests affected. For these and other reasons your committee decided that all power to regulate radio communication should be centered in one independent body, a radio commission, granting it full and complete authority over the entire subject of radio." S. Rep. 772, 69th Cong., 1st Sess., 3. </s> [Footnote 8 Scarcity may soon be a constraint of the past, thus obviating the concerns expressed in Red Lion. It has been predicted that it may be possible within 10 years to provide television viewers 400 channels through the advances of cable television. R. Smith, The Wired Nation 7 (1972); see Brandywine-Main Line Radio, Inc. v. FCC, 153 U.S. App. D.C. 305, 362-365, 473 F.2d 16, 73-76 (Bazelon, J., dissenting). </s> [Footnote 9 Currently, press censorship covers most of the globe. In Brazil the present regime of censorship is pervasive. As reported in the New York Times for Feb. 17, 1973, p. 11: "The censors' rules, issued a few months ago and constantly amended, cover a vast field and if strictly applied would leave the press little to discuss. In practice, however, much depends on the whims and suspicions of the local censors. "General prohibitions include protests against censorship, any discussion of a successor to President Emilio Garrastazu Medici, whose term is up in 1974, campaigns against the Government's special powers by decree and sensational news that might hurt the image of Brazil. "Others are campaigns to discredit the national housing program, the financial market or other matters of vital importance to the Government, the playing up of assaults on banks or credit establishments, tension between the Roman Catholic Church and the state, agitation in union and student circles, and publicity for Communist personalities and nations. Criticism of state governors and `exaltation of immorality' through news of homosexuality, prostitution and drugs are also barred. "The most controversial order, issued by the Minister of Justice last September, bans all news, comment or interviews on a political relaxation of the regime, on democracy for Brazil, and on the economic and financial situation in general." </s> [Footnote 10 Indeed, it can be argued that the existence of newspapers, and thus their access to the public, is dependent upon the preferential mailing privileges newspapers receive through second-class postage rates. This is a privilege afforded by the Government, and, as my Brother STEWART recognizes, a form of subsidy. Under the Postal Reorganization Act, the new Postal Rate Commission is empowered to fix postage rates at levels high enough to make each class of mail pay its own way. John Fischer reports that the increase in second-class mail rates for magazines and periodicals (127%) is "nothing less than a death sentence for an unpredictable number of publications." The Easy Chair, Harper's Magazine 30, 31 (May 1973). It is not the established giants of the publishing field that will suffer most, for it is estimated that some 10,000 magazines and small newspapers will be forced out of existence. Id., at 30. Fischer mentions specifically the National Review, Human Events, The Nation, and The New Republic. These are the publications that offer us the rich diversity of opinion and [412 U.S. 94, 160] reporting the First Amendment is designed to promote and protect. As Senator MeGee, Chairman of the Post Office and Civil Service Committee, has said: "I believe that the American public generally has a vested interest in the survival of newspapers and magazines. Regardless of the economic, political, or social policies which they espouse, they contribute to the nation's thought process. I am personally convinced that the Congress should not permit magazines to go under because the cost of distributing them through the postal system is higher than their readers are willing to pay." Id., at 32. In addition to the benefits of reduced postage rates, newspapers have been afforded a limited antitrust exemption. Newspaper Preservation Act, 15 U.S.C. 1801 et seq. </s> [Footnote 11 Judge Bazelon, dissenting in Brandywine-Main Line Radio, Inc. v. FCC, 153 U.S. App. D.C., at 358-359, 473 F.2d, at 69-70, said: "WXUR was no doubt devoted to a particular religious and political philosophy; but it was also a radio station devoted to speaking out and stirring debate on controversial issues. The station was purchased by Faith Theological Seminary to propagate a viewpoint which was not being heard in the greater Philadelphia area. The record is clear that through its interview and call-in shows it did offer a variety of opinions on a broad range of public issues; and that it never refused to lend its broadcast facilities to spokesmen of conflicting viewpoints. "The Commission's strict rendering of fairness requirements, as developed in its decision, has removed WXUR from the air. This has deprived the listening public not only of a viewpoint but also of robust debate on innumerable controversial issues. It is beyond dispute that the public has lost access to information and ideas. This is not a loss to be taken lightly, however unpopular or disruptive we might judge these ideas to be." (Footnotes omitted.) </s> [Footnote 12 If Eastern European experience since World War II is any criterion, the newspapers are pretty much the company paper in the huge company (Communist) nation. The easiest target, however, seems to be TV where the input can be carefully controlled and "prime time" filled with tapes of official meetings, political speeches, and the tedious accounts of achievement of the workers. See Morgan, Press Obedience in East Europe, Washington Post, May 19, 1973, p. A14. </s> [Footnote 13 FCC Order No. 73-331, 39 Fed. Reg. 8301 (Mar. 27, 1973). </s> [Footnote 14 The People's Need to Know, Editorial Series, Jan. 21-27, 1973, reprinted from Boston Globe, p. 12. </s> [Footnote 15 Id., at 13. </s> [Footnote 16 By reason of an Act of Congress of Mar. 30, 1973, the Rules of Evidence - and amendments to the Rules of Civil Procedure and to the Rules of Criminal Procedure (which we sent up Nov. 20, 1972, and Dec. 18, 1972) - will have no force or effect except to the extent that Congress expressly approves. 87 Stat. 9. </s> [Footnote 17 Alexander Bickel has spurned the "total agnosticism" that allows the First Amendment to have its way because "who really knows, after all, what is true or false, evil or good, noxious or wholesome." The Press and Government: Adversaries Without Absolutes, Freedom at Issue 5 (May-June 1973). He attributes this view to Mr. Justice Holmes. He would place at least partial responsibility with the Government for determining the "good counsels and wholesome doctrine." Ibid. But, it was precisely the mistrust of the evanescent, narrow, factional views of those in power and the belief that no one has a patent on the "truth" that underlay the First Amendment. </s> [Footnote 18 The monetary and other burdens imposed on the press by the right of a criticized person to reply, like the traditional damage remedy for libel, lead of course to self-censorship respecting matters of importance to the public that the First Amendment denies the Government the power to impose. The burdens certainly are as onerous as the indirect restrictions on First Amendment rights which we have struck down: (1) the requirement that a bookseller examine the contents of his shop, Smith v. California, 361 U.S. 147 (1959): (2) the requirement that a magazine publisher investigate his advertisers, Manual Enterprises, Inc. v. Day, 370 U.S. 478, 492 -493 [412 U.S. 94, 169] (1962) (opinion of Harlan, J.); (3) the requirement that names and addresses of sponsors be printed on handbills, Talley v. California, 362 U.S. 60 (1960); (4) the requirement that organizations supply membership lists, Gibson v. Florida Legislative Investigation Committee, 372 U.S. 539 (1963); Louisiana ex rel. Gremillion v. NAACP, 366 U.S. 293 (1961); Bates v. City of Little Rock, 361 U.S. 516 (1960); NAACP v. Alabama, 357 U.S. 449 (1958); and (5) the requirement that individuals disclose organizational membership, Shelton v. Tucker, 364 U.S. 479 (1960). In each instance we held the restriction unconstitutional on the ground that it discouraged or chilled constitutionally protected rights of speech, press, or association. </s> MR. JUSTICE BRENNAN, with whom MR. JUSTICE MARSHALL concurs, dissenting. </s> These cases require us to consider whether radio and television broadcast licensees may, with the approval of the Federal Communications Commission, 1 refuse absolutely to sell any part of their advertising time to groups or individuals wishing to speak out on controversial issues of public importance. In practical effect, the broadcaster policy here under attack permits airing of only those paid presentations which advertise products or deal with "noncontroversial" matters, while relegating the discussion of controversial public issues to formats such as documentaries, the news, or panel shows, which are tightly controlled and edited by the broadcaster. The Court holds today that this policy - including the absolute ban on the sale of air time for the discussion of controversial issues - is consistent with the "public interest" requirements of the Communications Act of 1934, 47 U.S.C. 307 (d), 309 (a). 2 The Court also holds that the [412 U.S. 94, 171] challenged policy does not violate the First Amendment. It is noteworthy that, in reaching this result, the Court does not hold that there is insufficient "governmental involvement" in the promulgation and enforcement of the challenged ban to activate the commands of the First Amendment. On the contrary, only THE CHIEF JUSTICE, and my Brothers STEWART and REHNQUIST express the view that the First Amendment is inapplicable to this case. My Brothers WHITE, BLACKMUN, and POWELL quite properly do not decide that question, for they find that the broadcaster policy here under attack does not violate the "substance" of the First Amendment. Similarly, there is no majority for the holding that the challenged ban does not violate the "substance" of the First Amendment. For, although THE CHIEF JUSTICE, and my Brother REHNQUIST purport to "decide" that question, their disposition of the "governmental involvement" issue necessarily renders their subsequent discussion of the "substantive" question mere dictum. [412 U.S. 94, 172] </s> In my view, the principle at stake here is one of fundamental importance, for it concerns the people's right to engage in and to hear vigorous public debate on the broadcast media. And balancing what I perceive to be the competing interests of broadcasters, the listening and viewing public, and individuals seeking to express their views over the electronic media, I can only conclude that the exclusionary policy upheld today can serve only to inhibit, rather than to further, our "profound national commitment to the principle that debate on public issues should be uninhibited, robust, and wide-open." New York Times Co. v. Sullivan, 376 U.S. 254, 270 (1964). I would therefore affirm the determination of the Court of Appeals that the challenged broadcaster policy is violative of the First Amendment. </s> I </s> The command of the First Amendment that "Congress shall make no law . . . abridging the freedom of speech, or of the press" is, on its face, directed at governmental rather than private action. Nevertheless, our prior decisions make clear that "[c]onduct that is formally `private' may become so entwined with governmental policies or so impregnated with a governmental character as to become subject to the constitutional limitations placed upon [governmental] action." Evans v. Newton, 382 U.S. 296, 299 (1966). Thus, the reach of the First Amendment depends not upon any formalistic "private-public" dichotomy but, rather, upon more functional considerations concerning the extent of governmental involvement in, and public character of, a particular "private" enterprise. "Only by sifting facts and weighing circumstances can the nonobvious involvement of the [Government] in private conduct be attributed its true significance." Burton v. Wilmington Parking Authority, 365 U.S. 715, 722 (1961); see Moose Lodge No. 107 v. [412 U.S. 94, 173] Irvis, 407 U.S. 163, 172 (1972). And because of the inherent complexity of this case-by-case inquiry, "[t]his Court has never attempted the `impossible task' of formulating an infallible test" for determining in all instances whether particular conduct must be deemed private or governmental. Reitman v. Mulkey, 387 U.S. 369, 378 (1967); see Kotch v. Pilot Comm'rs, 330 U.S. 552, 556 (1947). </s> This does not mean, of course, that our prior experience in this area offers no guidance for the purposes of our present inquiry. On the contrary, our previous decisions have focused on myriad indicia of "governmental action," many of which are directly applicable to the operations of the broadcast industry. 3 As the Court of Appeals recognized, "the general characteristics of the broadcast industry reveal an extraordinary relationship between the broadcasters and the federal government - a relationship which puts that industry in a class with few others." 146 U.S. App. D.C. 181, 190, 450 F.2d 642, 651. More specifically, the public nature of the airwaves, the governmentally created preferred status of broadcast licensees, the pervasive federal regulation of broadcast programming, and the Commission's specific approval of the challenged broadcaster policy combine in this case to bring the promulgation and enforcement of that policy within the orbit of constitutional imperatives. </s> At the outset, it should be noted that both radio and television broadcasting utilize a natural resource - the electromagnetic spectrum 4 - that is part of the public [412 U.S. 94, 174] domain. And, although broadcasters are granted the temporary use of this valuable resource for terminable three-year periods, "ownership" and ultimate control remain vested in the people of the United States. Thus, 301 of the Communications Act of 1934, 47 U.S.C. 301, specifically provides: </s> "It is the purpose of this [Act] . . . to maintain the control of the United States over all the channels of interstate and foreign radio transmission; and to provide for the use of such channels, but not the ownership thereof, by persons for limited periods of time, under licenses granted by Federal authority, and no such license shall be construed to create any right, beyond the terms, conditions, and periods of the license. . . ." </s> Such public "ownership" of an essential element in the operations of a private enterprise is, of course, an important and established indicium of "governmental involvement." In Burton v. Wilmington Parking Authority, supra, for example, we emphasized the fact of "public ownership" in holding the proscriptions of the Fourteenth Amendment applicable to a privately owned restaurant leasing space in a building owned by the State. 5 </s> [412 U.S. 94, 175] In reaching that result, we explained that, in part because of the "public ownership" of the building, the State "has elected to place its power, property and prestige behind the" actions of the privately owned restaurant. 365 U.S., at 725 . And, viewing the relationship in its entirety, we concluded that "[t]he State has so far insinuated itself into a position of interdependence with [the restaurant] that it must be recognized as a joint participant in the challenged activity. . . ." Ibid.; see also Moose Lodge No. 107 v. Irvis, supra, at 172-173, 175; Turner v. City of Memphis, 369 U.S. 350 (1962); Kissinger v. New York City Transit Authority, 274 F. Supp. 438 (SDNY 1967); Farmer v. Moses, 232 F. Supp. 154 (SDNY 1964). </s> A second indicium of "governmental involvement" derives from the direct dependence of broadcasters upon the Federal Government for their "right" to operate broadcast frequencies. There can be no doubt that, for the industry as a whole, governmental regulation alone makes "radio communication possible by . . . limiting the number of licenses so as not to overcrowd the spectrum." Red Lion Broadcasting Co. v. FCC, 395 U.S. 367, 389 (1969). 6 Moreover, with respect to individual licensees, it is equally clear that "existing broadcasters have often attained their present position," not as a result of free market pressures 7 but, rather, "because of their initial government selection. . . ." Id., at 400. Indeed, the "quasi-monopolistic" advantages enjoyed by broadcast licensees "are the fruit of a preferred position conferred by the Government." Ibid. [412 U.S. 94, 176] Thus, as MR. CHIEF JUSTICE (then Judge) BURGER has himself recognized, "[a] broadcaster seeks and is granted the free and exclusive use of a limited and valuable part of the public domain; when he accepts that franchise it is burdened by enforceable public obligations." Office of Communication of United Church of Christ v. FCC, 123 U.S. App. D.C. 328, 337, 359 F.2d 994, 1003 (1966). And, along these same lines, we have consistently held that "when authority derives in part from Government's thumb on the scales, the exercise of that power by private persons becomes closely akin, in some respects, to its exercise by Government itself." American Communications Assn. v. Douds, 339 U.S. 382, 401 (1950); see, e. g., Public Utilities Comm'n v. Pollak, 343 U.S. 451, 462 n. 8 (1952). </s> A further indicium of "governmental involvement" in the promulgation and enforcement of the challenged broadcaster policy may be seen in the extensive governmental control over the broadcast industry. It is true, of course, that this "Court has never held" that actions of an otherwise private entity necessarily constitute governmental action if that entity "is subject to . . . regulation in any degree whatever." Moose Lodge No. 107 v. Irvis, supra, at 173. Here, however, we are confronted, not with some minimal degree of regulation, but, rather, with an elaborate statutory scheme governing virtually all aspects of the broadcast industry. 8 Indeed, federal [412 U.S. 94, 177] agency review and guidance of broadcaster conduct is automatic, continuing, and pervasive. 9 Thus, as the Court of Appeals noted, "[a]lmost no other private business - almost no other regulated private business - is so intimately bound to government . . . ." 146 U.S. App. D.C., at 191, 450 F.2d, at 652. </s> Even more important than this general regulatory scheme, however, is the specific governmental involvement in the broadcaster policy presently under consideration. There is, for example, an obvious nexus between the Commission's Fairness Doctrine and the absolute refusal of broadcast licensees to sell any part of their air time to groups or individuals wishing to speak out on controversial issues of public importance. Indeed, in defense of this policy, the broadcaster-petitioners argue vigorously that this exclusionary policy is authorized and even compelled by the Fairness Doctrine. And the Court itself recognizes repeatedly that the Fairness Doctrine and other Communications Act policies are [412 U.S. 94, 178] inextricably linked to the challenged ban. Thus, at one point, the Court suggests that "[i]f the Fairness Doctrine were applied to editorial advertising, there is . . . the substantial danger that the effective operation of that doctrine would be jeopardized." Ante, at 124. Similarly, the Court maintains that, in light of the Fairness Doctrine, there simply is no reason to allow individuals to purchase advertising time for the expression of their own views on public issues. See ante, at 130-131. 10 Although I do not in any sense agree with the substance of these propositions, they serve at least to illustrate the extent to which the Commission's Fairness Doctrine has influenced the development of the policy here under review. </s> Moreover, the Commission's involvement in the challenged policy is not limited solely to the indirect effects of its Fairness Doctrine. On the contrary, in a decision which must inevitably provide guidance for future broadcaster action, the Commission has specifically considered and specifically authorized the flat ban. See Business Executives Move for Vietnam Peace, 25 F. C. C. 2d 242 (1970); Democratic National Committee, 25 F. C. C. 2d 216 (1970). In so doing, the Commission - and through it the Federal Government - has unequivocally given its imprimatur to the absolute ban on editorial advertising. And, of course, it is now well settled that specific governmental approval of or acquiescence in challenged action by a private entity indicates "governmental action." </s> Thus, in McCabe v. Atchison, T. & S. F. R. Co., 235 U.S. 151 (1914), for example, the Court dealt with a statute which, as construed by the Court, simply [412 U.S. 94, 179] authorized rail carriers to provide certain types of cars for white passengers without offering equal facilities to blacks. Although dismissal of the complaint on procedural grounds was affirmed, we made clear that such a statute, even though purely permissive in nature, was invalid under the Fourteenth Amendment because a carrier refusing equal service to blacks would be "acting in the matter under the authority of a state law." Id., at 162. And, some 50 years later, we explained this finding of "governmental action" in McCabe as "nothing less than considering a permissive state statute as an authorization to discriminate and as sufficient state action to violate the Fourteenth Amendment. . . ." Reitman v. Mulkey, 387 U.S., at 379 . Thus, "[o]ur prior decisions leave no doubt" that any action of the Government, through any of its agencies, approving, authorizing, encouraging, or otherwise supporting conduct which, if performed by the Government, would violate the Constitution, "constitutes illegal [governmental] involvement in those pertinent private acts . . . that subsequently occur." Adickes v. Kress & Co., 398 U.S. 144, 202 (1970) (opinion of BRENNAN, J.); see, e. g., Moose Lodge No. 107 v. Irvis, supra; Hunter v. Erickson, 393 U.S. 385 (1969); Reitman v. Mulkey, supra; Evans v. Newton, 382 U.S. 296 (1966); Robinson v. Florida, 378 U.S. 153 (1964); Lombard v. Louisiana, 373 U.S. 267 (1963); Peterson v. City of Greenville, 373 U.S. 244 (1963); Burton v. Wilmington Parking Authority, supra; McCabe v. Atchison, T. & S. F. R. Co., supra. </s> Finally, and perhaps most important, in a case virtually identical to those now before us, we held that a policy promulgated by a privately owned bus company, franchised by the Federal Government and regulated by the Public Utilities Commission of the District of Columbia, must be subjected to the constraints of the First Amendment. Public Utilities Comm'n v. Pollak, [412 U.S. 94, 180] 343 U.S. 451 (1952). In reaching that result, we placed primary emphasis on the specific regulatory acquiescence in the challenged action of the bus company. Thus, after noting that the bus company "operates its service under the regulatory supervision of the Public Utilities Commission of the District of Columbia which is an agency authorized by Congress," we explained that our finding of "governmental action" was predicated specifically </s> "upon the fact that that agency, pursuant to protests against the [challenged policy], ordered an investigation of it and, after formal public hearings, ordered its investigation dismissed on the ground that the public safety, comfort and convenience were not impaired thereby." Id., at 462. </s> See Moose Lodge No. 107 v. Irvis, supra, at 175-176, n. 3. </s> Although THE CHIEF JUSTICE, joined by MR. JUSTICE STEWART and MR. JUSTICE REHNQUIST, strains valiantly to distinguish Pollak, he offers nothing more than the proverbial "distinctions without a difference." Here, as in Pollak, the broadcast licensees operate "under the regulatory supervision of . . . an agency authorized by Congress." 343 U.S., at 462 . And, again as in Pollak, that agency received "protests" against the challenged policy and, after formal consideration, "dismissed" the complaints on the ground that the "public interest, convenience, and necessity" were not "impaired" by that policy. Indeed, the argument for finding "governmental action" here is even stronger than in Pollak, for this case concerns, not an incidental activity of a bus company, but, rather, the primary activity of the regulated entities - communication. </s> Thus, given the confluence of these various indicia of "governmental action" - including the public nature [412 U.S. 94, 181] of the airwaves, 11 the governmentally created preferred status of broadcasters, the extensive Government regulation of broadcast programming, and the specific governmental approval of the challenged policy - I can only conclude that the Government "has so far insinuated itself into a position" of participation in this policy that the absolute refusal of broadcast licensees to sell air time to groups or individuals wishing to speak out on controversial issues of public importance must be subjected to the restraints of the First Amendment. 12 </s> [412 U.S. 94, 182] </s> II </s> Radio and television have long been recognized as forms of communication "affected by a First Amendment interest" and, indeed, it can hardly be doubted that broadcast licensees are themselves protected by that Amendment. Red Lion Broadcasting Co. v. FCC, 395 U.S., at 386 . See United States v. Paramount Pictures, Inc., 334 U.S. 131, 166 (1948); Z. Chafee, Free Speech in the United States 545-546 (1941). Recognition of this fact does not end our inquiry, however, for it is equally clear that the protection of the First Amendment in this context is not limited solely to broadcasters. On the contrary, at least one set of competing claims to the [412 U.S. 94, 183] protection of that Amendment derives from the fact that, because of the limited number of broadcast frequencies available and the potentially pervasive impact of the electronic media, "the people as a whole retain their interest in free speech by radio and their collective right to have the medium function consistently with the ends and purposes of the First Amendment." Red Lion Broadcasting Co. v. FCC, supra, at 390. </s> Over 50 years ago, Mr. Justice Holmes sounded what has since become a dominant theme in applying the First Amendment to the changing problems of our Nation. "[T]he ultimate good," he declared, "is better reached by free trade in ideas," and "the best test of truth is the power of the thought to get itself accepted in the competition of the market . . . ." Abrams v. United States, 250 U.S. 616, 630 (1919) (dissenting opinion); see also Whitney v. California, 274 U.S. 357, 375 -376 (1927) (Brandeis, J., concurring); Gitlow v. New York, 268 U.S. 652, 672 -673 (1925) (Holmes, J., dissenting). Indeed, the First Amendment itself testifies to our "profound national commitment to the principle that debate on public issues should be uninhibited, robust, and wide-open," 13 and the Amendment "rests on the assumption that the widest possible dissemination of information from diverse and antagonistic sources is essential to the welfare of the public . . . ." Associated Press v. United States, 326 U.S. 1, 20 (1945). For "it is only through free debate and free exchange of ideas that government remains responsive to the will of the people and peaceful change is effected." Terminiello v. Chicago, 337 U.S. 1, 4 (1949); see also Thornhill v. Alabama, 310 U.S. 88, 102 (1940); Palko v. Connecticut, 302 U.S. 319, 326 -327 (1937). [412 U.S. 94, 184] </s> With considerations such as these in mind, we have specifically declared that, in the context of radio and television broadcasting, the First Amendment protects "the right of the public to receive suitable access to social, political, esthetic, moral, and other ideas and experiences . . . ." Red Lion Broadcasting Co. v. FCC, supra, at 390. 14 And, because "[i]t is the purpose of the First Amendment to preserve an uninhibited marketplace of ideas in which truth will ultimately prevail, rather than to countenance monopolization of that market, whether it be by the Government itself or a private licensee," "[i]t is the right of the viewers and listeners, not the right of the broadcasters, which is paramount." Ibid. </s> Thus, we have explicitly recognized that, in light of the unique nature of the electronic media, the public have strong First Amendment interests in the reception of a full spectrum of views - presented in a vigorous and uninhibited manner - on controversial issues of public importance. And, as we have seen, it has traditionally been thought that the most effective way to insure this "uninhibited, robust, and wide-open" debate is by fostering a "free trade in ideas" by making our forums of communication readily available to all persons wishing to express their views. Although apparently conceding the legitimacy of these principles, the Court nevertheless upholds the absolute ban on editorial advertising because, in its view, the Commission's Fairness Doctrine, in and of itself, is sufficient to satisfy the First Amendment interests of the public. I cannot agree. [412 U.S. 94, 185] </s> The Fairness Doctrine originated early in the history of broadcast regulation and, rather than being set forth in any specific statutory provision, 15 developed gradually in a long series of Commission rulings in particular cases. 16 In essence, the doctrine imposes a twofold duty upon broadcast licensees: (1) coverage of issues of public importance must be adequate, 17 and (2) such coverage must fairly reflect opposing viewpoints. 18 See Red Lion Broadcasting Co. v. FCC, supra, at 377. In fulfilling their obligations under the Fairness Doctrine, [412 U.S. 94, 186] however, broadcast licensees have virtually complete discretion, subject only to the Commission's general requirement that licensees act "reasonably and in good faith," 19 "to determine what issues should be covered, how much time should be allocated, which spokesmen should appear, and in what format." 20 Thus, the Fairness Doctrine does not in any sense require broadcasters to allow "non-broadcaster" speakers to use the airwaves to express their own views on controversial issues of public importance. 21 On the contrary, broadcasters may meet [412 U.S. 94, 187] their fairness responsibilities through presentation of carefully edited news programs, panel discussions, interviews, and documentaries. As a result, broadcasters retain almost exclusive control over the selection of issues and viewpoints to be covered, the manner of presentation, and, perhaps most important, who shall speak. Given this doctrinal framework, I can only conclude that the Fairness Doctrine, standing alone, is insufficient - in theory as well as in practice - to provide the kind of "uninhibited, robust, and wide-open" exchange of views to which the public is constitutionally entitled. </s> As a practical matter, the Court's reliance on the Fairness Doctrine as an "adequate" alternative to editorial advertising seriously overestimates the ability - or willingness - of broadcasters to expose the public to the "widest possible dissemination of information from diverse and antagonistic sources." 22 As Professor Jaffe has noted, "there is considerable possibility the broadcaster will exercise a large amount of self-censorship and try to avoid as much controversy as he safely can." 23 Indeed, in light of the strong interest of broadcasters in maximizing their audience, and therefore their profits, it seems almost naive to expect the majority of broadcasters to produce the variety and controversiality of material necessary to reflect a full spectrum of viewpoints. Stated simply, angry customers are not good customers and, in the commercial world of mass communications, it is simply "bad business" to espouse - or even to allow others to espouse - the heterodox or the controversial. As a result, even under the Fairness Doctrine, broadcasters generally tend to permit only established [412 U.S. 94, 188] - or at least moderated - views to enter the broadcast world's "marketplace of ideas." 24 </s> Moreover, the Court's reliance on the Fairness Doctrine as the sole means of informing the public seriously misconceives and underestimates the public's [412 U.S. 94, 189] interest in receiving ideas and information directly from the advocates of those ideas without the interposition of journalistic middlemen. Under the Fairness Doctrine, broadcasters decide what issues are "important," how "fully" to cover them, and what format, time, and style of coverage are "appropriate." The retention of such absolute control in the hands of a few Government licensees is inimical to the First Amendment, for vigorous, free debate can be attained only when members of the public have at least some opportunity to take the initiative and editorial control into their own hands. </s> Our legal system reflects a belief that truth is best illuminated by a collision of genuine advocates. Under the Fairness Doctrine, however, accompanied by an absolute ban on editorial advertising, the public is compelled to rely exclusively on the "journalistic discretion" of broadcasters, who serve in theory as surrogate spokesmen for all sides of all issues. This separation of the advocate from the expression of his views can serve only to diminish the effectiveness of that expression. Indeed, we emphasized this fact in Red Lion: 25 </s> "Nor is it enough that he should hear the arguments of adversaries from his own teachers, presented as they state them, and accompanied by what they offer as refutations. That is not the way to do justice to the arguments, or bring them into real contact with his own mind. He must be able to hear them from persons who actually believe them; who defend them in earnest, and do their very utmost for them." </s> Thus, if the public is to be honestly and forthrightly apprised of opposing views on controversial issues, it is imperative that citizens be permitted at least some [412 U.S. 94, 190] opportunity to speak directly for themselves as genuine advocates on issues that concern them. </s> Moreover, to the extent that broadcasters actually permit citizens to appear on "their" airwaves under the Fairness Doctrine, such appearances are subject to extensive editorial control. Yet it is clear that the effectiveness of an individual's expression of his views is as dependent on the style and format of presentation as it is on the content itself. And the relegation of an individual's views to such tightly controlled formats as the news, documentaries, edited interviews, or panel discussions may tend to minimize, rather than maximize the effectiveness of speech. Under a limited scheme of editorial advertising, however, the crucial editorial controls are in the speaker's own hands. </s> Nor are these cases concerned solely with the adequacy of coverage of those views and issues which generally are recognized as "newsworthy." For also at stake is the right of the public to receive suitable access to new and generally unperceived ideas and opinions. Under the Fairness Doctrine, the broadcaster is required to present only "representative community views and voices on controversial issues" of public importance. 26 Thus, by definition, the Fairness Doctrine tends to perpetuate coverage of those "views and voices" that are already established, while failing to provide for exposure of the public to those "views and voices" that are novel, unorthodox, or unrepresentative of prevailing opinion. 27 </s> [412 U.S. 94, 191] </s> Finally, it should be noted that the Fairness Doctrine permits, indeed requires, broadcasters to determine for themselves which views and issues are sufficiently "important" to warrant discussion. The briefs of the broadcaster-petitioners in this case illustrate the type of "journalistic discretion" licensees now exercise in this regard. Thus, ABC suggests that it would refuse to air those views which it considers "scandalous" or "crackpot," 28 while CBS would exclude those issues or opinions that are "insignificant" 29 or "trivial." 30 Similarly, NBC would bar speech that strays "beyond the bounds of normally accepted taste," 31 and WTOP would protect the public from subjects that are "slight, parochial or inappropriate." 32 </s> The genius of the First Amendment, however, is that it has always defined what the public ought to hear by permitting speakers to say what they wish. As the Court of Appeals recognized, "[i]t has traditionally been thought that the best judge of the importance of a particular viewpoint or issue is the individual or group holding the viewpoint and wishing to communicate it to others." 146 U.S. App. D.C., at 195, 450 F.2d, at 656. Indeed, "supervised and ordained discussion" is directly contrary to the underlying purposes of the First Amendment, 33 for that Amendment "presupposes that right [412 U.S. 94, 192] conclusions are more likely to be gathered out of a multitude of tongues, than through any kind of authoritative selection." 34 Thus, in a related context, we have explicitly recognized that editorial advertisements constitute "an important outlet for the promulgation of information and ideas by persons who do not themselves have access to [media] facilities," and the unavailability of such editorial advertising can serve only "to shackle the First Amendment in its attempt to secure `the widest possible dissemination of information from diverse and antagonistic sources.'" New York Times Co. v. Sullivan, 376 U.S., at 266 . </s> The Fairness Doctrine's requirement of full and fair coverage of controversial issues is, beyond doubt, a commendable and, indeed, essential tool for effective regulation of the broadcast industry. But, standing alone, it simply cannot eliminate the need for a further, complementary airing of controversial views through the limited availability of editorial advertising. Indeed, the availability of at least some opportunity for editorial advertising is imperative if we are ever to attain the "`free and general discussion of public matters [that] seems absolutely essential to prepare the people for an intelligent exercise of their rights as citizens.'" Grosjean v. American Press Co., 297 U.S. 233, 250 (1936). </s> III </s> Moreover, a proper balancing of the competing First Amendment interests at stake in this controversy must consider, not only the interests of broadcasters and of the listening and viewing public, but also the independent First Amendment interest of groups and individuals in effective self-expression. See, e. g., T. Emerson, Toward [412 U.S. 94, 193] a General Theory of the First Amendment 4-7 (1966); Z. Chafee, Free Speech in the United States 33 (1941). "[S]peech concerning public affairs . . . is the essence of self-government," Garrison v. Louisiana, 379 U.S. 64, 74 -75 (1964), and the First Amendment must therefore safeguard not only the right of the public to hear debate, but also the right of individuals to participate in that debate and to attempt to persuade others to their points of view. See, e. g., Thomas v. Collins, 323 U.S. 516, 537 (1945); cf. NAACP v. Button, 371 U.S. 415 . 429-430 (1963). And, in a time of apparently growing anonymity of the individual in our society, it is imperative that we take special care to preserve the vital First Amendment interest in assuring "self-fulfillment [of expression] for each individual." Police Dept. of Chicago v. Mosley, 408 U.S. 92, 96 (1972). For our citizens may now find greater than ever the need to express their own views directly to the public, rather than through a governmentally appointed surrogate, if they are to feel that they can achieve at least some measure of control over their own destinies. </s> In light of these considerations, the Court would concede, I assume, that our citizens have at least an abstract right to express their views on controversial issues of public importance. But freedom of speech does not exist in the abstract. On the contrary, the right to speak can flourish only if it is allowed to operate in an effective forum - whether it be a public park, a schoolroom, a town meeting hall, a soapbox, or a radio and television frequency. For in the absence of an effective means of communication, the right to speak would ring hollow indeed. And, in recognition of these principles, we have consistently held that the First Amendment embodies, not only the abstract right to be free from censorship, but also the right of an individual to utilize an appropriate and effective medium for the expression of his views. [412 U.S. 94, 194] See, e. g., Lloyd Corp., Ltd. v. Tanner, 407 U.S. 551, 559 (1972); Tinker v. Des Moines Independent School District, 393 U.S. 503 (1969); Amalgamated Food Employees Union v. Logan Valley Plaza, 391 U.S. 308 (1968); Brown v. Louisiana, 383 U.S. 131 (1966); Edwards v. South Carolina, 372 U.S. 229 (1963); Kunz v. New York, 340 U.S. 290 (1951); Marsh v. Alabama, 326 U.S. 501 (1946); Jamison v. Texas, 318 U.S. 413 (1943); Schneider v. State, 308 U.S. 147 (1939); Hague v. CIO, 307 U.S. 496 (1939). </s> Here, of course, there can be no doubt that the broadcast frequencies allotted to the various radio and television licensees constitute appropriate "forums" for the discussion of controversial issues of public importance. 35 </s> [412 U.S. 94, 195] Indeed, unlike the streets, parks, public libraries, and other "forums" that we have held to be appropriate for the exercise of First Amendment rights, the broadcast media are dedicated specifically to communication. And, since the expression of ideas - whether political, commercial, musical, or otherwise - is the exclusive purpose of the broadcast spectrum, it seems clear that the adoption of a limited scheme of editorial advertising would in no sense divert that spectrum from its intended use. Cf. Lloyd Corp., Ltd. v. Tanner, supra, at 563; Amalgamated Food Employees Union v. Logan Valley Plaza, supra, at 320. </s> Moreover, it is equally clear that, with the assistance of the Federal Government, the broadcast industry has become what is potentially the most efficient and effective "marketplace of ideas" ever devised. 36 Indeed, the electronic media are today "the public's prime source of information," 37 and we have ourselves recognized that broadcast "technology . . . supplants atomized, relatively [412 U.S. 94, 196] informal communication with mass media as a prime source of national cohesion and news . . . ." Red Lion Broadcasting Co. v. FCC, 395 U.S., at 386 n. 15. Thus, although "full and free discussion" of ideas may have been a reality in the heyday of political pamphleteering, modern technological developments in the field of communications have made the soapbox orator and the leafleteer virtually obsolete. And, in light of the current dominance of the electronic media as the most effective means of reaching the public, any policy that absolutely denies citizens access to the airwaves necessarily renders even the concept of "full and free discussion" practically meaningless. </s> Regrettably, it is precisely such a policy that the Court upholds today. And, since effectuation of the individual's right to speak through a limited scheme of editorial advertising can serve only to further, rather than to inhibit, the public's interest in receiving suitable exposure to "uninhibited, robust, and wide-open" debate on controversial issues, the challenged ban can be upheld only if it is determined that such editorial advertising would unjustifiably impair the broadcaster's assertedly overriding interest in exercising absolute control over "his" frequency. 38 Such an analysis, however, hardly reflects the delicate balancing of interests that this sensitive question demands. Indeed, this "absolutist" approach wholly disregards the competing First Amendment rights of all "non-broadcaster" citizens, ignores the [412 U.S. 94, 197] teachings of our recent decision in Red Lion Broadcasting Co. v. FCC, supra, and is not supported by the historical purposes underlying broadcast regulation in this Nation. </s> Prior to 1927, it must be remembered, it was clearly recognized that the broadcast spectrum was part of the public domain. As a result, the allocation of frequencies was left entirely to the private sector, 39 and groups and individuals therefore had the same right of access to radio facilities as they had, and still have, to the printed press - that is, "anyone who will may transmit." 40 Under this scheme, however, the number of broadcasters increased so dramatically that by 1927 every frequency was occupied by at least one station, and many were occupied by several. "The result was confusion and chaos. With everybody on the air, nobody could be heard." National Broadcasting Co. v. United States, 319 U.S. 190, 212 (1943). It soon became "apparent that broadcast frequencies constituted a scarce resource whose use could be regulated and rationalized only by the Government." Red Lion Broadcasting Co. v. FCC, supra, at 376. Thus, in the Radio Act of 1927, 44 Stat. 1162, Congress placed the broadcast spectrum under federal regulation and sought to reconcile competing uses of the airwaves by setting aside a limited number of frequencies for each of the important uses of radio. 41 And, since the number of frequencies allocated to public broadcasting was necessarily limited, the [412 U.S. 94, 198] Government was compelled to grant licenses to some applicants while denying them to others. See generally Red Lion Broadcasting Co. v. FCC, supra, at 375-377, 388; National Broadcasting Co. v. United States, supra, at 210-214. </s> Although the overriding need to avoid overcrowding of the airwaves clearly justifies the imposition of a ceiling on the number of individuals who will be permitted to operate broadcast stations 42 and, indeed, renders it "idle to posit an unabridgeable First Amendment right to broadcast comparable to the right of every individual to speak, write, or publish," 43 it does not in any sense dictate that the continuing First Amendment rights of all nonlicensees be brushed aside entirely. Under the existing system, broadcast licensees are granted a preferred status with respect to the airwaves, not because they have competed successfully in the free market but, rather, "because of their initial government selection . . . ." Red Lion Broadcasting Co. v. FCC, supra, at 400. And, in return for that "preferred status," licensees must respect the competing First Amendment [412 U.S. 94, 199] rights of others. Thus, although the broadcaster has a clear First Amendment right to be free from Government censorship in the expression of his own views 44 and, indeed, has a significant interest in exercising reasonable journalistic control over the use of his facilities, "[t]he right of free speech of a broadcaster . . . does not embrace a right to snuff out the free speech of others." Id., at 387 (emphasis added). Indeed, after careful consideration of the nature of broadcast regulation in this country, we have specifically declared that </s> "as far as the First Amendment is concerned those who are licensed stand no better than those to whom licenses are refused. A license permits broadcasting, but the licensee has no constitutional right to . . . monopolize a radio frequency to the exclusion of his fellow citizens." Id., at 389. </s> Because I believe this view is as sound today as when voiced only four years ago, I can only conclude that there is simply no overriding First Amendment interest of broadcasters that can justify the absolute exclusion of virtually all of our citizens from the most effective "marketplace of ideas" ever devised. </s> This is not to say, of course, that broadcasters have no First Amendment interest in exercising journalistic supervision over the use of their facilities. On the contrary, such an interest does indeed exist, and it is an interest that must be weighed heavily in any legitimate effort to balance the competing First Amendment interests involved in this case. In striking such a balance, however, it must be emphasized that these cases deal only with the allocation of advertising time - air time that broadcasters regularly relinquish to others without the retention of significant editorial control. Thus, we are concerned here, not with the speech of broadcasters themselves, 45 </s> [412 U.S. 94, 200] but, rather, with their "right" to decide which other individuals will be given an opportunity to speak in a forum that has already been opened to the public. </s> Viewed in this context, the absolute ban on editorial advertising seems particularly offensive because, although broadcasters refuse to sell any air time whatever to groups or individuals wishing to speak out on controversial issues of public importance, they make such air time readily available to those "commercial" advertisers who seek to peddle their goods and services to the public. Thus, as the system now operates, any person wishing to market a particular brand of beer, soap, toothpaste, or deodorant has direct, personal, and instantaneous access to the electronic media. He can present his own message, in his own words, in any format he selects, and at a time of his own choosing. Yet a similar individual seeking to discuss war, peace, pollution, or the suffering of the poor is denied this right to speak. Instead, he is compelled to rely on the beneficence of a corporate "trustee" appointed by the Government to argue his case for him. </s> It has long been recognized, however, that although access to public forums may be subjected to reasonable "time, place, and manner" regulations, 46 "[s]elective exclusions from a public forum may not be based on content alone . . . ." Police Dept. of Chicago v. Mosley, 408 U.S., at 96 (emphasis added); see, e. g., Shuttlesworth v. City of Birmingham, 394 U.S. 147 (1969); [412 U.S. 94, 201] Edwards v. South Carolina, 372 U.S. 229 (1963); Fowler v. Rhode Island, 345 U.S. 67 (1953); Niemotko v. Maryland, 340 U.S. 268 (1951); Saia v. New York, 334 U.S. 558 (1948). Here, of course, the differential treatment accorded "commercial" and "controversial" speech clearly violates that principle. 47 Moreover, and not without some irony, the favored treatment given "commercial" speech under the existing scheme clearly reverses traditional First Amendment priorities. For it has generally been understood that "commercial" speech enjoys less First Amendment protection than speech directed at the discussion of controversial issues of public importance. See, e. g., Breard v. Alexandria, 341 U.S. 622 (1951); Valentine v. Chrestensen, 316 U.S. 52 (1942). </s> The First Amendment values of individual self-fulfillment through expression and individual participation in public debate are central to our concept of liberty. If these values are to survive in the age of technology, it is essential that individuals be permitted at least some opportunity to express their views on public issues over the electronic media. Balancing those interests against the limited interest of broadcasters in exercising "journalistic supervision" over the mere allocation of advertising time that is already made available to some members of the public, I simply cannot conclude that the interest of broadcasters must prevail. </s> IV </s> Finally, the Court raises the specter of administrative apocalypse as justification for its decision today. The Court's fears derive largely from the assumption, implicit [412 U.S. 94, 202] in its analysis, that the Court of Appeals mandated an absolute right of access to the airwaves In reality, however, the issue in these cases is not whether there is an absolute right of access but, rather, whether there may be an absolute denial of such access. The difference is, of course, crucial, and the Court's misconception of the issue seriously distorts its evaluation of the administrative difficulties that an invalidation of the absolute ban might conceivably entail. </s> Specifically, the Court hypothesizes three potential sources of difficulty: (1) the availability of editorial advertising might, in the absence of adjustments in the system, tend to favor the wealthy; (2) application of the Fairness Doctrine to editorial advertising might adversely affect the operation of that doctrine; and (3) regulation of editorial advertising might lead to an enlargement of Government control over the content of broadcast discussion. These are, of course, legitimate and, indeed, important concerns. But, at the present time, they are concerns - not realities. We simply have no sure way of knowing whether, and to what extent, if any, these potential difficulties will actually materialize. The Court's bare assumption that these hypothetical problems are both inevitable and insurmountable indicates an utter lack of confidence in the ability of the Commission and licensees to adjust to the changing conditions of a dynamic medium. This sudden lack of confidence is, of course, strikingly inconsistent with the general propositions underlying all other aspects of the Court's approach to this case. </s> Moreover, it is noteworthy that, 28 years ago, the Commission itself declared that </s> "the operation of any station under the extreme principles that no time shall be sold for the discussion [412 U.S. 94, 203] of controversial public issues . . . is inconsistent with the concept of public interest. . . . The Commission recognizes that good program balance may not permit the sale or donation of time to all who may seek it for such purposes and that difficult problems calling for careful judgment on the part of station management may be involved in deciding among applicants for time when all cannot be accommodated. However, competent management should be able to meet such problems in the public interest and with fairness to all concerned. The fact that it places an arduous task on management should not be made a reason for evading the issue by a strict rule against the sale of time for any programs of the type mentioned." United Broadcasting Co., 10 F. C. C. 515, 518 (1945). </s> I can see no reason why the Commission and licensees should be deemed any less competent today then they were in 1945. And even if intervening developments have increased the complexities involved in implementing a limited right of access, there is certainly no dearth of proposed solutions to the potential difficulties feared by the Court. See, e. g., Canby, The First Amendment Right to Persuade: Access to Radio and Television, 19 U. C. L. A. L. Rev. 723, 754-757 (1972); Malone, Broadcasting, the Reluctant Dragon: Will the First Amendment Right of Access End the Suppressing of Controversial Ideas?, 5 U. Mich. J. L. Reform 193, 252-269 (1972); Johnson & Westen, A Twentieth-Century Soapbox: The Right to Purchase Radio and Television Time, 57 Va. L. Rev. 574 (1971); Note, 85 Harv. L. Rev. 689, 693-699 (1972). </s> With these considerations in mind, the Court of Appeals confined itself to invalidating the flat ban alone, [412 U.S. 94, 204] leaving broad latitude 48 to the Commission and licensees to develop in the first instance reasonable regulations to govern the availability of editorial advertising. In the context of these cases, this was surely the wisest course to follow, for "if experience with the administration of these doctrines indicates that they have the net effect of reducing rather than enhancing [First Amendment values], there will be time enough to reconsider the constitutional implications." Red Lion Broadcasting Co. v. FCC, 395 U.S., at 393 . </s> For the present, however, and until such time, if ever, as these assertedly "overriding" administrative difficulties actually materialize, I must agree with the conclusion of the Court of Appeals that although "it may unsettle some of us to see an antiwar message or a political party message in the accustomed place of a soap or beer commercial . . . we must not equate what is habitual with what is right - or what is constitutional. A society already so saturated with commercialism can well afford another outlet for speech on public issues. All that we may lose is some of our apathy." 49 </s> [Footnote 1 See Business Executives Move for Vietnam Peace, 25 F. C. C. 2d 242 (1970); Democratic National Committee, 25 F. C. C. 2d 216 (1970). </s> [Footnote 2 I do not specifically address the "statutory" question in this case because, in practical effect, the considerations underlying the "statutory" question are in many respects similar to those relevant to the "substance" of the "constitutional" claim. There is one aspect of the Court's "statutory" discussion, however, that merits at least brief attention. In upholding the absolute ban on the sale of editorial advertising, the Court relies heavily upon 47 U.S.C. 153 (h), which declares that broadcasters shall not be deemed "common carriers." In my view, this reliance is misplaced. Even a cursory examination of the legislative history of this provision reveals that it was enacted in recognition of the fact that [412 U.S. 94, 171] traditional doctrines governing true "common carriers," such as transportation companies, would not suit the particular problems of radio broadcasting. Specifically, it was feared that such "common carrier" status for broadcasters would mean that they "would have to give all their time to [public issues]." 67 Cong. Rec. 12504 (Sen. Dill) (emphasis added); see also ibid. (Sen. Broussard); id., at 12356 (Sen. Fess). Section 153 (h) was intended solely to assure that broadcasters would not be required to surrender all of their air time to willing purchasers; it does not bear upon the question whether they may be required to sell a reasonable and limited amount of air time to members of the public for discussion of controversial issues. See 2 Z. Chafee, Government and Mass Communications 635 n. 75 (1947). Indeed, the Commission itself has rejected the Court's interpretation of 153 (h) when it declared, over 25 years ago, that "the operation of any station under the extreme principles that no time shall be sold for the discussion of controversial public issues . . . is inconsistent with the concept of public interest established by the Communications Act. . . ." United Broadcasting Co., 10 F. C. C. 515, 518 (1945). </s> [Footnote 3 See generally Business Executives Move for Vietnam Peace, 25 F. C. C. 2d, at 253-264 (dissenting opinion), wherein Commissioner Johnson identified no less than eight separate indicia of "governmental action" involved in the promulgation and enforcement of the challenged broadcaster policy. </s> [Footnote 4 For a discussion of the attributes of the electromagnetic spectrum, see generally W. Jones, Regulated Industries 1019 (1967); Levin. The Radio Spectrum Resource. 11 J. Law & Econ. 433 (1968). </s> [Footnote 5 It is true, of course, that unlike the State in Burton, the Federal Government here does not receive substantial financial compensation for the use of the "public" property. See Burton v. Wilmington Parking Authority, 365 U.S. 715, 723 -724 (1961); Moose Lodge No. 107 v. Irvis, 407 U.S. 163, 174 -175 (1972). Nevertheless, the absence of such a financial arrangement represents, in practical effect, Government subsidization of broadcasters, thereby enhancing the degree of governmental involvement. Cf. Kalven, Broadcasting, Public Policy and the First Amendment, 10 J. Law & Econ. 15, 31 (1967). Moreover, as in Burton, the publicly owned property is "not surplus state property" but, rather, constitutes an "integral and, indeed, indispensable part" of the governmental scheme. Burton v. Wilmington Parking Authority, supra, at 723. See also 47 U.S.C. 303 (g). </s> [Footnote 6 For a discussion of the Fairness Doctrine and its relevance to this case, see text and notes, at nn. 15-34, infra. </s> [Footnote 7 Indeed, the Communications Act of 1934 makes it a criminal offense to operate a broadcast transmitter without a license. See 47 U.S.C. 501. Thus, the Federal Government specifically insulates the licensee from any real threat of economic competition. </s> [Footnote 8 Thus, the Communications Act of 1934 authorizes the Federal Communications Commission to assign frequency bands, 47 U.S.C. 303 (c); allocate licenses by location, 303 (d); regulate apparatus, 303 (e); establish service areas, 303 (h); regulate chain ownership, 303 (i); require the keeping of detailed records, 303 (j); establish qualifications of licensees, 303 (l); suspend licenses, 303 (m) (1); inspect station facilities, 303 (n); require publication of call letters and other information, 303 (p); make rules to effect regulation of radio and television, 303 (r); require that television sets be capable of receiving all signals, 303 (s); regulate [412 U.S. 94, 177] the granting of licenses and the terms thereof, 307, 309; prescribe information to be supplied by applicants for licenses, 308 (b); regulate the transfer of licenses, 310; impose sanctions on licensees, including revocation of license, 312; require fair coverage of controversial issues, 315; control the operation of transmitting apparatus, 318; and prohibit the use of offensive language, 18 U.S.C. 1464. </s> [Footnote 9 Pursuant to statutory authority, see n. 8, supra, the Commission has promulgated myriad regulations governing all aspects of licensee conduct. See 47 CFR 73.17 et seq. These regulations affect such matters as hours of operation, 73.23; multiple ownership of licenses by a single individual, 73.35; station location and program origination, 73.30; maintenance of detailed logs of programming, operation, and maintenance, 73.111-116; billing practices. 73.124; the personal attack and political editorial fairness requirements, 73.123; relationship of licensees to networks, 73.131-139; permissible equipment, 73.39-50. The above-cited regulations relate only to AM radio, but similar regulations exist for FM radio, 73.201 et seq., and television, 73.601 et seq. </s> [Footnote 10 In addition, the Court contends that, because of the Fairness Doctrine, the challenged broadcaster policy does not discriminate against controversial speech. See ante, at 128-130. </s> [Footnote 11 Moreover, the appropriateness of a particular forum, even if privately owned, for effective communication has in some instances been emphasized to establish the relevance of First Amendment protections. See, e. g., Amalgamated Food Employees Union v. Logan Valley Plaza, 391 U.S. 308 (1968); Marsh v. Alabama, 326 U.S. 501 (1946). Here, as the Court of Appeals recognized, "the broadcast media are specifically dedicated to communication. They function as both our foremost forum for public speech and our most important educator of an informed people." 146 U.S. App. D.C. 181, 192, 450 F.2d 642, 653. See also text and notes, at nn. 35-37, infra. </s> [Footnote 12 In his concurring opinion, my Brother STEWART suggests that a finding of governmental action in this context necessarily means that "private broadcasters are Government." Ante, at 139 (emphasis in original). In my view, this assertion reflects a complete misunderstanding of the nature of the governmental involvement in these cases. Here, the Government has selected the persons who will be permitted to operate a broadcast station, extensively regulates those broadcasters, and has specifically approved the challenged broadcaster policy. Thus, the commands of the First Amendment come into play, not because "private broadcasters are Government," but, rather, because the Government "has so far insinuated itself into a position" of participation in the challenged policy as to make the Government itself responsible for its effects. Similarly, I cannot agree with my Brother STEWART'S suggestion that a finding of governmental involvement here "would . . . simply strip broadcasters of their own First Amendment rights." Ibid. The actions of a purely private individual are, of course, not subject to the constraints of the First Amendment. But where, as here, the [412 U.S. 94, 182] Government has implicated itself in the actions of an otherwise private individual, that individual must exercise his own rights with due regard for the First Amendment rights of others. In other words, an accommodation of competing rights is required, and "balancing," not the "absolutist" approach suggested by my Brother STEWART, is the result. Indeed, it is this misunderstanding of the significance of governmental involvement that apparently leads to my Brother STEWART'S disagreement with my Brothers WHITE, BLACKMUN, and POWELL as to the relationship between the "public interest" standard of the Act and First Amendment "values." I might also note that, contrary to the suggestion of my Brother STEWART, a finding of governmental involvement in this case does not in any sense command a similar conclusion with respect to newspapers. Indeed, the factors that compel the conclusion that the Government is involved in the promulgation and enforcement of the challenged broadcaster policy have simply no relevance to newspapers. The decision as to who shall operate newspapers is made in the free market, not by Government fiat. The newspaper industry is not extensively regulated and, indeed, in light of the differences between the electronic and printed media, such regulation would violate the First Amendment with respect to newspapers. Finally, since such regulation of newspapers would be impossible, it would likewise be impossible for the Government to approve an exclusionary policy of newspapers in the sense that it has approved the challenged policy of the broadcasters. </s> [Footnote 13 New York Times Co. v. Sullivan, 376 U.S. 254, 270 (1964); see also Pickering v. Board of Education, 391 U.S. 563, 573 (1968); Mills v. Alabama, 384 U.S. 214, 218 (1966). </s> [Footnote 14 This was not new doctrine, for we have long recognized in a variety of contexts that the First Amendment "necessarily protects the right to receive [information]." Martin v. City of Struthers. 319 U.S. 141, 143 (1943); see, e. g., Stanley v. Georgia, 394 U.S. 557, 564 (1969); Time, Inc. v. Hill, 385 U.S. 374, 388 (1967); Griswold v. Connecticut, 381 U.S. 479, 482 (1965); Lamont v. Postmaster General, 381 U.S. 301 (1965). </s> [Footnote 15 The Fairness Doctrine was recognized and implicitly approved by Congress in the 1959 amendments to 315 of the Communications Act. Act of Sept. 14, 1959, 1, 73 Stat. 557, 47 U.S.C. 315 (a). As amended, 315 (a) recognizes the obligation of broadcasters "to operate in the public interest and to afford reasonable opportunity for the discussion of conflicting views on issues of public importance." </s> [Footnote 16 The Fairness Doctrine was first fully set forth in Report in the Matter of Editorializing by Broadcast Licensees, 13 F. C. C. 1246 (1949), and was elaborated upon in Applicability of the Fairness Doctrine in the Handling of Controversial Issues of Public Importance, 29 Fed. Reg. 10415 (1964). The statutory authority of the Commission to promulgate this doctrine and related regulations derives from the mandate to the "Commission from time to time, as public convenience, interest, or necessity requires," to promulgate "such rules and regulations and prescribe such restrictions and conditions . . . as may be necessary to carry out the provisions of [the Act]. . . ." 47 U.S.C. 303 (r). </s> [Footnote 17 See John J. Dempsey, 6 P & F Radio Reg. 615 (1950); see also Metropolitan Broadcasting Corp., 19 P & F Radio Reg. 602 (1960); The Evening News Assn., 6 P & F Radio Reg. 283 (1950). </s> [Footnote 18 If the broadcaster presents one side of a question, and does not wish to present the other side himself, he can fulfill his fairness obligation by announcing his willingness to broadcast opposing views by volunteers. See Mid-Florida Television Corp., 40 F. C. C. 620 (1964). If the broadcaster rejects a volunteer spokesman as "inappropriate," he must seek out others. See Richard G. Ruff, 19 F. C. C. 2d 838 (1969). The broadcaster must provide free time for the presentation of opposing views if sponsorship is unavailable. See Cullman Broadcasting Co., 25 P & F Radio Reg. 895 (1963). </s> [Footnote 19 Applicability of the Fairness Doctrine in the Handling of Controversial Issues of Public Importance, supra, n. 16, at 10424. </s> [Footnote 20 Notice of Inquiry: The Handling of Public Issues Under the Fairness Doctrine and the Public Interest Standards of the Communications Act, 30 F. C. C. 2d 26, 27-28 (1971); see also Applicability of the Fairness Doctrine in the Handling of Controversial Issues of Public Importance, supra, n. 16, at 10416; Report in the Matter of Editorializing by Broadcast Licensees, supra, n. 16. </s> [Footnote 21 Thus, the Fairness Doctrine must be sharply distinguished from the "equal time" requirement, which provides that a broadcaster who affords air time to one political candidate must make equal time available to other candidates for the same office. 47 U.S.C. 315. See also Nicholas Zapple, 23 F. C. C. 2d 707 (1970) (extension of "equal time" rule to cover a candidate's supporters where spokesmen for other candidates are permitted to purchase air time). Similarly, the Fairness Doctrine must not be confused with the Commission's "personal attack" and "political editorializing" rules which were upheld in Red Lion Broadcasting Co. v. FCC, 395 U.S. 367 (1969). The "personal attack" rule provides that "[w]hen during the presentation of views on a controversial issue of public importance, an attack is made upon the honesty, character, integrity or like personal qualities of an identified person," the licensee must notify the person attacked and offer him an opportunity to respond. 47 CFR 73.123. The "political editorializing" rule provides that when a licensee endorses a candidate for political office it must give other candidates or their spokesmen an opportunity to respond. See, e. g., 47 CFR 73.123. Thus, unlike the Fairness Doctrine, the "equal time," "personal attack," and "political editorializing" rules grant a particular group or individual a limited "right of access" to the airwaves not subject to the "journalistic supervision" of the broadcaster. </s> [Footnote 22 Associated Press v. United States, 326 U.S. 1, 20 (1945). </s> [Footnote 23 Jaffe, The Editorial Responsibility of the Broadcaster: Reflections on Fairness and Access, 85 Harv. L. Rev. 768, 773 n. 26 (1972). </s> [Footnote 24 See generally D. Lacy, Freedom and Communications 69 (1961); Mallamud, The Broadcast Licensee as Fiduciary: Toward the Enforcement of Discretion, 1973 Duke L. J. 89, 94-95, 98-99; Jaffe, supra, n. 23, at 773 n. 26; Canby, The First Amendment Right to Persuade: Access to Radio and Television, 19 U. C. L. A. L. Rev. 723, 727 (1972); Malone, Broadcasting, The Reluctant Dragon: Will the First Amendment Right of Access End the Suppressing of Controversial Ideas?, 5 U. Mich. J. L. Reform 193, 205-211, 216 (1972); Johnson & Westen, A Twentieth Century Soapbox: The Right to Purchase Radio and Television Time, 57 Va. L. Rev. 574 (1971); Barron, Access to the Press - A New First Amendment Right, 80 Harv. L. Rev. 1641 (1967); Note, Free Speech and the Mass Media, 57 Va. L. Rev. 636 (1971); Note, A Fair Break for Controversial Speakers: Limitations of the Fairness Doctrine and the Need for Individual Access, 39 Geo. Wash. L. Rev. 532 (1971); Note, The Wasteland Revisited: A Modest Attack Upon the FCC's Category System, 17 U. C. L. A. L. Rev. 868, 870-875 (1970); Comment, Freedom of Speech and the Individual's Right of Access to the Airwaves, 1970 Law & Social Order 424, 428; Note, The Federal Communications Commission's Fairness Regulations: A First Step Towards Creation of a Right of Access to the Mass Media, 54 Cornell L. Rev. 294, 296 (1969). Although admitting that the Fairness Doctrine "has not always brought to the public perfect or, indeed, even consistently high-quality treatment of all public events and issues," the Court nevertheless suggests that a broadcaster who fails to fulfill his fairness obligations does so "at the risk of losing his license." Ante, at 130-131. The Court does not cite a single instance, however, in which this sanction has ever been invoked because of a broadcaster's failure to comply with the Fairness Doctrine. Indeed, this is not surprising, for the Commission has acted with great reluctance in this area, intervening in only the most extreme cases of broadcaster abuse. See Mallamud, supra, at 115-122; Canby, supra, at 725-727; Malone, supra, at 215-216; see also Cox & Johnson, Broadcasting in America and the FCC's License Renewal Process: An Oklahoma Case Study, 14 F. C. C. 2d 1 (1968). </s> [Footnote 25 Red Lion Broadcasting Co. v. FCC, supra, at 392 n. 18, quoting J. Mill, On Liberty 32 (R. McCallum ed. 1947). </s> [Footnote 26 Democratic National Committee, 25 F. C. C. 2d, at 222 (emphasis added). </s> [Footnote 27 Indeed, the failure to provide adequate means for groups and individuals to bring new issues or ideas to the attention of the public explains, at least to some extent, "the development of new media to convey unorthodox, unpopular, and new ideas. Sit-ins and demonstrations testify to . . . the inability to secure access to the conventional means of reaching and changing public opinion. [For by] [412 U.S. 94, 191] the bizarre and unsettling nature of his technique, the demonstrator hopes to arrest and divert attention long enough to compel the public to ponder his message." Barron, 80 Harv. L. Rev., at 1647; cf. Adderley v. Florida, 385 U.S. 39, 50 -51 (1966) (DOUGLAS, J., dissenting). </s> [Footnote 28 Brief for American Broadcasting Companies, Inc. 52. </s> [Footnote 29 Brief for Columbia Broadcasting System, Inc. 34. </s> [Footnote 30 Id., at 40. </s> [Footnote 31 Brief for National Broadcasting Company, Inc. 10. </s> [Footnote 32 Brief for Post-Newsweek Stations, Capital Area, Inc. 31. </s> [Footnote 33 Tinker v. Des Moines Independent School District, 393 U.S. 503, 512 (1969). </s> [Footnote 34 United States v. Associated Press, 52 F. Supp. 362, 372 (SDNY 1943), aff'd, 326 U.S. 1 (1945). See also Thomas v. Collins, 323 U.S. 516, 545 (1945) (Jackson, J., concurring). </s> [Footnote 35 The Court does make the rather novel suggestion, however, that editorial advertising might indeed be "inappropriate" because "listeners and viewers constitute a `captive audience.'" Ante, at 127. In support of this proposition, the Court cites our decisions in Public Utilities Comm'n v. Pollak, 343 U.S. 451 (1952), and Kovacs v. Cooper, 336 U.S. 77 (1949). In Pollak, however, we explicitly rejected a claim that the broadcasting of radio programs in streetcars violated the First and Fifth Amendment rights of passengers who did not wish to listen to those programs. And in Kovacs, although we upheld an ordinance forbidding the use on public streets of sound trucks which emit "loud and raucous noises," we did so because the ordinance was concerned, not with the content of speech, but, rather, with the offensiveness of the sounds themselves. Here, however, the Court seems perfectly willing to allow broadcasters to continue to invade the "privacy" of the home through commercial advertising and even controversial programming under the Fairness Doctrine. Thus, the Court draws its line solely on the basis of the content of the particular speech involved and, of course, we have consistently held that, where content is at issue, constitutionally protected speech may not be prohibited because of a "mere desire to avoid the discomfort and unpleasantness that always accompany an unpopular viewpoint." Tinker v. Des Moines Independent School District, 393 U.S., at 509 ; see, e. g., Grayned v. City of Rockford, 408 U.S. 104, 117 (1972). The suggestion that constitutionally protected speech may be banned because some [412 U.S. 94, 195] persons may find the ideas expressed offensive is, in itself, offensive to the very meaning of the First Amendment. </s> [Footnote 36 Indeed, approximately 95% of American homes contain at least one television set, and that set is turned on for an average of more than five and one-half hours per day. See Hearings on H. R. 13721 before the Subcommittee on Communications and Power of the House Committee on Interstate and Foreign Commerce, 91st Cong., 2d Sess., 7 (1970) (statement of Dean Burch, Chairman of the Federal Communications Commission). As to the potential influence of the electronic media on American thought, see generally A. Krock, The Consent of the Governed 66 (1971); H. Mendelsohn & I. Crespi, Polls, Television, and the New Politics 256, 264 (1970); Malone, 5 U. Mich. J. L. Reform, at 197. </s> [Footnote 37 H. R. Rep. No. 91-257, p. 6 (1969). According to one study, 67% of Americans prefer the electronic media to other sources of information. See G. Wyekoff, The Image Candidates 13-14 (1968). See also Amendment of Sections 73.35, 73.240, and 73.636 of the Commission's Rules, 22 F. C. C. 2d 339, 344 (1970) (59% of Americans depend on television as their principal source of news). </s> [Footnote 38 It should be noted that, although the Fairness Doctrine is at least arguably relevant to the public's interest in receiving suitable exposure to "uninhibited, robust, and wide-open" debate on controversial issues, it is not in any sense relevant to the individual's interest in obtaining access to the airwaves for the purpose of effective self-expression. For the individual's interest in expressing his own views in a manner of his own choosing is an inherently personal one, and it can never be satisfied by the expression of "similar" views by a surrogate spokesman. </s> [Footnote 39 Indeed, pre-1927 regulation of radio gave no discretion to the Federal Government to deny the right to operate a broadcast station. See 1 A. Socolow, The Law of Radio Broadcasting 38 (1939); H. Warner, Radio & Television Law 757 et seq. (1948); see generally National Broadcasting Co. v. United States, 319 U.S. 190 . 210-214 (1943). </s> [Footnote 40 67 Cong. Rec. 5479 (Rep. White). </s> [Footnote 41 These include, of course, not only public broadcasting, but also "amateur operation, aircraft, police, defense, and navigation . . . ." Red Lion Broadcasting Co. v. FCC, 395 U.S., at 388 . </s> [Footnote 42 Although this licensing scheme necessarily restricts the First Amendment rights of those groups or individuals who are denied the "right" to operate a broadcast station, it does not, in and of itself, violate the First Amendment. For it has long been recognized that when "[c]onflicting demands on the same [forum] . . . compel the [Government] to make choices among potential users and uses," neutral rules of allocation to govern that scarce communications resource are not per se unconstitutional. Police Dept. of Chicago v. Mosley, 408 U.S. 92, 98 (1972); cf. Cox v. Louisiana, 379 U.S. 536, 554 (1965); Cox v. New Hampshire, 312 U.S. 569, 574 (1941); Schneider v. State, 308 U.S. 147, 160 (1939). And, in the context of broadcasting, it would be ironic indeed "if the First Amendment, aimed at protecting and furthering communications, prevented the Government from making radio communication possible . . . by limiting the number of licenses so as not to overcrowd the spectrum." Red Lion Broadcasting Co. v. FCC, supra, at 389. </s> [Footnote 43 Id., at 388. </s> [Footnote 44 See, e. g., 47 U.S.C. 326. </s> [Footnote 45 Thus, as the Court of Appeals recognized, "[i]n normal programming time, closely controlled and edited by broadcasters, the constellation of constitutional interests would be substantially different." 146 U.S. App. D.C., at 193, 450 F.2d, at 654. </s> [Footnote 46 See, e. g., Police Dept. of Chicago v. Mosley, supra, at 98; Grayned v. City of Rockford, 408 U.S., at 115 ; Cox v. Louisiana, supra, at 554; Poulos v. New Hampshire, 345 U.S. 395, 398 (1953); Cox v. New Hampshire, supra, at 575-576; Schneider v. State, supra, at 160. </s> [Footnote 47 Contrary to the Court's assertion, the existence of the Fairness Doctrine cannot in any sense rationalize this discrimination. Indeed, the Fairness Doctrine is wholly unresponsive to the need for individual access to the airwaves for the purpose of effective self-expression. See also n. 38, supra. </s> [Footnote 48 The Court of Appeals did, however, suggest certain possible contours of implementation. For example, the court noted that broadcasters should be permitted "to place an outside limit on the total amount of editorial advertising they will sell," and "`reasonable regulation' of the placement of advertisements is altogether proper." 146 U.S. App. D.C., at 202, 450 F.2d, at 663. </s> [Footnote 49 Id., at 204-205, 450 F.2d, at 665-666. </s> [412 U.S. 94, 205]

United States Supreme Court FITZGERALD v. UNITED STATES LINES(1963) No. 463 Argued: April 18, 1963Decided: June 10, 1963 </s> Claiming that he had twisted and strained his back while working for respondent on its ship, a seaman sued respondent for damages based on the negligence of respondent and the unseaworthiness of the ship and for a smaller amount based on respondent's failure to provide him with medical attention, maintenance and cure and wages. He demanded a jury trial on all the claims. The trial judge granted a jury trial on the Jones Act and unseaworthiness claims; but he held the question of recovery under maintenance and cure in abeyance to try himself after jury trial of the other issues. The jury returned a verdict for respondent on the negligence and unseaworthiness claims. After hearing testimony in addition to that presented to the jury, the judge awarded the seaman a small amount for maintenance and cure. Sitting en banc. the Court of Appeals affirmed by a divided vote. Held: A maintenance and cure claim joined with a Jones Act claim must be submitted to the jury when both arise out of one set of facts. In this case, the seaman is entitled to a jury trial as of right on his maintenance and cure claim, even though the Jones Act claim was decided against him and this Court declined to review that claim on certiorari. Pp. 16-22. </s> 306 F.2d 461, reversed. </s> Theodore H. Friedman argued the cause for petitioner. With him on the briefs was Jacob Rassner. </s> Matthew L. Danahar argued the cause for respondent. With him on the brief was Charles N. Fiddler. </s> MR. JUSTICE BLACK delivered the opinion of the Court. </s> Andres San Martin, a seaman, brought this action in the District Court for the Southern District of New York against the respondent United States Lines Company. [374 U.S. 16, 17] His complaint alleged that he had twisted and strained his back while working for respondent on its ship. He claimed $75,000 damages based on the negligence of respondent and on the unseaworthiness of the ship and $10,000 based on respondent's failure to provide him with medical attention, maintenance and cure, and wages as required by law. 1 Martin's negligence claim invoked a remedy created by Congress in 33 of the Jones Act, 46 U.S.C. 688, which explicitly provides that a seaman can have a jury trial as of right; but the actions for unseaworthiness and for maintenance and cure are traditional admiralty remedies which in the absence of a statute do not ordinarily require trial by jury. The complainant here did demand a jury, however, for all the issues growing out of the single accident. The trial judge granted a jury trial for the Jones Act and the unseaworthiness issues but held the question of recovery under maintenance and cure in abeyance to try himself after jury trial of the other two issues. The jury returned a verdict for United States Lines on the negligence and unseaworthiness issues; the court then, after hearing testimony in addition to that presented to the jury, awarded Martin $224 for maintenance and cure. Sitting en banc, the Court of Appeals for the Second Circuit affirmed, four judges stating that it would be improper to submit a maintenance and cure claim to the jury, two believing it to be permissible but not required, and three maintaining that a seaman is entitled, as of right, to a jury trial of a maintenance and cure claim joined with a Jones Act claim. 306 F.2d 461 The lower courts are at odds on this issue. 2 We granted certiorari to decide it. 3 </s> 371 U.S. 932 . [374 U.S. 16, 18] </s> For years it has been a common, although not uniform, 4 practice of District Courts to grant jury trials to plaintiffs who join in one complaint their Jones Act, unseaworthiness, and maintenance and cure claims when all the claims, as here, grow out of a single transaction or accident. 5 This practice of requiring issues arising out of a single accident to be tried by a single tribunal is by no means surprising. Although remedies for negligence, unseaworthiness, and maintenance and cure have different origins and may on occasion call for application of slightly different principles and procedures, they nevertheless, when based on one unitary set of circumstances, serve the same purpose of indemnifying a seaman for damages caused by injury, depend in large part upon the same evidence, and involve some identical elements of recovery. Requiring a seaman [374 U.S. 16, 19] to split up his lawsuit, submitting part of it to a jury and part to a judge, unduly complicates and confuses a trial, creates difficulties in applying doctrines of res judicata and collateral estoppel, and can easily result in too much or too little recovery. 6 The problems are particularly acute in determining the amount of damages. For example, all lost earnings and medical expenses are recoverable on a negligence count, but under the Jones Act they are subject to reduction by the jury if the seaman has been contributorily negligent. These same items are recoverable in part on the maintenance and cure count, but the damages are measured by different standards 7 and are not subject to reduction for any contributory negligence. It is extremely difficult for a judge in trying a maintenance and cure claim to ascertain, even with the use of special interrogatories, exactly what went into the damages awarded by a jury - how loss of earning power was calculated, how much was allowed for medical expenses and pain and suffering, how much was allowed for actual lost wages, and how much, if any, each of the recoveries was reduced by contributory negligence. This raises needless problems of who has the burden of proving [374 U.S. 16, 20] exactly what the jury did. 8 And even if the judge can find out what elements of damage the jury's verdict actually represented, he must still try to solve the puzzling problem of the bearing the jury's verdict should have on recovery under the different standards of the maintenance and cure claim. In the absence of some statutory or constitutional obstacle, an end should be put to such an unfortunate, outdated, and wasteful manner of trying these cases. 9 Fortunately, there is no such obstacle. </s> While this Court has held that the Seventh Amendment does not require jury trials in admiralty cases, 10 neither that Amendment nor any other provision of the Constitution forbids them. 11 Nor does any statute of Congress or Rule of Procedure, Civil or Admiralty, forbid jury trials in maritime cases. Article III of the Constitution vested in the federal courts jurisdiction over admiralty and maritime cases, and, since that time, the Congress has largely left to this Court the responsibility for fashioning the controlling rules of admiralty law. This Court has long recognized its power and responsibility in this area and has exercised that power where necessary to [374 U.S. 16, 21] do so. 12 Where, as here, a particular mode of trial being used by many judges is so cumbersome, confusing, and time consuming that it places completely unnecessary obstacles in the paths of litigants seeking justice in our courts, we should not and do not hesitate to take action to correct the situation. Only one trier of fact should be used for the trial of what is essentially one lawsuit to settle one claim split conceptually into separate parts because of historical developments. And since Congress in the Jones Act has declared that the negligence part of the claim shall be tried by a jury, we would not be free, even if we wished, to require submission of all the claims to the judge alone. Therefore, the jury, a time-honored institution in our jurisprudence, is the only tribunal competent under the present congressional enactments to try all the claims. Accordingly, we hold that a maintenance and cure claim joined with a Jones Act claim must be submitted to the jury when both arise out of one set of facts. The seaman in this case was therefore entitled to a jury trial as of right on his maintenance and cure claim. </s> Judgment against the seaman on the Jones Act claim was affirmed by the Court of Appeals, and we declined to review it on certiorari. The shipowner points out that on remand the maintenance and cure claim would no longer be joined with a Jones Act claim and therefore, he argues, could be tried by a judge without a jury. We cannot agree. Our holding is that it was error to deprive [374 U.S. 16, 22] the seaman of the jury trial he demanded, and he is entitled to relief from this error by having the kind of trial he would have had in the absence of error. </s> Reversed. </s> Footnotes [Footnote 1 Martin died while his appeal was pending and a public administrator was substituted for him. </s> [Footnote 2 See notes 4 and 5, infra. </s> [Footnote 3 Because of our limited grant of certiorari, we do not consider petitioner's argument that the complaint and trial record show diversity [374 U.S. 16, 18] of citizenship jurisdiction and that therefore plaintiff was entitled to a jury trial. See Atlantic & Gulf Stevedores, Inc., v. Ellerman Lines, 369 U.S. 355, 360 (1962). Nor do we find it necessary to reach petitioner's argument that we should reconsider that part of the holding of Romero v. International Terminal Operating Co., 358 U.S. 354 (1959), which concluded that claims based upon general maritime law cannot be brought in federal courts under the federal question jurisdiction of 28 U.S.C. 1331. </s> [Footnote 4 See, e. g., Jesonis v. Oliver J. Olson & Co., 238 F.2d 307 (C. A. 9th Cir. 1956); Stendze v. The Boat Neptune, Inc., 135 F. Supp. 801 (D.C. Mass. 1955); cf. Jordine v. Walling, 185 F.2d 662 (C. A. 3d Cir. 1950). </s> [Footnote 5 See, e. g., Nolan v. General Seafoods Corp., 112 F.2d 515 (C. A. 1st Cir. 1940); Lykes Bros. S. S. Co. v. Grubaugh, 128 F.2d 387, modified on rehearing, 130 F.2d 25 (C. A. 5th Cir. 1942); Bay State Dredging & Contracting Co. v. Porter, 153 F.2d 827 (C. A. 1st Cir. 1946); Gonzales v. United Fruit Co., 193 F.2d 479 (C. A. 2d Cir. 1951); Rosenquist v. Isthmian S. S. Co., 205 F.2d 486 (C. A. 2d Cir. 1953); Mitchell v. Trawler Racer, Inc., 265 F.2d 426 (C. A. 1st Cir. 1959), rev'd on other grounds, 362 U.S. 539 (1960); McDonald v. Cape Cod Trawling Corp., 71 F. Supp. 888, 891 (D.C. Mass. 1947); Gilmore and Black, The Law of Admiralty (1957), 262. </s> [Footnote 6 For an illuminating discussion of the practical problems, see Jenkins v. Roderick, 156 F. Supp. 299, 304-306 (D.C. Mass. 1957) (Wyzanski, J.). </s> This Court has held that recovery of maintenance and cure does not bar a subsequent action under the Jones Act, Pacific S. S. Co. v. Peterson, 278 U.S. 130 (1928), but of course, where such closely related claims are submitted to different triers of fact, questions of res judicata and collateral estoppel necessarily arise, particularly in connection with efforts to avoid duplication of damages. </s> [Footnote 7 Maintenance and cure allows recovery for wages only to the end of the voyage on which a seaman is injured or becomes ill. The Osceola, 189 U.S. 158, 175 (1903). Medical expenses need not be provided beyond the point at which a seaman becomes incurable. Farrell v. United States, 336 U.S. 511 (1949). </s> [Footnote 8 See, e. g., Bartholomew v. Universe Tankships, Inc., 279 F.2d 911, 915-916 (C. A. 2d Cir. 1960); Stendze v. The Boat Neptune, Inc., 135 F. Supp. 801 (D.C. Mass. 1955). For another example of some of the difficulties involved in separate trials, compare Claudio v. Sinclair Ref. Co., 160 F. Supp. 3 (D.C. E. D. N. Y. 1958), with Lazarowitz v. American Export Lines, 87 F. Supp. 197 (D.C. E. D. Pa. 1949). </s> [Footnote 9 See generally Currie, The Silver Oar and All That. A Study of the Romero Case, 27 U. of Chi. L. Rev. 1 (1959); Kurland, The Romero Case and Some Problems of Federal Jurisdiction, 73 Harv. L. Rev. 817, 850 (1960); Note, 73 Harv. L. Rev. 138 (1959). </s> [Footnote 10 Waring v. Clarke, 5 How. 441, 460 (1847). </s> [Footnote 11 The Genesee Chief v. Fitzhugh, 12 How. 443, 459-460 (Dec. Term, 1851) (upholding constitutionality of jury trial provision in Great Lakes Act). </s> [Footnote 12 See, e. g., The John G. Stevens, 170 U.S. 113 (1898); Swift & Co. Packers v. Compania Colombiana Del Caribe, S. A., 339 U.S. 684, 690 , 691 (1950); Warren v. United States, 340 U.S. 523, 527 (1951); Wilburn Boat Co. v. Fireman's Fund Ins. Co., 348 U.S. 310, 314 (1955); Romero v. International Terminal Operating Co., 358 U.S. 354, 360 -361 (1959); The Tungus v. Skovgaard, 358 U.S. 588, 597 , 611 (1959) (opinion of BRENNAN, J., concurring in part and dissenting in part); Mitchell v. Trawler Racer, Inc., 362 U.S. 539 (1960). </s> MR. JUSTICE HARLAN, dissenting. </s> I am wholly in sympathy with the result reached by the Court. It is, I believe, a result that is consistent with sound judicial administration and that will greatly simplify the conduct of suits in which a claim for maintenance and cure is joined with a Jones Act claim arising out of the same set of facts. </s> But the rule that the Court announces is in my view entirely procedural in character, and the manner in which such rules must be promulgated has been specified by Congress in 28 U.S.C. 2073. This statute provides that rules of procedure in admiralty </s> "shall not take effect until they have been reported to Congress by the Chief Justice at or after the beginning of a regular session thereof . . . and until the expiration of ninety days after they have been thus reported." </s> Believing that we are governed by this provision, and that the method there prescribed for the declaration of procedural rules, which are to be applicable in all Federal District Courts, is exclusive, I am unable to subscribe to the opinion of the Court. * I think the appropriate way to achieve what in this instance is obviously a desirable procedural reform is to deal with the matter through the Judicial Conference of the United States. Cf. Miner v. Atlass, 363 U.S. 641 . Meanwhile, substantially for the reasons given in Judge Friendly's opinion, I consider that the judgment below must be affirmed. </s> [Footnote * The course taken by the Court is not, in my view, supported by any of the cases cited in note 12 of the Court's opinion. None of them involved a procedural rule. </s> [374 U.S. 16, 23]

United States Supreme Court FTC v. INDIANA FEDERATION OF DENTISTS(1986) No. 84-1809 Argued: March 25, 1986Decided: June 2, 1986 </s> Respondent organization of dentists in Indiana promulgated a policy requiring its members to withhold x rays from dental insurers in connection with evaluating patients' claims for benefits. The Federal Trade Commission (FTC) issued a cease-and-desist order, ruling that the policy constituted an unfair method of competition in violation of 5 of the Federal Trade Commission Act, since it amounted to a conspiratorial restraint of trade in violation of 1 of the Sherman Act. The Court of Appeals vacated the FTC's order on the ground that it was not supported by substantial evidence, holding that the FTC's findings that respondent's x-ray policy was anticompetitive were erroneous; that the findings were inadequate because of the FTC's failure to define the market in which respondent allegedly restrained competition and to establish that respondent had the power to restrain competition in that market; and that the FTC erred in not determining whether the alleged restraint on competition among dentists had actually resulted in higher dental costs to patients and insurers. </s> Held: </s> 1. The FTC's factual findings regarding respondent's x-ray policy are supported by substantial evidence. There is no dispute that respondent's members conspired among themselves to withhold x rays, and the FTC's finding that competition among dentists with respect to cooperation with insurers' requests for x rays was diminished where respondent held sway also finds adequate support in the record. Pp. 455-457. </s> 2. Evaluated under the Rule of Reason, the FTC's factual findings are sufficient as a matter of law to establish a violation of 1 of the Sherman Act, i.e., an unreasonable restraint of trade, and hence a violation of 5 of the FTC Act. Respondent's x-ray policy takes the form of a horizontal agreement among its members to withhold from their customers a particular service that they desire. Absent some countervailing procompetitive virtue, such an agreement cannot be sustained under the Rule of Reason. This conclusion is not precluded by the absence of specific findings as to the market in which respondent allegedly restrained competition or as to the power of respondent's members in that market or by the FTC's failure to find that respondent's [476 U.S. 447, 448] x-ray policy resulted in more costly dental services than the patients and insurers would have chosen if they were able to evaluate x rays in conjunction with claim forms. Nor do alleged noncompetitive "quality of care" considerations justify respondent's x-ray policy. And whether or not respondent's policy is consistent with Indiana's supposed policy against submission of x rays to insurers, it is not immunized from antitrust scrutiny. Anticompetitive collusion among private actors, even when consistent with state policy, acquires antitrust immunity only when it is actually supervised by the State, and there is no suggestion of such supervision here. Pp. 457-465. </s> 745 F.2d 1124, reversed. </s> WHITE, J., delivered the opinion for a unanimous Court. </s> Marcy J. K. Tiffany argued the cause for petitioner. With her on the briefs were Solicitor General Fried, Assistant Attorney General Ginsburg, Ernest J. Isenstadt, David C. Shonka, and L. Barry Costilo. </s> Bruce W. Graham argued the cause for respondent. With him on the brief was Ronald K. Fowler. * </s> [Footnote * Briefs of amici curiae urging reversal were filed for the American Association of Retired Persons by Alfred Miller and Steven S. Honigman; for the Health Insurance Association of America by Joe Sims and Edwin R. Soeffing; and for the Washington Business Group on Health by Stephan E. Lawton. </s> Briefs of amici curiae urging affirmance were field for the American College of Radiology by Reuben L. Hedlund and James A. Cherney; for the American Dental Association by Peter M. Sfikas; for the American Medical Association by Benjamin W. Heineman, Jr., Carter G. Phillips, Newton N. Minow, and Jack R. Bierig; and for the Physicians and Surgeons Association of Massachusetts, Inc., by Robert D. Paul and Donald B. Gould. </s> JUSTICE WHITE delivered the opinion of the Court. </s> This case concerns commercial relations among certain Indiana dentists, their patients, and the patients' dental health care insurers. The question presented is whether the Federal Trade Commission correctly concluded that a conspiracy among dentists to refuse to submit x rays to dental insurers for use in benefits determinations constituted an [476 U.S. 447, 449] "unfair method of competition" in violation of 5 of the Federal Trade Commission Act, 38 Stat. 719, as amended, 15 U.S.C. 45 (1982 ed. and Supp. II). </s> I </s> Since the 1970's, dental health insurers, responding to the demands of their policyholders, have attempted to contain the cost of dental treatment by, among other devices, limiting payment of benefits to the cost of the "least expensive yet adequate treatment" suitable to the needs of individual patients. Implementation of such cost-containment measures, known as "alternative benefits" plans, requires evaluation by the insurer of the diagnosis and recommendation of the treating dentist, either in advance of or following the provision of care. In order to carry out such evaluation, insurers frequently request dentists to submit, along with insurance claim forms requesting payment of benefits, any dental x rays that have been used by the dentist in examining the patient as well as other information concerning their diagnoses and treatment recommendations. Typically, claim forms and accompanying x rays are reviewed by lay claims examiners, who either approve payment of claims or, if the materials submitted raise a question whether the recommended course of treatment is in fact necessary, refer claims to dental consultants, who are licensed dentists, for further review. On the basis of the materials available, supplemented where appropriate by further diagnostic aids, the dental consultant may recommend that the insurer approve a claim, deny it, or pay only for a less expensive course of treatment. </s> Such review of diagnostic and treatment decisions has been viewed by some dentists as a threat to their professional independence and economic well-being. In the early 1970's, the Indiana Dental Association, a professional organization comprising some 85% of practicing dentists in the State of Indiana, initiated an aggressive effort to hinder insurers' [476 U.S. 447, 450] efforts to implement alternative benefits plans by enlisting member dentists to pledge not to submit x rays in conjunction with claim forms. 1 The Association's efforts met considerable success: large numbers of dentists signed the pledge, and insurers operating in Indiana found it difficult to obtain compliance with their request for x rays and accordingly had to choose either to employ more expensive means of making alternative benefits determinations (for example, visiting the office of the treating dentist or conducting an independent oral examination) or to abandon such efforts altogether. </s> By the mid-1970's, fears of possible antitrust liability had dampened the Association's enthusiasm for opposing the submission of x rays to insurers. In 1979, the Association and a number of its constituent societies consented to a Federal Trade Commission order requiring them to cease and desist from further efforts to prevent member dentists from submitting [476 U.S. 447, 451] x rays. In re Indiana Dental Assn., 93 F. T. C. 392. Not all Indiana dentists were content to leave the matter of submitting x rays to the individual dentist. In 1976, a group of such dentists formed the Indiana Federation of Dentists, respondent in this case, in order to continue to pursue the Association's policy of resisting insurers' requests for x rays. The Federation, which styled itself a "union" in the belief that this label would stave off antitrust liability, 2 immediately promulgated a "work rule" forbidding its members to submit x rays to dental insurers in conjunction with claim forms. Although the Federation's membership was small, numbering less than 100, its members were highly concentrated in and around three Indiana communities: Anderson, Lafayette, and Fort Wayne. The Federation succeeded in enlisting nearly 100% of the dental specialists in the Anderson area, and approximately 67% of the dentists in and around Lafayette. In the areas of its strength, the Federation was successful in continuing to enforce the Association's prior policy of refusal to submit x rays to dental insurers. </s> In 1978, the Federal Trade Commission issued a complaint against the Federation, alleging in substance that its efforts to prevent its members from complying with insurers' requests for x rays constituted an unfair method of competition in violation of 5 of the Federal Trade Commission Act. Following lengthy proceeding including a full evidentiary hearing before an Administrative Law Judge, the Commission ruled that the Federation's policy constituted a violation of 5 and issued an order requiring the Federation to cease and desist from further efforts to organize dentists to refuse to submit x rays to insurers. In re Indiana Federation of Dentists, 101 F. T. C. 57 (1983). The Commission based its ruling on the conclusion that the Federation's policy of requiring its members to withhold x rays amounted to a conspiracy in restraint of trade that was unreasonable and hence [476 U.S. 447, 452] unlawful under the standards for judging such restraints developed in this Court's precedents interpreting 1 of the Sherman Act. E. g., Chicago Board of Trade v. United States, 246 U.S. 231 (1918); National Society of Professional Engineers v. United States, 435 U.S. 679 (1978). The Commission found that the Federation had conspired both with the Indiana Dental Association and with its own members to withhold cooperation with dental insurers' requests for x rays; that absent such a restraint, competition among dentists for patients would have tended to lead dentists to compete with respect to their policies in dealing with patients' insurers; and that in those areas where the Federation's membership was strong, the Federation's policy had had the actual effect of eliminating such competition among dentists and preventing insurers from obtaining access to x rays in the desired manner. These findings of anticompetitive effect, the Commission concluded, were sufficient to establish that the restraint was unreasonable even absent proof that the Federation's policy had resulted in higher costs to the insurers and patients than would have occurred had the x rays been provided. Further, the Commission rejected the Federation's argument that its policy of withholding x rays was reasonable because the provision of x rays might lead the insurers to make inaccurate determinations of the proper level of care and thus injure the health of the insured patients; the Commission found no evidence that use of x rays by insurance companies in evaluating claims would result in inadequate dental care. Finally, the Commission rejected the Federation's contention that its actions were exempt from antitrust scrutiny because the withholding of x rays was consistent with the law and policy of the State of Indiana against the use of x rays in benefit determination by insurance companies. The Commission concluded that no such policy existed, and that in any event the existence of such a policy would not have justified the dentists' private and unsupervised conspiracy in restraint of trade. [476 U.S. 447, 453] </s> The Federation sought judicial review of the Commission's order in the United States Court of Appeals for the Seventh Circuit, which vacated the order on the ground that it was not supported by substantial evidence. 745 F.2d 1124 (1984). Accepting the Federation's characterization of its rule against submission of x rays as merely an ethical and moral policy designed to enhance the welfare of dental patients, the majority concluded that the Commission's findings that the policy was anticompetitive were erroneous. According to the majority, the evidence did not support the finding that in the absence of restraint dentists would compete for patients by offering cooperation with the requests of the patients' insurers, nor, even accepting that finding, was there evidence that the Federation's efforts had prevented such competition. Further, the court held that the Commission's findings were inadequate because of its failure both to offer a precise definition of the market in which the Federation was alleged to have restrained competition and to establish that the Federation had the power to restrain competition in that market. Finally, the majority faulted the Commission for not finding that the alleged restraint on competition among dentists had actually resulted in higher dental costs to patients and insurers. The third member of the Court of Appeals panel concurred in the judgment solely on the ground that there was insufficient proof that cooperation with insurers was an element of dental services as to which dentists would tend to compete. </s> We granted certiorari, 474 U.S. 900 (1985), in order to consider the Commission's claim that in vacating the Commission's order the Court of Appeals misconstrued applicable principles of antitrust law and "`misapprehended or grossly misapplied' the substantial evidence test," American Textile Manufacturers Institute, Inc. v. Donovan, 452 U.S. 490, 523 (1981) (citation omitted). We now reverse. [476 U.S. 447, 454] </s> II </s> The issue is whether the Commission erred in holding that the Federation's policy of refusal to submit x rays to dental insurers for use in benefits determinations constituted an "unfair method of competition," unlawful under 5 of the Federal Trade Commission Act. The question involves review of both factual and legal determinations. As to the former, our review is governed by 15 U.S.C. 45(c), which provides that "[t]he findings of the Commission as to the facts, if supported by evidence, shall be conclusive." The statute forbids a court to "make its own appraisal of the testimony, picking and choosing for itself among uncertain and conflicting inferences." FTC v. Algoma Lumber Co., 291 U.S. 67, 73 (1934). Rather, as under the essentially identical "substantial evidence" standard for review of agency factfinding, the court must accept the Commission's findings of fact if they are supported by "such relevant evidence as a reasonable mind might accept as adequate to support a conclusion." Universal Camera Corp. v. NLRB, 340 U.S. 474, 477 (1951); see also Beneficial Corp. v. FTC, 542 F.2d 611, 616 (CA3 1976), cert. denied, 430 U.S. 983 (1977). </s> The legal issues presented - that is, the identification of governing legal standards and their application to the facts found - are, by contrast, for the courts to resolve, although even in considering such issues the courts are to give some deference to the Commission's informed judgment that a particular commercial practice is to be condemned as "unfair." See FTC v. Sperry & Hutchinson Co., 405 U.S. 233 (1972); Atlantic Refining Co. v. FTC, 381 U.S. 357, 367 -368 (1965); FTC v. Cement Institute, 333 U.S. 683, 720 (1948). The standard of "unfairness" under the FTC Act is, by necessity, an elusive one, encompassing not only practices that violate the Sherman Act and the other antitrust laws, see FTC v. Cement Institute, supra, at 689-695, but also practices that the Commission determines are against public policy for other reasons, see FTC v. Sperry & Hutchinson Co., 405 Page 455 U.S., at 244 . Once the Commission has chosen a particular legal rationale for holding a practice to be unfair, however, familiar principles of administrative law dictate that its decision must stand or fall on that basis, and a reviewing court may not consider other reasons why the practice might be deemed unfair. See id., at 245-250; cf. SEC v. Chenery Corp., 318 U.S. 80 (1943). In the case now before us, the sole basis of the FTC's finding of an unfair method of competition was the Commission's conclusion that the Federation's collective decision to withhold x rays from insurers was an unreasonable and conspiratorial restraint of trade in violation of 1 of the Sherman Act, 26 Stat. 209, as amended, 15 U.S.C. 1. Accordingly, the legal question before us is whether the Commission's factual findings, if supported by evidence, make out a violation of Sherman Act 1. </s> III </s> The relevant factual findings are that the members of the Federation conspired among themselves to withhold x rays requested by dental insurers for use in evaluating claims for benefits, and that this conspiracy had the effect of suppressing competition among dentists with respect to cooperation with the requests of the insurance companies. As to the first of these findings there can be no serious dispute: abundant evidence in the record reveals that one of the primary reasons - if not the primary reason - for the Federation's existence was the promulgation and enforcement of the so-called "work rule" against submission of x rays in conjunction with insurance claim forms. </s> As for the second crucial finding - that competition was actually suppressed - the Seventh Circuit held it to be unsupported by the evidence, on two theories. First, the court stated that the evidence did not establish that cooperation with requests for information by patients' insurance companies was an aspect of the provision of dental services with respect to which dentists would, in the absence of some [476 U.S. 447, 456] restraint, compete. Second, the court found that even assuming that dentists would otherwise compete with respect to policies of cooperating or not cooperating with insurance companies, the Federation's policy did not impair that competition, for the member dentists continued to allow insurance companies to use other means of evaluating their diagnoses when reviewing claims for benefits: specifically, "the IFD member dentists allowed insurers to visit the dental office to review and examine the patient's x rays along with all of the other diagnostic and clinical aids used in formulating a proper course of dental treatment." 745 F.2d, at 1143. </s> Neither of these criticisms of the Commission's findings is well founded. The Commission's finding that "[i]n the absence of . . . concerted behavior, individual dentists would have been subject to market forces of competition, creating incentives for them to . . . comply with the requests of patients' third-party insurers," 101 F. T. C., at 173, finds support not only in common sense and economic theory, upon both of which the FTC may reasonably rely, but also in record documents, including newsletters circulated among Indiana dentists, revealing that Indiana dentists themselves perceived that unrestrained competition tended to lead their colleagues to comply with insurers' requests for x rays. See App. to Pet. for Cert. 289a, 306a-308a. Moreover, there was evidence that outside of Indiana, in States where dentists had not collectively refused to submit x rays, insurance companies found little difficulty in obtaining compliance by dentists with their requests. 101 F. T. C., at 172. A "reasonable mind" could conclude on the basis of this evidence that competition for patients, who have obvious incentives for seeking dentists who will cooperate with their insurers, would tend to lead dentists in Indiana (and elsewhere) to cooperate with requests for information by their patients' insurers. [476 U.S. 447, 457] </s> The Commission's finding that such competition was actually diminished where the Federation held sway also finds adequate support in the record. The Commission found that in the areas where Federation membership among dentists was most significant (that is, in the vicinity of Anderson and Lafayette) insurance companies were unable to obtain compliance with their requests for submission of x rays in conjunction with claim forms and were forced to resort to other, more costly, means of reviewing diagnoses for the purpose of benefit determination. Neither the opinion of the Court of Appeals nor the brief of respondent identifies any evidence suggesting that the Commission's finding that the Federation's policy had an actual impact on the ability of insurers to obtain the x rays they requested was incorrect. The lower court's conclusion that this evidence is to be discounted because Federation members continued to cooperate with insurers by allowing them to use more costly - indeed, prohibitively costly - methods of reviewing treatment decisions is unpersuasive. The fact remains that the dentists' customers (that is, the patients and their insurers) sought a particular service: cooperation with the insurers' pretreatment review through the forwarding of x rays in conjunction with claim forms. The Federation's collective activities resulted in the denial of the information the customers requested in the form that they requested it, and forced them to choose between acquiring that information in a more costly manner or forgoing it altogether. To this extent, at least, competition among dentists with respect to cooperation with the requests of insurers was restrained. </s> IV </s> The question remains whether these findings are legally sufficient to establish a violation of 1 of the Sherman Act - that is, whether the Federation's collective refusal to cooperate with insurers' requests for x rays constitutes an "unreasonable" restraint of trade. Under our precedents, a [476 U.S. 447, 458] restraint may be adjudged unreasonable either because it fits within a class of restraints that has been held to be "per se" unreasonable, or because it violates what has come to be known as the "Rule of Reason," under which the "test of legality is whether the restraint imposed is such as merely regulates and perhaps thereby promotes competition or whether it is such as may suppress or even destroy competition." Chicago Board of Trade v. United States, 246 U.S., at 238 . </s> The policy of the Federation with respect to its members' dealings with third-party insurers resembles practices that have been labeled "group boycotts": the policy constitutes a concerted refusal to deal on particular terms with patients covered by group dental insurance. Cf. St. Paul Fire & Marine Insurance Co. v. Barry, 438 U.S. 531 (1978); Paramount Famous Lasky Corp. v. United States, 282 U.S. 30 (1930). Although this Court has in the past stated that group boycotts are unlawful per se, see United States v. General Motors Corp., 384 U.S. 127 (1966); Klor's, Inc. v. Broadway-Hale Stores, Inc. 359 U.S. 207 (1959), we decline to resolve this case by forcing the Federation's policy into the "boycott" pigeonhole and invoking the per se rule. As we observed last Term in Northwest Wholesale Stationers, Inc. v. Pacific Stationery & Printing Co., 472 U.S. 284 (1985), the category of restraints classed as group boycotts is not to be expanded indiscriminately, and the per se approach has generally been limited to cases in which firms with market power boycott suppliers or customers in order to discourage them from doing business with a competitor - a situation obviously not present here. Moreover, we have been slow to condemn rules adopted by professional associations as unreasonable per se, see National Society of Professional Engineers v. United States, 435 U.S. 679 (1978), and, in general, to extend per se analysis to restraints imposed in the context [476 U.S. 447, 459] of business relationships where the economic impact of certain practices is not immediately obvious, see Broadcast Music, Inc. v. Columbia Broadcasting System, Inc., 441 U.S. 1 (1979). Thus, as did the FTC, we evaluate the restraint at issue in this case under the Rule of Reason rather than a rule of per se illegality. </s> Application of the Rule of Reason to these facts is not a matter of any great difficulty. The Federation's policy takes the form of a horizontal agreement among the participating dentists to withhold from their customers a particular service that they desire - the forwarding of x rays to insurance companies along with claim forms. "While this is not price fixing as such, no elaborate industry analysis is required to demonstrate the anticompetitive character of such an agreement." National Society of Professional Engineers, supra, at 692. A refusal to compete with respect to the package of services offered to customers, no less than a refusal to compete with respect to the price term of an agreement, impairs the ability of the market to advance social welfare by ensuring the provision of desired goods and services to consumers at a price approximating the marginal cost of providing them. Absent some countervailing procompetitive virtue - such as, for example, the creation of efficiencies in the operation of a market or the provision of goods and services, see Broadcast Music, Inc. v. Columbia Broadcasting System, Inc., supra; Chicago Board of Trade, supra; cf. National Collegiate Athletic Assn. v. Board of Regents of Univ. of Okla., 468 U.S. 85 (1984) - such an agreement limiting consumer choice by impeding the "ordinary give and take of the market place," National Society of Professional Engineers, supra, at 692, cannot be sustained under the Rule of Reason. No credible argument has been advanced for the proposition that making it more costly for the insurers and patients who are the dentists' customers to obtain information needed for evaluating the dentists' diagnoses has any such procompetitive effect. [476 U.S. 447, 460] </s> The Federation advances three principal arguments for the proposition that, notwithstanding its lack of competitive virtue, the Federation's policy of withholding x rays should not be deemed an unreasonable restraint of trade. First, as did the Court of Appeals, the Federation suggests that in the absence of specific findings by the Commission concerning the definition of the market in which the Federation allegedly restrained trade and the power of the Federation's members in that market, the conclusion that the Federation unreasonably restrained trade is erroneous as a matter of law, regardless of whether the challenged practices might be impermissibly anticompetitive if engaged in by persons who together possessed power in a specifically defined market. This contention, however, runs counter to the Court's holding in National Collegiate Athletic Assn. v. Board of Regents of Univ. of Okla., supra, that "[a]s a matter of law, the absence of proof of market power does not justify a naked restriction on price or output," and that such a restriction "requires some competitive justification even in the absence of a detailed market analysis." Id., at 109-110. Moreover, even if the restriction imposed by the Federation is not sufficiently "naked" to call this principle into play, the Commission's failure to engage in detailed market analysis is not fatal to its finding of a violation of the Rule of Reason. The Commission found that in two localities in the State of Indiana (the Anderson and Lafayette areas), Federation dentists constituted heavy majorities of the practicing dentists and that as a result of the efforts of the Federation, insurers in those areas were, over a period of years, actually unable to obtain compliance with their requests for submission of x rays. Since the purpose of the inquiries into market definition and market power is to determine whether an arrangement has the potential for genuine adverse effects on competition, "proof of actual detrimental effect, such as a reduction of output," can [476 U.S. 447, 461] obviate the need for an inquiry into market power, which is but a "surrogate for detrimental effect." 7 P. Areeda, Antitrust Law § 1511, p. 429 (1986). In this case, we conclude that the finding of actual, sustained adverse effects on competition in those areas where IFD dentists predominated, viewed in light of the reality that markets for dental services tend to be relatively localized, is legally sufficient to support a finding that the challenged restraint was unreasonable even in the absence of elaborate market analysis. 3 </s> Second, the Federation, again following the lead of the Court of Appeals, argues that a holding that its policy of withholding x rays constituted an unreasonable restraint of trade is precluded by the Commission's failure to make any finding that the policy resulted in the provision of dental services that were more costly than those that the patients and their insurers would have chosen were they able to evaluate x rays in conjunction with claim forms. This argument, too, is unpersuasive. Although it is true that the goal of the insurers in seeking submission of x rays for use in their review of benefits claims was to minimize costs by choosing the least expensive adequate course of dental treatment, a showing that this goal was actually achieved through the means chosen is not an essential step in establishing that the dentists' attempt to thwart its achievement by collectively refusing to supply the requested information was an unreasonable restraint of trade. A concerted and effective effort to withhold (or make more costly) information desired by consumers for the purpose of determining whether a particular purchase is cost justified is likely enough to disrupt the proper functioning of the price-setting mechanism of the [476 U.S. 447, 462] market that it may be condemned even absent proof that it resulted in higher prices or, as here, the purchase of higher priced service, than would occur in its absence. National Society of Professional Engineers v. United States, 435 U.S. 679 (1978). Moreover, even if the desired information were in fact completely useless to the insurers and their patients in making an informed choice regarding the least costly adequate course of treatment - or, to put it another way, if the costs of evaluating the information were far greater than the cost savings resulting from its use - the Federation would still not be justified in deciding on behalf of its members' customers that they did not need the information: presumably, if that were the case, the discipline of the market would itself soon result in the insurers' abandoning their requests for x rays. The Federation is not entitled to pre-empt the working of the market by deciding for itself that its customers do not need that which they demand. </s> Third, the Federation complains that the Commission erred in failing to consider, as relevant to its Rule of Reason analysis, noncompetitive "quality of care" justifications for the prohibition on provision of x rays to insurers in conjunction with claim forms. This claim reflects the Court of Appeals' repeated characterization of the Federation's policy as a "legal, moral, and ethical policy of quality dental care, requiring that insurers examine and review all diagnostic and clinical aids before formulating a proper course of dental treatment." 745 F.2d, at 1144. The gist of the claim is that x rays, standing alone, are not adequate bases for diagnosis of dental problems or for the formulation of an acceptable course of treatment. Accordingly, if insurance companies are permitted to determine whether they will pay a claim for dental treatment on the basis of x rays as opposed to a full examination of all the diagnostic aids available to the examining dentist, there is a danger that they will erroneously decline to pay for treatment that is in fact in the interest of [476 U.S. 447, 463] the patient, and that the patient will as a result be deprived of fully adequate care. </s> The Federation's argument is flawed both legally and factually. The premise of the argument is that, far from having no effect on the cost of dental services chosen by patients and their insurers, the provision of x rays will have too great an impact: it will lead to the reduction of costs through the selection of inadequate treatment. Precisely such a justification for withholding information from customers was rejected as illegitimate in the National Society of Professional Engineers case. The argument is, in essence, that an unrestrained market in which consumers are given access to the information they believe to be relevant to their choices will lead them to make unwise and even dangerous choices. Such an argument amounts to "nothing less than a frontal assault on the basic policy of the Sherman Act." National Society of Professional Engineers, supra, at 695. Moreover, there is no particular reason to believe that the provision of information will be more harmful to consumers in the market for dental services than in other markets. Insurers deciding what level of care to pay for are not themselves the recipients of those services, but it is by no means clear that they lack incentives to consider the welfare of the patient as well as the minimization of costs. They are themselves in competition for the patronage of the patients - or, in most cases, the unions or businesses that contract on their behalf for group insurance coverage - and must satisfy their potential customers not only that they will provide coverage at a reasonable cost, but also that that coverage will be adequate to meet their customers' dental needs. There is thus no more reason to expect dental insurance companies to sacrifice quality in return for cost savings than to believe this of consumers in, say, the market for engineering services. Accordingly, if noncompetitive quality-of-service justifications are inadmissible to justify the denial of information to consumers [476 U.S. 447, 464] in the latter market, there is little reason to credit such justifications here. </s> In any event, the Commission did not, as the Federation suggests, refuse even to consider the quality-of-care justification for the withholding of x rays. Rather, the Commission held that the Federation had failed to introduce sufficient evidence to establish such a justification: "IFD has not pointed to any evidence - or even argued - that any consumers have in fact been harmed by alternative benefits determinations, or that actual determinations have been medically erroneous." 101 F. T. C., at 177. The evidence before the Administrative Law Judge on this issue appears to have consisted entirely of expert opinion testimony, with the Federation's experts arguing that x rays generally provide an insufficient basis, standing alone, for dental diagnosis, and the Commission's experts testifying that x rays may be useful in assessing diagnosis of and appropriate treatment for a variety of dental complaints. Id., at 128-132. The Commission was amply justified in concluding on the basis of this conflicting evidence that even if concern for the quality of patient care could under some circumstances serve as a justification for a restraint of the sort imposed here, the evidence did not support a finding that the careful use of x rays as a basis for evaluating insurance claims is in fact destructive of proper standards of dental care. 4 </s> [476 U.S. 447, 465] </s> In addition to arguing that its conspiracy did not effect an unreasonable restraint of trade, the Federation appears to renew its argument, pressed before both the Commission and the Court of Appeals, that the conspiracy to withhold x rays is immunized from antitrust scrutiny by virtue, of a supposed policy of the State of Indiana against the evaluation of dental x rays by lay employees of insurance companies. See Brief for Respondent 25-26, and n. 10. Allegedly, such use of x rays by insurance companies - even where no claim was actually denied without examination of an x ray by a licensed dentist - would constitute unauthorized practice of dentistry by the insurance company and its employees. The Commission found that this claim had no basis in any authoritative source of Indiana law, see 101 F. T. C., at 181-183, and the Federation has not identified any adequate reason for rejecting the Commission's conclusion. Even if the Commission were incorrect in its reading of the law, however, the Federation's claim of immunity would fail. That a particular practice may be unlawful is not, in itself, a sufficient justification for collusion among competitors to prevent it. See Fashion Originators' Guild of America, Inc. v. FTC, 312 U.S. 457, 468 (1941). Anticompetitive collusion among private actors, even when its goal is consistent with state policy, acquires antitrust immunity only when it is actively supervised by the State. See Southern Motor Carriers Rate Conference, Inc. v. United States, 471 U.S. 48, 57 (1985). There is no suggestion of any such active supervision here; accordingly, whether or not the policy the Federation has taken upon itself to advance is consistent with the policy of the State of Indiana, the Federation's activities are subject to Sherman Act condemnation. </s> V </s> The factual findings of the Commission regarding the effect of the Federation's policy of withholding x rays are supported [476 U.S. 447, 466] by substantial evidence, and those findings are sufficient as a matter of law to establish a violation of 1 of the Sherman Act, and, hence, 5 of the Federal Trade Commission Act. Since there has been no suggestion that the cease-and-desist order entered by the Commission to remedy this violation is itself improper for any reason distinct from the claimed impropriety of the finding of a violation, the Commission's order must be sustained. The judgment of the Court of Appeals is accordingly </s> Reversed. </s> Footnotes [Footnote 1 A presentation made in 1974 by Dr. David McClure, an Association official and later one of the founders of respondent Indiana Federation of Dentists, is revealing as to the motives underlying the dentists' resistance to the provision of x rays for use by insurers in making alternative benefits determinations: </s> "The problems associated with third party programs are many, but I believe the `Indiana Plan' [i. e., the policy of refusing to submit x rays] to be sound and if we work together, we can win this battle. We are fighting an economic war where the very survival of our profession is at stake. </s> "How long can some of the leaders of dentistry in other states be so complacent and willing to fall into the trap that is being set for us. If only they would take the time, to see from whence come the arrows that are heading in our direction. The Delta Dental Plans have bedded down with the unions and have been a party to setting up the greatest controls that any profession has ever known in a free society. . . . </s> "The name of the game is money. The government and labor are determined to reduce the cost of the dental health dollar at the expense of the dentist. There is no way a dental service can be rendered cheaper when the third party has to have its share of the dollar. </s> "Already we are locked into a fee freeze that could completely control the quality of dental care, if left on long enough." FTC Complaint Counsel's Trial Exhibit CX 372A, F, App. 104. </s> [Footnote 2 Respondent no longer makes any pretense of arguing that it is immune from antitrust liability as a labor organization. </s> [Footnote 3 Because we find that the Commission's findings can be sustained on this basis, we do not address the Commission's contention that the Federation's activities can be condemned regardless of market power or actual effect merely because they constitute a continuation of the restraints formerly imposed by the Indiana Dental Association, which allegedly had market power throughout the State of Indiana. </s> [Footnote 4 It is undisputed that lay claims examiners employed by insurance companies have no authority to deny claims on the basis of examination of x rays; rather, initial screening of x rays serves only as a means of identifying cases that merit further scrutiny by the licensed dentists serving as consultants to the insurers. Any recommendation that benefits be denied or a less expensive course of treatment be pursued is based on the professional judgment of a licensed dentist that the materials available to him - x rays, claim forms, and whatever further diagnostic aids he chooses to consult - are sufficient to indicate that the treating dentist's recommendation is not necessary to the health of the patient. There is little basis for concluding that, where such a divergence of professional judgment exists, the treatment recommendation made by the patient's dentist should be [476 U.S. 447, 465] assumed to be the one that in fact represents the best interests of the patient. </s> [476 U.S. 447, 467]

United States Supreme Court PLUMMER v. CITY OF COLUMBUS(1973) No. 72-6897 Argued: Decided: October 15, 1973 </s> The Ohio Supreme Court erred in finding no constitutional infirmity in the lower court's holding that a city ordinance punishing abuse of another by using menacing, insulting, slanderous, or profane language might constitutionally reach appellant's use of "fighting words," where the ordinance, as construed by the Ohio courts, is facially unconstitutional because it may be applied to punish not only unprotected but also protected speech. Even though a law may be valid as applied to the conduct charged against a particular defendant, he may raise its vagueness or unconstitutional overbreadth as applied to others, and, if the law is found deficient in one of these respects, it may not be applied to him either, absent a satisfactory limiting construction. </s> Reversed. </s> PER CURIAM. </s> The Court of Appeals of Franklin County, Ohio, in an unreported opinion, affirmed appellant's conviction of violating Columbus City Code 2327.03, which provides: "No person shall abuse another by using menacing, insulting, slanderous, or profane language." The Ohio Supreme Court, in an unreported order, sua sponte dismissed appellant's appeal to that court "for the reason that no substantial constitutional question exists herein." We grant leave to proceed in forma pauperis and reverse. </s> On December 11, 1972, we held that Gooding v. Wilson, 405 U.S. 518 (1972), required the reversal of a previous action of the Ohio Supreme Court that dismissed an appeal from a conviction under 2327.03. Cason v. City of Columbus, 409 U.S. 1053 . Section 2327.03 punishes only spoken words and, as construed by the Ohio courts, is facially unconstitutional because not limited [414 U.S. 2, 3] in application "to punish only unprotected speech" but is "susceptible of application to protected expression." Gooding v. Wilson, supra, at 522. In that circumstance, the Ohio Supreme Court erred when it found no constitutional infirmity in the holding of the Court of Appeals of Franklin County that the ordinance might constitutionally reach appellant's conduct because "the words as used by the [appellant] are in the nature of `fighting words' and thereby fall within that limit of conduct proscribed by the ordinance . . . ." For "`[a]lthough [the ordinance] may be neither vague, overbroad, nor otherwise invalid as applied to the conduct charged against a particular defendant, he is permitted to raise its vagueness or unconstitutional overbreadth as applied to others. And if the law is found deficient in one of these respects, it may not be applied to him either, until and unless a satisfactory limiting construction is placed on the [ordinance]. The [ordinance], in effect, is stricken down on its face. . . .'" Id., at 521. </s> Reversed. </s> THE CHIEF JUSTICE and MR. JUSTICE BLACKMUN dissent for the reasons expressed in MR. JUSTICE BLACKMUN'S dissenting opinion in Gooding v. Wilson, 405 U.S. 518, 534 (1972), and in the dissenting statement in Cason v. City of Columbus, 409 U.S. 1053 (1972). </s> MR. JUSTICE POWELL, with whom MR. JUSTICE REHNQUIST concurs, dissenting. </s> Appellant is a Columbus cab driver. He had a female fare in his cab who had requested to be taken to a certain address. When he passed this address, the fare complained and - according to the statement of the trial court - the cab driver's response was "a series of absolutely [414 U.S. 2, 4] vulgar, suggestive and abhorrent, sexually-oriented statements." </s> I would sustain appellant's conviction for the reasons stated in my dissenting opinion in Rosenfeld v. New Jersey, 408 U.S. 901, 906 (1972). As stated therein: </s> "[A] verbal assault on an unwilling audience [or an individual] may be so grossly offensive and emotionally disturbing as to be the proper subject of criminal proscription, whether under a statute denominating it disorderly conduct, or, more accurately, a public nuisance." </s> The Columbus City Code was certainly sufficiently explicit to inform appellant that his verbal assault on a female passenger in his cab was "menacing and insulting." As a wrong of this character does not fall within the protection of the First Amendment, the overbreadth doctrine is not applicable. See Model Penal Code, 250.2 (1) (a) and (b) (Proposed Official Draft 1962); see also Williams v. District of Columbia, 136 U.S. App. D.C. 56, 64, 419 F.2d 638, 646 (1969). </s> [414 U.S. 2, 5]

United States Supreme Court GLADSTONE, REALTORS v. VILLAGE OF BELLWOOD(1979) No. 77-1493 Argued: November 29, 1978Decided: April 17, 1979 </s> Section 812 of the Fair Housing Act of 1968 (Act) provides that the rights granted by 804 against racial discrimination in the sales or rental of housing "may be enforced by civil actions in appropriate United States district courts." Respondents (the village of Bellwood, one Negro and four white residents of Bellwood, and one Negro resident of a neighboring municipality) brought separate actions in District Court under 812 against petitioners (two real estate brokerage firms and certain of their employees), alleging that they had violated 804 by "steering" prospective Negro homeowners toward a specified 12- by 13-block integrated area ("target" area) of Bellwood and by steering white customers away from the "target" area. It was further alleged that Bellwood had been injured by having its housing market wrongfully manipulated to the economic and social detriment of its citizens and that the individual respondents had been denied their right to select housing without regard to race and had been deprived of the social and professional benefits of living in an integrated society. Monetary, injunctive, and declaratory relief was sought. Prior to bringing suit, the individual respondents, purportedly but not in fact seeking to purchase homes, had acted as "testers" in an attempt to determine whether petitioners were engaged in racial steering. Four of the six individual respondents reside in the "target" area. The District Court granted summary judgment for the petitioners in both cases, holding that respondents, who had acted only as testers and thus were at most indirect victims of the alleged violations, lacked standing to sue under 812, which was limited to actions by "direct victims" of violations. The Court of Appeals reversed and remanded, holding that although the individual respondents lacked standing in their capacity as testers, they were entitled to prove that the discriminatory practices documented by their testing deprived them, as residents of the adversely affected area, of the social and professional benefits of living in an integrated society; that the requirements of Art. III had been satisfied as to both the individual respondents and respondent village; that 810 of the Act - which provides that a "person aggrieved" by a violation of the [441 U.S. 91, 92] Act may seek conciliation from the Secretary of Housing and Urban Development (HUD) and if conciliation fails bring suit in district court - and 812 provide alternative remedies available to precisely the same class of plaintiffs; and that the conclusion in Trafficante v. Metropolitan Life Ins. Co., 409 U.S. 205, 209 , that standing under 810 extends "`as broadly as is permitted by Article III,'" is applicable to cases brought under 812. </s> Held: </s> 1. The Court of Appeals correctly interpreted 810 and 812 as providing alternative remedies to precisely the same class of plaintiffs, with the result that standing under 812, like that under 810, is as broad as is permitted by Art. III. Trafficante, supra. This construction of the Act is consistent with both its language and its legislative history and with the interpretation of HUD, the agency primarily assigned to implement and administer the Act. Pp. 100-109. </s> 2. The facts alleged in the complaints and revealed by initial discovery are sufficient to provide standing to respondents under Art. III, except with respect to the two individual respondents who do not reside within the "target" area, and thus summary judgments for petitioners should not have been entered. Pp. 109-116. </s> (a) If, as alleged, petitioners' sales practices actually have begun to rob Bellwood of its racial balance and stability, the village has standing to challenge the legality of that conduct. Pp. 109-111. </s> (b) The allegation that the "target" area is losing its integrated character because of petitioners' conduct is sufficient to satisfy Art. III with respect to the individual respondents who reside in that area. The constitutional limits of these respondents' standing to protest the intentional segregation of their community do not vary simply because that community is defined in terms of city blocks rather than, as in Trafficante, supra, by reference to apartment buildings, but instead are determined by the presence or absence of a "distinct and palpable injury" to respondents. Warth v. Seldin, 422 U.S. 490, 501 . Moreover, to the extent that the complaints allege economic injury to these respondents resulting from a diminution in the value of their homes due to petitioners' conduct, convincing evidence of such a decrease in value would be sufficient under Art. III to allow standing to contest the legality of that conduct. Pp. 111-115. </s> 569 F.2d 1013, affirmed in part. </s> POWELL, J., delivered the opinion of the Court, in which BURGER, C. J., and BRENNAN, WHITE, MARSHALL, BLACKMUN, and STEVENS, JJ., joined. [441 U.S. 91, 93] REHNQUIST, J., filed a dissenting opinion, in which STEWART, J., joined, post, p. 116. </s> Jonathan T. Howe argued the cause for petitioners. With him on the briefs were Russell J. Hoover, Barry Sullivan, and James A. McKenna. </s> F. Willis Caruso argued the cause for respondents. With him on the brief was Robert G. Schwemm. </s> Deputy Solicitor General Wallace argued the cause for the United States as amicus curiae urging affirmance. With him on the brief were Solicitor General McCree, Assistant Attorney General Days, Harriet S. Shapiro, and Walter W. Barnett. * </s> [Footnote * William D. North filed a brief for the National Association of Realtors as amicus curiae urging reversal. </s> Briefs of amici curiae urging affirmance were filed by Charles A. Bane, Thomas D. Barr, Robert A. Murphy, and Norman J. Chachkin for the Lawyers' Committee for Civil Rights Under Law; and by Martin E. Sloane for the National Committee Against Discrimination in Housing. </s> Arthur C. Thorpe and John J. Gunther filed a brief for the National League of Cities et al. as amici curiae. </s> MR. JUSTICE POWELL delivered the opinion of the Court. </s> Title VIII of the Civil Rights Act of 1968, 82 Stat. 81, as amended, 42 U.S.C. 3601 et seq., commonly known as the Fair Housing Act of 1968 (Act), broadly prohibits discrimination in housing throughout the Nation. This case presents both statutory and constitutional questions concerning standing to sue under Title VIII. </s> I </s> Petitioners in this case are two real estate brokerage firms, Gladstone, Realtors (Gladstone), and Robert A. Hintze, Realtors (Hintze), and nine of their employees. Respondents are the village of Bellwood, a municipal corporation and suburb of Chicago, one Negro and four white residents of Bellwood, and one Negro resident of neighboring Maywood. During [441 U.S. 91, 94] the fall of 1975, the individual respondents and other persons consulted petitioners, stating that they were interested in purchasing homes in the general suburban area of which Bellwood is a part. The individual respondents were not in fact seeking to purchase homes, but were acting as "testers" in an attempt to determine whether petitioners were engaging in racial "steering," i. e., directing prospective home buyers interested in equivalent properties to different areas according to their race. </s> In October 1975, respondents commenced an action under 812 of the Act, 42 U.S.C. 3612, 1 against Gladstone and its employees in the District Court for the Northern District of Illinois, alleging that they had violated 804 of Title VIII, 42 U.S.C. 3604. 2 Simultaneously, respondents filed a [441 U.S. 91, 95] virtually identical complaint against Hintze and its sales-people in the same court. The complaints, as illuminated by subsequent discovery, charged that petitioners had steered prospective Negro home buyers toward an integrated area of Bellwood approximately 12 by 13 blocks in dimension and away from other, predominately white areas. White customers, by contrast, allegedly were steered away from the integrated area of Bellwood. Four of the six individual respondents reside in this "target" area of Bellwood described in the complaint. 3 The complaints further alleged that the "Village of Bellwood . . . has been injured by having [its] housing market . . . wrongfully and illegally manipulated to the economic and social detriment of the citizens of [the] village," and that the individual respondents "have been denied their right to select housing without regard to race and have been deprived of the social and professional benefits of living in an integrated society." App. 6, 99. Respondents requested monetary, injunctive, and declaratory relief. </s> Petitioners moved for summary judgment in both cases, arguing that respondents had "no actionable claim or standing to sue" under the statutes relied upon in the complaint, that there existed "no case or controversy between the parties within the meaning of Article III of the Constitution," and that respondents failed to satisfy the prudential requirements for standing applicable in the federal courts. Id., at 78, 143. The District Judge presiding over the case against Gladstone and its employees decided that respondents were not within the [441 U.S. 91, 96] class of persons to whom Congress had extended the right to sue under 812. The court expressly adopted the reasoning of TOPIC v. Circle Realty, 532 F.2d 1273 (CA9 1976), a case involving facts similar to those here. In TOPIC the Ninth Circuit decided that Congress intended to limit actions under 812 of the Act to "direct victims" of Title VIII violations, even though under Trafficante v. Metropolitan Life Ins. Co., 409 U.S. 205 (1972), standing under 810 4 of the Act, [441 U.S. 91, 97] 42 U.S.C. 3610, extends to the broadest class of plaintiffs permitted by Art. III. Since the individual respondents had been acting only as testers and thus admittedly had not been steered away from any homes they might have wished to purchase, the court concluded that they were, at most, only indirect victims of Gladstone's alleged violations of the Act. As respondents' action was brought under 812, the court ruled that they lacked standing under the terms of the Act. The court did not discuss Gladstone's contention that respondents lacked standing under Art. III and the prudential limitations on federal jurisdiction. The District Judge presiding over the case against Hintze adopted the opinion of the Gladstone court as his own and also granted summary judgment. </s> The Court of Appeals for the Seventh Circuit consolidated the cases for appellate review. It first considered the significance of the fact that the individual respondents were merely testers not genuinely interested in purchasing homes. The court noted that while this precluded respondents from arguing that they had been denied their right to select housing without regard to race, "the testers did . . . generate evidence suggesting the perfectly permissible inference that [petitioners] have been engaging, as the complaints allege, in the practice of racial steering with all of the buyer prospects who come through their doors." 569 F.2d 1013, 1016 (1978) (emphasis in original). Thus, although the individual respondents lacked standing in their capacity as testers, they were entitled to prove that the discriminatory practices documented by [441 U.S. 91, 98] their testing deprived them, as residents of the adversely affected area, "of the social and professional benefits of living in an integrated society." </s> The Court of Appeals then turned to the question whether the Art. III minima for standing had been satisfied. Observing the similarity between the allegations of injury here and those accepted as constitutionally sufficient in Trafficante, it concluded that the individual respondents had presented a case or controversy within the meaning of Art. III. The court also read the complaints as alleging economic injury to the village itself as a consequence of the claimed racial segregation of a portion of Bellwood. Although this aspect of the case was not directly controlled by Trafficante, the court found that the requirements of Art. III had been satisfied. 5 </s> Having concluded that a case or controversy within the meaning of Art. III was before it, the Court of Appeals addressed the District Court's ruling that 812 of the Act, unlike 810, affords standing only to those directly injured by the discriminatory acts challenged. After considering the legislative history and recent federal-court decisions construing these provisions, the court concluded, contrary to the decision in TOPIC v. Circle Realty, supra, that 810 and 812 provide alternative remedies available to precisely the same class of plaintiffs. The conclusion of this Court in Trafficante that standing under 810 extends "`as broadly as is permitted by Article III of the Constitution.'" 409 U.S., at 209 , quoting Hackett v. McGuire Bros., Inc., 445 F.2d 442, 446 (CA3 1971), was seen as applicable to these cases brought under 812. The Court of Appeals reversed the judgments of the District Court and remanded for further proceedings. </s> Petitioners sought review in this Court. We granted certiorari [441 U.S. 91, 99] to resolve the conflict between the decision of the Court of Appeals in this case and that of the Ninth Circuit in TOPIC, and to consider the important questions of standing raised under Title VIII of the Civil Rights Act of 1968. 436 U.S. 956 (1978). With the limitation noted in n. 25, infra, we now affirm. </s> II </s> In recent decisions, we have considered in some detail the doctrine of standing in the federal courts. "In essence the question of standing is whether the litigant is entitled to have the court decide the merits of the dispute or of particular issues. This inquiry involves both constitutional limitations on federal-court jurisdiction and prudential limitations on its exercise. . . . In both dimensions it is founded in concern about the proper - and properly limited - role of the courts in a democratic society." Warth v. Seldin, 422 U.S. 490, 498 (1975). </s> The constitutional limits on standing eliminate claims in which the plaintiff has failed to make out a case or controversy between himself and the defendant. In order to satisfy Art. III, the plaintiff must show that he personally has suffered some actual or threatened injury as a result of the putatively illegal conduct of the defendant. Duke Power Co. v. Carolina Environmental Study Group, Inc., 438 U.S. 59, 72 (1978); Arlington Heights v. Metropolitan Housing Dev. Corp., 429 U.S. 252, 260 -261 (1977); Simon v. Eastern Kentucky Welfare Rights Org., 426 U.S. 26, 38 (1976); Warth v. Seldin, supra, at 499; Linda R. S. v. Richard D., 410 U.S. 614, 617 (1973). Otherwise, the exercise of federal jurisdiction "would be gratuitous and thus inconsistent with the Art. III limitation." Simon v. Eastern Kentucky Welfare Rights Org., supra, at 38. </s> Even when a case falls within these constitutional boundaries, a plaintiff may still lack standing under the prudential principles by which the judiciary seeks to avoid deciding [441 U.S. 91, 100] questions of broad social import where no individual rights would be vindicated and to limit access to the federal courts to those litigants best suited to assert a particular claim. For example, a litigant normally must assert an injury that is peculiar to himself or to a distinct group of which he is a part, rather than one "shared in substantially equal measure by all or a large class of citizens." Warth v. Seldin, 422 U.S., at 499 . He also must assert his own legal interests, rather than those of third parties. 6 Ibid. Accord, Arlington Heights v. Metropolitan Housing Dev. Corp., supra, at 263. </s> Congress may, by legislation, expand standing to the full extent permitted by Art. III, thus permitting litigation by one "who otherwise would be barred by prudential standing rules." Warth v. Seldin, 422 U.S., at 501 . In no event, however, may Congress abrogate the Art. III minima: A plaintiff must always have suffered "a distinct and palpable injury to himself," ibid., that is likely to be redressed if the requested relief is granted. Simon v. Eastern Kentucky Welfare Rights Org., supra, at 38. </s> III </s> Petitioners have insisted throughout this litigation that respondents lack standing under the terms of the Act. Their argument, which was accepted by the District Court, is that while 810 provides standing to the fullest extent permitted by Art. III, see Trafficante v. Metropolitan Life Ins. Co., 409 U.S., at 209 , 812, under which respondents proceed, affords standing only to "direct victims" of the conduct proscribed by Title VIII. Respondents, on the other hand, argue [441 U.S. 91, 101] that the Court of Appeals correctly concluded that 810 and 812 are alternative remedies available to precisely the same class of plaintiffs. The issue is a critical one, for if the District Court correctly understood and applied 812, we do not reach the question whether the minimum requirements of Art. III have been satisfied. If the Court of Appeals is correct, however, then the constitutional question is squarely presented. 7 </s> Petitioners' argument centers on two points. First, 810 uses the term "person aggrieved," defined as "[a]ny person who claims to have been injured by a discriminatory housing practice," to describe those who may seek relief under that section. By contrast, 812 lacks this broad definition of potential plaintiffs, referring explicitly only to civil suits brought to enforce the rights granted elsewhere in the Act. Second, under 810 a plaintiff must first seek informal conciliation of housing discrimination disputes from the Department of Housing and Urban Development (HUD) and appropriate state agencies before pursuing a judicial remedy. See n. 4, supra. But under 812 a complainant may proceed directly to federal court. </s> From these facts, petitioners infer a congressional plan to create two distinct, though overlapping, remedial avenues under Title VIII. Under 810, they argue, Congress intended to reach all victims - both direct and indirect - of housing discrimination by referring generally to those "aggrieved." But in order to protect the courts from the volume of litigation [441 U.S. 91, 102] such plaintiffs might generate, to make available the administrative expertise of state and federal agencies, and to involve state and local governments in national fair housing goals, Congress interposed administrative remedies as a prerequisite to the invocation of the federal judicial power by "indirect victims" of Title VIII violations. </s> Since 812 does not specifically refer to "persons aggrieved" and allows direct access to the courts by those invoking it, petitioners argue that Congress must have intended this provision to be available only to those most in need of a quick, authoritative solution: those directly victimized by a wrongful refusal to rent or sell a dwelling place or by some other violation of the Act. The construction of 812 accepted by the Court of Appeals, they contend, is illogical because it would permit a plaintiff simply to ignore, at his option, the scheme of administrative remedies set up in 810. Thus, according to petitioners, "direct victims" may proceed under either 810 or 812, while those injured only indirectly by housing discrimination may proceed, if at all, under the former provision alone. </s> Finally, petitioners claim that the legislative history of the Act supports their view. That history reflects that Congress was concerned that Title VIII not be used as an instrument of harassment. 8 Petitioners contend that permitting individuals such as respondents, who have not been harmed directly by petitioners' alleged conduct, to invoke 812 provides substantial opportunity for abuse of that kind. </s> We find this construction of Title VIII to be inconsistent with the statute's terms and its legislative history. Nothing in the language of 812 suggests that it contemplates a more restricted class of plaintiffs than does 810. The operative language of 812 is phrased in the passive voice - "[t]he rights granted by sectio[n] 804 . . . may be enforced by civil [441 U.S. 91, 103] actions in appropriate United States district courts" - simply avoiding the need for a direct reference to the potential plaintiff. The absence of "person aggrieved" in 812, therefore, does not indicate that standing is more limited under that provision than under 810. To the contrary, 812 on its face contains no particular statutory restrictions on potential plaintiffs. 9 </s> Contrary to petitioners' contention, 810 is not structured to keep complaints brought under it from reaching the federal courts, or even to assure that the administrative process runs its full course. Section 810 (d) appears to give a complainant the right to commence an action in federal court whether or not the Secretary of HUD completes or chooses to pursue conciliation efforts. 10 Thus, a complainant under 810 may [441 U.S. 91, 104] resort to federal court merely because he is dissatisfied with the results or delays of the conciliatory efforts of HUD. 11 The most plausible inference to be drawn from Title VIII is that Congress intended to provide all victims of Title VIII violations two alternative mechanisms by which to seek redress: immediate suit in federal district court, or a simple, inexpensive, informal conciliation procedure, to be followed by litigation should conciliation efforts fail. 12 </s> [441 U.S. 91, 105] </s> Although the legislative history gave little help in determining the proper scope of standing under 810, see Trafficante, 409 U.S., at 210 , it provides substantial and rather specific support for the view that 810 and 812 are available to precisely the same class of plaintiffs. 13 Early legislative proposals for fair housing legislation contained no administrative remedies. 14 The nonjudicial avenue of relief was later added on the theory that it would provide a more expeditious and less burdensome method of resolving housing complaints. 15 </s> [441 U.S. 91, 106] There is no evidence that Congress intended to condition access to the courts on a prior resort to the federal agency. To the contrary, the history suggests that all Title VIII complainants were to have available immediate judicial review. The alternative, administrative remedy was then offered as an option to those who desired to use it. </s> This apparently was the understanding of Representative Celler who, as chairman of the House Judiciary Committee, summarized the Act on the floor of the House. 16 Similar perceptions were reflected in reports on the proposed legislation by the Department of Justice 17 and the House Judiciary [441 U.S. 91, 107] Committee. 18 HUD, the federal agency primarily assigned to implement and administer Title VIII, consistently has treated 810 and 812 as alternative remedial provisions. 19 Under familiar principles, see Teamsters v. Daniel, 439 U.S. 551, 566 n. 20 (1979); Udall v. Tallman, 380 U.S. 1, 16 (1965), and as we stated in Trafficante, supra, at 210, the agency's interpretation of the statute ordinarily commands considerable deference. </s> Petitioners have identified nothing in the legislative history contrary to this view. Their reliance on the expressed intent that Title VIII not be used for harassment is unconvincing. Nowhere does the history of the Act suggest that Congress attempted to deter possible harassment by limiting standing under 812. Indeed, such an attempt would have been [441 U.S. 91, 108] pointless, given the relatively easy access to the courts provided by 810. 20 </s> Most federal courts that have considered the issue agree that 810 and 812 provide parallel remedies to precisely the same prospective plaintiffs. E. g., Wheatley Heights Neighborhood Coalition v. Jenna Resales Co., 429 F. Supp. 486, 489-492 (EDNY 1977); Village of Park Forest v. Fairfax Realty, P-H 1 EOHC § 13,699, pp. 14,467-14,468 (ND Ill. 1975); Fair Housing Council v. Eastern Bergen Country Multiple Listing Serv., Inc., 422 F. Supp. 1071, 1081-1083 (NJ 1976). See also Howard v. W. P. Bill Atkinson Enterprises, 412 F. Supp. 610, 611 (WD Okla. 1975); Miller v. Poretsky, 409 F. Supp. 837, 838 (DC 1976); Young v. AAA Realty Co., 350 F. Supp. 1382, 1384-1385 (MDNC 1972); Crim v. Glover, 338 F. Supp. 823, 825 (SD Ohio 1972); Johnson v. Decker, 333 F. Supp. 88, 90-92 (ND Cal. 1971); Brown v. Lo Duca, 307 F. Supp. 102, 103-104 (ED Wis. 1969). The notable exception is the Ninth Circuit in TOPIC v. Circle Realty, 532 F.2d 1273 (1976), upon which petitioners rely. For the reasons [441 U.S. 91, 109] stated, we believe that the Court of Appeals in this case correctly declined to follow TOPIC. Standing under 812, like that under 810, is "`as broa[d] as is permitted by Article III of the Constitution.'" Trafficante, 409 U.S., at 209 . 21 </s> IV </s> We now consider the standing of the village of Bellwood and the individual respondents in light of Art. III. We "accept as true all material allegations of the complaint, and . . . construe the complaint in favor of the complaining party," Warth v. Seldin, 422 U.S., at 501 , as standing was challenged largely on the basis of the pleadings. 22 </s> A </s> The gist of Bellwood's complaint is that petitioners' racial steering effectively manipulates the housing market in the [441 U.S. 91, 110] described area of the village: Some whites who otherwise would purchase homes there do not do so simply because petitioners refrain from showing them what is available; conversely, some Negroes purchase homes in the affected area solely because petitioners falsely lead them to believe that no suitable homes within the desired price range are available elsewhere in the general area. Although the complaints are more conclusory and abbreviated than good pleading would suggest, construed favorably to Bellwood they allege that this conduct is affecting the village's racial composition, replacing what is presently an integrated neighborhood with a segregated one. </s> The adverse consequences attendant upon a "changing" neighborhood can be profound. If petitioners' steering practices significantly reduce the total number of buyers in the Bellwood housing market, prices may be deflected downward. This phenomenon would be exacerbated if perceptible increases in the minority population directly attributable to racial steering precipitate an exodus of white residents. Cf. Zuch v. Hussey, 394 F. Supp. 1028, 1030, 1054 (ED Mich. 1975), order aff'g and remanding, 547 F.2d 1168 (CA6 1977); Barrick Realty, Inc. v. City of Gary, 354 F. Supp. 126, 135 (ND Ind. 1973), aff'd, 491 F.2d 161 (CA7 1974); United States v. Mitchell, 335 F. Supp. 1004, 1005 (ND Ga. 1971), aff'd sub nom. United States v. Bob Lawrence Realty, Inc., 474 F.2d 115 (CA5), cert. denied, 414 U.S. 826 (1973). 23 A significant reduction in property values directly injures a [441 U.S. 91, 111] municipality by diminishing its tax base, thus threatening its ability to bear the costs of local government and to provide services. Other harms flowing from the realities of a racially segregated community are not unlikely. 24 As we have said before, "[t]here can be no question about the importance" to a community of "promoting stable, racially integrated housing." Linmark Associates, Inc. v. Willingboro, 431 U.S. 85, 94 (1977). If, as alleged, petitioners' sales practices actually have begun to rob Bellwood of its racial balance and stability, the village has standing to challenge the legality of that conduct. </s> B </s> The individual respondents appeared before the District Court in two capacities. First, they and other individuals had acted as testers of petitioners' sales practices. In this Court, however, respondents have not pressed the claim that they have standing to sue as testers, see Brief for Respondents 14-15, and we therefore do not reach this question. Second, the individual respondents claimed to be injured as homeowners in the community against which petitioners' alleged steering has been directed. It is in this capacity that they claim standing to pursue this litigation. </s> Four of the individual respondents actually reside within the target area of Bellwood. They claim that the transformation of their neighborhood from an integrated to a predominantly Negro community is depriving them of "the social and professional benefits of living in an integrated society." This allegation is similar to that presented in Trafficante. In that case, a Negro and a white resident of a large apartment complex [441 U.S. 91, 112] in San Francisco complained that the landlord's exclusion of nonwhites from the complex stigmatized them as residents of a "white ghetto" and deprived them of the social and professional advantages of living in an integrated community. Noting the importance of the "benefits from interracial associations," 409 U.S., at 210 , and in keeping with the Court's recent statement that noneconomic injuries may suffice to provide standing, Sierra Club v. Morton, 405 U.S. 727, 734 -735 (1972), we concluded that this injury was sufficient to satisfy the constitutional standing requirement of actual or threatened harm. </s> Petitioners argue that Trafficante is distinguishable because the complainants in that case alleged harm to the racial character of their "community," whereas respondents refer only to their "society." Reading the complaints as a whole, and remembering that we encounter these allegations at the pleading stage, we attach no particular significance to this difference in word choice. Although an injury to one's "society" arguably would be an exceptionally generalized harm or, more important for Art. III purposes, one that could not conceivably be the result of these petitioners' conduct, we are obliged to construe the complaint favorably to respondents, against whom the motions for summary judgment were made in the District Court. So construed, and read in context, the allegations of injury to the individual respondents' "society" refer to the harm done to the residents of the carefully described neighborhood in Bellwood in which four of the individual respondents reside. 25 The question before us, [441 U.S. 91, 113] therefore, is whether an allegation that this particular area is losing its integrated character because of petitioners' conduct is sufficient to satisfy Art. III. 26 </s> Petitioners suggest that there is a critical distinction between an apartment complex, even one as large as that in Trafficante, 27 and a 12- by 13-block residential neighborhood. Although there are factual differences, we do not view them as controlling in this case. We note first that these differences arguably may run in favor of standing for the individual respondents, according to how one views his living environment. Apartment dwellers often are more mobile, with less attachment to a community as such, and thus are able to react more quickly to perceived social or economic changes. [441 U.S. 91, 114] The homeowner in a suburban neighborhood such as Bellwood may well have deeper community attachments and be less mobile. Various inferences may be drawn from these and other differences, but for the purpose of standing analysis, we perceive no categorical distinction between injury from racial steering suffered by occupants of a large apartment complex and that imposed upon residents of a relatively compact neighborhood such as Bellwood. 28 </s> The constitutional limits of respondents' standing to protest the intentional segregation of their community do not vary simply because that community is defined in terms of city blocks rather than apartment buildings. Rather, they are determined by the presence or absence of a "distinct and palpable injury," Warth v. Seldin, 422 U.S., at 501 , to respondents resulting from petitioners' conduct. A "neighborhood" whose racial composition allegedly is being manipulated may be so extensive in area, so heavily or even so sparsely populated, or so lacking in shared social and commercial intercourse that there would be no actual injury to a particular resident. The presence of a genuine injury should be ascertainable on the basis of discrete facts presented at trial. 29 </s> [441 U.S. 91, 115] </s> In addition to claiming the loss of social and professional benefits to the individual respondents, the complaints fairly can be read as alleging economic injury to them as well. 30 The most obvious source of such harm would be an absolute or relative diminution in value of the individual respondents' homes. This is a fact subject to proof before the District Court, but convincing evidence that the economic value of one's own home has declined as a result of the conduct of another certainly is sufficient under Art. III to allow standing to contest the legality of that conduct. </s> V </s> We conclude that the facts alleged in the complaints and revealed by initial discovery are sufficient to provide standing under Art. III. It remains open to petitioners, of course, to contest these facts at trial. 31 The adequacy of proof of respondents' standing is not before us, and we express no views on it. 32 We hold only that the summary judgments should not have been entered on the records before the District Court, except with respect to respondents Perry and Sharp. [441 U.S. 91, 116] See n. 25, supra. Subject to this exception, the judgment of the Court of Appeals is affirmed. 33 </s> So ordered. </s> Footnotes [Footnote 1 Section 812 provides in part: </s> "(a) The rights granted by sections 803, 804, 805, and 806 may be enforced by civil actions in appropriate United States district courts without regard to the amount in controversy and in appropriate State or local courts of general jurisdiction." </s> [Footnote 2 Section 804 provides: </s> "As made applicable by section 803 and except as exempted by sections 803 (b) and 807, it shall be unlawful - </s> "(a) To refuse to sell or rent after the making of a bona fide offer, or to refuse to negotiate for the sale or rental of, or otherwise make unavailable or deny, a dwelling to any person because of race, color, religion, sex, or national origin. </s> "(b) To discriminate against any person in the terms, conditions, or privileges of sale or rental of a dwelling, or in the provision of services or facilities in connection therewith, because of race, color, religion, sex, or national origin. </s> "(c) To make, print, or publish, or cause to be made, printed, or published any notice, statement, or advertisement, with respect to the sale or rental of a dwelling that indicates any preference, limitation, or discrimination based on race, color, religion, sex, or national origin, or an intention to make any such preference, limitation, or discrimination. </s> "(d) To represent to any person because of race, color, religion, sex, or national origin that any dwelling is not available for inspection, sale, or rental when such dwelling is in fact so available. </s> "(e) For profit, to induce or attempt to induce any person to sell or [441 U.S. 91, 95] rent any dwelling by representations regarding the entry or prospective entry into the neighborhood of a person or persons of a particular race, color, religion, sex, or national origin." 82 Stat. 83, as amended, 88 Stat. 729. </s> Respondents also claimed that petitioners had violated 42 U.S.C. 1982. </s> [Footnote 3 Respondent Perry is a resident of Bellwood, but lives outside the area allegedly affected by petitioners' steering practices. Respondent Sharp lives in Maywood. These respondents are Negroes. </s> [Footnote 4 Section 810 provides in part: </s> "(a) Any person who claims to have been injured by a discriminatory housing practice or who believes that he will be irrevocably injured by a discriminatory housing practice that is about to occur (hereafter `person aggrieved') may file a complaint with the Secretary [of HUD]. . . . Within thirty days after receiving a complaint, or within thirty days after the expiration of any period of reference under subsection (c), the Secretary shall investigate the complaint and give notice in writing to the person aggrieved whether he intends to resolve it. If the Secretary decides to resolve the complaint, he shall proceed to try to eliminate or correct the alleged discriminatory housing practice by informal methods of conference, conciliation, and persuasion. . . . </s> . . . . . </s> "(c) Wherever a State or local fair housing law provides rights and remedies for alleged discriminatory housing practices which are substantially equivalent to the rights and remedies provided in this title, the Secretary shall notify the appropriate State or local agency of any complaint filed under this title which appears to constitute a violation of such State or local fair housing law, and the Secretary shall take no further action with respect to such complaint if the appropriate State or local law enforcement official has, within thirty days from the date the alleged offense has been brought to his attention, commenced proceedings in the matter, or, having done so, carries forward such proceedings with reasonable promptness. In no event shall the Secretary take further action unless he certifies that in his judgment, under the circumstances of the particular case, the protection of the rights of the parties or the interests of justice require such action. </s> "(d) If within thirty days after a complaint is filed with the Secretary or within thirty days after expiration of any period of reference under subsection (c), the Secretary has been unable to obtain voluntary compliance with this title, the person aggrieved may, within thirty days [441 U.S. 91, 97] thereafter, commence a civil action in any appropriate United States district court, against the respondent named in the complaint, to enforce the rights granted or protected by this title, insofar as such rights relate to the subject of the complaint: Provided. That no such civil action may be brought in any United States district court if the person aggrieved has a judicial remedy under a State or local fair housing law which provides rights and remedies for alleged discriminatory housing practices which are substantially equivalent to the rights and remedies provided in this title. . . ." 82 Stat. 85. </s> [Footnote 5 The Court of Appeals agreed with the District Court that the Leadership Council for Metropolitan Open Communities, also a plaintiff in the two actions in the District Court, lacked standing. 569 F.2d, at 1017. That ruling has not been challenged in this Court. </s> [Footnote 6 There are other nonconstitutional limitations on standing to be applied in appropriate circumstances. See, e. g., Simon v. Eastern Kentucky Welfare Rights Org., 426 U.S. 26, 39 n. 19 (1976) ("the interest of the plaintiff, regardless of its nature in the absolute, [must] at least be `arguably within the zone of interests to be protected or regulated' by the statutory framework within which his claim arises," quoting Data Processing Service v. Camp, 397 U.S. 150, 153 (1969)). </s> [Footnote 7 It is not clear whether our opinion in Trafficante was intended to construe 812 as well as 810. Although certain intervening plaintiffs in that case asserted standing under 812, but not 810, see Trafficante v. Metropolitan Life Ins. Co., 322 F. Supp. 352, 353 (ND Cal.), aff'd, 446 F.2d 1158, 1161 n. 5 (CA9 1971), and the Court failed to disclaim a decision on the former provision, the opinion focuses exclusively on 810. Rather than attempt to reconstruct whatever understanding of the relationship between 810 and 812 might have been implicit in Trafficante, we consider the merits of this important statutory question directly. </s> [Footnote 8 This concern was expressed clearly in connection with an amendment to 804 proposed by Senator Allott. See 114 Cong. Rec. 5515 (1968). </s> [Footnote 9 Both petitioners and the dissenting opinion, post, at 124, emphasize the language of 812 that "[t]he rights granted by sectio[n] 804 . . . may be enforced by civil actions . . . ." See n. 1, supra. They argue that since 804 on its face grants no right to have one's community protected from the harms of racial segregation, respondents have no substantive rights to enforce under 812. </s> That respondents themselves are not granted substantive rights by 804, however, hardly determines whether they may sue to enforce the 804 rights of others. See supra, at 99-100. If, as is demonstrated in the text, Congress intended standing under 812 to extend to the full limits of Art. III, the normal prudential rules do not apply; as long as the plaintiff suffers actual injury as a result of the defendant's conduct, he is permitted to prove that the rights of another were infringed. The central issue at this stage of the proceedings is not who possesses the legal rights protected by 804, but whether respondents were genuinely injured by conduct that violates someone's 804 rights, and thus are entitled to seek redress of that harm under 812. </s> [Footnote 10 The lower federal courts are divided over the question whether a Title VIII complainant who has enlisted the aid of HUD under 810 must commence the civil action referred to in 810 (d) no later than 60 days after the filing of his administrative complaint, even if HUD has not completed its conciliatory efforts by that time. Several courts believe the plain language of 810 (d), see n. 4, supra, requires this result. Green v. Ten Eyck, 572 F.2d 1233, 1240-1243 (CA8 1978); Tatum v. Myrick, [441 U.S. 91, 104] 425 F. Supp. 809, 810-812 (MD Fla. 1977); Sumlin v. Brown, 420 F. Supp. 78, 80-82 (ND Fla. 1976); Brown v. Blake & Bane, Inc., 402 F. Supp. 621, 622 (ED Va. 1975); Young v. AAA Realty Co., 350 F. Supp. 1382, 1385-1387 (MDNC 1972). Others, following HUD's interpretation of 810 (d), see 24 CFR 105.16 (a), 105.34 (1978), believe that the only time limitation on one who has properly complained to HUD is that a civil action be commenced within 30 days of notice of HUD's failure to negotiate a settlement. Logan v. Richard E. Carmack & Assoc., 368 F. Supp. 121, 122-123 (ED Tenn. 1973); Brown v. Ballas, 331 F. Supp. 1033, 1036 (ND Tex. 1971). This case does not require us to resolve this conflict, and we express no views on it. But regardless of which position is correct, it is clear that 810 does not serve as a screening mechanism to deflect certain classes of Title VIII grievances from the federal courts. </s> [Footnote 11 Section 810 does appear to restrict access to the federal courts in one respect not paralleled by 812. To the extent state or local remedies prove adequate, a complainant under 810 is required to pursue them. Thus, under 810 (c), the Secretary of HUD must suspend his conciliation efforts if local remedies providing protection equivalent to that of Title VIII are being carried forward by the appropriate public officials. Such deferral by the Secretary apparently delays the availability of judicial review under 810 (d). Section 810 (d) also conditions the availability of its civil action on the absence of an equivalent state or local judicial remedy. Section 812 contains no such limitation. </s> We are convinced that neither these differences nor the variations between 810 and 812 relied upon by the dissent, see post, at 124-126, imply that 810 is directed to a larger class of plaintiffs than is 812. The legislative history, discussed in the text, contradicts any such suggestion. See infra, at 105-108, and n. 20. </s> [Footnote 12 It is instructive to compare the administrative remedy of 810 with that provided by 706 of Title VII of the Civil Rights Act of 1964, 42 U.S.C. 2000e-5. Under 810 (d), a complainant may simply bypass [441 U.S. 91, 105] the conciliatory efforts of HUD by commencing a civil action, apparently without notice to the agency, 30 days after filing his complaint. Under 706 (f) (1), by contrast, a complainant must allow the Equal Employment Opportunity Commission a full 180 days to negotiate a settlement, and he must obtain a "right-to-sue" letter before proceeding in federal court. Moreover, under 706 (b), the EEOC is instructed to make a judgment on the merits of the administrative complaints it receives by dismissing those it does not have reasonable cause to believe are true. No such administrative statement on the merits of a 810 complaint is required; the Secretary of HUD is asked only to indicate whether he "intends to resolve" a complaint. Finally, under 706 (f) (1), the EEOC may elect to bring suit itself, thereby pre-empting the individual complainant's right to commence the litigation and exercising important supervision over the conduct of the case. The Secretary of HUD enjoys no similar authority under 810. From these and other differences between the two statutes, it is apparent that 810, unlike 706, does not provide an effective administrative buffer between the federal courts and individual complainants. </s> [Footnote 13 For a general review of the legislative history of Title VIII, see Dubofsky, Fair Housing: A Legislative History and a Perspective, 8 Washburn L. J. 149 (1969). </s> [Footnote 14 Three bills containing fair housing provisions were introduced in Congress in 1966: S. 3296, 89th Cong., 2d Sess.; H. R. 14770, 89th Cong., 2d Sess.; H. R. 14765, 89th Cong., 2d Sess. As introduced, they provided for judicial enforcement only. </s> [Footnote 15 Explaining the addition of administrative remedies to H. R. 14765, one of the bills introduced in 1966, Representative Conyers stated: </s> "Experience with comparable State and local agencies repeatedly has shown that the administrative process is quicker and fairer. It more quickly implements the rights of the person discriminated against and also quickly resolves frivolous and otherwise invalid complaints. Conciliation [441 U.S. 91, 106] is easier in an informal administrative procedure than in the formal judicial process. Also individual court suits would place a greater burden of expense, time and effort on not only the plaintiff but on all other parties involved, including the seller, broker and mortgage financier, and on the judicial system itself." 112 Cong. Rec. 18402 (1966). </s> Fair housing legislation introduced in 1967 similarly provided for administrative relief, which again was justified in terms of its perceived advantages to litigants over judicial review. Hearings on S. 1358 et al. before the Subcommittee on Housing and Urban Affairs of the Senate Committee on Banking and Currency, 90th Cong., 1st Sess., 108 (testimony of Roy Wilkins, Executive Director, NAACP, and Chairman, Leadership Conference on Civil Rights). </s> The administrative remedies in the 1966 and 1967 proposals would have granted substantive enforcement powers to HUD. Although Title VIII, enacted in 1968, provided for only informal, conciliatory efforts by that agency, petitioners have identified nothing in the legislative history suggesting that the purpose for including an administrative avenue of relief had changed from that stated with respect to the 1966 and 1967 bills. </s> [Footnote 16 In describing the enforcement provisions of Title VIII, Representative Celler stated: "In addition to administrative remedies, the bill authorizes immediate civil suits by private persons within 180 days after the alleged discriminatory housing practice occurred . . . ." 114 Cong. Rec. 9560 (1968). </s> [Footnote 17 The Justice Department report explained an amendment to the proposed Fair Housing Act offered by Senator Dirksen, which contained the enforcement provisions ultimately enacted as 810 and 812. It states: </s> "In addition to the administrative remedy provided through the Department of Housing and Urban Development, the bill provides for an [441 U.S. 91, 107] immediate right to proceed by civil action in an appropriate Federal or State court." 114 Cong. Rec. 4908 (1968). </s> [Footnote 18 The House Judiciary Committee Report states: </s> "Section 812 states what is apparently an alternative to the conciliation-then-litigation approach [of 810]: an aggrieved person within 180 days after the alleged discriminatory practice occurred, may, without complaining to HUD, file an action in the appropriate U.S. district court." Id., at 9612 (emphasis added). </s> The use of the term "aggrieved person" to refer to potential plaintiffs under 812, as well as the reference to the 812 remedy as an alternative to that of 810, indicates that the authors of this Report believed the two sections were intended to reach a single class of plaintiffs. </s> [Footnote 19 In its regulations describing the process of administrative conciliation under 810, HUD provides that every "person aggrieved [who files a complaint with HUD] shall be notified of . . . his right to bring court action under sections 810 and 812." 24 CFR 105.16 (a) (1978). The regulations suggest no distinction between complainants under 810 and plaintiffs under 812. </s> In a handbook designed for internal agency use, 812 is described as an "additional remed[y] for discriminatory housing practices [that] may be pursued concurrently with the complaint procedure [of 810]." Department of Housing and Urban Development, Title VIII Field Operations Handbook 59 (1971). </s> [Footnote 20 Although the legislative history is not free from some ambiguity, we do not agree with the view of it taken by the dissenting opinion. See post, at 126-128. The fact that, under Senator Miller's amendment, Title VIII complainants choosing to avail themselves of the informal, administrative procedures under 810 are required to exhaust state remedies equivalent to Title VIII does not compel any particular conclusion about the size of the class to which 812 extends. It was not irrational for Congress to conclude that, even with its limited exhaustion requirement, the incentive of 810's simple, inexpensive conciliation procedure, as opposed to the immediate commencement of a formal lawsuit in federal district court under 812, would be an attractive alternative to many of those aggrieved under Title VIII. Thus, under our construction of 812, the exhaustion requirement of 810 is not rendered meaningless. Apart from the argument based on the Miller amendment, the dissent relies on nothing more than an isolated, rhetorical remark by one Senator. Nothing in the legislative history or the administrative practices of HUD affirmatively supports the view that standing under 810 is not identical to that under 812. </s> [Footnote 21 Petitioners argue that regardless of the scope of standing under 812, the village of Bellwood cannot sue under that provision since it is not a "private person" as referred to in the caption to 812. </s> The Court of Appeals noted that "[i]n a single sentence at oral argument, counsel for [petitioners] advanced the argument, not mentioned in their brief, that the Village lacks standing because it is not a `person' as defined in [ 802 (d)]." 569 F.2d, at 1020 n. 8. The court rejected this contention, reasoning that the inclusion of "corporation" in the Act's definition of person encompassed municipal corporations such as Bellwood. Ibid. In this Court, petitioners have not argued that the village is not a "person," contending instead that it is not a "private person." Petitioners thus have presented a variant of the question raised belatedly in the Court of Appeals and given, perhaps deservedly, only cursory treatment there. Under these circumstances, the question whether Bellwood is a "private person" entitled to sue under 812 is not properly before us, and we express no views on it. </s> [Footnote 22 In addition to the complaints, the records in these cases contain several admissions by respondents, answers to petitioners' interrogatories, and exhibits appended to those answers, including maps of Bellwood. As did the courts below and the parties themselves, we accept as true the facts contained in these discovery materials for the purposes of the standing issue. </s> [Footnote 23 Zuch and Mitchell were cases in which real estate brokers were accused of "blockbusting," i. e., exploiting fears of racial change by directly perpetuating rumors and soliciting sales in target neighborhoods. Respondents have not alleged that petitioners engaged in such unprincipled conduct, but the description in those cases of the reaction of some whites to a perceived influx of minority residents underscores the import of Bellwood's allegation that petitioners' sales practices threaten serious economic dislocation to the village. </s> [Footnote 24 It has been widely recognized, for example, that school segregation is linked closely to housing segregation. See, e. g., Lee v. Nyquist, 318 F. Supp. 710, 717 (WDNY 1970) (three-judge court), summarily aff'd, 402 U.S. 935 (1971); National Advisory Commission on Civil Disorders, Report 237 (1968); 114 Cong. Rec. 2276 (1968) (remarks of Sen. Mondale). </s> [Footnote 25 As previously indicated, n. 3, supra, neither respondent Perry nor respondent Sharp resides within the target neighborhood of Bellwood. We read the complaints as claiming injury only to that area and its residents, and we are unable to find any allegations of harm to individuals residing elsewhere. On the record before us, we therefore conclude that summary judgment as to these two respondents was appropriate. We note, however, that the standing issue as framed by the District Court [441 U.S. 91, 113] was simply whether respondents were direct, as opposed to indirect, victims of the steering practices of petitioners. Viewed in that context, it made no difference whether Perry and Sharp were residents of the target area or not, for they would be found to be without standing in either event. As stated in Part III, supra, the District Court's perception of the standing question was incorrect. Only upon reaching this Court has the failure of the complaints to make sufficient allegations as to these two individuals been put in issue clearly. Although we intimate no view as to whether persons residing outside of the target neighborhood have standing to sue under 812 of Title VIII, we do not foreclose consideration of this question if, on remand, the District Court permits respondents Perry and Sharp to amend their complaints to include allegations of actual harm. </s> [Footnote 26 Apart from the use of "community" rather than "society," the complaint in Trafficante differed from those here in that it alleged that a segregated community was prevented from becoming integrated because of the defendant's conduct. Here, by contrast, respondents claim that an integrated neighborhood is becoming a segregated community because of petitioners' conduct. We find this difference unimportant to our analysis of standing. In both situations, the deprivation of the benefits of interracial associations constitutes the alleged injury. </s> [Footnote 27 The apartment complex in Trafficante housed 8,200 tenants. 409 U.S., at 206 . The population of Bellwood, of which the target neighborhood is only a part, was estimated at 20,969 in 1975. Department of Commerce, Bureau of the Census, Population Estimates and Projections, Series P-25, No. 661, p. Ill. 15 (1977). </s> [Footnote 28 See Shannon v. HUD, 305 F. Supp. 205, 208, 211 (ED Pa. 1969), aff'd in part, 436 F.2d 809, 817-818 (CA3 1970) (residents in a neighborhood affected by urban renewal project have standing to challenge the project's impact on the neighborhood's racial balance). Accord, Fox v. HUD, 416 F. Supp. 954, 955-956 (ED Pa. 1976); Marin City Council v. Marin County Redevelopment Agency, 416 F. Supp. 700, 702, 704 (ND Cal. 1975). See also Comment, The Fair Housing Act: Standing for the Private Attorney General, 12 Santa Clara Law. 562, 568-571 (1972). </s> [Footnote 29 In addition to evidence about the community, it will be relevant at trial to consider the nature and extent of the business of the petitioner real estate brokers. This should include an inquiry into the extent of their participation in the purchase, sale, and rental of residences in the target area, the number and race of their customers, and the type of housing desired by customers. Evidence of this kind may be relevant to the establishment of the necessary casual connection between the alleged conduct and the asserted injury. Respondents apparently attempted to [441 U.S. 91, 115] discover such information, but summary judgment was entered against them before this was accomplished. </s> [Footnote 30 The complaints state that petitioners have manipulated the housing market of Bellwood "to the economic and social detriment of the citizens of [the] village." App. 6, 99. </s> [Footnote 31 Although standing generally is a matter dealt with at the earliest stages of litigation, usually on the pleadings, it sometimes remains to be seen whether the factual allegations of the complaint necessary for standing will be supported adequately by the evidence adduced at trial. </s> [Footnote 32 The federal courts that have considered the question have concluded that racial steering is prohibited by Title VIII. E. g., Wheatley Heights Neighborhood Coalition v. Jenna Resales Co., 429 F. Supp. 486, 488 (EDNY 1977); United States v. Real Estate One, Inc., 433 F. Supp. 1140, 1144 (ED Mich. 1977); Fair Housing Council v. Eastern Bergen County Multiple Listing Serv., Inc., 422 F. Supp. 1071, 1075 (NJ 1976). We do not reach this issue, as it is not presented by this case. </s> [Footnote 33 The Court of Appeals found it unnecessary to consider respondents' standing under 1982. For this reason, and because of our decision with respect to respondents' standing under Title VIII, we do not reach the 1982 issue. </s> MR. JUSTICE REHNQUIST, with whom MR. JUSTICE STEWART joins, dissenting. </s> Title VIII of the Civil Rights Act of 1968, 82 Stat. 81, as amended, 42 U.S.C. 3601 et seq., which outlaws discrimination in virtually all aspects of the sale or rental of housing, provides two distinct and widely different routes into federal court. Under 810, 42 U.S.C. 3610, 1 a "person aggrieved," [441 U.S. 91, 117] that is, "[a]ny person who claims to have been injured by a discriminatory housing practice," may seek administrative relief from the Secretary of the Department of Housing and [441 U.S. 91, 118] Urban Development and, if the Secretary cannot within 30 days resolve the dispute "by informal methods of conference, conciliation, and persuasion," may bring a civil action in federal district court. In Trafficante v. Metropolitan Life Ins. Co., 409 U.S. 205 (1972), we held that the broad definition given to the term "person aggrieved" in 810 evinced "`a congressional intention to define standing as broadly as is permitted by Article III of the Constitution.'" 409 U.S., at 209 . </s> The second route into federal court under Title VIII - 812 2 - provides simply that "[t]he rights granted by sections [441 U.S. 91, 119] 803, 804, 805, and 806 of this title may be enforced by civil actions in appropriate United States district courts . . . ." 42 U.S.C. 3612. Despite the absence from 812 of the "person aggrieved" language so crucial to our holding in Trafficante regarding standing under 810, the Court today holds that "[s]tanding under 812, like that under 810, is `as broa[d] as is permitted by Article III of the Constitution.'" Ante, at 109, quoting Trafficante v. Metropolitan Life Ins. Co., supra, at 209. I think that the Court's decision ignores the plain language of 812 and makes nonsense out of Title VIII's formerly sensible statutory enforcement scheme. </s> I </s> The doctrine of standing is comprised of both constitutional limitations on the jurisdiction of federal courts and prudential rules of self-restraint designed to bar from federal court those parties who are ill-suited to litigate the claims they assert. In its constitutional dimension, the standing inquiry asks whether the party before the court has "`such a personal stake in the outcome of the controversy' as to warrant his invocation of federal-court jurisdiction and to justify [441 U.S. 91, 120] exercise of the court's remedial powers on his behalf." Warth v. Seldin, 422 U.S. 490, 498 -499 (1975) (emphasis in original), quoting Baker v. Carr, 369 U.S. 186, 204 (1962). The crucial elements of standing are injury in fact and causation. To demonstrate the "personal stake" in the litigation necessary to satisfy the Constitution, the party must suffer "a distinct and palpable injury." Warth v. Seldin, supra, at 501, that bears a "`fairly traceable' causal connection" to the challenged action. Duke Power Co. v. Carolina Environmental Study Group, Inc., 438 U.S. 59, 72 (1978), quoting Arlington Heights v. Metropolitan Housing Dev. Corp., 429 U.S. 252, 261 (1977). Accordingly, when an objection to a party's standing to litigate in federal court is constitutionally based, "the relevant inquiry is whether . . . the plaintiff has shown an injury to himself that is likely to be redressed by a favorable decision." Simon v. Eastern Kentucky Welfare Rights Org., 426 U.S. 26, 38 (1976). </s> A plaintiff who alleges sufficient injury to satisfy these minimum constitutional limitations on federal jurisdiction may nonetheless be barred from federal court under our prudential standing rules because he asserts a generalized grievance shared in substantially equal measure by all or a large class of citizens, Schlesinger v. Reservists Comm. to Stop the War, 418 U.S. 208 (1974), or because he seeks to "rest his claim to relief on the legal rights or interests of third parties" rather than his own. Warth v. Seldin, 422 U.S., at 499 . These prudential rules, however, are subject to modification by Congress, which may grant to any person satisfying Art. III's minimum standing requirements a right "to seek relief on the basis of the legal rights and interests of others, and, indeed, [to] invoke the general public interest in support of [his] claim." Id., at 501. Congress did just that in enacting 810 of Title VIII, which grants to "[a]ny person who claims to have been injured by a discriminatory housing practice" a right to seek federal administrative and judicial relief. In Trafficante, [441 U.S. 91, 121] supra, we held that the broad definition given "person aggrieved" in 810 indicated a congressional intent to accord apartment dwellers, who had not themselves suffered discrimination, an actionable right to be free from the adverse consequences flowing to them from racially discriminatory rental practices directed at third parties. 3 Plaintiffs' alleged "loss of important benefits from interracial associations," 409 U.S., at 210 , was sufficient to satisfy the injury-in-fact requirement of Art. III. </s> In the case now before us, respondents - the village of Bellwood, five of its residents, and one resident of a neighboring community - brought suit against petitioner real estate firms, alleging that the firms had violated both 42 U.S.C. 1982 and 804 of Title VIII by "steering" prospective homebuyers to different areas in and around Bellwood according to their race. Like plaintiffs in Trafficante, the individual respondents allege that petitioners' practice of racial steering has deprived them of "the social and professional benefits of living in an integrated society." 4 App. 6, 99. Respondent village of Bellwood alleges that it has been injured "by having [its] housing market . . . wrongfully and illegally [441 U.S. 91, 122] manipulated to the economic and social detriment of [its] citizens." Ibid. Unlike plaintiffs in Trafficante, however, respondents have not proceeded under 810 of Title VIII, choosing instead to travel the direct route into federal court provided by 812. </s> In pertinent part, 812 provides: </s> "The rights granted by sections 803, 804, 805, and 806 may be enforced by civil actions in appropriate United States district courts without regard to the amount in controversy and in appropriate State or local courts of general jurisdiction." 82 Stat. 88, 42 U.S.C. 3612 (a). </s> The language of 812 contains no indication that Congress intended to authorize the commencement of suits under Title VIII by persons who would otherwise be barred from federal court by prudential standing rules. Indeed, were 812 the only method for enforcing Title VIII, respondents - who were not themselves discriminated against by petitioners - could hardly argue that they were statutorily authorized to seek relief on the basis of legal rights and interests of third parties who had been racially "steered" into and away from certain areas in the community. The Court, however, in effect reads the broadly defined "person aggrieved" language of 810 into 812, holding that the alternative routes into federal court provided under the sections are available to precisely the same class of plaintiffs. The language and structure of Title VIII lead me to a contrary conclusion. </s> II </s> The term "person aggrieved" is used throughout 810 - no less than four times - to denominate the proper 810 claimant; 5 by contrast, in 812 Congress wholly avoided use of this broadly defined term, preferring instead the familiar "plaintiff." Noting that 812 is phrased in the passive voice, [441 U.S. 91, 123] the Court concludes that the absence of the "person aggrieved" language from the provision "does not indicate that standing is more limited under that provision than under 810." Ante, at 103 (emphasis added). The point of our decision in Trafficante, however, was that the presence of the "person aggrieved" language in 810 demonstrated Congress' affirmative intent to abrogate prudential standing rules and to expand standing under the section to the full extent permitted by Art. III of the Constitution. It thus follows that the absence of "person aggrieved" from 812 indicates that Congress did not intend to abrogate the normal prudential rules of standing with regard to 812. </s> Consistent with 810's broad grant of standing is the language chosen by Congress to define the scope of the civil action that may be brought under the section: "[T]he person aggrieved may . . . commence a civil action in any appropriate United States district court . . . to enforce the rights granted or protected by this title . . . ." 82 Stat. 86, 42 U.S.C. 3610 (d) (emphasis added). Section 812, in contrast, authorizes the commencement of a civil action to enforce only "[t]he rights granted by," as opposed to "rights granted or protected by," 803, 804, 805, and 806. Clearly, Congress contemplated that 812 suits could be instituted only by persons alleging injury to rights expressly secured under the enumerated sections. </s> Section 804, the provision allegedly offended by petitioners, provides in pertinent part: </s> "[I]t shall be unlawful - </s> "(a) To refuse to sell or rent after the making of a bona fide offer, or to refuse to negotiate for the sale or rental of, or otherwise make unavailable or deny, a dwelling to any person because of race, color, religion, sex, or national origin. </s> "(b) To discriminate against any person in the terms, conditions, or privileges of sale or rental of a dwelling, or [441 U.S. 91, 124] in the provision of services or facilities in connection therewith, because of race, color, religion, sex, or national origin. </s> . . . . . </s> "(d) To represent to any person because of race, color, religion, sex, or national origin that any dwelling is not available for inspection, sale, or rental when such dwelling is in fact so available." 82 Stat. 83, as amended, 88 Stat. 729, 42 U.S.C. 3604. </s> In essence, 804 grants to all persons 6 seeking housing the right not to be discriminated against on the basis of race, color, religion, sex, or national origin. Nowhere in the section are the individual respondents granted a right to reap the "social and professional benefits of living in an integrated society." Nor does 804 grant the village of Bellwood an actionable right not to have its housing market "wrongfully and illegally manipulated." Accordingly, respondents have suffered no injury to "rights granted by [ 804]." </s> The structure of both 810 and 812 and the significant differences between the two enforcement provisions further support the conclusion that Congress intended to restrict access to federal courts under 812 to a more limited class of plaintiffs than that contemplated under 810. A "person aggrieved" proceeding under 810 must first file a complaint with the Secretary of Housing and Urban Development, who is authorized "to try to eliminate or correct the alleged discriminatory housing practice by informal methods of conference, conciliation, and persuasion." 42 U.S.C. 3610 (a). The Secretary, however, must defer to the appropriate state [441 U.S. 91, 125] or local agency whenever state or local fair-housing laws provide rights and remedies substantially equivalent to those secured under Title VIII. The Secretary may recommence action on the complaint only upon certification that such action is necessary to protect the rights of the parties or the interest of justice. 42 U.S.C. 3610 (c). If the Secretary's informal efforts prove futile, the "person aggrieved" may commence a civil action under Title VIII in federal district court, but only if he has no comparable judicial remedy under "substantially equivalent" state or local fair-housing legislation. 42 U.S.C. 3610 (d). </s> The 812 "plaintiff" is not similarly encumbered. He may proceed directly into federal court, deferring neither to the Secretary of Housing and Urban Development nor to state administrative and judicial processes. See 42 U.S.C. 3612 (a). The District Court is authorized to appoint an attorney for the 812 plaintiff and to waive payment of fees, costs, and security. 42 U.S.C. 3612 (b). Additionally, broader relief is available under 812. The "prevailing plaintiff" may be awarded a "permanent or temporary injunction, temporary restraining order, or other order, and . . . actual damages and not more than $1,000 punitive damages, together with court costs and reasonable attorney fees . . . ." 42 U.S.C. 3612 (c). Section 810, by contrast, makes no allowance for damages, costs, or counsel fees, limiting the victorious claimant to injunctive relief and such other affirmative action as may be appropriate. 42 U.S.C. 3610 (d). Nor does 812 contain a provision similar to 810 (e), which provides that "[i]n any proceeding brought pursuant to [ 810], the burden of proof shall be on the complainant." Given the advantages to the claimant of proceeding under 812, it is hard to imagine why anyone would voluntarily proceed under 810 if both routes were equally available. </s> When the carefully chosen language and the widely variant provisions of 810 and 812 are thus compared, the logic of [441 U.S. 91, 126] Title VIII's private enforcement mechanism becomes clear. Immediate access to federal judicial power under 812 was reserved to those directly victimized by a discriminatory housing practice; that is, those actually discriminated against on the basis of race, color, religion, sex, or national origin. Only direct victims of housing discrimination were deemed to suffer injuries of sufficient magnitude to authorize appointment of counsel and recovery of compensatory and punitive damages, costs, and attorney fees. But because discrimination in housing can injure persons other than the direct objects of the discrimination, Trafficante, 409 U.S., at 210 , Congress believed that the statute's fair-housing goals would be served by extending standing under 810 as broadly as constitutionally permissible. Anyone claiming to have been injured by a discriminatory housing practice, even if not himself directly discriminated against, is authorized to seek redress under 810. By barring indirect victims of housing discrimination from immediate access to federal court under 812, and thus requiring them to exhaust federal conciliation procedures as well as viable state and local remedies pursuant to 810, Congress sought to facilitate informal resolution of Title VIII disputes, to avoid federal judicial intervention when possible, and to encourage state and local involvement in the effort to eliminate housing discrimination. </s> The legislative history of Title VIII, while "not too helpful," Trafficante, supra, at 210, supports the view that standing to commence a civil action under 812 is limited to direct victims of housing discrimination. Introduced on the Senate floor and approved unchanged by the House, Title VIII's legislative history must be culled primarily from the Congressional Record. The brief debate preceding adoption of Amendment No. 586, which amended 810 to require exhaustion of "substantially equivalent" remedies under state or local fair-housing laws as a prerequisite to the filing of a Title [441 U.S. 91, 127] VIII action in federal court, is particularly enlightening. Senator Miller, who introduced the amendment, explained: </s> "I provide in the second part of my amendment that no civil action may be brought in any U.S. district court if the person aggrieved has a judicial remedy under a State or local fair housing law which provides substantially equivalent rights and remedies to this act. </s> "I believe it is a matter of letting the State and local courts have jurisdiction. We in the Senate know that our Federal district court calendars are crowded enough, without adding to that load if there is a good remedy under State law." 114 Cong. Rec. 4987 (1968). </s> Senator Hart added that the amendment "recognizes the desire all of us share that the State remedies, where adequate, be availed of and that unnecessary burdening litigation not further clog the court calendars." Ibid. It seems unlikely that Congress would wholly frustrate the concerns moving it to adopt 810's exhaustion requirement by opening 812's direct route into federal court to all "persons aggrieved." </s> The debate concerning the allowance of attorney's fees to prevailing plaintiffs under 812 also indicates a congressional understanding that standing to proceed immediately into federal court under 812 was limited to discriminatees. Senator Hart commented that 812 (b) and (c) - which authorize the district court to waive payment of fees, costs, and security in appropriate cases and to award damages, court costs, and reasonable attorney fees to prevailing plaintiffs - "reveal a clear congressional intent to permit, and even encourage, litigation by those who cannot afford to redress specific wrongs aimed at them because of the color of their skin." 114 Cong. Rec. 5514-5515 (1968) (emphasis added). </s> The meager legislative history marshaled by the Court provides at best thin support for its expansive interpretation of standing under 812. References in the legislative history describing 812 as an "addition[al]" and "alternative" remedial [441 U.S. 91, 128] provision to 810, ante, at 106, and nn. 16, 17, and 18, are hardly dispositive: one need only read the two sections to conclude that they provide "alternative" enforcement mechanisms. That 810 and 812 are "alternative" remedial provisions does not, however, compel the conclusion that they are equally available to all potential Title VIII claimants. The only piece of legislative history arguably supporting the Court's interpretation of 812 is the House Judiciary Committee staff's use of the term "aggrieved person" to refer to potential 812 plaintiffs. Ante, at 107 n. 18. This single, fleeting reference in the legislative history hardly seems sufficient to overwhelm the contrary indications of congressional intent found elsewhere in Title VIII's legislative history and in the carefully worded and structured provisions of 810 and 812. </s> I think that Trafficante pushed standing to the limit in construing the "person aggrieved" language of 810. I cannot join the Court in pressing the more narrowly confined language of 812 to the same limit. </s> III </s> Respondents also claim standing under 42 U.S.C. 1982, which provides: "All citizens of the United States shall have the same right . . . as is enjoyed by white citizens . . . to inherit, purchase, lease, sell, hold, and convey real and personal property." Unlike Title VIII, " 1982 is not a comprehensive open housing law." Jones v. Alfred H. Mayer Co., 392 U.S. 409, 413 (1968). Enacted as part of the Civil Rights Act of 1866, the section bars all racial discrimination, both private and public, in the sale or rental of property. Ibid. </s> It is clear that respondents have suffered no injury to the only right secured under 1982 - the right to be free from racially motivated interference with property rights. Their claim of standing under 1982 is thus conceptually indistinguishable from a similar claim rejected by this Court in [441 U.S. 91, 129] Warth v. Seldin, 422 U.S. 490 (1975). Plaintiffs in Warth brought a 1982 action against the town of Penfield, N. Y., and members of its Zoning, Planning, and Town Boards, claiming that the town's zoning ordinance effectively excluded persons of minority racial and ethnic groups. One of the plaintiffs, a nonprofit corporation organized to alleviate the housing shortage for low-and moderate-income persons in and around Penfield, based its standing to challenge the zoning ordinance on the loss to its members residing in Penfield of the "benefits of living in a racially and ethnically integrated community." 422 U.S., at 512 . This Court rejected plaintiff's claim of standing, distinguishing Trafficante on the ground that 1982, unlike 810 of Title VIII, does not give residents of certain communities an actionable right to be free from the adverse consequences of racially discriminatory practices directed at and immediately harmful to others. Thus, we held plaintiff's "attempt to raise putative rights of third parties," 422 U.S., at 514 , barred by the prudential rules of standing. </s> Like plaintiffs in Warth, respondents claim that they have been injured by racially discriminatory acts practiced on others. Thus, their claim of standing under 1982 must also fail. </s> Because I think that respondents have no standing to litigate claims under 42 U.S.C. 1982 and 812 of the Civil Rights Act of 1968, I would reverse the judgment of the Court of Appeals. </s> [Footnote 1 Section 810 provides: </s> "(a) Any person who claims to have been injured by a discriminatory housing practice or who believes that he will be irrevocably injured by a discriminatory housing practice that is about to occur (hereafter `person aggrieved') may file a complaint with the Secretary. Complaints shall be in writing and shall contain such information and be in such form as the Secretary requires. Upon receipt of such a complaint the Secretary shall furnish a copy of the same to the person or persons who allegedly committed or are about to commit the alleged discriminatory housing practice. Within thirty days after receiving a complaint, or within thirty days after the expiration of any period of reference under subsection (c), the Secretary shall investigate the complaint and give notice in writing to the person aggrieved whether he intends to resolve it. If the Secretary decides to resolve the complaint, he shall proceed to try to eliminate or correct the alleged discriminatory housing practice by informal methods of conference, conciliation, and persuasion. Nothing said or done in the course of such informal endeavors may be made public or used as evidence in a subsequent proceeding under this title without the written consent of the persons concerned. Any employee of the Secretary who shall make public any information in violation of this provision shall be deemed guilty of a misdemeanor and upon conviction thereof shall be fined not more than $1,000 or imprisoned not more than one year. </s> "(b) A complaint under subsection (a) shall be filed within one hundred [441 U.S. 91, 117] and eighty days after the alleged discriminatory housing practice occurred. Complaints shall be in writing and shall state the facts upon which the allegations of a discriminatory housing practice are based. Complaints may be reasonably and fairly amended at any time. A respondent may file an answer to the complaint against him and with the leave of the Secretary, which shall be granted whenever it would be reasonable and fair to do so, may amend his answer at any time. Both complaints and answers shall be verified. </s> "(c) Wherever a State or local fair housing law provides rights and remedies for alleged discriminatory housing practices which are substantially equivalent to the rights and remedies provided in this title, the Secretary shall notify the appropriate State or local agency of any complaint filed under this title which appears to constitute a violation of such State or local fair housing law, and the Secretary shall take no further action with respect to such complaint if the appropriate State or local law enforcement official has, within thirty days from the date the alleged offense has been brought to his attention, commenced proceedings in the matter, or, having done so, carries forward such proceedings with reasonable promptness. In no event shall the Secretary take further action unless he certifies that in his judgment, under the circumstances of the particular case, the protection of the rights of the parties or the interests of justice require such action. </s> "(d) If within thirty days after a complaint is filed with the Secretary or within thirty days after expiration of any period of reference under subsection (c), the Secretary has been unable to obtain voluntary compliance with this title, the person aggrieved may, within thirty days thereafter, commence a civil action in any appropriate United States district court, against the respondent named in the complaint, to enforce the rights granted or protected by this title, insofar as such rights relate to the subject of the complaint: Provided, That no such civil action may be brought in any United States district court if the person aggrieved has a judicial remedy under a State or local fair housing law which provides rights and remedies for alleged discriminatory housing practices which are substantially equivalent to the rights and remedies provided in this title. Such actions may be brought without regard to the amount in controversy in any United States district court for the district in which the discriminatory housing practice is alleged to have occurred or be about to occur or [441 U.S. 91, 118] in which the respondent resides or transacts business. If the court finds that a discriminatory housing practice has occurred or is about to occur, the court may, subject to the provisions of section 812 of this title, enjoin the respondent from engaging in such practice or order such affirmative action as may be appropriate. </s> "(e) In any proceeding brought pursuant to this section, the burden of proof shall be on the complaint. </s> "(f) Whenever an action filed by an individual, in either Federal or State court, pursuant to this section or section 812 of this title, shall come to trial the Secretary shall immediately terminate all efforts to obtain voluntary compliance." 82 Stat. 85, 42 U.S.C. 3610. </s> [Footnote 2 Section 812 provides: </s> "(a) The rights granted by sections 803, 804, 805, and 806 of this title may be enforced by civil actions in appropriate United States district courts without regard to the amount in controversy and in appropriate State or local courts of general jurisdiction. A civil action shall be commenced within one hundred and eighty days after the alleged discriminatory housing practice occurred: Provided, however, That the court shall continue such civil case brought pursuant to this section or section 810 (d) of this title from time to time before bringing it to trial if the court believes that the conciliation efforts of the Secretary or a State or local agency are likely to result in satisfactory settlement of the discriminatory housing practice complained of in the complaint made to the Secretary or to the local or State agency and which practice forms the basis for the action in court: And provided, however, That any sale, encumbrance, or rental consummated prior to the issuance of any court order issued under the authority of this Act, and involving a bona fide purchaser, encumbrancer, or tenant without actual notice of the existence of the filing of a [441 U.S. 91, 119] complaint or civil action under the provisions of this Act shall not be affected. </s> "(b) Upon application by the plaintiff and in such circumstances as the court may deem just, a court of the United States in which a civil action under this section has been brought may appoint an attorney for the plaintiff and may authorize the commencement of a civil action upon proper showing without the payment of fees, costs, or security. A court of a State or subdivision thereof may do likewise to the extent not inconsistent with the law or procedures of the State or subdivision. </s> "(c) The court may grant as relief, as it deems appropriate, any permanent or temporary injunction, temporary restraining order, or other order, and may award to the plaintiff actual damages and not more than $1,000 punitive damages, together with court costs and reasonable attorney fees in the case of a prevailing plaintiff: Provided, That the said plaintiff in the opinion of the court is not financially able to assume said attorney's fees." 82 Stat. 88, 42 U.S.C. 3612. </s> [Footnote 3 Despite suggestions to the contrary by the Court, ante, at 101 n. 7, our decision in Trafficante was clearly not intended to construe 812 as well as 810. The opinion focuses exclusively on 810, closing with the following statement: </s> "We can give vitality to 810 (a) only by a generous construction which gives standing to sue to all in the same housing unit who are injured by racial discrimination in the management of those facilities within the coverage of the statute." 409 U.S., at 212 . </s> The Court's passing reference in Trafficante to 812 can hardly be construed as an interpretation of that provision. </s> [Footnote 4 Alleging injury to "their right to select housing without regard to race," App. 6, 99, the individual respondents initially sought to establish standing in their capacity as "testers." Respondents have abandoned, in this Court, their claim of standing as testers, electing to stand or fall on their allegations of injury in their capacity as residents in and around Bellwood. </s> [Footnote 5 Indeed, the term is found nowhere else in Title VIII. </s> [Footnote 6 "Person" is defined in Title VIII as "one or more individuals, corporations, partnerships, associations, labor organizations, legal representatives, mutual companies, joint-stock companies, trusts, unincorporated organizations, trustees, trustees in bankruptcy, receivers, and fiduciaries." 42 U.S.C. 3602 (d). </s> [441 U.S. 91, 130]

United States Supreme Court MONTANA v. IMLAY(1992) No. 91-687 Argued: October 7, 1992Decided: November 3, 1992 </s> Certiorari dismissed. Reported below: 249 Mont. 82, 813 P.2d 979. </s> Marc Racicot, Attorney General of Montana, argued the cause for petitioner. With him on the briefs was Elizabeth L. Griffing, Assistant Attorney General. </s> Billy B. Miller argued the cause and filed briefs for respondent. * </s> [Footnote * Briefs of amici curiae urging reversal were filed for the United States by Solicitor General Starr, Assistant Attorney General Mueller, and Deputy Solicitor General Bryson; and for the State of Vermont et al. by Jeffrey L. Amestoy, Attorney General of Vermont, and Donald F. Hartman, Jr., Assistant Attorney General, and by the Attorneys General for their respective States as follows: Charles E. Cole of Alaska, Paul J. McMurdie of Arizona, Charles M. Oberly III of Delaware, Robert T. Stephan of Kansas, Chris Gorman of Kentucky, Richard P. Ieyoub of Louisiana, Frank J. Kelley of Michigan, Frankie Sue Del Papa of Nevada, Robert J. Del Tufo of New Jersey, Lacy H. Thornburg of North Carolina, Lee Fisher of Ohio, Ernest D. Preate, Jr., of Pennsylvania, T. Travis Medlock of South Carolina, Mark Barnett of South Dakota, Paul Van Dam of Utah, and Mary Sue Terry of Virginia. </s> John E. B. Myers filed a brief for the American Professional Society on the Abuse of Children as amicus curiae. </s> PER CURIAM. </s> The writ of certiorari is dismissed as improvidently granted. </s> JUSTICE STEVENS, concurring. </s> When the trial judge revoked respondent's parole, he reinstated a 5-year sentence of imprisonment. On appeal, the Montana Supreme Court, in the decision before us, vacated the revocation order and remanded the case for resentencing. 249 Mont. 82, 813 P.2d 979 (1991). The trial court subsequently [506 U.S. 5, 6] resentenced respondent, again to a 5-year term of imprisonment, and the Montana Supreme Court upheld that sentence in a judgment not now before us for review. </s> Thus, no matter which party might prevail in this Court, the respondent's term of imprisonment will be the same. At oral argument, neither counsel identified any way in which the interests of his client would be advanced by a favorable decision on the merits - except, of course, for the potential benefit that might flow from an advisory opinion. * Because it is not the business of this Court to render such opinions, it wisely decides to dismiss a petition that should not have been granted in the first place. </s> [Footnote * Indeed, counsel for the State went so far as to explain that a victory for Montana on the merits would actually work to the advantage of respondent, by subjecting him to treatment leading to parole eligibility: </s> "Question: So you're really trying to advance his [respondent's interests? </s> "[Answer]: Yes, sir, we are. </s> "Question: He is better off if you win than if you lose. </s> "[Answer]: In our judgment that is certainly the case." Tr. of Oral Arg. 5. </s> JUSTICE WHITE, dissenting. </s> We granted certiorari to consider whether the Fifth Amendment bars a State from conditioning probation upon the probationer's successful completion of a therapy program in which he would be required to admit responsibility for his criminal acts. In the decision below, the Montana Supreme Court held that, "absent any grant of immunity" from prosecution for incriminating statements made during therapy, the Fifth Amendment "prohibit[s] augmenting a defendant's sentence because he refuses to confess to a crime or invokes his privilege against self-incrimination." 249 Mont. 82, 91, 813 P.2d 979, 985 (1991). The constitutional question is an important one and the decision below places the Montana Supreme Court in conflict with other courts. See State v. Gleason, 154 Vt. 205, 576 A. 2d 1246 (1990); Henderson v. [506 U.S. 5, 7] State, 543 So.2d 344 (Fla. App. 1989); Russell v. Eaves, 722 F. F. Supp. 558 (ED Mo. 1989), appeal dism'd, 902 F.2d 1574 (CA8 1990). I believe we should decide the question and resolve the conflict. </s> As an initial matter, there can be no doubt that the decision below is a "final judgment" for purposes of 28 U.S.C. 1257. Although the Montana Supreme Court remanded the case for resentencing, this is clearly a case in which "the federal issue, finally decided by the highest court in the State, will survive and require decision regardless of the outcome of future state-court proceedings." Cox Broadcasting Corp. v. Cohn, 420 U.S. 469, 480 (1975); see also Brady v. Maryland, 373 U.S. 83, 85 , n. 1 (1963). </s> At oral argument, however, two further questions were raised concerning whether any live controversy persists in this case. First, counsel for respondent stated that his client had been assured by state corrections officials that he would be paroled in the very near future. If this were true, the outcome of this case could have no practical effect upon respondent's sentence. Second, counsel for petitioner stated his belief that a probationer would enjoy immunity from prosecution for incrimination statements made during court-ordered therapy. This statement calls into doubt a critical assumption underpinning the Montana Supreme Court's judgment and might suggest that there really is no disagreement about the Fifth Amendment's application to this case. </s> In my view, however, neither party's representation is sufficient to deprive this case of its status as a case or controversy. First, as counsel for both parties readily acknowledged, there is nothing in the record to support the expectation of respondent's counsel that respondent will be paroled shortly without regard to his completion of the State's therapy program. As far as the record is concerned, a decision in this case would affect respondent's eligibility for parole and thus have real consequences for the litigants. [506 U.S. 5, 8] </s> Nor does the State's "concession" that a defendant would have immunity from prosecution based upon incrimination statement made to a therapist moot this case or otherwise render it unsuitable for review. This "concession" appeared to rest solely on the State's assumption that this Court's decision in Minnesota v. Murphy, 465 U.S. 420 (1984), mandated such a result. That reading of Murphy, however, is at least debatable. Because the State's concession appears to reflect a possible misunderstanding of its obligation under the law rather than any unequivocal and unconditional declaration of its own future prosecutorial policy, this statement does not moot this case or obviate the controversy. If its reading of Murphy were shown to be erroneous, the State might well revert to the view that a defendant could be prosecuted on the basis of statements made during postconviction therapy. Such a qualified concession is too uncertain a basis to find that no live controversy is presented. Cf. United States v. Generix Drug Corp., 460 U.S. 453, 456 , n. 6 (1983); United States v. Concentrated Phosphate Export Assn., Inc., 393 U.S. 199, 203 (1968). In any event, the Montana Supreme Court evidently was of the view that no grant of immunity protected respondent or others in his position and the State continues to suffer the consequences of its constitutional holding. </s> Because I believe that a genuine and important controversy is presented in this case, I respectfully dissent from the dismissal of the writ of certiorari. </s> [506 U.S. 5, 9]

United States Supreme Court LAMB'S CHAPEL v. CENTER MORICHES SCH. DIST.(1993) No. 91-2024 Argued: February 24, 1993Decided: June 7, 1993 </s> New York law authorizes local school boards to adopt reasonable regulations permitting the after-hours use of school property for 10 specified purposes, not including meetings for religious purposes. Pursuant to this law, respondent school board (District) issued rules and regulations allowing, inter alia, social, civic, and recreational uses of its schools (Rule 10), but prohibiting use by any group for religious purposes (Rule 7). After the District refused two requests by petitioners, an evangelical church and its pastor (Church), to use school facilities for a religious-oriented film series on family values and childrearing on the ground that the film series appeared to be church-related, the Church filed suit in the District Court, claiming that the District's actions violated, among other things, the First Amendment's Freedom of Speech Clause. The court granted summary judgment to the District, and the Court of Appeals affirmed. It reasoned that the school property, as a "limited public forum" open only for designated purposes, remained nonpublic except for the specified purposes, and ruled that the exclusion of the Church's film was reasonable and viewpoint neutral. </s> Held: </s> Denying the Church access to school premises to exhibit the film series violates the Freedom of Speech Clause. Pp. 390-397. </s> (a) There is no question that the District may legally preserve the property under its control, and need not have permitted after-hours use for any of the uses permitted under state law. This Court need not address the issue whether Rule 10, by opening the property to a wide variety of communicative purposes, has opened the property for religious uses, because, even if the District has not opened its property for such uses, Rule 7 has been unconstitutionally applied in this case. Access to a nonpublic forum can be based on subject matter or speaker identity so long as the distinctions drawn are reasonable and viewpoint-neutral. Cornelius v. NAACP Legal Defense and Ed. Fund, Inc., 473 U.S. 788, 806 . That Rule 7 treats all religions and religious purposes alike does not make its application in this case viewpoint-neutral, however, for it discriminates on the basis of viewpoint by permitting school property to be used for the presentation of all views about family issues and child rearing except those dealing with the subject from a religious [508 U.S. 384, 384] standpoint. Denial on this basis is plainly invalid under the holding in Cornelius, supra, at 806, that the government violates the First Amendment when it denies access to a speaker solely to suppress the point of view he espouses on an otherwise includible subject. Pp. 390-394. </s> (b) Permitting District property to be used to exhibit the film series would not have been an establishment of religion under the three-part test articulated in Lemon v. Kurtzman, 403 U.S. 602 . Since the film series would not have been shown during school hours, would not have been sponsored by the school, and would have been open to the public, there would be no realistic danger that the community would think that the District was endorsing religion or any particular creed, and any benefit to religion or the Church would have been incidental. Widmar v. Vincent, 454 U.S. 263, 271 -272. Nor is there anything in the record to support the claim that the exclusion was justified on the ground that allowing access to a "radical" church would lead to threats of public unrest and violence. In addition, the Court of Appeals' judgment was not based on the justification proffered here that the access rules' purpose is to promote the interests of the general public, rather than sectarian or other private interests. Moreover, that there was no express finding below that the Church's application would have been granted absent the religious connection is beside the point for the purposes of this opinion, which is concerned with the validity of the stated reason for denying the application, namely, that the film series appeared to be church-related. Pp. 395-397. </s> 959 F.2d 381 (CA2 1992), reversed. </s> WHITE, J., delivered the opinion of the Court, in which REHNQUIST, C.J., and BLACKMUN, STEVENS, O'CONNOR, and SOUTER, JJ., joined. KENNEDY, J., filed an opinion concurring in part and concurring in the judgment, post, p. 397. SCALIA, J., filed an opinion concurring in the judgment, in which THOMAS, J., joined, post, p. 397. </s> Jay Alan Sekulow argued the cause for petitioners. With him on the briefs were Keith A. Fournier, Mark N. Troobnick, James M. Henderson, Sr., Thomas Patrick Monaghan, Walter M. Weber, and John Stepanovich. </s> John W. Hoefling argued the cause for respondents. With him on the brief for respondents Center Moriches Union Free School District et al. was Ross Paine Masler, Robert Abrams, Attorney General of New York, filed a brief respondents pro se. With him on the brief were Jerry Boone, [508 U.S. 384, 386] Solicitor General, and Lillian Z. Cohen and Jeffrey I. Slonim, Assistant Attorneys General. * </s> [Footnote * Briefs of amici curiae urging reversal were filed for the United States by Solicitor General Starr, Assistant Attorney General Gerson, Deputy Solicitor General Roberts, Edward C. DuMont, Anthony J. Steinmeyer, and Lowell V. Sturgill, Jr.; for the American Civil Liberties Union et al. by David H. Remes, T. Jeremy Gunn, Steven R. Shapiro, John A. Powell, and Elliot M. Mincberg; for the American Federation of Labor and Congress of Industrial Organizations by Robert M. Weinberg, Laurence Gold, and Walter A. Kamiat; for the Christian Legal Society et al. by Kimberlee Wood Colby, Steven T. McFarland, Bradley P. Jacob, and Karon Owen Bowdre; for Concerned Women for America et al. by Wendell R. Bird and David J. Myers; for the National Jewish Commission on Law and Public Affairs by Nathan Lewin and Dennis Rapps; and for the Rutherford Institute by James J. Knicely and John W. Whitehead. </s> Jay Worona, Pilar Sokol, and Louis Grument filed a brief for the New York State School Boards Association et al. as amicus curiae urging affirmance. </s> JUSTICE WHITE delivered the opinion of the Court. </s> New York Educ. Law 414 (McKinney 1988 and Supp. 1993) authorizes local school boards to adopt reasonable regulations for the use of school property for 10 specified purposes when the property is not in use for school purposes. Among the permitted uses is the holding of "social, civic and recreational meetings and entertainments, and other uses pertaining to the welfare of the community; but such meetings, entertainment and uses shall be nonexclusive and shall be open to the general public." 414(1)(c). 1 The list of permitted uses does not include meetings for religious purposes, and a New York appellate court, in Trietley v. Board of Ed. of Buffalo, 65 A.D.2d 1, 409 N.Y.S.2d 912, 915 (App. Div. 1978), ruled that local boards could not allow student bible clubs [508 U.S. 384, 387] to meet on school property because "[r]eligious purposes are not included in the enumerated purposes for which a school may be used under section 414." In Deeper Life Christian Fellowship, Inc. v. Sobol, 948 F.2d 7, 83-84 (1991), the Court of Appeals for the Second Circuit accepted Trietley as an authoritative interpretation of state law. Furthermore, the Attorney General of New York supports Trietley as an appropriate approach to deciding this case. </s> Pursuant to 414's empowerment of local school districts, the Board of Center Moriches Union Free School District (District) has issued rules and regulations with respect to the use of school property when not in use for school purposes. The rules allow only 2 of the 10 purposes authorized by 414: social, civic, or recreational uses (Rule 10) and use by political organizations if secured in compliance with 414 (Rule 8). Rule 7, however, consistent with the judicial interpretation of state law, provides that "[t]he school premises shall not be used [by any group for religious purposes."] App. to Pet. for Cert. 57a. </s> The issue in this case is whether, against this background of state law, it violates the Free Speech Clause of the First Amendment, made applicable to the States by the Fourteenth Amendment, to deny a church access to school premises to exhibit for public viewing and for assertedly religious purposes, a film series dealing with family and childrearing issues faced by parents today. </s> I </s> Petitioners (Church) are Lamb's Chapel, an evangelical church in the community of Center Moriches, and its pastor John Steigerwald. Twice the Church applied to the District for permission to use school facilities to show a six-part film series containing lectures by Doctor James Dobson. 2 A [508 U.S. 384, 388] brochure provided on request of the District identified Dr. Dobson as a licensed psychologist, former associate clinical professor of pediatrics at the University of Southern California, best-selling author, and radio commentator. The brochure stated that the film series would discuss Dr. Dobson's views on the undermining influences of the media that could only be counterbalanced by returning to traditional Christian family values instilled at an early stage. The brochure went on to describe the contents of each of the six parts of the series. 3 The District denied the first application, saying [508 U.S. 384, 389] that "[t]his film does appear to be church-related, and therefore your request must be refused." App. 84. The second application for permission to use school premises for showing the film series, which described it as a "Family-oriented movie - from a Christian perspective," id., at 91, was denied using identical language. </s> The Church brought suit in the District Court, challenging the denial as a violation of the Freedom of Speech and Assembly Clauses, the Free Exercise Clause, and the Establishment Clause of the First Amendment, as well as the Equal Protection Clause of the Fourteenth Amendment. As to each cause of action, the Church alleged that the actions were undertaken under color of state law, in violation of 42 U.S.C. 1983. The District Court granted summary judgment for respondents, rejecting all the Church's claims. With respect to the free speech claim under the First Amendment, the District Court characterized the District's facilities as a "limited public forum." The court noted that the enumerated purposes for which 414 allowed access to school facilities did not include religious worship or instruction, that Rule 7 explicitly proscribes using school facilities for religious purposes, and that the Church had conceded that its showing of the film series would be for religious purposes. 770 F.Supp. 91, 92, 98-99 (E.D.N.Y. 1991). The District Court stated that, once a limited public forum is opened to a particular type of speech, selectively denying access to other activities of the same genre is forbidden. Id., at 99. Noting that the District had not opened its facilities to organizations [508 U.S. 384, 390] similar to Lamb's Chapel for religious purposes, the District Court held that the denial in this case was viewpoint-neutral and, hence, not a violation of the Freedom of Speech Clause. Ibid. The District Court also rejected the assertion by the Church that denying its application demonstrated a hostility to religion and advancement of nonreligion not justified under the Establishment of Religion Clause of the First Amendment. 736 F.Supp. 1247, 1253 (1990). </s> The Court of Appeals affirmed the judgment of the District Court "in all respects." 959 F.2d 381, 389 (CA2 1992). It held that the school property, when not in use for school purposes, was neither a traditional nor a designated public forum; rather, it was a limited public forum open only for designated purposes, a classification that "allows it to remain nonpublic except as to specified uses." Id., at 386. The court observed that exclusions in such a forum need only be reasonable and viewpoint-neutral, ibid., and ruled that denying access to the Church for the purpose of showing its film did not violate this standard. Because the holding below was questionable under our decisions, we granted the petition for certiorari, 506 U.S. 813 (1992), which in principal part challenged the holding below as contrary to the Free Speech Clause of the First Amendment. 4 </s> II </s> [There is no question that the District, like the private owner of property, may legally preserve the property under its control for the use to which it is dedicated.] Cornelius v. NAACP Legal Defense & Ed. Fund, Inc., 473 U.S. 788, 800 (1985); Perry Ed. Assn. v. Perry Local Educators' Assn., 460 U.S. 37, 46 (1983); Postal Service v. Council of Greenburgh Civic Assns., [508 U.S. 384, 391] 453 U.S. 114, 129 -130 (1981); Greer v. Spock, 424 U.S. 828, 836 (1976); Adderley v. Florida, 385 U.S. 39, 47 (1966). It is also common ground that the District need not have permitted after-hours use of its property for any of the uses permitted by 414 N.Y. Educ. Law. The District, however, did open its property for 2 of the 10 uses permitted by 414. The Church argued below that, because under Rule 10 of the rules issued by the District, school property could be used for "social, civic, and recreational" purposes, the District had opened its property for such a wide variety of communicative purposes that restrictions on communicative uses of the property were subject to the same constitutional limitations as restrictions in traditional public forums such as parks and sidewalks. Hence, its view was that subject matter or speaker exclusions on District property were required to be justified by a compelling state interest, and to be narrowly drawn to achieve that end. See Perry, supra, at 45; Cornelius, supra, at 800. Both the District Court and the Court of Appeals rejected this submission, which is also presented to this Court. The argument has considerable force, for the District's property is heavily used by a wide variety of private organizations, including some that presented a "close question," which the Court of Appeals resolved in the District's favor, as to whether the District had in fact already opened its property for religious uses. 959 F.2d, at 387. 5 </s> [508 U.S. 384, 392] We need not rule on this issue, however, for even if the courts below were correct in this respect - and we shall assume for present purposes that they were - the judgment below must he reversed. </s> With respect to public property that is not a designated public forum open for indiscriminate public use for communicative purposes, we have said that "[c]ontrol over access to a nonpublic forum can be based on subject matter and speaker identity so long as the distinctions drawn are reasonable in [508 U.S. 384, 393] light of the purpose served by the forum and are viewpoint-neutral." Cornelius, 473 U.S., at 806 , citing Perry Education Assn., supra, at 49. The Court of Appeals appeared to recognize that the total ban on using District property for religious purposes could survive First Amendment challenge only if excluding this category of speech was reasonable and viewpoint-neutral. The court's conclusion in this case was that Rule 7 met this test. We cannot agree with this holding, for Rule 7 was unconstitutionally applied in this case. 6 </s> Court of Appeals thought that the application of Rule 7 in this case was viewpoint-neutral because it had been, and would be, applied in the same way to all uses of school property for religious purposes. That all religions and all uses for religious purposes are treated alike under Rule 7, however, does not answer the critical question whether it discriminates on the basis of viewpoint to permit school property to be used for the presentation of all views about family issues and childrearing except those dealing with the subject matter from a religious standpoint. </s> There is no suggestion from the courts below or from the District or the State that a lecture or film about childrearing and family values would not be a use for social or civic purposes otherwise permitted by Rule 10. That subject matter is not one that the District has placed off limits to any and all speakers. Nor is there any indication in the record before us that the application to exhibit the particular film series involved here was, or would have been, denied for any reason other than the fact that the presentation would have [508 U.S. 384, 394] been from a religious perspective. In our view, denial on that basis was plainly invalid under our holding in Cornelius, supra, at 806, that </s> "[al]though a speaker may be excluded from a nonpublic forum if he wishes to address a topic not encompassed within the purpose of the forum . . . or if he is not a member of the class of speakers for whose special benefit the forum was created . . ., the government violates the First Amendment when it denies access to a speaker solely to suppress the point of view he espouses on an otherwise includible subject." </s> The film series involved here no doubt dealt with a subject otherwise permissible under Rule 10, and its exhibition was denied solely because the film series dealt with the subject from a religious standpoint. The principle that has emerged from our cases "is that the First Amendment forbids the government to regulate speech in ways that favor some viewpoints or ideas at the expense of others." City Council of Los Angeles v. Taxpayers for Vincent, 466 U.S. 789, 804 (1984). That principle applies in the circumstances of this case; as Judge Posner said for the Court of Appeals, for the Seventh Circuit, to discriminate "against a particular point of view . . . would . . . flunk the test . . . [of] Cornelius, provided that the defendants have no defense based on the establishment clause." May v. Evansville-Vanderburgh School Corp., 787 F.2d 1105, 1114 (1986). </s> The District, as a respondent, would save its judgment below on the ground that to permit its property to be used for religious purposes would be an establishment of religion forbidden by the First Amendment. This Court suggested in Widmar v. Vincent, 454 U.S. 263, 271 (1981), that the interest of the State in avoiding an Establishment Clause violation "may be [a] compelling" one justifying an abridgment of free speech otherwise protected by the First Amendment; but the Court went on to hold that permitting [508 U.S. 384, 395] use of university property for religious purposes under the open access policy involved there would not be incompatible with the Court's Establishment Clause cases. </s> We have no more trouble than did the Widmar Court in disposing of the claimed defense on the ground that the posited fears of an Establishment Clause violation are unfounded. The showing of this film series would not have been during school hours, would not have been sponsored by the school, and would have been open to the public, not just to church members. The District property had repeatedly been used by a wide variety of private organizations. Under these circumstances, as in Widmar, there would have been [no realistic danger] that the community would [think that the District was [endorsing religion] or any particular creed,] and any benefit to religion or to the Church would have been no more than incidental. As in Widmar, supra, at 271-272, permitting District property to be used to exhibit the film series involved in this case would not have been an establishment of religion under the three-part test articulated in Lemon v. Kurtzman, 403 U.S. 602 (1971): the challenged governmental action has a secular purpose, does not have the principal or primary effect of advancing or inhibiting religion, and does not foster an excessive entanglement with religion. 7 </s> The District also submits that it justifiably denied use of its property to a "radical" church for the purpose of proselytizing, since to do so would lead to threats of public unrest and even violence. Brief for Respondent Center Moriches [508 U.S. 384, 396] Union Free School District et al. 4-5, 11-12, 24. There is nothing in the record to support such a justification, which in any event would be difficult to defend as a reason to deny the presentation of a religious point of view about a subject the District otherwise opens to discussion on District property. </s> We note that the Attorney General New York State, a respondent here, does not rely on either the Establishment Clause or possible danger to the public peace in supporting the judgment below. Rather, he submits that the exclusion is justified because the purpose of the access rules is to promote the interests of the public in general, rather than sectarian or other private interests. In light of the variety of the uses of District property that have been permitted under Rule 10, this approach has its difficulties. This is particularly so since Rule 10 states that District property may be used for social, civic, or recreational use "only if it can be nonexclusive and open to all residents of the school district that form a homogeneous group deemed relevant to the event." App. to Pet. for Cert. 57a. At least arguably, the Rule does not require that permitted uses need be open to the public at large. However that may be, this was not the basis of the judgment that we are reviewing. The Court of Appeals, as we understand it, ruled that, because the District had the power to permit or exclude certain subject matters, it was entitled to deny use for any religious purpose, including the purpose in this case. The Attorney General also defends this as a permissible subject matter exclusion, rather than a denial based on viewpoint, a submission that we have already rejected. </s> The Attorney General also argues that there is no express finding below that the Church's application would have been granted absent the religious connection. This fact is beside the point for the purposes of this opinion, which is concerned with the validity of the stated reason for denying the [508 U.S. 384, 397] Church's application, namely, that the film series sought to be shown "appeared to be church-related." </s> For the reasons stated in this opinion, the judgment of the Court of Appeals is </s> Reversed. </s> Footnotes [Footnote 1 Section 414(1)(e) authorizes the use of school property "[f]or polling places for holding primaries and elections and for the registration of voters and for holding political meetings. But no meetings sponsored by political organizations shall be permitted unless authorized by a vote of a district meeting, held as provided by law, or, in cities by the board of education thereof." </s> [Footnote 2 Shortly before the first of these requests, the Church had applied for permission to use school rooms for its Sunday morning services and for Sunday School. The hours specified were 9 a.m. to 1 p.m. and the time [508 U.S. 384, 388] period one year beginning in the next month. 959 F.2d 381, 383 (CA2 1992). Within a few days, the District wrote petitioner that the application "requesting use of the high school for your Sunday services" was denied, citing both N.Y. Educ. Law 414 and the District's Rule 7 barring uses for religious purposes. The Church did not challenge this denial in the courts, and the validity of this denial is not before us. </s> [Footnote 3 "Turn Your Heart Toward Home is available now in a series of six discussion-provoking films: </s> "1) A FATHER LOOKS BACK emphasizes how swiftly time passes, and appeals to all parents to "turn their hearts toward home" during the all-important childrearing years. (60 minutes.) </s> "2) POWER IN PARENTING: THE YOUNG CHILD begins by exploring the inherent nature of power, and offers many practical helps for facing the battlegrounds in childrearing - bedtime, mealtime and other confrontations so familiar to parents. Dr. Dobson also takes a look at areas of conflict in marriage and other adult relationships. (60 minutes.) </s> "3) POWER IN PARENTING: THE ADOLESCENT discusses father/daughter and mother/son relationships, and the importance of allowing children to grow to develop as individuals. Dr. Dobson also encourages parents to free themselves of undeserved guilt when their teenagers choose to rebel. (45 minutes.) </s> "4) THE FAMILY UNDER FIRE views the family in the context of today's society, where a "civil war of values" is being waged. Dr. Dobson urges parents to look at the effects of governmental interference, abortion and pornography, and to get involved. To preserve what they care about most - their own families! (52 minutes.) </s> Note: This film contains explicit information regarding the pornography industry. Not recommended for young audiences. </s> "5) OVERCOMING A PAINFUL CHILDHOOD includes Shirley Dobson's intimate memories of a difficult childhood with her alcoholic [508 U.S. 384, 389] father. Mrs. Dobson recalls the influences which brought her to a loving God who saw her personal circumstances and heard her cries for help. (40 minutes.) </s> "6) THE HERITAGE presents Dr. Dobson's powerful closing remarks. Here he speaks clearly and convincingly of our traditional values which, if properly employed and defended, can assure happy, healthy, strengthened homes and family relationships in the years to come. (60 minutes.)" App. 87-88. </s> [Footnote 4 The petition also presses the claim by the, Church, rejected by both courts below, that the rejection of its application to exhibit its film series violated the Establishment Clause because it and Rule 7's categorical refusal to permit District property to be used for religious purposes demonstrate hostility to religion. Because we reverse on another ground, we need not decide what merit this submission might have. </s> [Footnote 5 In support of its case in the District Court, the Church presented the following sampling of the uses that had been permitted under Rule 10 in 1987 and 1988: </s> A New Age religious group known as the "Mind Center" Southern Harmonize Gospel Singers Salvation Army Youth Band Hampton Council of Churches' Billy Taylor Concert Center Moriches Co-op Nursery School's Quilting Bee Manorville Humane Society's Chinese Auction Moriches Bay Power Squadron [508 U.S. 384, 392] Unkechaug Dance Group Paul Gibson's Baseball Clinic Moriches Bay Civic Association Moriches Chamber of Commerce's Town Fair Day Center Moriches Drama Club Center Moriches Music Award Associations' `Amahl & the Night Visitors' Saint John's Track and Field Program Girl Scouts of Suffolk [C]ounty Cub Scouts Pack 23 Boy Scout Troop #414." 770 F.Supp. 91, 93, n. # 4 (E.D.N.Y. 1991). </s> The Church claimed that the first three uses listed above demonstrated that Rule 10 actually permitted the District property to be used for religious purposes as well as a great assortment of other uses. The first item listed is particularly interesting and relevant to the issue before us. The District Court referred to this item as "a lecture series by the Mind Center, purportedly a New Age religious group." Id., at 93. The Court of Appeals described it as follows: </s> "The lecture series, "Psychology and The Unknown," by Jerry Huck, was sponsored by the Center Moriches Free Public Library. The library's newsletter characterized Mr. Huck as a psychotherapist who would discuss such topics as parapsychology, transpersonal psychology, physics and metaphysics in his night series of lectures. Mr. Huck testified that he lectured principally on parapsychology, which he defined by "reference to the human unconscious, the mind, the unconscious emotional system or the body system." When asked whether his lecture involved matters of both a spiritual and a scientific nature, Mr. Huck responded: "It was all science. Anything I speak on based on parapsychology, analytic, quantum physicists [sic]." Although some incidental reference to religious matters apparently was made in the lectures, Mr. Huck himself characterized such matters as `a fascinating sideline," and "not the purpose of the [lecture].'" 959 F.2d, at 388. </s> [Footnote 6 Although the Court of Appeals apparently held that Rule 7 was reasonable as well as viewpoint-neutral, the court uttered not a word in support of its reasonableness holding. If Rule 7 were to be held unreasonable, it could be held facially invalid, that is, it might be held that the rule could in no circumstances be applied to religious speech or religious communicative conduct. In view of our disposition of this case, we need not pursue this issue. </s> [Footnote 7 While we are somewhat diverted by JUSTICE SCALIA's evening at the cinema, post, at 1-3, we return to the reality that there is a proper way to inter an established decision, and Lemon, however frightening it might be to some, has not been overruled. This case, like Corporation of Presiding Bishop of Church of Jesus Christ of Latter-day Saints v. Amos, 483 U.S. 327 (1987), presents no occasion to do so. JUSTICE SCALIA apparently was less haunted by the ghosts of the living when he joined the opinion of the Court in that case. </s> JUSTICE KENNEDY, concurring in part and concurring in the judgment. </s> Given the issues presented, as well as the apparent unanimity of our conclusion that this overt, viewpoint-based discrimination contradicts the Speech Clause of the First Amendment and that there has been no substantial showing of a potential Establishment Clause violation, I agree with JUSTICE SCALIA that the Court's citation of Lemon v. Kurtzman, 403 U.S. 602 (1971), is unsettling and unnecessary. The same can be said of the Court's use of the phrase "endorsing religion," see ante, at 10, which, as I have indicated elsewhere, cannot suffice as a rule of decision consistent with our precedents and our traditions in this part of our jurisprudence. See Allegheny County v. American Civil Liberties Union, Greater Pittsburgh Chapter, 492 U.S. 573, 655 (1989) (opinion concurring in judgment in part and dissenting in part). With these observations, I concur in part and concur in the judgment. </s> JUSTICE SCALIA, with whom JUSTICE THOMAS joins, concurring in the judgment. </s> I join the Court's conclusion that the District's refusal to allow use of school facilities for petitioners' film viewing, while generally opening the schools for community activities, violates petitioners' First Amendment free speech rights (as does N.Y.Educ.Law 414 (McKinney 1988 and Supp. 1993), to the extent it compelled the District's denial, see ante, at 386-387). I also agree with the Court that allowing Lamb's Chapel to use school facilities poses "no realistic danger" of a violation of the Establishment Clause, ante, at 395, but I [508 U.S. 384, 398] cannot accept most of its reasoning in this regard. The Court explains that the showing of petitioners' film on school property after school hours would not cause the community to "think that the District was endorsing religion or any particular creed," and further notes that access to school property would not violate the three-part test articulated in Lemon v. Kurtzman, 403 U.S. 602 (1971). Ante, at 395. </s> As to the Court's invocation of the Lemon test: like some ghoul in a late-night horror movie that repeatedly sits up in its grave and shuffles abroad after being repeatedly killed and buried, Lemon stalks our Establishment Clause jurisprudence once again, frightening the little children and school attorneys of Center Moriches Union Free School District. Its most recent burial, only last Term, was, to be sure, not fully six feet under: Our decision in Lee v. Weisman, 505 U.S. 577, 586 -587 (1992), conspicuously avoided using the supposed "test," but also declined the invitation to repudiate it. Over the years, however, no fewer than five of the currently sitting Justices have, in their own opinions, personally driven pencils through the creature's heart (the author of today's opinion repeatedly), and a sixth has joined an opinion doing so. See, e.g., Weisman, supra, at 644 (SCALIA, J., joined by, inter alios, THOMAS, J., dissenting); Allegheny County v. American Civil Liberties Union, Greater Pittsburgh Chapter, 492 U.S. 573, 655 -657 (1989) (KENNEDY, J., concurring in judgment in part and dissenting in part); Corporation of Presiding Bishop of Church of Jesus Christ of Latter-day Saints v. Amos, 483 U.S. 327, 346 -349 (1987) (O'CONNOR, J., concurring in judgment); Wallace v. Jaffree, 472 U.S. 38, 107 -113 (1985) (REHNQUIST, J., dissenting); id., at 90-91 (WHITE, J., dissenting); School Dist. of Grand Rapids v. Ball, 473 U.S. 373, 400 (1985) (WHITE, J., dissenting); Widmar v. Vincent, 454 U.S. 263, 282 (1981) (WHITE, J., dissenting); New York v. Cathedral Academy, 434 U.S. 125 , [508 U.S. 384, 399] 134-135 (1977) (WHITE, J., dissenting); Roemer v. Board of Pub. Works, of Md., 426 U.S. 736, 768 (1976) (WHITE, J., concurring in judgment); Committee for Public Educ. & Religious Liberty v. Nyquist, 413 U.S. 756, 820 (1973) (WHITE, J., dissenting). </s> The secret of the Lemon test's survival, I think, is that it is so easy to kill. It is there to scare us (and our audience) when we wish it to do so, but we can command it to return to the tomb at will. See, e.g., Lynch v. Donnelly, 465 U.S. 668, 679 (1984) (noting instances in which Court has not applied Lemon test). When we wish to strike down a practice it forbids, we invoke it, see, e.g., Aguilar v. Fenton, 473 U.S. 402 (1985) (striking down state remedial education program administered in part in parochial schools); when we wish to uphold a practice it forbids, we ignore it entirely, see Marsh v. Chambers, 463 U.S. 783 (1983) (upholding state legislative chaplains). Sometimes, we take a middle course, calling its three prongs "no more than helpful signposts," Hunt v. McNair, 413 U.S. 734, 741 (1973). Such a docile and useful monster is worth keeping around, at least in a somnolent state; one never knows when one might need him. </s> For my part, I agree with the long list of constitutional scholars who have criticized Lemon and bemoaned the strange Establishment Clause geometry of crooked lines and wavering shapes its intermittent use has produced. See, e.g., Choper, The Establishment Clause and Aid to Parochial Schools - An Update, 75 Calif.L.Rev. 5 (1987); Marshall, "We Know It When We See It": The Supreme Court and Establishment, 59 S.Cal.L.Rev. 495 (1986); McConnell, Accommodation of Religion, 1985 S.Ct. Rev. 1; Kurland, The Religion Clauses and the Burger Court, 34 Cath. U.L.Rev. 1 (1984); R. Cord, Separation of Church and State (1982); Choper, The Religion Clauses of the First Amendment: Reconciling the Conflict, 41 U.Pitt.L.Rev. 673 (1980). I will decline to apply Lemon - whether it validates [508 U.S. 384, 400] or invalidates the government action in question - and therefore cannot Join the opinion of the Court today. * </s> I cannot join for yet another reason: the Court's statement that the proposed use of the school's facilities is constitutional because (among other things) it would not signal endorsement of religion in general. Ante, at 10. What a strange notion, that a Constitution which itself gives "religion in general" preferential treatment (I refer to the Free Exercise Clause) forbids endorsement of religion in general. The attorney general of New York not only agrees with that strange notion, he has an explanation for it: "Religious advocacy," he writes, "serves the community only in the eyes of its adherents, and yields a benefit only to those who already believe." Brief for Respondent Attorney General 24. That was not the view of those who adopted our Constitution, who believed that the public virtues inculcated by religion are a public good. It suffices to point out that, during the summer of 1789, when it was in the process of drafting the First Amendment, Congress enacted the Northwest Territory Ordinance of that the Confederation Congress had adopted, in 1787 - Article III of which provides, "Religion, morality, and knowledge, being necessary to good government and the happiness of mankind, schools and the means of education shall forever be encouraged." Unsurprisingly, then, indifference to "religion in general" is not what our cases, both old and recent, demand. See, e.g., Zorach v. Clauson, 343 U.S. 306, 313 -314 (1952) ("When the state [508 U.S. 384, 401] encourages religious instruction or cooperates with religious authorities by adjusting the schedule of public events to sectarian needs, it follows the best of our traditions"); Walz v. Tax Comm'n of New York City, 397 U.S. 664 (1970) (upholding property tax exemption for church property); Lynch, 465 U.S., at 673 (the Constitution "affirmatively mandates accommodation, not merely tolerance, of all religions. . . . Anything less would require the `callous indifference' we have said was never intended" (citations omitted)); id., at 683 ("Our precedents plainly contemplate th that, on occasion, some advancement of religion will result from governmental action"); Marsh, supra; Corporation of Presiding Bishop of Church of Jesus christ of Latterday Saints v. Amos, 483 U.S. 327 (1987) (exemption for religious organizations from certain provisions of Civil Rights Act). </s> * * * * </s> For the reasons given by the Court, I agree that the Free Speech Clause of the First Amendment forbids what respondents have done here. As for the asserted Establishment Clause justification, I would hold, simply and clearly, that giving Lamb's Chapel nondiscriminatory access to school facilities cannot violate that provision because it does not signify state or local embrace of a particular religious sect. </s> [Footnote * The Court correctly notes, ante, at 395, n. 7, that I joined the opinion in Corporation of Presiding Bishop of Church of Jesus Christ of Latterday Saints v. Amos, 483 U.S. 327 (1987), which considered the Lemon test. Lacking a majority at that time to abandon Lemon, we necessarily focused on that test, which had been the exclusive basis for the lower court's judgment. Here, of course, the lower court did not mention Lemon, and indeed did not even address any Establishment Clause argument on behalf of respondents. Thus, the Court is ultimately correct that Presiding Bishop provides a useful comparison: It was as impossible to avoid Lemon there as it is unnecessary to inject Lemon here. </s> [508 U.S. 384, 402]

United States Supreme Court MOORE v. EAST CLEVELAND(1977) No. 75-6289 Argued: November 2, 1976Decided: May 31, 1977 </s> Appellant lives in her East Cleveland, Ohio, home with her son and two grandsons (who are first cousins). An East Cleveland housing ordinance limits occupancy of a dwelling unit to members of a single family, but defines "family" in such a way that appellant's household does not qualify. Appellant was convicted of a criminal violation of the ordinance. Her conviction was upheld on appeal over her claim that the ordinance is unconstitutional. Appellee city contends that the ordinance should be sustained under Village of Belle Terre v. Boraas, 416 U.S. 1 , which upheld an ordinance imposing limits on the types of groups that could occupy a single dwelling unit. Held: The judgment is reversed. Pp. 498-506; 513-521. </s> Reversed. </s> MR. JUSTICE POWELL, joined by MR. JUSTICE BRENNAN, MR. JUSTICE MARSHALL, and MR. JUSTICE BLACKMUN, concluded that the ordinance deprived appellant of her liberty in violation of the Due Process Clause of the Fourteenth Amendment. </s> (a) This case is distinguishable from Belle Terre, supra, where the ordinance affected only unrelated individuals. The ordinance here expressly selects certain categories of relatives who may live together and declares that others may not, in this instance making it a crime for a grandmother to live with her grandson. Pp. 498-499. </s> (b) When the government intrudes on choices concerning family living arrangements, the usual deference to the legislature is inappropriate; and the Court must examine carefully the importance of the governmental interests advanced and the extent to which they are served by the challenged regulation. P. 499. </s> (c) The ordinance at best has but a tenuous relationship to the objectives cited by the city: avoiding overcrowding, traffic congestion, and an undue financial burden on the school system. Pp. 499-500. </s> (d) The strong constitutional protection of the sanctity of the family established in numerous decisions of this Court extends to the family choice involved in this case and is not confined within an arbitrary boundary drawn at the limits of the nuclear family (essentially a couple [431 U.S. 494, 495] and their dependent children). Appropriate limits on substantive due process come not from drawing arbitrary lines but from careful "respect for the teachings of history [and] solid recognition of the basic values that underlie our society." Griswold v. Connecticut, 381 U.S. 479, 501 (Harlan, J., concurring). The history and tradition of this Nation compel a larger conception of the family. Pp. 500-506. </s> MR. JUSTICE STEVENS concluded that under the limited standard of review preserved in Euclid v. Ambler Realty Co., 272 U.S. 365 , and Nectow v. Cambridge, 277 U.S. 183 , before a zoning ordinance can be declared unconstitutional it must be shown to be clearly arbitrary and unreasonable as having no substantial relation to the public health, safety, morals, or general welfare; that appellee city has failed totally to explain the need for a rule that would allow a homeowner to have grandchildren live with her if they are brothers but not if they are cousins; and that under that standard appellee city's unprecedented ordinance constitutes a taking of property without due process and without just compensation. Pp. 513-521. </s> POWELL, J., announced the judgment of the Court and delivered an opinion in which BRENNAN, MARSHALL, and BLACKMUN, JJ., joined. BRENNAN, J., filed a concurring opinion, in which MARSHALL, J., joined, post, p. 506. STEVENS, J., filed an opinion concurring in the judgment, post, p. 513. BURGER, C. J., filed a dissenting opinion, post, p. 521. STEWART, J., filed a dissenting opinion, in which REHNQUIST, J., joined, post, p. 531. WHITE, J., filed a dissenting opinion, post, p. 541. </s> Edward R. Stege, Jr., argued the cause for appellant. With him on the brief were Francis D. Murtaugh, Jr., and Lloyd B. Snyder. </s> Leonard Young argued the cause for appellee. With him on the brief was Henry B. Fischer. * </s> [Footnote * Melvin L. Wulf and Benjamin Sheerer filed a brief for the American Civil Liberties Union et al. as amici curiae. </s> MR. JUSTICE POWELL announced the judgment of the Court, and delivered an opinion in which MR. JUSTICE BRENNAN, MR. JUSTICE MARSHALL, and MR. JUSTICE BLACKMUN joined. </s> East Cleveland's housing ordinance, like many throughout the country, limits occupancy of a dwelling unit to members [431 U.S. 494, 496] of a single family. 1351.02. 1 But the ordinance contains an unusual and complicated definitional section that recognizes as a "family" only a few categories of related individuals. 1341.08. 2 Because her family, living together in her home, fits none of those categories, appellant stands convicted of a criminal offense. The question in this case is whether the ordinance violates the Due Process Clause of the Fourteenth Amendment. 3 </s> I </s> Appellant, Mrs. Inez Moore, lives in her East Cleveland home together with her son, Dale Moore, Sr., and her two grandsons, Dale, Jr., and John Moore, Jr. The two boys are first cousins rather than brothers; we are told that John [431 U.S. 494, 497] came to live with his grandmother and with the elder and younger Dale Moores after his mother's death. 4 </s> In early 1973, Mrs. Moore received a notice of violation from the city, stating that John was an "illegal occupant" and directing her to comply with the ordinance. When she failed to remove him from her home, the city filed a criminal charge. Mrs. Moore moved to dismiss, claiming that the ordinance was constitutionally invalid on its face. Her motion was overruled, and upon conviction she was sentenced to five days in jail and a $25 fine. The Ohio Court of Appeals affirmed after giving full consideration to her constitutional claims, 5 </s> [431 U.S. 494, 498] and the Ohio Supreme Court denied review. We noted probable jurisdiction of her appeal, 425 U.S. 949 (1976). </s> II </s> The city argues that our decision in Village of Belle Terre v. Boraas, 416 U.S. 1 (1974), requires us to sustain the ordinance attacked here. Belle Terre, like East Cleveland, imposed limits on the types of groups that could occupy a single dwelling unit. Applying the constitutional standard announced in this Court's leading land-use case, Euclid v. Ambler Realty Co., 272 U.S. 365 (1926), 6 We sustained the Belle Terre ordinance on the ground that it bore a rational relationship to permissible state objectives. </s> But one overriding factor sets this case apart from Belle Terre. The ordinance there affected only unrelated individuals. It expressly allowed all who were related by "blood, adoption, or marriage" to live together, and in sustaining the ordinance we were careful to note that it promoted "family needs" and "family values." 416 U.S., at 9 . East Cleveland, in contrast, has chosen to regulate the occupancy of its housing by slicing deeply into the family itself. This is no mere incidental result of the ordinance. On its face it selects certain [431 U.S. 494, 499] categories of relatives who may live together and declares that others may not. In particular, it makes a crime of a grandmother's choice to live with her grandson in circumstances like those presented here. </s> When a city undertakes such intrusive regulation of the family, neither Belle Terre nor Euclid governs; the usual judicial deference to the legislature is inappropriate. "This Court has long recognized that freedom of personal choice in matters of marriage and family life is one of the liberties protected by the Due Process Clause of the Fourteenth Amendment." Cleveland Board of Education v. LaFleur, 414 U.S. 632, 639 -640 (1974). A host of cases, tracing their lineage to Meyer v. Nebraska, 262 U.S. 390, 399 -401 (1923), and Pierce v. Society of Sisters, 268 U.S. 510, 534 -535 (1925), have consistently acknowledged a "private realm of family life which the state cannot enter." Prince v. Massachusetts, 321 U.S. 158, 166 (1944). See, e. g., Roe v. Wade, 410 U.S. 113, 152 -153 (1973); Wisconsin v. Yoder, 406 U.S. 205, 231 -233 (1972); Stanley v. Illinois, 405 U.S. 645, 651 (1972); Ginsberg v. New York, 390 U.S. 629, 639 (1968); Griswold v. Connecticut, 381 U.S. 479 (1965); id., at 495-496 (Goldberg, J., concurring); id., at 502-503 (WHITE, J., concurring); Poe v. Ullman, 367 U.S. 497, 542 -544, 549-553 (1961) (Harlan, J., dissenting); cf. Loving v. Virginia, 388 U.S. 1, 12 (1967); May v. Anderson, 345 U.S. 528, 533 (1953); Skinner v. Oklahoma ex rel. Williamson, 316 U.S. 535, 541 (1942). Of course, the family is not beyond regulation. See Prince v. Massachusetts, supra, at 166. But when the government intrudes on choices concerning family living arrangements, this Court must examine carefully the importance of the governmental interests advanced and the extent to which they are served by the challenged regulation. See Poe v. Ullman, supra, at 554 (Harlan, J., dissenting). </s> When thus examined, this ordinance cannot survive. The city seeks to justify it as a means of preventing overcrowding, [431 U.S. 494, 500] minimizing traffic and parking congestion, and avoiding an undue financial burden on East Cleveland's school system. Although these are legitimate goals, the ordinance before us serves them marginally, at best. 7 For example, the ordinance permits any family consisting only of husband, wife, and unmarried children to live together, even if the family contains a half dozen licensed drivers, each with his or her own car. At the same time it forbids an adult brother and sister to share a household, even if both faithfully use public transportation. The ordinance would permit a grandmother to live with a single dependent son and children, even if his school-age children number a dozen, yet it forces Mrs. Moore to find another dwelling for her grandson John, simply because of the presence of his uncle and cousin in the same household. We need not labor the point. Section 1341.08 has but a tenuous relation to alleviation of the conditions mentioned by the city. </s> III </s> The city would distinguish the cases based on Meyer and Pierce. It points out that none of them "gives grandmothers any fundamental rights with respect to grandsons," Brief for Appellee 18, and suggests that any constitutional right to live together as a family extends only to the nuclear family - essentially a couple and their dependent children. </s> To be sure, these cases did not expressly consider the family relationship presented here. They were immediately concerned with freedom of choice with respect to childbearing, e. g., LaFleur, Roe v. Wade, Griswold, supra, or with the rights [431 U.S. 494, 501] of parents to the custody and companionship of their own children, Stanley v. Illinois, supra, or with traditional parental authority in matters of child rearing and education. Yoder, Ginsberg, Pierce, Meyer, supra. But unless we close our eyes to the basic reasons why certain rights associated with the family have been accorded shelter under the Fourteenth Amendment's Due Process Clause, we cannot avoid applying the force and rationale of these precedents to the family choice involved in this case. </s> Understanding those reasons requires careful attention to this Court's function under the Due Process Clause. Mr. Justice Harlan described it eloquently: </s> "Due process has not been reduced to any formula; its content cannot be determined by reference to any code. The best that can be said is that through the course of this Court's decisions it has represented the balance which our Nation, built upon postulates of respect for the liberty of the individual, has struck between that liberty and the demands of organized society. If the supplying of content to this Constitutional concept has of necessity been a rational process, it certainly has not been one where judges have felt free to roam where unguided speculation might take them. The balance of which I speak is the balance struck by this country, having regard to what history teaches are the traditions from which it developed as well as the traditions from which it broke. That tradition is a living thing. A decision of this Court which radically departs from it could not long survive, while a decision which builds on what has survived is likely to be sound. 8 No formula could serve as a substitute, in this area, for judgment and restraint. [431 U.S. 494, 502] </s> ". . . [T]he full scope of the liberty guaranteed by the Due Process Clause cannot be found in or limited by the precise terms of the specific guarantees elsewhere provided in the Constitution. This `liberty' is not a series of isolated points pricked out in terms of the taking of property; the freedom of speech, press, and religion; the right to keep and bear arms; the freedom from unreasonable searches and seizures; and so on. It is a rational continuum which, broadly speaking, includes a freedom from all substantial arbitrary impositions and purposeless restraints, . . . and which also recognizes, what a reasonable and sensitive judgment must, that certain interests require particularly careful scrutiny of the state needs asserted to justify their abridgment." Poe v. Ullman, supra, at 542-543 (dissenting opinion). </s> Substantive due process has at times been a treacherous field for this Court. There are risks when the judicial branch gives enhanced protection to certain substantive liberties without the guidance of the more specific provisions of the Bill of Rights. As the history of the Lochner era demonstrates, there is reason for concern lest the only limits to such judicial intervention become the predilections of those who happen at the time to be Members of this Court. 9 That history counsels caution and restraint. But it does not counsel abandonment, nor does it require what the city urges here: cutting off any protection of family rights at the first convenient, if arbitrary boundary - the boundary of the nuclear family. [431 U.S. 494, 503] </s> Appropriate limits on substantive due process come not from drawing arbitrary lines but rather from careful "respect for the teachings of history [and] solid recognition of the basic values that underlie our society." 10 Griswold v. Connecticut, 381 U.S., at 501 (Harlan, J., concurring). 11 See generally Ingraham v. Wright, 430 U.S. 651, 672 -674, and nn. 41, 42 (1977); Joint Anti-Fascist Refugee Committee v. McGrath, 341 U.S. 123, 162 -163 (1951) (Frankfurter, J., concurring); Lochner v. New York, 198 U.S. 45, 76 (1905) (Holmes, J., dissenting). Our decisions establish that the Constitution protects the sanctity of the family precisely because the institution of the family is deeply rooted in this Nation's history and tradition. 12 It is through the family that we inculcate and [431 U.S. 494, 504] pass down many of our most cherished values, moral and cultural. 13 </s> Ours is by no means a tradition limited to respect for the bonds uniting the members of the nuclear family. The tradition of uncles, aunts, cousins, and especially grandparents sharing a household along with parents and children has roots equally venerable and equally deserving of constitutional recognition. 14 Over the years millions [431 U.S. 494, 505] of our citizens have grown up in just such an environment, and most, surely, have profited from it. Even if conditions of modern society have brought about a decline in extended family households, they have not erased the accumulated wisdom of civilization, gained over the centuries and honored throughout our history, that supports a larger conception of the family. Out of choice, necessity, or a sense of family responsibility, it has been common for close relatives to draw together and participate in the duties and the satisfactions of a common home. Decisions concerning child rearing, which Yoder, Meyer, Pierce and other cases have recognized as entitled to constitutional protection, long have been shared with grandparents or other relatives who occupy the same household - indeed who may take on major responsibility for the rearing of the children. 15 Especially in times of adversity, such as the death of a spouse or economic need, the broader family has tended to come together for mutual sustenance and to maintain or rebuild a secure home life. This is apparently what happened here. 16 </s> Whether or not such a household is established because of personal tragedy, the choice of relatives in this degree [431 U.S. 494, 506] of kinship to live together may not lightly be denied by the State. Pierce struck down an Oregon law requiring all children to attend the State's public schools, holding that the Constitution "excludes any general power of the State to standardize its children by forcing them to accept instruction from public teachers only." 268 U.S., at 535 . By the same token the Constitution prevents East Cleveland from standardizing its children - and its adults - by forcing all to live in certain narrowly defined family patterns. </s> Reversed. </s> Footnotes [Footnote 1 All citations by section number refer to the Housing Code of the city of East Cleveland, Ohio. </s> [Footnote 2 Section 1341.08 (1966) provides: "`Family' means a number of individuals related to the nominal head of the household or to the spouse of the nominal head of the household living as a single housekeeping unit in a single dwelling unit, but limited to the following: "(a) Husband or wife of the nominal head of the household. "(b) Unmarried children of the nominal head of the household or of the spouse of the nominal head of the household, provided, however, that such unmarried children have no children residing with them. "(c) Father or mother of the nominal head of the household or of the spouse of the nominal head of the household. "(d) Notwithstanding the provisions of subsection (b) hereof, a family may include not more than one dependent married or unmarried child of the nominal head of the household or of the spouse of the nominal head of the household and the spouse and dependent children of such dependent child. For the purpose of this subsection, a dependent person is one who has more than fifty percent of his total support furnished for him by the nominal head of the household and the spouse of the nominal head of the household. "(e) A family may consist of one individual." </s> [Footnote 3 Appellant also claims that the ordinance contravenes the Equal Protection Clause, but it is not necessary for us to reach that contention. </s> [Footnote 4 Brief for Appellant 4, 25. John's father, John Moore, Sr., has apparently been living with the family at least since the time of trial. Whether he was living there when the citation was issued is in dispute. Under the ordinance his presence too probably would be a violation. But we take the case as the city has framed it. The citation that led to prosecution recited only that John Moore, Jr., was in the home in violation of the ordinance. </s> [Footnote 5 The dissenting opinion of THE CHIEF JUSTICE suggests that Mrs. Moore should be denied a hearing in this Court because she failed to seek discretionary administrative relief in the form of a variance, relief that is no longer available. There are sound reasons for requiring exhaustion of administrative remedies in some situations, but such a requirement is wholly inappropriate where the party is a criminal defendant in circumstances like those present here. See generally McKart v. United States, 395 U.S. 185 (1969). Mrs. Moore defends against the State's prosecution on the ground that the ordinance is facially invalid, an issue that the zoning review board lacks competency to resolve. In any event, this Court has never held that a general principle of exhaustion could foreclose a criminal defendant from asserting constitutional invalidity of the statute under which she is being prosecuted. See, e. g., Yakus v. United States, 321 U.S. 414, 446 -447 (1944). Moreover, those cases that have denied certain nonconstitutional defenses to criminal defendants for failure to exhaust remedies did so pursuant to statutes that implicitly or explicitly mandated such a holding. See, e. g., Falbo v. United States, 320 U.S. 549 (1944); Yakus v. United States, supra; McGee v. United States, 402 U.S. 479 (1971). Because of the statutes the defendants were on notice that failure to pursue [431 U.S. 494, 498] available administrative relief might result in forfeiture of a defense in an enforcement proceeding. But here no Ohio statute or ordinance required exhaustion or gave Mrs. Moore any such warning. Indeed, the Ohio courts entertained all her claims, perceiving no denigration of state administrative process in according full judicial review. </s> [Footnote 6 Euclid held that land-use regulations violate the Due Process Clause if they are "clearly arbitrary and unreasonable, having no substantial relation to the public health, safety, morals, or general welfare." 272 U.S., at 395 . See Nectow v. Cambridge, 277 U.S. 183, 188 (1928). Later cases have emphasized that the general welfare is not to be narrowly understood; it embraces a broad range of governmental purposes. See Berman v. Parker, 348 U.S. 26 (1954). But our cases have not departed from the requirement that the government's chosen means must rationally further some legitimate state purpose. </s> [Footnote 7 It is significant that East Cleveland has another ordinance specifically addressed to the problem of overcrowding. See United States Dept. of Agriculture v. Moreno, 413 U.S. 528, 536 -537 (1973). Section 1351.03 limits population density directly, tying the maximum permissible occupancy of a dwelling to the habitable floor area. Even if John, Jr., and his father both remain in Mrs. Moore's household, the family stays well within these limits. </s> [Footnote 8 This explains why Meyer and Pierce have survived and enjoyed frequent reaffirmance, while other substantive due process cases of the same era have been repudiated - including a number written, as were Meyer and Pierce, by Mr. Justice McReynolds. </s> [Footnote 9 Lochner v. New York, 198 U.S. 45 (1905). See North Dakota Pharmacy Bd. v. Snyder's Drug Stores, Inc., 414 U.S. 156, 164 -167 (1973); Griswold v. Connecticut, 381 U.S. 479, 514 -527 (1965) (Black, J., dissenting); Ferguson v. Skrupa, 372 U.S. 726 (1963); Baldwin v. Missouri, 281 U.S. 586, 595 (1930) (Holmes, J., dissenting); G. Gunther, Cases and Materials on Constitutional Law 550-596 (9th ed. 1975). </s> [Footnote 10 A similar restraint marks our approach to the questions whether an asserted substantive right is entitled to heightened solicitude under the Equal Protection Clause because it is "explicitly or implicitly guaranteed by the Constitution," San Antonio Independent School Dist. v. Rodriguez, 411 U.S. 1, 33 -34 (1973), and whether or to what extent a guarantee in the Bill of Rights should be "incorporated" in the Due Process Clause because it is "necessary to an Anglo-American regime of ordered liberty." Duncan v. Louisiana, 391 U.S. 145, 149 -150, n. 14 (1968); see Johnson v. Louisiana, 406 U.S. 356, 372 n. 9 (1972) (opinion of POWELL, J.). </s> [Footnote 11 For a recent suggestion that the holding in Griswold is best understood in this fashion, see Pollak, Comment, 84 Yale L. J. 638, 650-653 (1975). "[I]n due course we will see Griswold as a reaffirmation of the Court's continuing obligation to test the justifications offered by the state for state-imposed constraints which significantly hamper those modes of individual fulfillment which are at the heart of a free society." Id., at 653. </s> [Footnote 12 In Wisconsin v. Yoder, 406 U.S. 205 (1972), the Court rested its holding in part on the constitutional right of parents to assume the primary role in decisions concerning the rearing of their children. That right is recognized because it reflects a "strong tradition" founded on "the history and culture of Western civilization," and because the parental role "is now established beyond debate as an enduring American tradition." Id., at 232. In Ginsberg v. New York, 390 U.S. 629 (1968), the Court spoke of the same right as "basic in the structure of our society." Id., at 639. Griswold v. Connecticut, supra, struck down Connecticut's [431 U.S. 494, 504] anticontraception statute. Three concurring Justices, relying on both the Ninth and Fourteenth Amendments, emphasized that "the traditional relation of the family" is "a relation as old and as fundamental as our entire civilization." 381 U.S., at 496 (Goldberg, J., joined by Warren, C. J., and BRENNAN, J., concurring). Speaking of the same statute as that involved in Griswold, Mr. Justice Harlan wrote, dissenting in Poe v. Ullman, 367 U.S. 497, 551 -552 (1961): "[H]ere we have not an intrusion into the home so much as on the life which characteristically has its place in the home. . . . The home derives its pre-eminence as the seat of family life. And the integrity of that life is something so fundamental that it has been found to draw to its protection the principles of more than one explicitly granted Constitutional right." Although he agrees that the Due Process Clause has substantive content, MR. JUSTICE WHITE in dissent expresses the fear that our recourse to history and tradition will "broaden enormously the horizons of the Clause." Post, at 549-550. To the contrary, an approach grounded in history imposes limits on the judiciary that are more meaningful than any based on the abstract formula taken from Palko v. Connecticut, 302 U.S. 319 (1937), and apparently suggested as an alternative. Cf. Duncan v. Louisiana, supra, at 149-150, n. 14 (rejecting the Palko formula as the basis for deciding what procedural protections are required of a State, in favor of a historical approach based on the Anglo-American legal tradition). Indeed, the passage cited in MR. JUSTICE WHITE'S dissent as "most accurately reflect[ing] the thrust of prior decisions" on substantive due process, post, at 545, expressly points to history and tradition as the source for "supplying . . . content to this Constitutional concept." Poe v. Ullman, supra, at 542 (Harlan, J., dissenting). </s> [Footnote 13 See generally Wilkinson & White, Constitutional Protection for Personal Lifestyles, 62 Cornell L. Rev. 563, 623-624 (1977). </s> [Footnote 14 See generally B. Yorburg, The Changing Family (1973); Bronfenbrenner, The Calamitous Decline of the American Family, Washington [431 U.S. 494, 505] Post, Jan. 2, 1977, p. C1. Recent census reports bear out the importance of family patterns other than the prototypical nuclear family. In 1970, 26.5% of all families contained one or more members over 18 years of age, other than the head of household and spouse. U.S. Department of Commerce, 1970 Census of Population, vol. 1, pt. 1, Table 208. In 1960 the comparable figure was 26.1%. U.S. Department of Commerce, 1960 Census of Population, vol. 1, pt. 1, Table 187. Earlier data are not available. </s> [Footnote 15 Cf. Prince v. Massachusetts, 321 U.S. 158 (1944), which spoke broadly of family authority as against the State, in a case where the child was being reared by her aunt, not her natural parents. </s> [Footnote 16 We are told that the mother of John Moore, Jr., died when he was less than one year old. He, like uncounted others who have suffered a similar tragedy, then came to live with the grandmother to provide the infant with a substitute for his mother's care and to establish a more normal home environment. Brief for Appellant 25. </s> MR. JUSTICE BRENNAN, with whom MR. JUSTICE MARSHALL joins, concurring. </s> I join the plurality's opinion. I agree that the Constitution is not powerless to prevent East Cleveland from prosecuting as a criminal and jailing 1 a 63-year-old grandmother for refusing to expel from her home her now 10-year-old grandson who has lived with her and been brought up by her since his mother's death when he was less than a year old. 2 I do not question that a municipality may constitutionally zone to [431 U.S. 494, 507] alleviate noise and traffic congestion and to prevent overcrowded and unsafe living conditions, in short to enact reasonable land-use restrictions in furtherance of the legitimate objectives East Cleveland claims for its ordinance. But the zoning power is not a license for local communities to enact senseless and arbitrary restrictions which cut deeply into private areas of protected family life. East Cleveland may not constitutionally define "family" as essentially confined to parents and the parents' own children. 3 The plurality's opinion conclusively demonstrates that classifying family patterns in this eccentric way is not a rational means of achieving the ends East Cleveland claims for its ordinance, and further that the ordinance unconstitutionally abridges the "freedom of personal choice in matters of . . . family life [that] is one of the liberties protected by the Due Process Clause of the Fourteenth Amendment." Cleveland Board of Education v. LaFleur, 414 U.S. 632, 639 -640 (1974). I write only to underscore the cultural myopia of the arbitrary boundary drawn by the East Cleveland ordinance in the light of the tradition of the American home that has been a feature of our society since our beginning as a Nation - the "tradition" in the plurality's words, "of uncles, aunts, cousins, and especially grandparents sharing a household along with parents and children . . . ." Ante, at 504. The line drawn by this ordinance [431 U.S. 494, 508] displays a depressing insensitivity toward the economic and emotional needs of a very large part of our society. </s> In today's America, the "nuclear family" is the pattern so often found in much of white suburbia. J. Vander Zanden, Sociology: A Systematic Approach 322 (3d ed. 1975). The Constitution cannot be interpreted, however, to tolerate the imposition by government upon the rest of us of white suburbia's preference in patterns of family living. The "extended family" that provided generations of early Americans with social services and economic and emotional support in times of hardship, and was the beachhead for successive waves of immigrants who populated our cities, 4 remains not merely still a pervasive living pattern, but under the goad of brutal economic necessity, a prominent pattern - virtually a means of survival - for large numbers of the poor and deprived minorities of our society. For them compelled pooling of scant resources requires compelled sharing of a household. 5 </s> [431 U.S. 494, 509] </s> The "extended" form is especially familiar among black families. 6 We may suppose that this reflects the truism that black citizens, like generations of white immigrants before them, have been victims of economic and other disadvantages that would worsen if they were compelled to abandon extended, for nuclear, living patterns. 7 Even in husband and wife households, 13% of black families compared with 3% of white families include relatives under 18 years old, in addition [431 U.S. 494, 510] to the couple's own children. 8 In black households whose head is an elderly woman, as in this case, the contrast is even more striking: 48% of such black households, compared with 10% of counterpart white households, include related minor children not offspring of the head of the household. 9 </s> I do not wish to be understood as implying that East Cleveland's enforcement of its ordinance is motivated by a racially discriminatory purpose: The record of this case would not support that implication. But the prominence of other than nuclear families among ethnic and racial minority groups, including our black citizens, surely demonstrates that the "extended family" pattern remains a vital tenet of our society. 10 It suffices that in prohibiting this pattern of family living as a means of achieving its objectives, appellee city has chosen a device that deeply intrudes into family associational rights that historically have been central, and today remain central, to a large proportion of our population. </s> Moreover, to sanction the drawing of the family line at the arbitrary boundary chosen by East Cleveland would surely conflict with prior decisions that protected "extended" family [431 U.S. 494, 511] relationships. For the "private realm of family life which the state cannot enter," recognized as protected in Prince v. Massachusetts, 321 U.S. 158, 166 (1944), was the relationship of aunt and niece. And in Pierce v. Society of Sisters, 268 U.S. 510, 534 -535 (1925), the protection held to have been unconstitutionally abridged was "the liberty of parents and guardians to direct the upbringing and education of children under their control" (emphasis added). See also Wisconsin v. Yoder, 406 U.S. 205, 232 -233 (1972). Indeed, Village of Belle Terre v. Boraas, 416 U.S. 1 (1974), the case primarily relied upon by the appellee, actually supports the Court's decision. The Belle Terre ordinance barred only unrelated individuals from constituting a family in a single-family zone. The village took special care in its brief to emphasize that its ordinance did not in any manner inhibit the choice of related individuals to constitute a family, whether in the "nuclear" or "extended" form. This was because the village perceived that choice as one it was constitutionally powerless to inhibit. Its brief stated: "Whether it be the extended family of a more leisurely age or the nuclear family of today the role of the family in raising and training successive generations of the species makes it more important, we dare say, than any other social or legal institution . . . . If any freedom not specifically mentioned in the Bill of Rights enjoys a `preferred position' in the law it is most certainly the family." (Emphasis supplied.) Brief for Appellants in No. 73-191, O. T. 1973, p. 26. The cited decisions recognized, as the plurality recognizes today, that the choice of the "extended family" pattern is within the "freedom of personal choice in matters of . . . family life [that] is one of the liberties protected by the Due Process Clause of the Fourteenth Amendment." 414 U.S., at 639 -640. </s> Any suggestion that the variance procedure of East Cleveland's Housing Code assumes special significance is without merit. This is not only because this grandmother [431 U.S. 494, 512] was not obligated to exhaust her administrative remedy before defending this prosecution on the ground that the single-family occupancy ordinance violates the Equal Protection Clause. Euclid v. Ambler Realty Co., 272 U.S. 365 (1926), the leading case in the zoning field, expressly held that one attacking the constitutionality of a building or zoning code need not first seek a variance. Id., at 386. Rather, the matter of a variance is irrelevant also because the municipality is constitutionally powerless to abridge, as East Cleveland has done, the freedom of personal choice of related members of a family to live together. Thus, the existence of the variance procedure serves to lessen neither the irrationality of the definition of "family" nor the extent of its intrusion into family life-style decisions. </s> There is no basis for an inference - other than the city's self-serving statement that a hardship variance "possibly with some stipulation(s) would probably have been granted" - that this grandmother would have obtained a variance had she requested one. Indeed, a contrary inference is more supportable. In deciding to prosecute her in the first place, the city tipped its hand how discretion would have been exercised. In any event, 1311.02 (1965), limits the discretion of the Board of Building Code Appeals to grant variances to those which are "in harmony with the general intent of such ordinance . . . ." If one of the legitimate objectives of the definition of "family" was to preserve the single (nuclear) family character of East Cleveland, then granting this grandmother a variance would be in excess of the Board's powers under the ordinance. </s> Furthermore, the very existence of the "escape hatch" of the variance procedure only heightens the irrationality of the restrictive definition, since application of the ordinance then depends upon which family units the zoning authorities permit to reside together and whom the prosecuting authorities choose to prosecute. The Court's disposition of the analogous situation in Roe v. Wade, 410 U.S. 113 (1973), [431 U.S. 494, 513] is instructive. There Texas argued that, despite a rigid and narrow statute prohibiting abortions except for the purpose of saving the mother's life, prosecuting authorities routinely tolerated elective abortion procedures in certain cases, such as nonconsensual pregnancies resulting from rape or incest. The Court was not persuaded that this saved the statute, THE CHIEF JUSTICE commenting that "no one in these circumstances should be placed in a posture of dependence on a prosecutorial policy or prosecutorial discretion." Id., at 208 (concurring opinion). Similarly, this grandmother cannot be denied the opportunity to defend against this criminal prosecution because of a variance procedure that holds her family hostage to the vagaries of discretionary administrative decisions. Smith v. Cahoon, 283 U.S. 553, 562 (1931). We have now passed well beyond the day when illusory escape hatches could justify the imposition of burdens on fundamental rights. Stanley v. Illinois, 405 U.S. 645, 647 -649 (1972); Staub v. City of Baxley, 355 U.S. 313, 319 (1958). </s> [Footnote 1 This is a criminal prosecution which resulted in the grandmother's conviction and sentence to prison and a fine. Section 1345.99 permits imprisonment of up to six months, and a fine of up to $1,000, for violation of any provision of the Housing Code. Each day such violation continues may, by the terms of this section, constitute a separate offense. </s> [Footnote 2 Brief for Appellant 4. In addition, we were informed by appellant's counsel at oral argument that "application of this ordinance here would not only sever and disrupt the relationship between Mrs. Moore and her own son, but it would disrupt the relationship that is established between young John and young Dale, which is in essence a sibling type relationship, and it would most importantly disrupt the relationship between young John and his grandmother, which is the only maternal influence that he has had during his entire life." Tr. of Oral Arg. 16. The city did not dispute these representations, and it is clear that this case was argued from the outset as requiring decision in this context. </s> [Footnote 3 The East Cleveland ordinance defines "family" to include, in addition to the spouse of the "nominal head of the household," the couple's childless unmarried children, but only one dependent child (married or unmarried) having dependent children, and one parent of the nominal head of the household or of his or her spouse. Thus an "extended family" is authorized in only the most limited sense, and "family" is essentially confined to parents and their own children. Appellant grandmother was charged with violating the ordinance because John, Jr., lived with her at the same time her other grandson, Dale, Jr., was also living in the home; the latter is classified as an "unlicensed roomer" authorized by the ordinance to live in the house. </s> [Footnote 4 See Report of the National Advisory Commission on Civil Disorders 278-281 (1968); Kosa & Nash, Social Ascent of Catholics, 8 Social Order 98-103 (1958); M. Novak, The Rise of the Unmeltable Ethnics 209-210 (1972); B. Yorburg, The Changing Family 106-109 (1973); Kosa, Rachiele, & Schommer, Sharing the Home with Relatives, 22 Marriage and Family Living 129 (1960). </s> [Footnote 5 See, e. g., H. Gans, The Urban Villagers 45-73, 245-249 (1962). "Perhaps the most important - or at least the most visible - difference between the classes is one of family structure. The working class subculture is distinguished by the dominant role of the family circle. . . . "The specific characteristics of the family circle may differ widely - from the collateral peer group form of the West Enders, to the hierarchical type of the Irish, or to the classical three-generation extended family . . . . What matters most - and distinguishes this subculture from others - is that there be a family circle which is wider than the nuclear family, and that all of the opportunities, temptations, and pressures of the larger society be evaluated in terms of how they affect the ongoing way of life that has been built around this circle." Id., at 244-245 (emphasis in original). </s> [Footnote 6 Yorburg, supra, n. 4, at 108. "Within the black lower-class it has been quite common for several generations, or parts of the kin, to live together under one roof. Often a maternal grandmother is the acknowledged head of this type of household which has given rise to the term `matrifocal' to describe lower-class black family patterns." See J. Scanzoni, The Black Family in Modern Society 134 (1971); see also Anderson, The Pains and Pleasures of Old Black Folks, Ebony 123, 128-130 (Mar. 1973). See generally E. Frazier, The Negro Family in the United States (1939); Lewis, The Changing Negro Family, in E. Ginzberg, ed., The Nation's Children 108 (1960). The extended family often plays an important role in the rearing of young black children whose parents must work. Many such children frequently "spend all of their growing-up years in the care of extended kin. . . . Often children are `given' to their grandparents, who rear them to adulthood. . . . Many children normally grow up in a three-generation household and they absorb the influences of grandmother and grandfather as well as mother and father." J. Ladner, Tomorrow's Tomorrow: The Black Woman 60 (1972). </s> [Footnote 7 The extended family has many strengths not shared by the nuclear family. "The case histories behind mounting rates of delinquency, addiction, crime, neurotic disabilities, mental illness, and senility in societies in which autonomous nuclear families prevail suggest that frequent failure to develop enduring family ties is a serious inadequacy for both individuals and societies." D. Blitsten, The World of the Family 256 (1963). Extended families provide services and emotional support not always found in the nuclear family: "The troubles of the nuclear family in industrial societies, generally, and in American society, particularly, stem largely from the inability of this type of family structure to provide certain of the services performed in the past by the extended family. Adequate health, education, and [431 U.S. 494, 510] welfare provision, particularly for the two nonproductive generations in modern societies, the young and the old, is increasingly an insurmountable problem for the nuclear family. The unrelieved and sometimes unbearably intense parent-child relationship, where childrearing is not shared at least in part by others, and the loneliness of nuclear family units, increasingly turned in on themselves in contracted and relatively isolated settings, is another major problem." Yorburg, supra, n. 4, at 194. </s> [Footnote 8 R. Hill, The Strengths of Black Families 5 (1972). </s> [Footnote 9 Id., at 5-6. It is estimated that at least 26% of black children live in other than husband-wife families, "including foster parents, the presence of other male or female relatives (grandfather or grandmother, older brother or sister, uncle or aunt), male or female nonrelatives, [or with] only one adult (usually mother) present . . . ." Scanzoni, supra, n. 6, at 44. </s> [Footnote 10 Novak, supra, n. 4; Hill, supra, at 5-6; N. Glazer & D. Moynihan, Beyond the Melting Pot 50-53 (2d ed. 1970); L. Rainwater & W. Yancey, The Moynihan Report and the Politics of Controversy 51-60 (1967). </s> MR. JUSTICE STEVENS, concurring in the judgment. </s> In my judgment the critical question presented by this case is whether East Cleveland's housing ordinance is a permissible restriction on appellant's right to use her own property as she sees fit. </s> Long before the original States adopted the Constitution, the common law protected an owner's right to decide how best to use his own property. This basic right has always been limited by the law of nuisance which proscribes uses that impair the enjoyment of other property in the vicinity. But the question whether an individual owner's use could be further limited by a municipality's comprehensive zoning plan was not finally decided until this century. </s> The holding in Euclid v. Ambler Realty Co., 272 U.S. 365 , that a city could use its police power, not just to abate a specific use of property which proved offensive, but also to create and implement a comprehensive plan for the use [431 U.S. 494, 514] of land in the community, vastly diminished the rights of individual property owners. It did not, however, totally extinguish those rights. On the contrary, that case expressly recognized that the broad zoning power must be exercised within constitutional limits. </s> In his opinion for the Court, Mr. Justice Sutherland fused the two express constitutional restrictions on any state interference with private property - that property shall not be taken without due process nor for a public purpose without just compensation - into a single standard: "[B]efore [a zoning] ordinance can be declared unconstitutional, [it must be shown to be] clearly arbitrary and unreasonable, having no substantial relation to the public health, safety, morals, or general welfare." Id., at 395 (emphasis added). This principle was applied in Nectow v. Cambridge, 277 U.S. 183 ; on the basis of a specific finding made by the state trial court that "the health, safety, convenience and general welfare of the inhabitants of the part of the city affected" would not be promoted by prohibiting the landowner's contemplated use, this Court held that the zoning ordinance as applied was unconstitutional. Id., at 188. 1 </s> With one minor exception, 2 between the Nectow decision in 1928 and the 1974 decision in Village of Belle Terre v. Boraas, 416 U.S. 1 , this Court did not review the substance of any zoning ordinances. The case-by-case development of the constitutional limits on the zoning power has not, therefore, taken place in this Court. On the other hand, during [431 U.S. 494, 515] the past half century the broad formulations found in Euclid and Nectow have been applied in countless situations by the state courts. Those cases shed a revelatory light on the character of the single-family zoning ordinance challenged in this case. </s> Litigation involving single-family zoning ordinances is common. Although there appear to be almost endless differences in the language used in these ordinances, 3 they contain three principal types of restrictions. First, they define the kind of structure that may be erected on vacant land. 4 Second, they require that a single-family home be occupied only by a "single housekeeping unit." 5 Third, they often [431 U.S. 494, 516] require that the housekeeping unit be made up of persons related by blood, adoption, or marriage, with certain limited exceptions. </s> Although the legitimacy of the first two types of restrictions is well settled, 6 attempts to limit occupancy to related persons have not been successful. The state courts have recognized a valid community interest in preserving the stable character of residential neighborhoods which justifies a prohibition against transient occupancy. 7 Nevertheless, in well-reasoned opinions, the courts of Illinois, 8 New York, 9 New Jersey, 10 </s> [431 U.S. 494, 517] California, 11 Connecticut, 12 Wisconsin, 13 and other jurisdictions, 14 have permitted unrelated persons to occupy single-family residences notwithstanding an ordinance prohibiting, either expressly or implicitly, such occupancy. [431 U.S. 494, 518] </s> These cases delineate the extent to which the state courts have allowed zoning ordinances to interfere with the right of a property owner to determine the internal composition of his [431 U.S. 494, 519] household. The intrusion on that basic property right has not previously gone beyond the point where the ordinance defines a family to include only persons related by blood, marriage, or adoption. Indeed, as the cases in the margin demonstrate, state courts have not always allowed the intrusion to penetrate that far. The state decisions have upheld zoning ordinances which regulated the identity, as opposed to the number, of persons who may compose a household only to the extent that the ordinances require such households to remain nontransient, single-housekeeping units. 15 </s> [431 U.S. 494, 520] </s> There appears to be no precedent for an ordinance which excludes any of an owner's relatives from the group of persons who may occupy his residence on a permanent basis. Nor does there appear to be any justification for such a restriction on an owner's use of his property. 16 The city has failed totally to explain the need for a rule which would allow a homeowner to have two grandchildren live with her if they are brothers, but not if they are cousins. Since this ordinance has not been shown to have any "substantial relation to the public health, safety, morals, or general welfare" of the city of East Cleveland, and since it cuts so deeply into a fundamental right normally associated with the ownership of residential property - that of an owner to decide who may reside on his or her property - it must fall under the limited standard of review of zoning decisions which this Court preserved in [431 U.S. 494, 521] Euclid and Nectow. Under that standard, East Cleveland's unprecedented ordinance constitutes a taking of property without due process and without just compensation. </s> For these reasons, I concur in the Court's judgment. </s> [Footnote 1 The Court cited Zahn v. Board of Public Works, 274 U.S. 325 . The statement of the rule in Zahn remains viable today: "The most that can be said [of this zoning ordinance] is that whether that determination was an unreasonable, arbitrary or unequal exercise of power is fairly debatable. In such circumstances, the settled rule of this court is that it will not substitute its judgment for that of the legislative body charged with the primary duty and responsibility of determining the question." Id., at 328. </s> [Footnote 2 Goldblatt v. Town of Hempstead, 369 U.S. 590 . </s> [Footnote 3 See, for example, the various provisions quoted or paraphrased in Brady v. Superior Court, 200 Cal. App. 2d 69, 80-81, n. 3, 19 Cal. Rptr. 242, 249 n. 3 (1962). </s> [Footnote 4 As this Court recognized in Euclid, even residential apartments can have a negative impact on an area of single-family homes. "[O]ften the apartment house is a mere parasite, constructed in order to take advantage of the open spaces and attractive surroundings created by [a single-family dwelling area] . . . . [T]he coming of one apartment house is followed by others, interfering by their height and bulk with the free circulation of air and monopolizing the rays of the sun which otherwise would fall upon the smaller homes, and bringing, as their necessary accompaniments, the disturbing noises incident to increased traffic and business, and the occupation, by means of moving and parked automobiles, of larger portions of the streets, thus detracting from their safety and depriving children of the privilege of quiet and open spaces for play, enjoyed by those in more favored localities, - until, finally, the residential character of the neighborhood and its desirability as a place of detached residences are utterly destroyed. Under these circumstances, apartment houses, which in a different environment would be not only entirely unobjectionable but highly desirable, come very near to being nuisances." 272 U.S., at 394 -395. </s> [Footnote 5 Limiting use to single-housekeeping units, like limitations on the number of occupants, protects the community's interest in minimizing overcrowding, avoiding the excessive use of municipal services, traffic control, and other aspects of an attractive physical environment. See Village of Belle Terre v. Boraas, 416 U.S. 1, 9 . </s> [Footnote 6 See nn. 4 and 5, supra, and also Professor N. Williams' discussion of the subject in his excellent treatise on zoning law, 2 American Land Planning Law 349-361 (1974). </s> [Footnote 7 Types of group living which have not fared well under single-family ordinances include fraternities, Schenectady v. Alumni Assn., 5 App. Div. 2d 14, 168 N. Y. S. 2d 754 (1957); sororities, Cassidy v. Triebel, 337 Ill. App. 117, 85 N. E. 2d 461 (1948); a retirement home designed for over 20 people, Kellog v. Joint Council of Women's Auxiliaries Welfare Assn., 265 S. W. 2d 374 (Mo. 1954); and a commercial therapeutic home for emotionally disturbed children, Browndale International v. Board of Adjustment, 60 Wis. 2d 182, 208 N. W. 2d 121 (1973). These institutional uses are not only inconsistent with the single-housekeeping-unit concept but include many more people than would normally inhabit a single-family dwelling. </s> [Footnote 8 In City of Des Plaines v. Trottner, 34 Ill. 2d 432, 216 N. E, 2d 116 (1966), the Illinois Supreme Court faced a challenge to a single-family zoning ordinance by a group of four unrelated young men who occupied a dwelling in violation of the ordinance which provided that a "`family' consists of one or more persons each related to the other by blood (or adoption or marriage) . . . ." Id., at 433, 216 N. E. 2d, at 117. In his opinion for the court, Justice Schaefer wrote: "When other courts have been called upon to define the term `family' they have emphasized the single housekeeping unit aspect of the term, rather than the relationship of the occupants. [Citing cases.] . . . . . "In terms of permissible zoning objectives, a group of persons bound together only by their common desire to operate a single housekeeping [431 U.S. 494, 517] unit, might be thought to have a transient quality that would affect adversely the stability of the neighborhood, and so depreciate the value of other property. An ordinance requiring relationship by blood, marriage or adoption could be regarded as tending to limit the intensity of land use. And it might be considered that a group of unrelated persons would be more likely to generate traffic and parking problems than would an equal number of related persons. "But none of these observations reflects a universal truth. Family groups are mobile today, and not all family units are internally stable and well-disciplined. Family groups with two or more cars are not unfamiliar. And so far as intensity of use is concerned, the definition in the present ordinance, with its reference to the `respective spouses' of persons related by blood, marriage or adoption, can hardly be regarded as an effective control upon the size of family units. "The General Assembly has not specifically authorized the adoption of zoning ordinances that penetrate so deeply as this one does into the internal composition of a single housekeeping unit. Until it has done so, we are of the opinion that we should not read the general authority that it has delegated to extend so far." Id., at 436-438, 216 N. E. 2d, at 119-120. </s> [Footnote 9 In White Plains v. Ferraioli, 34 N. Y. 2d 300, 313 N. E. 2d 756 (1974), the Court of Appeals of New York refused to apply an ordinance limiting occupancy of single-family dwellings to related individuals to a "group home" licensed by the State to care for abandoned and neglected children. The court wrote: "Zoning is intended to control types of housing and living and not the genetic or intimate internal family relations of human beings. "Whether a family be organized along ties of blood or formal adoptions, or be a similarly structured group sponsored by the State, as is the group home, should not be consequential in meeting the test of the zoning ordinance. So long as the group home bears the generic character of a family unit as a relatively permanent household, and is not a framework for transients or transient living, it conforms to the purpose of the ordinance . . . ." Id., at 305-306, 313 N. E. 2d, at 758. </s> [Footnote 10 In Kirsch Holding Co. v. Borough of Manasquan, 59 N. J. 241, 252, [431 U.S. 494, 518] 281 A. 2d 513, 518 (1971), the Supreme Court of New Jersey reviewed a complex single-family zoning ordinance designed to meet what the court recognized to be a pressing community problem. The community, a seaside resort, had been inundated during recent summers by unruly groups of summer visitors renting seaside cottages. To solve the problems of excessive noise, overcrowding, intoxication, wild parties, and immorality that resulted from these group rentals, the community passed a zoning ordinance which prohibited seasonal rentals of cottages by most groups other than "families" related by blood or marriage. The court found that even though the problems were severe, the ordinance "preclude[d] so many harmless dwelling uses" that it became "sweepingly excessive, and therefore legally unreasonable." Ibid. The court quoted, id., at 252, 281 A. 2d, at 519, the following language from Gabe Collins Realty, Inc. v. Margate City, 112 N. J. Super. 341, 349, 271 A. 2d 430, 434 (1970), in a similar case as "equally applicable here": "Thus, even in the light of the legitimate concern of the municipality with the undesirable concomitants of group rentals experienced in Margate City, and of the presumption of validity of municipal ordinances, we are satisfied that the remedy here adopted constitutes a sweepingly excessive restriction of property rights as against the problem sought to be dealt with, and in legal contemplation deprives plaintiffs of their property without due process." The court in Kirsch Holding Co., supra, at 251 n. 6, 281 A. 2d., at 518 n. 6, also quoted with approval the following statement from Marino v. Mayor & Council of Norwood, 77 N. J. Super. 587, 594, 187 A. 2d 217, 221 (1963): "Until compelled to do so by a New Jersey precedent squarely in point, this court will not conclude that persons who have economic or other personal reasons for living together as a bona fide single housekeeping unit and who have no other orientation, commit a zoning violation, with possible penal consequences, just because they are not related." </s> [Footnote 11 A California appellate court in Brady v. Superior Court, 200 Cal. App. 2d, at 81, 19 Cal. Rptr., at 250, allowed use of a single-family dwelling by two unrelated students, noting: "The erection or construction of a `single family dwelling,' in itself, would imply that any building so constructed would contain a central kitchen, dining room, living room, bedrooms; that is, constitute a single housekeeping unit. Consequently, to qualify as a `single family dwelling' an erected structure need only be used as a single housekeeping unit." </s> [Footnote 12 The Supreme Court of Connecticut allowed occupancy of a large summer home by four related families because the families did "not occupy separate quarters within the house, [but used] the lodging, cooking and eating facilities [as] common to all." Neptune Park Assn. v. Steinberg, 138 Conn. 357, 360, 84 A. 2d 687, 689 (1951). </s> [Footnote 13 The Supreme Court of Wisconsin, noting that "the letter killeth but the spirit giveth life," 2 Corinthians 3:6, held that six priests and two lay brothers constituted a "family" and that their use, for purely residential purposes of a single-family dwelling did not violate a single-family zoning ordinance. Missionaries of Our Lady of LaSalette v. Whitefish Bay, 267 Wis. 609, 66 N. W. 2d 627 (1954). </s> [Footnote 14 Carroll v. Miami Beach, 198 So.2d 643 (Fla. App. 1967); Robertson v. Western Baptist Hospital, 267 S. W. 2d 395 (Ky. App. 1954); Women's Kansas City St. Andrew Soc. v. Kansas City, 58 F.2d 593 (CA8 1932); University Heights v. Cleveland Jewish Orphans' Home, 20 F.2d 743 (CA6 1927). </s> [Footnote 15 Village of Belle Terre v. Boraas, 416 U.S. 1 , is consistent with this line of state authority. Chief Judge Breitel in White Plains v. Ferraioli, supra, at 304-305, 313 N. E. 2d, at 758, cogently characterized the Belle Terre decision upholding a single-family ordinance as one primarily concerned with the prevention of transiency in a small, quiet suburban community. He wrote: "The group home [in White Plains] is not, for purposes of a zoning ordinance, a temporary living arrangement as would be a group of college students sharing a house and commuting to a nearby school (cf. Village of [431 U.S. 494, 520] Belle Terre v. Boraas . . .). Every year or so, different college students would come to take the place of those before them. There would be none of the permanency of community that characterizes a residential neighborhood of private homes." </s> [Footnote 16 Of course, a community has other legitimate concerns in zoning an area for single-family use including prevention of overcrowding in residences and prevention of traffic congestion. A community which attacks these problems by restricting the composition of a household is using a means not reasonably related to the ends it seeks to achieve. See Des Plaines v. Trottner, 34 Ill. 2d, at 435-436, 216 N. E. 2d, at 118. To prevent overcrowding, a community can certainly place a limit on the number of occupants in a household, either in absolute terms or in relation to the available floor space. Indeed, the city of East Cleveland had on its books an ordinance requiring a minimum amount of floor space per occupant in every dwelling. See Nolden v. East Cleveland City Comm'n, 12 Ohio Misc. 205, 232 N. E. 2d 421 (Com. Pl. Ct., Cuyahoga Cty. 1966). Similarly, traffic congestion can be reduced by prohibiting on-street parking. To attack these problems through use of a restrictive definition of family is, as one court noted, like "burn[ing] the house to roast the pig." Larson v. Mayor, 99 N. J. Super. 365, 374, 240 A. 2d 31, 36 (1968). More narrowly, a limitation on which of the owner's grandchildren may reside with her obviously has no relevance to these problems. </s> MR. CHIEF JUSTICE BURGER, dissenting. </s> It is unnecessary for me to reach the difficult constitutional issue this case presents. Appellant's deliberate refusal to use a plainly adequate administrative remedy provided by the city should foreclose her from pressing in this Court any constitutional objections to the city's zoning ordinance. Considerations of federalism and comity, as well as the finite capacity of federal courts, support this position. In courts, as in hospitals, two bodies cannot occupy the same space at the same time; when any case comes here which could have been disposed of long ago at the local level, it takes the place that might well have been given to some other case in which there was no alternative remedy. </s> (1) </s> The single-family zoning ordinances of the city of East Cleveland define the term "family" to include only the head of the household and his or her most intimate relatives, principally the spouse and unmarried and dependent children. Excluded from the definition of "family," and hence from cohabitation, are various persons related by blood or adoption to the head of the household. The obvious purpose of the city is the traditional one of preserving certain areas as family residential communities. </s> The city has established a Board of Building Code Appeals to consider variances from this facially stringent single-family limit when necessary to alleviate "practical difficulties and unnecessary hardships" and "to secure the general welfare and [do] substantial justice . . . ." East Cleveland Codified Ordinances 1311.02 (1965). The Board has power to grant variances to "[a]ny person adversely affected by a decision of [431 U.S. 494, 522] any City official made in the enforcement of any [zoning] ordinance," so long as appeal is made to the Board within 10 days of notice of the decision appealed from. 1311.03. </s> After appellant's receipt of the notice of violation, her lawyers made no effort to apply to the Board for a variance to exempt her from the restrictions of the ordinance, even though her situation appears on its face to present precisely the kind of "practical difficulties and unnecessary hardships" the variance procedure was intended to accommodate. Appellant's counsel does not claim appellant was unaware of the right to go to the Board and seek a variance, or that any attempt was made to secure relief by an application to the Board. 1 Indeed, appellant's counsel makes no claim that the failure to seek a variance was due to anything other than a deliberate decision to forgo the administrative process in favor of a judicial forum. </s> (2) </s> In view of appellant's deliberate bypass of the variance procedure, the question arises whether she should now be permitted to complain of the unconstitutionality of the single-family ordinance as it applies to her. This Court has not yet required one in appellant's position to utilize available state administrative remedies as a prerequisite to obtaining federal relief; but experience has demonstrated that such a requirement is imperative if the critical overburdening of federal courts at all levels is to be alleviated. That burden has now become "a crisis of overload, a crisis so serious that it threatens the capacity of the federal system to function as it should." [431 U.S. 494, 523] Department of Justice Committee on Revision of the Federal Judicial System, Report on the Needs of the Federal Courts 1 (1977). The same committee went on to describe the disastrous effects an exploding caseload has had on the administration of justice: </s> "Overloaded courts . . . mean long delays in obtaining a final decision and additional expense as court procedures become more complex in the effort to handle the rush of business. . . . [T]he quality of justice must necessarily suffer. Overloaded courts, seeking to deliver justice on time insofar as they can, necessarily begin to adjust their processes, sometimes in ways that threaten the integrity of the law and of the decisional process. </s> "District courts have delegated more and more of their tasks to magistrates . . . . Time for oral argument is steadily cut back . . . . [T]he practice of delivering written opinions is declining. </s> . . . . . </s> ". . . Courts are forced to add more clerks, more administrative personnel, to move cases faster and faster. They are losing . . . time for reflection, time for the deliberate maturation of principles." Id., at 3-4. </s> The devastating impact overcrowded dockets have on the quality of justice received by all litigants makes it essential that courts be reserved for the resolution of disputes for which no other adequate forum is available. </s> A </s> The basis of the doctrine of exhaustion of administrative remedies was simply put in Myers v. Bethlehem Shipbuilding Corp., 303 U.S. 41, 50 -51 (1938), as </s> "the long settled rule of judicial administration that no one is entitled to judicial relief for a supposed or [431 U.S. 494, 524] threatened injury until the prescribed administrative remedy has been exhausted." </s> Exhaustion is simply one aspect of allocation of overtaxed judicial resources. Appellant wishes to use a residential property in a manner at variance with a municipal housing code. That claim could have been swiftly and inexpensively adjudicated in a municipal administrative tribunal, without engaging cumbersome federal judicial machinery at the highest level. Of course, had appellant utilized the local administrative remedies and state judicial remedies to no avail, resort to this Court would have been available. 2 </s> The exhaustion principle asks simply that absent compelling circumstances - and none are claimed here - the avenues of relief nearest and simplest should be pursued first. This Court should now make unmistakably clear that when state or local governments provide administrative remedial procedures, no federal forum will be open unless the claimant can show either that the remedy is inadequate or that resort to those remedies is futile. </s> Utilization of available administrative processes is mandated for a complex of reasons. Statutes sometimes provide administrative procedures as the exclusive remedy. Even apart from a statutory command, it is common sense to permit the simple, speedy, and inexpensive processes of the administrative machinery to sift the facts and compile a complete record for the benefit of any reviewing courts. Exhaustion avoids interruption of the administrative process and allows application of an agency's specialized experience and the broad discretion granted to local entities, such as zoning boards. [431 U.S. 494, 525] Indeed, judicial review may be seriously hampered if the appropriate agency has no chance to apply its experience, exercise its discretion, or make a factual record reflecting all aspects of the problem. </s> Most important, if administrative remedies are pursued, the citizen may win complete relief without needlessly invoking judicial process. This permits the parties to resolve their disputes by relatively informal means far less costly and time consuming than litigation. By requiring exhaustion of administrative processes the courts are assured of reviewing only final agency decisions arrived at after considered judgment. It also permits agencies an opportunity to correct their own mistakes or give discretionary relief short of judicial review. Consistent failure by courts to mandate utilization of administrative remedies - under the growing insistence of lawyers demanding broad judicial remedies - inevitably undermines administrative effectiveness and defeats fundamental public policy by encouraging "end runs" around the administrative process. </s> It is apparent without discussion that resort to the local appeals board in this case would have furthered these policies, particularly since the exercise of informed discretion and experience by the proper agency is the essence of any housing code variance procedure. We ought not to encourage litigants to bypass simple, inexpensive, and expeditious remedies available at their doorstep in order to invoke expensive judicial machinery on matters capable of being resolved at local levels. </s> B </s> The suggestion is made that exhaustion of administrative remedies is not required on issues of constitutional law. In one sense this argument is correct, since administrative agencies have no power to decide questions of federal constitutional law. But no one has a right to a federal constitutional adjudication [431 U.S. 494, 526] on an issue capable of being resolved on a less elevated plane. Indeed, few concepts have had more faithful adherence in this Court than the imperative of avoiding constitutional resolution of issues capable of being disposed of otherwise. Mr. Justice Brandeis put it well in a related context, arguing for judicial restraint in Ashwander v. TVA, 297 U.S. 288, 347 (1936) (concurring opinion): </s> "[This] Court will not pass upon a constitutional question although properly presented by the record, if there is also present some other ground upon which the case may be disposed of. . . . Thus, if a case can be decided on either of two grounds, one involving a constitutional question, the other a question of statutory construction or general law, the Court will decide only the latter." </s> This Court has frequently remanded cases for exhaustion "before a challenge can be made in a reviewing court of the constitutionality of the basic statute, on which the agency may not pass . . . ." K. Davis, Administrative Law Text 394 (3d ed. 1972). Indeed, exhaustion is often required precisely because there are constitutional issues present in a case, in order to avoid unnecessary adjudication of these delicate questions by giving the affected administrative agency an opportunity to resolve the matter on nonconstitutional grounds. See Christian v. New York Dept. of Labor, 414 U.S. 614 (1974); Public Utilities Comm'n of California v. United States, 355 U.S. 534, 539 -540 (1958); Allen v. Grand Central Aircraft Co., 347 U.S. 535, 553 (1954); Aircraft & Diesel Equipment Corp. v. Hirsch, 331 U.S. 752, 766 -767 (1947); Natural Gas Co. v. Slattery, 302 U.S. 300, 309 -311 (1937); Fuchs, Prerequisites to Judicial Review of Administrative Agency Action, 51 Ind. L. J. 817, 883 (1976). </s> Of course, if administrative authority fails to afford relief, further exhaustion is pointless and judicial relief may be available. See Weinberger v. Salfi, 422 U.S. 749 (1975). [431 U.S. 494, 527] But so long as favorable administrative action is still possible, the policies favoring exhaustion are not mitigated in the slightest by the presence of a constitutional issue. See Christian, supra. To the extent that a nonconstitutional decision is possible only at the administrative level, those policies are reinforced. Plainly we have here precisely such a case. Appearance before the local city Board would have provided an opportunity for complete relief without forcing a constitutional ruling. The posture of the constitutional issues in this case thus provides an additional reason supporting the exhaustion requirement. </s> C </s> It is also said that exhaustion is not required when to do so would inflict irreparable injury on the litigant. In the present case, as in others in which a constitutional claim is asserted, injury is likely to include the "loss or destruction of substantive rights." In such a case, "the presence of constitutional questions, coupled with a sufficient showing of inadequacy of prescribed administrative relief and of threatened or impending irreparable injury flowing from delay . . ., has been held sufficient to dispense with exhausting the administrative process before instituting judicial intervention." Aircraft & Diesel Equipment Corp., supra, at 773. </s> But there is every reason to require resort to administrative remedies "where the individual charged is to be deprived of nothing until the completion of [the administrative] proceeding." Gibson v. Berryhill, 411 U.S. 564, 574 -575 (1973); see Natural Gas Co., supra, at 309-311; Schlesinger v. Councilman, 420 U.S. 738 (1975); Aircraft & Diesel Equipment Corp., supra, at 773-774. The focus must be on the adequacy of the administrative remedy. If the desired relief may be obtained without undue burdens, and if substantial rights are protected as the process moves forward, no harm is done by requiring the litigant to pursue and exhaust those remedies before calling on the Constitution of [431 U.S. 494, 528] the United States. To do otherwise trivializes constitutional adjudication. 3 </s> In this case appellant need have surrendered no asserted constitutional rights in order to pursue the local administrative remedy. No reason appears why appellant could not have sought a variance as soon as notice of a claimed violation was received, without altering the living arrangements in question. The notice of violation gave appellant 10 days within which to seek a variance; no criminal or civil sanctions could possibly have attached pending the outcome of that proceeding. </s> Though timely invocation of the administrative remedy would have had no effect on appellant's asserted rights, and would have inflicted no irreparable injury, the present availability of such relief under the city ordinance is less clear. But it is unrealistic to expect a municipality to hold open its administrative process for years after legal enforcement action has begun. Appellant cannot rely on the current absence [431 U.S. 494, 529] of administrative relief either as justification for the original failure to seek it, or as a reason why accountability for that failure is unreasonable. See Huffman v. Pursue, Ltd., 420 U.S. 592, 611 n. 22 (1975). Any other rule would make a mockery of the exhaustion doctrine by placing no penalty on its violation. </s> D </s> This is not a case where inadequate or unclear or costly remedies make exhaustion inappropriate, or where the Board's position relating to appellant's claims is so fixed that further administrative review would be fruitless. There is not the slightest indication of any fixed Board policy against variances, or that a prompt application for a variance would not have been granted. 4 Nor is it dispositive that the case involves criminal rather than civil penalties. The applicability of the exhaustion principle to bar challenges to the legality of prosecutions is established, even where, unlike the present case, substantial felony penalties are at stake. McGee v. United States, 402 U.S. 479 (1971); Yakus v. United States, 321 U.S. 414 (1944); Falbo v. United States, 320 U.S. 549 (1944); see McKart v. United States, 395 U.S. 185 (1969). There is far less reason to take into account the criminal nature of the proceedings when only misdemeanor penalties are involved. </s> (3) </s> Thus, the traditional justifications offered in support of the exhaustion principle point toward application of the doctrine. But there is a powerful additional reason why exhaustion should be enforced in this case. We deal here with federal [431 U.S. 494, 530] judicial review of an administrative determination by a subdivision of the State of Ohio. When the question before a federal court is whether to enforce exhaustion of state administrative remedies, interests of federalism and comity make the analysis strikingly similar to that appropriate when the question is whether federal courts should abstain from interference with ongoing state judicial proceedings. 5 In both situations federal courts are being requested to act in ways lacking deference to, and perhaps harmful to, important state interests in order to vindicate rights which can be protected in the state system as well as in the federal. Cf. Wisconsin v. Constantineau, 400 U.S. 433, 439 (1971) (BURGER, C. J., dissenting). The policies underlying this Court's refusals to jeopardize important state objectives needlessly in Huffman v. Pursue, Ltd., supra; Juidice v. Vail, 430 U.S. 327 (1977); and Trainor v. Hernandez, ante, p. 434, argue strongly against action which encourages evasion and undermining of other important state interests embodied in regulatory procedures. </s> When the State asserts its sovereignty through the administrative process, no less than when it proceeds judicially, "federal courts . . . should abide by standards of restraint that go well beyond those of private equity jurisprudence." Huffman, supra, at 603; cf. Younger v. Harris, 401 U.S. 37, 41 (1971). A proper respect for state integrity is manifested by and, in part, dependent on, our reluctance to disrupt state [431 U.S. 494, 531] proceedings even when important federal rights are asserted as a reason for doing so. Where, as here, state law affords an appropriate "doorstep" vehicle for vindication of the claims underlying those rights, federal courts should not be called upon unless those remedies have been utilized. No litigant has a right to force a constitutional adjudication by eschewing the only forum in which adequate nonconstitutional relief is possible. Appellant seeks to invoke federal judicial relief. We should now make clear that the finite resources of this Court are not available unless the litigant has first pursued all adequate and available administrative remedies. </s> The doctrine of exhaustion of administrative remedies has a long history. Though its salutary effects are undisputed, they have often been casually neglected, due to the judicial penchant of honoring the doctrine more in the breach than in the observance. For my part, the time has come to insist on enforcement of the doctrine whenever the local or state remedy is adequate and where asserted rights can be protected and irreparable injury avoided within the administrative process. Only by so doing will this Court and other federal courts be available to deal with the myriad new problems clamoring for resolution. </s> [Footnote 1 Counsel for appellant candidly admitted at oral argument that "Mrs. Moore did not seek a variance in this case" but argued that her failure to do so is constitutionally irrelevant. Tr. of Oral Arg. 20. Thus, this was not an unpublicized administrative remedy of which appellant remained unaware until after it became unavailable. Such a case would, of course, present materially different considerations. Cf. Lambert v. California, 355 U.S. 225 (1957). </s> [Footnote 2 Exhaustion does not deny or limit litigants' rights to a federal forum "because state administrative agency determinations do not create res judicata or collateral estoppel effects. The exhaustion of state administrative remedies postpones rather than precludes the assertion of federal jurisdiction." Comment, Exhaustion of State Administrative Remedies in Section 1983 Cases, 41 U. Chi. L. Rev. 537, 551 (1974). </s> [Footnote 3 This analysis explains those cases in which this Court has allowed persons subject to claimed unconstitutional restrictions on their freedom of expression to challenge that restriction without first applying for a permit which, if granted, would moot their claim. E. g., Hynes v. Mayor of Oradell, 425 U.S. 610 (1976); Shuttlesworth v. Birmingham, 394 U.S. 147 (1969); Staub v. City of Baxley, 355 U.S. 313 (1958). In each instance the permit procedure was itself an unconstitutional infringement on First Amendment rights. Thus, in those cases irreparable injury - the loss or postponement of precious First Amendment rights - was a concomitant of the available administrative procedure. Similarly explicable are those cases in which challenge is made to the constitutionality of the administrative proceedings themselves. See Freedman v. Maryland, 380 U.S. 51 (1965); Public Utilities Comm'n of California v. United States, 355 U.S. 534, 540 (1958). But see Christian v. New York Dept. of Labor, 414 U.S. 614, 622 (1974), where appellants' constitutional due process challenge to administrative procedures was deferred pending agency action. Exhaustion in those situations would similarly risk infringement of a constitutional right by the administrative process itself. </s> [Footnote 4 To be adequate for exhaustion purposes, an administrative remedy need not guarantee the litigant success on the merits in advance. What is required is a forum with the power to grant relief, capable of hearing the case with objectivity and dispatch. There is no reason to doubt that appellant would have received a fair hearing before the Board. </s> [Footnote 5 See Parisi v. Davidson, 405 U.S. 34, 37 , 40 n. 6 (1972); Public Utilities Comm'n v. United Fuel Co., 317 U.S. 456 (1943); Natural Gas Co. v. Slattery, 302 U.S. 300, 311 (1937); Prentis v. Atlantic Coast Line, 211 U.S. 210, 229 (1908); First Nat. Bank v. Board of County Comm'rs, 264 U.S. 450 (1924); cf. Schlesinger v. Councilman, 420 U.S. 738, 756 -757 (1975). See generally L. Jaffe, Judicial Control of Administrative Action 437-438 (1965); Fuchs, Prerequisites to Judicial Review of Administrative Agency Action, 51 Ind. L. J. 817, 861-862 (1976); Comment, Exhaustion of State Administrative Remedies Under the Civil Rights Act, 8 Ind. L. Rev. 565 (1975). </s> MR. JUSTICE STEWART, with whom MR. JUSTICE REHNQUIST joins, dissenting. </s> In Village of Belle Terre v. Boraas, 416 U.S. 1 , the Court considered a New York village ordinance that restricted land use within the village to single-family dwellings. That ordinance defined "family" to include all persons related by blood, adoption, or marriage who lived and cooked together as a single-housekeeping unit; it forbade occupancy by any group of three or more persons who were not so related. We held that the ordinance was a valid effort by the village government to promote the general community welfare, and that it did not violate the Fourteenth Amendment or infringe [431 U.S. 494, 532] any other rights or freedoms protected by the Constitution. </s> The present case brings before us a similar ordinance of East Cleveland, Ohio, one that also limits the occupancy of any dwelling unit to a single family, but that defines "family" to include only certain combinations of blood relatives. The question presented, as I view it, is whether the decision in Belle Terre is controlling, or whether the Constitution compels a different result because East Cleveland's definition of "family" is more restrictive than that before us in the Belle Terre case. </s> The city of East Cleveland is a residential suburb of Cleveland, Ohio. It has enacted a comprehensive Housing Code, one section of which prescribes that "[t]he occupancy of any dwelling unit shall be limited to one, and only one, family . . . ." 1 The Code defines the term "family" as follows: </s> "`Family' means a number of individuals related to the nominal head of the household or to the spouse of the nominal head of the household living as a single house-keeping unit in a single dwelling unit, but limited to the following: </s> "(a) Husband or wife of the nominal head of the household. </s> "(b) Unmarried children of the nominal head of the household or of the spouse of the nominal head of the household, provided, however, that such unmarried children have no children residing with them. </s> "(c) Father or mother of the nominal head of the household or of the spouse of the nominal head of the household. </s> "(d) Notwithstanding the provisions of subsection (b) hereof, a family may include not more than one dependent married or unmarried child of the nominal head of the household or of the spouse of the nominal head of [431 U.S. 494, 533] the household and the spouse and dependent children of such dependent child. For the purpose of this subsection, a dependent person is one who has more than fifty percent of his total support furnished for him by the nominal head of the household and the spouse of the nominal head of the household. </s> "(e) A family may consist of one individual." 2 </s> The appellant, Inez Moore, owns a 2 1/2-story frame house in East Cleveland. The building contains two "dwelling units." 3 At the time this litigation began Mrs. Moore occupied one of these dwelling units with her two sons, John Moore, Sr., and Dale Moore, Sr., and their two sons, John, Jr., and Dale, Jr. 4 These five persons constituted more than one family under the ordinance. </s> In January 1973, a city housing inspector cited Mrs. Moore for occupation of the premises by more than one family. 5 She received a notice of violation directing her to [431 U.S. 494, 534] correct the situation, which she did not do. Sixteen months passed, during which the city repeatedly complained about the violation. Mrs. Moore did not request relief from the Board of Building Code Appeals, although the Code gives the Board the explicit power to grant a variance "where practical difficulties and unnecessary hardships shall result from the strict compliance with or the enforcement of the provisions of any ordinance . . . ." 6 Finally, in May 1974, a municipal court found Mrs. Moore guilty of violating the single-family occupancy ordinance. The court overruled her motion to dismiss the charge, rejecting her claim that the ordinance's definition of "family" is invalid on its face under the United States Constitution. The Ohio Court of Appeals affirmed on the authority of Village of Belle Terre v. Boraas, and the Ohio Supreme Court dismissed Mrs. Moore's appeal. </s> In my view, the appellant's claim that the ordinance in question invades constitutionally protected rights of association and privacy is in large part answered by the Belle Terre decision. The argument was made there that a municipality could not zone its land exclusively for single-family occupancy because to do so would interfere with protected rights of privacy or association. We rejected this contention, and held that the ordinance at issue "involve[d] no `fundamental' right guaranteed by the Constitution, such as . . . the right of association, NAACP v. Alabama, 357 U.S. 449 ; . . . or any rights of privacy, cf. Griswold v. Connecticut, 381 U.S. 479 ; Eisenstadt v. Baird, 405 U.S. 438, 453 -454." 416 U.S., at 7 -8. </s> The Belle Terre decision thus disposes of the appellant's contentions to the extent they focus not on her blood relationships with her sons and grandsons but on more general [431 U.S. 494, 535] notions about the "privacy of the home." Her suggestion that every person has a constitutional right permanently to share his residence with whomever he pleases, and that such choices are "beyond the province of legitimate governmental intrusion," amounts to the same argument that was made and found unpersuasive in Belle Terre. </s> To be sure, the ordinance involved in Belle Terre did not prevent blood relatives from occupying the same dwelling, and the Court's decision in that case does not, therefore, foreclose the appellant's arguments based specifically on the ties of kinship present in this case. Nonetheless, I would hold, for the reasons that follow, that the existence of those ties does not elevate either the appellant's claim of associational freedom or her claim of privacy to a level invoking constitutional protection. </s> To suggest that the biological fact of common ancestry necessarily gives related persons constitutional rights of association superior to those of unrelated persons is to misunderstand the nature of the associational freedoms that the Constitution has been understood to protect. Freedom of association has been constitutionally recognized because it is often indispensable to effectuation of explicit First Amendment guarantees. See NAACP v. Alabama ex rel. Patterson, 357 U.S. 449, 460 -461; Bates v. Little Rock, 361 U.S. 516, 523 ; Shelton v. Tucker, 364 U.S. 479 ; NAACP v. Button, 371 U.S. 415, 430 -431; Railroad Trainmen v. Virginia Bar, 377 U.S. 1 ; Kusper v. Pontikes, 414 U.S. 51, 56 -61; cf. Edwards v. South Carolina, 372 U.S. 229 . But the scope of the associational right, until now, at least, has been limited to the constitutional need that created it; obviously not every "association" is for First Amendment purposes or serves to promote the ideological freedom that the First Amendment was designed to protect. </s> The "association" in this case is not for any purpose relating to the promotion of speech, assembly, the press, or religion. And wherever the outer boundaries of constitutional protection [431 U.S. 494, 536] of freedom of association may eventually turn out to be, they surely do not extend to those who assert no interest other than the gratification, convenience, and economy of sharing the same residence. </s> The appellant is considerably closer to the constitutional mark in asserting that the East Cleveland ordinance intrudes upon "the private realm of family life which the state cannot enter." Prince v. Massachusetts, 321 U.S. 158, 166 . Several decisions of the Court have identified specific aspects of what might broadly be termed "private family life" that are constitutionally protected against state interference. See, e. g., Roe v. Wade, 410 U.S. 113, 152 -154 (woman's right to decide whether to terminate pregnancy); Loving v. Virginia, 388 U.S. 1, 12 (freedom to marry person of another race); Griswold v. Connecticut, 381 U.S. 479 ; Eisenstadt v. Baird, 405 U.S. 438 (right to use contraceptives); Pierce v. Society of Sisters, 268 U.S. 510, 534 -535 (parents' right to send children to private schools); Meyer v. Nebraska, 262 U.S. 390 (parents' right to have children instructed in foreign language). </s> Although the appellant's desire to share a single-dwelling unit also involves "private family life" in a sense, that desire can hardly be equated with any of the interests protected in the cases just cited. The ordinance about which the appellant complains did not impede her choice to have or not to have children, and it did not dictate to her how her own children were to be nurtured and reared. The ordinance clearly does not prevent parents from living together or living with their unemancipated offspring. </s> But even though the Court's previous cases are not directly in point, the appellant contends that the importance of the "extended family" in American society requires us to hold that her decision to share her residence with her grandsons may not be interfered with by the State. This decision, like the decisions involved in bearing and raising children, is said [431 U.S. 494, 537] to be an aspect of "family life" also entitled to substantive protection under the Constitution. Without pausing to inquire how far under this argument an "extended family" might extend, I cannot agree. 7 When the Court has found that the Fourteenth Amendment placed a substantive limitation on a State's power to regulate, it has been in those rare cases in which the personal interests at issue have been deemed "`implicit in the concept of ordered liberty.'" See Roe v. Wade, supra, at 152, quoting Palko v. Connecticut, 302 U.S. 319, 325 . The interest that the appellant may have in permanently sharing a single kitchen and a suite of contiguous rooms with some of her relatives simply does not rise to that level. To equate this interest with the fundamental decisions to marry and to bear and raise children is to extend the limited substantive contours of the Due Process Clause beyond recognition. </s> The appellant also challenges the single-family occupancy ordinance on equal protection grounds. Her claim is that the city has drawn an arbitrary and irrational distinction between groups of people who may live together as a "family" and those who may not. While acknowledging the city's right to preclude more than one family from occupying a single-dwelling unit, the appellant argues that the purposes of the single-family occupancy law would be equally served by an ordinance that did not prevent her from sharing her residence with her two sons and their sons. </s> This argument misconceives the nature of the constitutional inquiry. In a case such as this one, where the challenged [431 U.S. 494, 538] ordinance intrudes upon no substantively protected constitutional right, it is not the Court's business to decide whether its application in a particular case seems inequitable, or even absurd. The question is not whether some other ordinance, drafted more broadly, might have served the city's ends as well or almost as well. The task, rather, is to determine if East Cleveland's ordinance violates the Equal Protection Clause of the United States Constitution. And in performing that task, it must be borne in mind that "[w]e deal with economic and social legislation where legislatures have historically drawn lines which we respect against the charge of violation of the Equal Protection Clause if the law be `"reasonable, not arbitrary"' (quoting Royster Guano Co. v. Virginia, 253 U.S. 412, 415 ) and bears `a rational relationship to a [permissible] state objective.' Reed v. Reed, 404 U.S. 71, 76 ." Village of Belle Terre v. Boraas, 416 U.S. at 8. "[E]very line drawn by a legislature leaves some out that might well have been included. That exercise of discretion, however, is a legislative, not a judicial, function." Ibid. (footnote omitted). 8 </s> Viewed in the light of these principles, I do not think East Cleveland's definition of "family" offends the Constitution. The city has undisputed power to ordain single-family residential [431 U.S. 494, 539] occupancy. Village of Belle Terre v. Boraas, supra; Euclid v. Ambler Realty Co., 272 U.S. 365 . And that power plainly carries with it the power to say what a "family" is. Here the city has defined "family" to include not only father, mother, and dependent children, but several other close relatives as well. The definition is rationally designed to carry out the legitimate governmental purposes identified in the Belle Terre opinion: "The police power is not confined to elimination of filth, stench, and unhealthy places. It is ample to lay out zones where family values, youth values, and the blessings of quiet seclusion and clean air make the area a sanctuary for people." 416 U.S., at 9 . 9 </s> Obviously, East Cleveland might have as easily and perhaps as effectively hit upon a different definition of "family." But a line could hardly be drawn that would not sooner or later become the target of a challenge like the appellant's. If "family" included all of the householder's grandchildren there would doubtless be the hard case of an orphaned niece or nephew. If, as the appellant suggests, a "family" must include all blood relatives, what of longtime friends? The point is that any definition would produce hardships in some cases without materially advancing the legislative purpose. That this ordinance also does so is no reason to hold it unconstitutional, unless we are to use our power to interpret the United States Constitution as a sort of generalized authority to correct seeming inequity wherever it surfaces. It is not for us to rewrite the ordinance, or substitute our judgment for [431 U.S. 494, 540] the discretion of the prosecutor who elected to initiate this litigation. 10 </s> In this connection the variance provisions of East Cleveland's Building Code assume special significance, for they show that the city recognized the difficult problems its ordinances were bound to create in particular cases, and provided a means to solve at least some of them. Section 1311.01 of the Code establishes a Board of Building Code Appeals. Section 1311.02 then provides, in pertinent part: </s> "The Board of Building Code Appeals shall determine all matters properly presented to it and where practical difficulties and unnecessary hardships shall result from the strict compliance with or the enforcement of the provisions of any ordinance for which it is designated as [431 U.S. 494, 541] the Board of Appeals, such Board shall have the power to grant variances in harmony with the general intent of such ordinance and to secure the general welfare and substantial justice in the promotion of the public health, comfort, convenience, morals, safety and general welfare of the City." </s> The appellant did not request a variance under this section, although she could have done so. While it is impossible to know whether such a request would have been granted, her situation appears to present precisely the kind of "practical difficulties" and "unnecessary hardships" that the variance provisions were designed to accommodate. </s> This is not to say that the appellant was obligated to exhaust her administrative remedy before defending this prosecution on the ground that the single-family occupancy ordinance violates the Equal Protection Clause. In assessing her claim that the ordinance is "arbitrary" and "irrational," however, I think the existence of the variance provisions is particularly persuasive evidence to the contrary. The variance procedure, a traditional part of American land-use law, bends the straight lines of East Cleveland's ordinances, shaping their contours to respond more flexibly to the hard cases that are the inevitable byproduct of legislative linedrawing. </s> For these reasons, I think the Ohio courts did not err in rejecting the appellant's constitutional claims. Accordingly, I respectfully dissent. </s> [Footnote 1 East Cleveland Housing Code 1351.02 (1964). </s> [Footnote 2 East Cleveland Housing Code 1341.08 (1966). </s> [Footnote 3 The Housing Code defines a "dwelling unit" as "a group of rooms arranged, maintained or designed to be occupied by a single family and consisting of a complete bathroom with toilet, lavatory and tub or shower facilities; one, and one only, complete kitchen or kitchenette with approved cooking, refrigeration and sink facilities; approved living and sleeping facilities. All of such facilities shall be in contiguous rooms and used exclusively by such family and by any authorized persons occupying such dwelling unit with the family." 1341.07. </s> [Footnote 4 There is some suggestion in the record that the other dwelling unit in the appellant's house was also occupied by relatives of Mrs. Moore. A notice of violation dated January 16, 1973, refers to "Ms. Carol Moore and her son, Derik," as illegal occupants in the other unit, and at some point the illegal occupancy in one of the units allegedly was corrected by transferring one occupant over to the other unit. </s> [Footnote 5 Mrs. Moore, as the owner of the house, was responsible for compliance with the Housing Code. East Cleveland Housing Code 1343.04 (1966). The illegal occupant, however, was identified by the city as John Moore, Jr., Mrs. Moore's grandson. The record suggests no reason why he was named, rather than Dale Moore, Jr. The occupancy might have been [431 U.S. 494, 534] legal but for one of the two grandsons. One of Mrs. Moore's sons, together with his son, could have lived with Mrs. Moore under 1341.08 (d) of the Code if they were dependent on her. The other son, provided he was "unmarried," could have been included under 1341.08 (b). </s> [Footnote 6 East Cleveland Building Code 1311.02 (1965). </s> [Footnote 7 The opinion of MR. JUSTICE POWELL and MR. JUSTICE BRENNAN'S concurring opinion both emphasize the traditional importance of the extended family in American life. But I fail to understand why it follows that the residents of East Cleveland are constitutionally prevented from following what MR. JUSTICE BRENNAN calls the "pattern" of "white suburbia," even though that choice may reflect "cultural myopia." In point of fact, East Cleveland is a predominantly Negro community, with a Negro City Manager and City Commission. </s> [Footnote 8 The observation of Mr. Justice Holmes quoted in the Belle Terre opinion, 416 U.S., at 8 n. 5, bears repeating here. "When a legal distinction is determined, as no one doubts that it may be, between night and day, childhood and maturity, or any other extremes, a point has to be fixed or a line has to be drawn, or gradually picked out by successive decisions, to mark where the change takes place. Looked at by itself without regard to the necessity behind it the line or point seems arbitrary. It might as well or nearly as well be a little more to one side or the other. But when it is seen that a line or point there must be, and that there is no mathematical or logical way of fixing it precisely, the decision of the legislature must be accepted unless we can say that it is very wide of any reasonable mark." Louisville Gas Co. v. Coleman, 277 U.S. 32, 41 (dissenting opinion). </s> [Footnote 9 The appellant makes much of East Cleveland Housing Code 1351.03 (1966), which prescribes a minimum habitable floor area per person; she argues that because the municipality has chosen to establish a specific density control the single-family ordinance can have no role to play. It is obvious, however, that 1351.03 is directed not at preserving the character of a residential area but at establishing minimum health and safety standards. </s> [Footnote 10 MR. JUSTICE STEVENS, in his opinion concurring in the judgment, frames the issue in terms of the "appellant's right to use her own property as she sees fit." Ante, at 513. Focusing on the householder's property rights does not substantially change the constitutional analysis. If the ordinance is invalid under the Equal Protection Clause as to those classes of people whose occupancy it forbids, I should suppose it is also invalid as an arbitrary intrusion upon the property owner's rights to have them live with her. On the other hand, if the ordinance is a rational attempt to promote "the city's interest in preserving the character of its neighborhoods," Young v. American Mini Theaters, 427 U.S. 50, 71 (opinion of STEVENS, J.), it is consistent with the Equal Protection Clause and a permissible restriction on the use of private property under Euclid v. Ambler Realty Co., 272 U.S. 365 , and Nectow v. Cambridge, 277 U.S. 183 . The state cases that MR. JUSTICE STEVENS discusses do not answer this federal constitutional issue. For the most part, they deal with state-law issues concerning the proper statutory construction of the term "family," and they indicate only that state courts have been reluctant to extend ambiguous single-family zoning ordinances to nontransient, single-housekeeping units. By no means do they establish that narrow definitions of the term "family" are unconstitutional. Finally, MR. JUSTICE STEVENS calls the city to task for failing "to explain the need" for enacting this particular ordinance. Ante, at 520. This places the burden on the wrong party. </s> MR. JUSTICE WHITE, dissenting. </s> The Fourteenth Amendment forbids any State to "deprive any person of life, liberty, or property, without due process of law," or to "deny to any person within its jurisdiction the equal protection of the laws." Both provisions are invoked in this case in an attempt to invalidate a city zoning ordinance. [431 U.S. 494, 542] </s> I </s> The emphasis of the Due Process Clause is on "process." As Mr. Justice Harlan once observed, it has been "ably and insistently argued in response to what were felt to be abuses by this Court of its reviewing power," that the Due Process Clause should be limited "to a guarantee of procedural fairness." Poe v. Ullman, 367 U.S. 497, 540 (1961) (dissenting opinion). These arguments had seemed "persuasive" to Justice Brandeis and Holmes, Whitney v. California, 274 U.S. 357, 373 (1927), but they recognized that the Due Process Clause, by virtue of case-to-case "judicial inclusion and exclusion," Davidson v. New Orleans, 96 U.S. 97, 104 (1878), had been construed to proscribe matters of substance, as well as inadequate procedures, and to protect from invasion by the States " all fundamental rights comprised within the term liberty." Whitney v. California, supra, at 373. </s> Mr. Justice Black also recognized that the Fourteenth Amendment had substantive as well as procedural content. But believing that its reach should not extend beyond the specific provisions of the Bill of Rights, see Adamson v. California, 332 U.S. 46, 68 (1947) (dissenting opinion), he never embraced the idea that the Due Process Clause empowered the courts to strike down merely unreasonable or arbitrary legislation, nor did he accept Mr. Justice Harlan's consistent view. See Griswold v. Connecticut, 381 U.S. 479, 507 (1965) (Black, J., dissenting), and id., at 499 (Harlan, J., concurring in judgment). Writing at length in dissent in Poe v. Ullman, supra, at 543, Mr. Justice Harlan stated the essence of his position as follows: </s> "This `liberty' is not a series of isolated points pricked out in terms of the taking of property; the freedom of speech, press, and religion; the right to keep and bear arms; the freedom from unreasonable searches and seizures; [431 U.S. 494, 543] and so on. It is a rational continuum which, broadly speaking, includes a freedom from all substantial arbitrary impositions and purposeless restraints, see Allgeyer v. Louisiana, 165 U.S. 578 ; Holden v. Hardy, 169 U.S. 366 ; Booth v. Illinois, 184 U.S. 425 ; Nebbia v. New York, 291 U.S. 502 ; Skinner v. Oklahoma, 316 U.S. 535 , 544 (concurring opinion); Schware v. Board of Bar Examiners, 353 U.S. 232 , and which also recognizes, what a reasonable and sensitive judgment must, that certain interests require particularly careful scrutiny of the state needs asserted to justify their abridgment. Cf. Skinner v. Oklahoma, supra; Bolling v. Sharpe, [347 U.S. 497 (1954)]." </s> This construction was far too open ended for Mr. Justice Black. For him, Meyer v. Nebraska, 262 U.S. 390 (1923), and Pierce v. Society of Sisters, 268 U.S. 510 (1925), as substantive due process cases, were as suspect as Lochner v. New York, 198 U.S. 45 (1905), Coppage v. Kansas, 236 U.S. 1 (1915), and Adkins v. Children's Hospital, 261 U.S. 525 (1923). In his view, Ferguson v. Skrupa, 372 U.S. 726 (1963), should have finally disposed of them all. But neither Meyer nor Pierce has been overruled, and recently there have been decisions of the same genre - Roe v. Wade, 410 U.S. 113 (1973); Loving v. Virginia, 388 U.S. 1 (1967); Griswold v. Connecticut, supra; and Eisenstadt v. Baird, 405 U.S. 438 (1972). Not all of these decisions purport to rest on substantive due process grounds, compare Roe v. Wade, Supra, at 152-153, with Eisenstadt v. Baird, supra, at 453-454, but all represented substantial reinterpretations of the Constitution. </s> Although the Court regularly proceeds on the assumption that the Due Process Clause has more than a procedural dimension, we must always bear in mind that the substantive content of the Clause is suggested neither by its language nor by preconstitutional history; that content is nothing more than the accumulated product of judicial interpretation of [431 U.S. 494, 544] the Fifth and Fourteenth Amendments. This is not to suggest, at this point, that any of these cases should be overruled, or that the process by which they were decided was illegitimate or even unacceptable, but only to underline Mr. Justice Black's constant reminder to his colleagues that the Court has no license to invalidate legislation which it thinks merely arbitrary or unreasonable. And no one was more sensitive than Mr. Justice Harlan to any suggestion that his approach to the Due Process Clause would lead to judges "roaming at large in the constitutional field." Griswold v. Connecticut, supra, at 502. No one proceeded with more caution than he did when the validity of state or federal legislation was challenged in the name of the Due Process Clause. </s> This is surely the preferred approach. That the Court has ample precedent for the creation of new constitutional rights should not lead it to repeat the process at will. The Judiciary, including this Court, is the most vulnerable and comes nearest to illegitimacy when it deals with judge-made constitutional law having little or no cognizable roots in the language or even the design of the Constitution. Realizing that the present construction of the Due Process Clause represents a major judicial gloss on its terms, as well as on the anticipation of the Framers, and that much of the underpinning for the broad, substantive application of the Clause disappeared in the conflict between the Executive and the Judiciary in the 1930's and 1940's, the Court should be extremely reluctant to breathe still further substantive content into the Due Process clause so as to strike down legislation adopted by a State or city to promote its welfare. Whenever the Judiciary does so, it unavoidably pre-empts for itself another part of the governance of the country without express constitutional authority. </s> II </s> Accepting the cases as they are and the Due Process Clause as construed by them, however, I think it evident that the [431 U.S. 494, 545] threshold question in any due process attack on legislation, whether the challenge is procedural or substantive, is whether there is a deprivation of life, liberty, or property. With respect to "liberty," the statement of Mr. Justice Harlan in Poe v. Ullman, quoted supra, at 504, most accurately reflects the thrust of prior decisions - that the Due Process Clause is triggered by a variety of interests, some much more important than others. These interests have included a wide range of freedoms in the purely commercial area such as the freedom to contract and the right to set one's own prices and wages. Meyer v. Nebraska, supra, at 399, took a characteristically broad view of "liberty": </s> "While this Court has not attempted to define with exactness the liberty thus guaranteed, the term has received much consideration and some of the included things have been definitely stated. Without doubt, it denotes not merely freedom from bodily restraint but also the right of the individual to contract, to engage in any of the common occupations of life, to acquire useful knowledge, to marry, establish a home and bring up children, to worship God according to the dictates of his own conscience, and generally to enjoy those privileges long recognized at common law as essential to the orderly pursuit of happiness by free men." </s> As I have said, Meyer has not been overruled nor its definition of liberty rejected. The results reached in some of the cases cited by Meyer have been discarded or undermined by later cases, but those cases did not cut back the definition of liberty espoused by earlier decisions. They disagreed only, but sharply, as to the protection that was "due" the particular liberty interests involved. See, for example, West Coast Hotel Co. v. Parish, 300 U.S. 379 (1937), overruling Adkins v. Children's Hospital, 261 U.S. 525 (1923). </s> Just a few years ago, we recognized that while "the range of interests protected by procedural due process is not infinite," [431 U.S. 494, 546] and while we must look to the nature of the interest rather than its weight in determining whether a protected interest is at issue, the term "liberty" has been given broad meaning in our cases. Board of Regents v. Roth, 408 U.S. 564, 570 -571 (1972). "In a Constitution for a free people, there can be no doubt that the meaning of `liberty' must be broad indeed. See, e. g., Bolling v. Sharpe, 347 U.S. 497, 499 -500; Stanley v. Illinois, 405 U.S. 645 ." Id., at 572. </s> It would not be consistent with prior cases to restrict the liberties protected by the Due Process Clause to those fundamental interests "implicit in the concept of ordered liberty." Ante, at 537. Palko v. Connecticut, 302 U.S. 319 (1937), from which this much-quoted phrase is taken, id., at 325, is not to the contrary. Palko was a criminal case, and the issue was thus not whether a protected liberty interest was at stake but what protective process was "due" that interest. The Court used the quoted standard to determine which of the protections of the Bill of Rights was due a criminal defendant in a state court within the meaning of the Fourteenth Amendment. Nor do I think the broader view of "liberty" is inconsistent with or foreclosed by the dicta in Roe v. Wade, 410 U.S., at 152 , and Paul v. Davis, 424 U.S. 693, 713 (1976). These cases at most assert that only fundamental liberties will be given substantive protection; and they may be understood as merely identifying certain fundamental interests that the Court has deemed deserving of a heightened degree of protection under the Due Process Clause. </s> It seems to me that Mr. Justice Douglas was closest to the mark in Poe v. Ullman, 367 U.S., at 517 , when he said that the trouble with the holdings of the "old Court" was not in its definition of liberty but in its definition of the protections guaranteed to that liberty - "not in entertaining inquiries concerning the constitutionality of social legislation but in applying the standards that it did." [431 U.S. 494, 547] </s> The term "liberty" is not, therefore, to be given a crabbed construction. I have no more difficulty than MR. JUSTICE POWELL apparently does in concluding that appellant in this case properly asserts a liberty interest within the meaning of the Due Process Clause. The question is not one of liberty vel non. Rather, there being no procedural issue at stake, the issue is whether the precise interest involved - the interest in having more than one set of grandchildren live in her home - is entitled to such substantive protection under the Due Process Clause that this ordinance must be held invalid. </s> III </s> Looking at the doctrine of "substantive" due process as having to do with the possible invalidity of an official rule of conduct rather than of the procedures for enforcing that rule, I see the doctrine as taking several forms under the cases, each differing in the severity of review and the degree of protection offered to the individual. First, a court may merely assure itself that there is in fact a duly enacted law which proscribes the conduct sought to be prevented or sanctioned. In criminal cases, this approach is exemplified by the refusal of courts to enforce vague statutes that no reasonable person could understand as forbidding the challenged conduct. There is no such problem here. </s> Second is the general principle that "liberty may not be interfered with, under the guise of protecting the public interest, by legislative action which is arbitrary or without reasonable relation to some purpose within the competency of the State to effect." Meyer v. Nebraska, 262 U.S., at 399 -400. This means-end test appears to require that any statute restrictive of liberty have an ascertainable purpose and represent a rational means to achieve that purpose, whatever the nature of the liberty interest involved. This approach was part of the substantive due process doctrine [431 U.S. 494, 548] prevalent earlier in the century, and it made serious inroads on the presumption of constitutionality supposedly accorded to state and federal legislation. But with Nebbia v. New York, 291 U.S. 502 (1934), and other cases of the 1930's and 1940's such as West Coast Hotel Co. v. Parish, supra, the courts came to demand far less from and to accord far more deference to legislative judgments. This was particularly true with respect to legislation seeking to control or regulate the economic life of the State or Nation. Even so, "while the legislative judgment on economic and business matters is `well-nigh conclusive' . . ., it is not beyond judicial inquiry." Poe v. Ullman, supra, at 518 (Douglas, J., dissenting). No case that I know of, including Ferguson v. Skrupa, 372 U.S. 726 (1963), has announced that there is some legislation with respect to which there no longer exists a means ends test as a matter of substantive due process law. This is not surprising, for otherwise a protected liberty could be infringed by a law having no purpose or utility whatsoever. Of course, the current approach is to deal more gingerly with a state statute and to insist that the challenger bear the burden of demonstrating its unconstitutionality; and there is a broad category of cases in which substantive review is indeed mild and very similar to the original thought of Munn v. Illinois, 94 U.S. 113, 132 (1877), that "if a state of facts could exist that would justify such legislation," it passes its initial test. </s> There are various "liberties," however, which require that infringing legislation be given closer judicial scrutiny, not only with respect to existence of a purpose and the means employed, but also with respect to the importance of the purpose itself relative to the invaded interest. Some interests would appear almost impregnable to invasion, such as the freedoms of speech, press, and religion, and the freedom from cruel and unusual punishments. Other interests, for example, the right of association, the right to vote, and various [431 U.S. 494, 549] claims sometimes referred to under the general rubric of the right to privacy, also weigh very heavily against state claims of authority to regulate. It is this category of interests which, as I understand it, MR. JUSTICE STEWART refers to as "`implicit in the concept of ordered liberty.'" Ante, at 537. Because he would confine the reach of substantive due process protection to interests such as these and because he would not classify in this category the asserted right to share a house with the relatives involved here, he rejects the due process claim. </s> Given his premise, he is surely correct. Under our cases, the Due Process Clause extends substantial protection to various phases of family life, but none requires that the claim made here be sustained. I cannot believe that the interest in residing with more than one set of grandchildren is one that calls for any kind of heightened protection under the Due Process Clause. To say that one has a personal right to live with all, rather than some, of one's grandchildren and that this right is implicit in ordered liberty is, as my Brother STEWART says, "to extend the limited substantive contours of the Due Process Clause beyond recognition." Ibid. The present claim is hardly one of which it could be said that "neither liberty nor justice would exist if [it] were sacrificed." Palko v. Connecticut, 302 U.S., at 326 . </s> MR. JUSTICE POWELL would apparently construe the Due Process Clause to protect from all but quite important state regulatory interests any right or privilege that in his estimate is deeply rooted in the country's traditions. For me, this suggests a far too expansive charter for this Court and a far less meaningful and less confining guiding principle than MR. JUSTICE STEWART would use for serious substantive due process review. What the deeply rooted traditions of the country are is arguable; which of them deserve the protection of the Due Process Clause is even more debatable. The suggested view would broaden enormously the horizons of [431 U.S. 494, 550] the Clause; and, if the interest involved here is any measure of what the States would be forbidden to regulate, the courts would be substantively weighing and very likely invalidating a wide range of measures that Congress and state legislatures think appropriate to respond to a changing economic and social order. </s> Mrs. Moore's interest in having the offspring of more than one dependent son live with her qualifies as a liberty protected by the Due Process Clause; but, because of the nature of that particular interest, the demands of the Clause are satisfied once the Court is assured that the challenged proscription is the product of a duly enacted or promulgated statute, ordinance, or regulation and that it is not wholly lacking in purpose or utility. That under this ordinance any number of unmarried children may reside with their mother and that this number might be as destructive of neighborhood values as one or more additional grandchildren is just another argument that children and grandchildren may not constitutionally be distinguished by a local zoning ordinance. </s> That argument remains unpersuasive to me. Here the head of the household may house himself or herself and spouse, their parents, and any number of their unmarried children. A fourth generation may be represented by only one set of grandchildren and then only if born to a dependent child. The ordinance challenged by appellant prevents her from living with both sets of grandchildren only in East Cleveland, an area with a radius of three miles and a population of 40,000. Brief for Appellee 16 n.1. The ordinance thus denies appellant the opportunity to live with all her grandchildren in this particular suburb; she is free to do so in other parts of the Cleveland metropolitan area. If there is power to maintain the character of a single-family neighborhood, as there surely is, some limit must be placed on the reach of the "family." Had it been our task to legislate, we [431 U.S. 494, 551] might have approached the problem in a different manner than did the drafters of this ordinance; but I have no trouble in concluding that the normal goals of zoning regulation are present here and that the ordinance serves these goals by limiting, in identifiable circumstances, the number of people who can occupy a single household. The ordinance does not violate the Due Process Clause. </s> IV </s> For very similar reasons, the equal protection claim must fail, since it is not to be judged by the strict scrutiny standard employed when a fundamental interest or suspect classification is involved, see, e. g., Dunn v. Blumstein, 405 U.S. 330 (1972), and Korematsu v. United States, 323 U.S. 214 (1944), or by the somewhat less strict standard of Craig v. Boren, 429 U.S. 190 (1976), Califano v. Webster, 430 U.S. 313 (1977), Reed v. Reed, 404 U.S. 71 (1971), and Royster Guano Co. v. Virginia, 253 U.S. 412, 415 (1920). Rather, it is the generally applicable standard of McGowan v. Maryland, 366 U.S. 420, 425 (1961): </s> "The constitutional safeguard [of the Equal Protection Clause] is offended only if the classification rests on grounds wholly irrelevant to the achievement of the State's objective. State legislatures are presumed to have acted within their constitutional power despite the fact that, in practice, their laws result in some inequality. A statutory discrimination will not be set aside if any state of facts reasonably may be conceived to justify it." </s> See also Dandridge v. Williams, 397 U.S. 471 (1970); Massachusetts Bd. of Retirement v. Murgia, 427 U.S. 307 (1976). Under this standard, it is not fatal if the purpose of the law is not articulated on its face, and there need be only a rational relation to the ascertained purpose. [431 U.S. 494, 552] </s> On this basis, as already indicated, I have no trouble in discerning a rational justification for an ordinance that permits the head of a household to house one, but not two, dependent sons and their children. </s> Respectfully, therefore, I dissent and would affirm the judgment. </s> [431 U.S. 494, 553]

United States Supreme Court NEW HAVEN INCLUSION CASES(1970) No. 915 Argued: March 30, 1970Decided: June 29, 1970 </s> [Footnote * No. 915, New York, New Haven & Hartford Railroad Co. First Mortgage 4% Bondholders Committee v. United States et al., No. 917, Manufacturers Hanover Trust Co., Trustee v. United States et al., and No. 921, Chase Manhattan Bank, N. A., Trustee v. United States et al., on appeal from the United States District Court for the Southern District of New York. No. 914, New York, New Haven & Hartford Railroad Co. First Mortgage 4% Bondholders Committee v. Smith, Trustee, et al., No. 916, Manufacturers Hanover Trust Co., Trustee v. United States et al., No. 920, Chase Manhattan Bank, N. A., Trustee v. Penn Central Co. et al., No. 1038, Penn Central Co. v. Manufacturers Hanover Trust Co., Trustee, et al., and No. 1057, United States et al. v. New York, New Haven & Hartford Railroad Co. First Mortgage 4% Bondholders Committee et al., on certiorari to the United States Court of Appeals for the Second Circuit in advance of judgment. </s> When this Court sustained the Penn-Central merger ( 389 U.S. 486 ), it upheld the action of the Interstate Commerce Commission (ICC) in conditioning its approval of the merger on inclusion as an operating entity of the New York, New Haven & Hartford R. Co. (New Haven), whose continued operation the ICC had found to be essential. Since 1961 the New Haven had been under reorganization proceedings under 77 of the Bankruptcy Act and was close to financial collapse. The basic issue in these cases concerns the propriety of the financial terms for the inclusion. The ICC had remitted the parties to negotiate the terms of the inclusion, and after considering their appraisals issued its inclusion report, in which it concluded that the net liquidation value of New Haven's assets (after deducting liquidation expenses and making a discount to present worth on the basis of hypothesized receipts over the six-year period anticipated for liquidation) was $125,000,000, a figure that the ICC found "just and reasonable" as a condition of the merger under 5 of the Interstate Commerce Act and "fair and equitable" as part of a plan of reorganization under 77 of the Bankruptcy Act. The New Haven bondholders thereupon commenced litigation for review of the inclusion report (in its aspect as a condition of the merger) in the three-judge District Court for the Southern District of New York, [399 U.S. 392, 393] which was called upon to review the order under 5 of the Interstate Commerce Act. The ICC certified to the reorganization court in Connecticut the sale of New Haven's assets to Penn Central, and the New Haven bondholders filed their objections in that court. The bondholders' group and the United States each tried to avoid duplicate litigation - the bondholders by an application in the three-judge court to enjoin the ICC's certification of its plan to the reorganization court (which was denied), and the United States by a motion to dismiss the complaints in the three-judge court (which was also denied). Each court, after hearings, concluded that New Haven's assets had been substantially undervalued and remanded the case to the ICC. The ICC then revalued New Haven's assets at a higher figure than that first reached, which, after deductions for certain factors not previously considered ("the added deductions"), came to $140,600,000. In addition, the ICC directed Penn Central to pay $5,000,000 toward New Haven's interim operating expenses. The reorganization court ordered New Haven's assets transferred to Penn Central, which was done on December 31, 1968. The bondholders filed objections to the revised evaluation with the reorganization court and brought actions against the United States and the ICC in the three-judge court. The reorganization court rejected the plan, though it accepted some of the ICC's determinations. The three-judge court sustained the plan with modifications. Though the two courts agreed on many substantial issues, the total evaluation reached by the reorganization court exceeded that reached by the three-judge court by $28,000,000. The bondholders appealed directly to this Court from the three-judge court's judgment and this Court noted probable jurisdiction. The bondholders appealed to the Court of Appeals from the order of the reorganization court; the United States, the ICC, and Penn Central cross-appealed; and this Court granted certiorari in advance of judgment. The disputed items of valuation, plus one issue affecting the consideration given by Penn Central, are as follows: (1) Though the parties have agreed that New Haven, as Penn Central's partner in the development of the Grand Central Terminal Properties, is entitled to the capitalized value of 50% of the "excess income" from those properties, the bondholders claim that no recognition has been given to New Haven's right to have its share of basic Terminal income, used to defray its share of Terminal expenses, for purposes of determining the fair price Penn Central should pay. (2) The New Haven owned two [399 U.S. 392, 394] large freight yards in the Bronx, which service important industrial enterprises in a 160-acre area and a vital municipal food market installation. The reorganization court ruled that the ICC had erred in rejecting an appraisal by a witness premised upon the yards' availability for continued industrial occupancy with existing trackage and electrical facilities, in favor of a lower appraisal based on his assumption that on New Haven's liquidation the yards would be stripped of those facilities, depressing the value of the land, and necessitating substantial removal expenses. The three-judge court approved the ICC's valuation. (3) The reorganization court rejected, but the three-judge court approved, the added deductions, one made by the ICC in the net liquidation value as an adjustment for the assumed effect of a year's anticipated delay in securing a certificate of abandonment, the other that the ICC made on the basis of a hypothetical sale of all New Haven's land assets at a bulk discount. (4) The reorganization court found that the ICC had overstated the discount for the projected six-year liquidation. (5) The ICC ordered Penn Central to assume interim losses during the actual 11-month period from merger to inclusion to the extent of a ceiling of $5,000,000 (which constituted about 61% of the total loss). The reorganization court upheld the ICC and dismissed the bondholders' contention that Penn Central bear all operating losses. (6) The bondholders attack the ICC's order that New Haven transfer to Penn Central its ownership of stock, which the ICC found worthless, in two concerns. (7) The bondholders urge that Penn Central should pay an added amount to reflect New Haven's "going-concern" value as a supplement to the liquidation value. (8) The New Haven received, in partial payment for the assets transferred to Penn Central, 950,000 shares of Penn Central common stock which were valued at $87.50 per share at the time of the valuation date used by the ICC but which had declined to $63.38 as of the inclusion date. To remedy "the unfairness [arising from] the fact that the purchaser is getting assets of sure present value while the seller is asked to gamble on the future of Penn Central," the reorganization court provided for (and the three-judge court adopted) an "underwriting" formula under which Penn Central would be called upon to make up in cash the difference between the market price of Penn Central stock in 1978 and $87.50 per share, unless before that time the market price had attained $87.50 for a five-day period. The bondholders contend that this formula fails [399 U.S. 392, 395] to cure the overvaluation. The bondholders also urge that the continued deficit operation of the New Haven from the inception of the reorganization proceeding in 1961 to the inclusion in Penn Central in 1968 resulted in their being deprived of property without just compensation in violation of the Fifth Amendment. Held: </s> 1. The three-judge court erred in not granting the Government's motion to dismiss to the extent of deferring to the reorganization court in proceedings ultimately involving only the price to be paid for the assets of the debtor's estate. Pp. 419-430. </s> (a) The reorganization court under 77 of the Bankruptcy Act and the ICC had full power over the debtor and its property, including the power to formulate and confirm a reorganization plan providing for sale of the debtor's property, and it would have disrupted that plan for the three-judge court to have enjoined certification of the plan by the ICC to the reorganization court. Pp. 419-421. </s> (b) Though transfer of the New Haven assets was also a part of the merger under 5 of the Interstate Commerce Act, and neither court had "complete" jurisdiction when the litigation started, the statutory interrelationship between 5 and 77 and the ability of the reorganization court to adjudicate all the inclusion issues made it advisable for the three-judge court to have yielded to the reorganization court, in which primary jurisdiction had vested. Pp. 423-427. </s> (c) When the merger occurred and no question remained of Penn Central's obligation to assume the assets of New Haven, the jurisdiction of the reorganization court became "complete" and the three-judge court had virtually nothing to decide. Pp. 427-428. </s> 2. The reorganization court is empowered by Congress to review the plan to determine whether the ICC has followed the statutory mandate that the plan be "fair and equitable" and whether there was material evidence to support the agency's conclusion. Pp. 431-435. </s> 3. There was no error in the finding of the reorganization court that, under the contractual arrangements, only after Terminal income had been applied to meeting Terminal expenses would the residue be distributed to the two railroads, and thus the basic income could not be "freed up" from the obligation to meet Terminal expenses. Nor did that court err in concluding [399 U.S. 392, 396] that New Haven's access rights to the Terminal under the agreements were not entitled to recognition in evaluating New Haven's assets, since those rights were more than offset by New Haven's deficit operations which Penn Central assumed. Pp. 438-451. </s> 4. The ICC's adherence to the lower of an expert witness' two estimates of the valuation of the Bronx freight yards was clearly erroneous as it was based on the premise that New Haven would dismantle the yards upon liquidation of the rest of the railroad even though Penn Central already had a link by which service to the yards would continue, and implied that a common carrier could deny service to industrial and public activities simply because ownership of adjoining trackage had changed hands. Pp. 451-457. </s> 5. The reorganization court did not err in disallowing the added deductions. Pp. 457-473. </s> (a) The ICC should not have made a deduction for costs that New Haven would incur during the year's period anticipated to obtain approval for abandonment of train operations, since the valuation date (December 31, 1966) represented not the date on which New Haven would have sought a certificate of abandonment but the date on which it would have commenced its six-year liquidation sale. Moreover, since the interested public bodies have not arranged to continue New Haven's transportation system during the long period New Haven has been in reorganization, there is no justification for assuming that if confronted with an abandonment application they would do so now and that a delay would be necessary for the ICC to hear from those communities. Pp. 459-466. </s> (b) The ICC's deduction from the estate's liquidation value, based on a hypothetical sale of all New Haven's land assets in bulk was properly rejected by the reorganization court as the ICC had concluded that only its power to compel the sale of the real estate to a single buyer for continued operation justified the bulk-sale discount, and there is no evidence in the record that a bulk buyer would agree to take over New Haven properties for continued service at any price. Pp. 468-473. </s> 6. The adjustment made by the reorganization court in the ICC's erroneous computation of the discount to present values of New Haven's liquidation proceeds over the six-year liquidation period is affirmed as being substantially free from error. Pp. 473-476. [399 U.S. 392, 397] </s> 7. The payment made by Penn Central for New Haven's interim operating losses between the effective date of the merger and the date of inclusion, was in accordance with a formula devised by the ICC in its inclusion report that constituted a pragmatic compromise between the competing interests of the Penn Central and the bondholders. The reorganization court's acceptance of that disposition is affirmed. Pp. 476-479. </s> 8. The argument of the Bondholders Committee that the ICC erred in ordering the transfer to Penn Central of stocks that New Haven held in two concerns, which the ICC found were valueless, is foreclosed by res judicata since the bondholders had not appealed the order of the reorganization court directing the transfer of New Haven assets. Pp. 479-481. </s> 9. The bondholders' contention that Penn Central should pay an added amount for New Haven's "going-concern" value is without merit, being entirely at odds with the liquidation hypothesis on which appraisal of New Haven's assets was predicated. Pp. 481-482. </s> 10. The "underwriting plan" of the reorganization court added to the assessment of present worth of the Penn Central stock both a reasonable assurance of realization of such worth and the opportunity of additional gain, and on the basis of the record before that court at the time of its order the package constituted full compensation for the assets transferred to Penn Central. In view, however, of the impact of recent events, which make it possible that this aspect of the decree is not realistic, further proceedings will be needed to reassess the consideration that Penn Central must give in exchange for the New Haven properties. Pp. 483-489. </s> 11. The substantial losses to the bondholders that occurred during the course of the reorganization proceedings did not result in any unconstitutional taking of the property of the bondholders, whose rights are not absolute and who will be receiving the highest and best price for the debtor's assets as of the valuation date. Moreover, the bondholders did not petition the reorganization court to dismiss the proceedings and thereby permit foreclosure on the mortgage liens until well after the valuation date. Nor is the price Penn Central must pay unfair, in view of the benefits that were anticipated from the merger. Pp. 489-495. </s> Nos. 914, 916, 920, 1038, and 1057, 304 F. Supp. 793 and 1136, affirmed in part and vacated and remanded in part; Nos. 915, 917, and 921, 305 F. Supp. 1049, vacated and remanded. [399 U.S. 392, 398] </s> Whitney North Seymour argued the cause for Manufacturers Hanover Trust Co. With him on the brief were Horace J. McAfee and Albert X. Bader, Jr. Lester C. Migdal argued the cause for New York, New Haven & Hartford Railroad Co. First Mortgage 4% Bondholders Committee. With him on the briefs was Lawrence W. Pollack. Joseph Auerbach argued the cause for Smith, Trustee of the property of New York, New Haven & Hartford Railroad Co. With him on the briefs were James Wm. Moore, Robert G. Bleakney, Jr., and Morris Raker. Leonard S. Goodman argued the cause for the United States et al. With him on the brief were Solicitor General Griswold, Assistant Attorney General McLaren, Deputy Solicitor General Springer, John H. D. Wigger, and Robert W. Ginnane. Hugh B. Cox argued the cause for Penn Central Transportation Co. With him on the brief were Roswell B. Perkins, Ulrich Schweitzer, Samuel E. Gates, Robert L. King, and Harvey J. Goldschmid. Joseph Schreiber and Wilkie Bushby filed briefs for the Chase Manhattan Bank, N. A. Louis J. Lefkowitz, Attorney General, Dunton F. Tynan, Assistant Solicitor General, and Walter J. Myskowski filed a brief for the State of New York. Robert K. Killian, Attorney General, Samuel Kanell, Special Assistant Attorney General, and Jack Rubin, Assistant Attorney General, filed a brief for the State of Connecticut. Herbert F. De Simone, Attorney General of Rhode Island, and W. Slater Allen, Jr., Special Assistant Attorney General, joined in the briefs for the States of New York and Connecticut. </s> MR. JUSTICE STEWART delivered the opinion of the Court. </s> These cases represent the latest stage of the litigation arising from the merger of the Pennsylvania and New York Central railroads, which we upheld two Terms ago in the Penn-Central Merger Cases, 389 U.S. 486 . A condition [399 U.S. 392, 399] of that merger was Penn Central's promise to take in the New York, New Haven & Hartford Railroad Company as an operating entity - a promise that Penn Central fulfilled on December 31, 1968, 11 months after its own formation. The ultimate question presented by the cases now before us is the price Penn Central must pay for the assets of the New Haven.Fn </s> I </s> 1. The Penn Central. The proposed combination of the Pennsylvania and New York Central railroads first came under consideration by the parties and the Interstate Commerce Commission more than 12 years ago, a decade prior to its eventual consummation. 1 The two railroads formally sought permission to merge under the Interstate Commerce Act, 49 U.S.C. 1 et seq., on March 9, 1962. 2 On April 6, 1966, the Commission authorized the merger of the two roads. 3 The union of the two carriers was the largest railroad merger in the history of the Nation, 4 bringing together the companies that "dominate rail transportation in the Northeast." 5 In 1965 the component roads enjoyed a total operating revenue in excess of $1,500,000,000 and a net annual income of over $75,000,000. 6 The two companies held [399 U.S. 392, 400] some $72,000,000 in working capital and $1,242,000,000 in combined investments. 7 With about 19,600 miles of road "sprawling between the Great Lakes on the north . . . and the Ohio and Potomac Rivers on the south," 8 Penn Central was at its inception nearly twice the size of the next largest railroad system in the East and three times that of the third largest. 9 </s> The predicted economies effected by the merger were likewise enormous; it was thought that within about eight years of the combination they would exceed $80,000,000 annually. 10 Those savings represented a value, capitalized at 8%, of $1,000,000,000. </s> On June 9, 1967, after considerable litigation involving protective conditions for various affected railroad competitors, 11 the Commission issued a modified order authorizing [399 U.S. 392, 401] the Penn-Central merger. 12 On October 19, 1967, a court of three judges, convened in the United States District Court for the Southern District of New York to review the Commission's order pursuant to 28 U.S.C. 1336, 2284, and 2321-2325, upheld the Commission's action. 13 On January 15, 1968, this Court affirmed with minor modifications, and thereby sustained the validity of the merger. 14 Two weeks later, on February 1, 1968, Pennsylvania and New York Central merged. </s> 2. The New Haven. The New York, New Haven & Hartford Railroad is now an operating division of the Penn Central system. At the time of the merger, however, it was an independent Class I railroad operating some 1,500 miles of line in the Commonwealth of Massachusetts and the States of Rhode Island, Connecticut, and New York; as such, it was the sixth largest railroad in the northeast region and the largest in New England. 15 With an operations area extending from Boston to New York and connecting with nine other Class I railroads, the New Haven served 12 cities of greater than 100,000 population, as well as a number of important defense [399 U.S. 392, 402] establishments. 16 In 1964 the railroad employed about 9,800 people and paid them annual wages amounting to $70,000,000. 17 About 30,000 commuters used the line every day to reach work in New York City alone. 18 As described by the Commission, </s> "The New Haven has both a large passenger and freight business. It is the fourth largest passenger carrying railroad in the United States, and has the second highest commuter revenue of all such roads. . . . The volume of its freight business . . . is substantially greater . . . . It is the largest freight railroad in New England and ranks tenth in freight traffic among all railroads in the eastern district. . . . Its freight service is considered to be of extreme importance to the industrial well-being of southern New England." 19 </s> The financial history of the New Haven was for decades a history of extreme vicissitudes. The company's decline and fall, with passage into, out of, and back into railroad reorganization, have been chronicled elsewhere. 20 It first went into reorganization under 77 of the Bankruptcy Act, 11 U.S.C. 205, on October 23, 1935. Due [399 U.S. 392, 403] in large measure to the difficulties of including formerly leased lines in the reorganized road, nearly 12 years elapsed from the filing of the debtor's petition in the United States District Court for the District of Connecticut to that court's eventual order approving consummation of the Commission's plan of reorganization. 21 </s> The railroad emerged from reorganization in 1947 with a vastly simplified debt structure in which only the most senior holders of secured interests survived. 22 But in the following years the financial condition of the company again deteriorated, prompting it to seek at first partial and then total discontinuance of passenger service on the former Old Colony lines in Massachusetts. 23 By 1959 the financial condition of the New Haven was such as to render the chance of surplus earnings "slight at best." 24 Through late 1960 and into early 1961 the company's management expended great efforts to stave off bankruptcy by obtaining loans or grants from the Federal and State Governments. 25 By the middle of 1961, current liabilities exceeded current assets by $36,310,000, 26 and the company was losing cash at the annual rate of $18,000,000. 27 </s> Finally, on July 7, 1961, the New Haven again petitioned for reorganization under 77 in the United States [399 U.S. 392, 404] District Court for the District of Connecticut, a step that the court was later to find had been far too long delayed: </s> "[I]n the interest of its creditors, its employees and the public [the railroad] should have petitioned . . . long before it did. The grave problems which . . . beset the reorganization would have been much less acute and infinitely more manageable if bankruptcy had not been put off until its cash was almost entirely depleted, credit was practically gone, maintenance was down and in all other respects the bottom was out of the barrel." 28 </s> Immediately upon their taking over the New Haven, the trustees appointed by the reorganization court were obliged to borrow $8,000,000 to meet the payroll. 29 The situation did not improve with the passage of time. "[I]n spite of spartan economies and a sizeable reduction in numbers of employees, the costs of operation . . . offset savings and eroded away the accumulated cash." 30 On July 6, 1964, the New Haven trustees petitioned the Commission, pursuant to 13a (2) of the Interstate Commerce Act, 49 U.S.C. 13a (2), for authority to discontinue suburban passenger train service in the Boston area. There followed a public hearing, an adjournment to afford Massachusetts authorities an opportunity - ultimately unavailing - to negotiate a contract with New Haven for continuation of some service, and a motion by the New Haven for expedited disposition "by reason of the critical nature of New Haven's finances, the irretrievable drain which the operations in question impose upon New Haven's resources, and the increasing adverse effect which New Haven's situation has upon [399 U.S. 392, 405] the public interest and upon New Haven's creditors . . . ." The Commission granted the trustees' application, concluding that for a period beginning four years before the 1961 reorganization petition and continuing thereafter, New Haven's financial condition had been "critical" and "drastically weak . . . ." 31 </s> By 1965 it was evident that the New Haven was on the verge of collapse. 32 Its year-end current assets amounted to $20,521,000, some $16,685,000 less than current liabilities plus long-term debt payments due within the coming year. The obligations payable after one year totaled $189,042,000. The retained income account showed a deficit of $81,672,000; the working capital account, a deficit of $16,700,000. For the year the net railway operating income showed a deficit of $16,000,000, with overall net income a deficit only $1,000,000 less. The company was in default in its payments of both principal and interest on its long-term debt. 33 In the view of the trustees, New Haven was [399 U.S. 392, 406] "absolutely faced with economic obsolescence if it continues as an independent, short-line, terminal railroad." 34 </s> On October 11, 1965, the New Haven notified the Commission, pursuant to 13a (1) of the Interstate Commerce Act, 49 U.S.C. 13a (1), of its intention to discontinue all its interstate passenger trains effective March 1, 1966. 35 If carried into effect, the proposed discontinuance would have drastically curtailed passenger train service in New York and Massachusetts, and ended it completely in Connecticut and Rhode Island. 36 In the spring of 1966 the Commission, noting that over an 11-year period New Haven had experienced "an unending succession of reverses," concluded that "[t]here now is totally lacking any hope or plan for future survival of this carrier, except that held out by its merger into a trunkline railroad." 37 The Commission acceded in part to the trustees' notice of discontinuance, but invoked its statutory power to keep many of the trains in operation on the ground that "passenger as well as freight service by the N[ew] H[aven] is a national necessity and that termination of either would lead to distress in Connecticut, Massachusetts, and Rhode Island, and would severely damage New York City and the Nation generally." 38 </s> As 1966 gave way to 1967, the New Haven's situation deteriorated still further. As of April 1967 the reorganization court thought "the prospect for the continued operation of the Railroad was very dim." 39 The road lacked even a current expense fund from which to satisfy the "six months" creditors, and the court thought it [399 U.S. 392, 407] "highly unlikely that there ever will be one." 40 In July 1967 the reorganization court found that the New Haven's situation had become "desperately critical"; its cash depletion was "so serious that, if the present rate of loss continues, there will be insufficient left by late September to meet the payroll of approximately $1,400,000 per week." 41 </s> As 1967 came to an end, so did the New Haven's cash reserve. By August 31 the cash balance fell to $4,500,000 - a precarious condition for a company requiring $1,750,000 a week simply to meet current operating expenses. 42 The trustees estimated that as of December 31, 1967, the balance would decline to $3,100,000 and two months later would fall to $850,000. 43 The New Haven's financial position had thus eroded to the point where its shutdown was "imminent . . . ." 44 </s> [399 U.S. 392, 408] </s> 3. The inclusion negotiations. From the outset of the 77 proceeding in 1961, the trustees of the New Haven and the reorganization court charged with conservation of the debtor's dwindling assets recognized that "a merger with a large trunk line railroad would be the most promising and feasible means of continuing the viability of the New Haven's transportation system . . . ." In re New York, N. H. & H. R. Co., 289 F. Supp. 451, 456; cf. 281 F. Supp. 65. After Pennsylvania and New York Central filed their merger application before the Interstate Commerce Commission in 1962, the New Haven trustees sought inclusion in the new company, both by private negotiations with the component roads and by a petition to the Commission filed June 26, 1962. See In re New York, N. H. & H. R. Co., 378 F.2d 635, 636; Merger Report, 327 I. C. C. 475, 480. As the reorganization court said, it was "apparent that the inclusion of the New Haven in the Penn-Central merger was the only salvation for the New Haven as an operating railroad . . . ." In re New York, N. H. & H. R. Co., 289 F. Supp., at 456; see also In re New York, N. H. & H. R. Co., 304 F. Supp. 793, 800. </s> The Commission, as we have noted, authorized the merger of the two roads in 1966. But in so doing, it found that "[w]ithout some radical change in circumstances, even if this merger application were denied, N[ew] H[aven] would face a nearly insuperable task in bringing itself out of bankruptcy." Merger Report, 327 I. C. C., at 522. The Commission concluded that the proposed Penn-Central combination, "without complete inclusion of N[ew] H[aven], would not be consistent with the public interest . . . ." Id., at 524. Accordingly, it required "all the New Haven railroad to be included in the applicants' transaction," and conditioned its approval of the merger upon that inclusion, id., at 524, 527. In so doing, the Commission spelled out Penn [399 U.S. 392, 409] Central's obligation toward New Haven in unequivocal language. Condition 8 of the Merger Report stipulated as follows: </s> "The Pennsylvania New York Central Transportation Company shall be required to include in the transaction all the New York, New Haven and Hartford Railroad Company . . . upon such fair and equitable terms as the parties may agree subject to the approval of the Bankruptcy Court and the Commission. Within 6 months after the date this report is served, the parties shall file with the Commission for its approval, a plan for such inclusion. In the event the parties are unable to reach an agreement (and subject to approval by the Bankruptcy Court) such inclusion shall be upon such fair and equitable terms and conditions as the Commission may impose. </s> . . . . . </s> "Jurisdiction is hereby reserved for such purposes. Consummation of the merger by applicants shall indicate their full and complete assent to these requirements." 327 I. C. C., at 553. </s> Condition 16 of the Merger Report reiterated that </s> "Consummation of the transaction approved herein shall constitute on the part of The Pennsylvania Railroad Company and the New York Central Railroad Company, their successors and assigns, acquiescence in and assent to the conditions stated in this appendix and in the attached report." Id., at 555. </s> Having determined to require the inclusion of New Haven in Penn Central as a condition of merger, the Commission remitted the parties to private negotiation of the terms of inclusion. Id., at 527. The New Haven trustees on the one side, and the Pennsylvania and New [399 U.S. 392, 410] York Central railroads on the other, had already been bargaining for some time, having drafted preliminary documents, dated December 22, 1964, and February 5, 1965, that provided for Penn Central's assumption of New Haven's freight operations. Oscar Gruss & Son v. United States, 261 F. Supp. 386, 393; Interstate Discontinuance Case, 327 I. C. C. 151, 175 n. 6. On April 21, 1966, two weeks after the Merger Report, they executed a Purchase Agreement for the transfer of substantially all the New Haven assets to Penn Central. Penn-Central Merger Cases, 389 U.S., at 508 ; see In re New York, N. H. & H. R. Co., 378 F.2d, at 636. 45 The Purchase Agreement provided for the transfer of the New Haven properties to Penn Central, with the consideration in exchange to consist in part of cash and in part of stocks and bonds of Penn Central. 46 </s> [399 U.S. 392, 411] </s> In September 1966 the trustees filed a petition with the reorganization court reciting the background of the negotiations with Penn Central, the New Haven's large and growing deficits, and the insufficiency of internally generated cash to meet operating demands. In the trustees' view, inclusion in Penn Central afforded "the only practicable means for reorganization of the Debtor that is consistent with the best interest of the public and of all parties interested in the Debtor's estate . . . ." They submitted that operations should continue so long as inclusion was possible, and that the court should grant them leave to press for inclusion on the basis of the Purchase Agreement. In re New York, N. H. & H. R. Co., 378 F.2d, at 637. On October 24, 1966, the reorganization [399 U.S. 392, 412] court authorized the trustees to present the Agreement to the Commission, noting that the goal of preserving the New Haven operations "has been the policy from the beginning of these proceedings . . . ." Three days later the trustees and the Pennsylvania and New York Central railroads petitioned the Commission for approval of the New Haven's inclusion on the terms of the Agreement. </s> On November 16, 1967, the Commission ratified the Purchase Agreement as the basis for the inclusion of New Haven in Penn Central. Pennsylvania R. Co. - Merger - New York Central R. Co., 331 I. C. C. 643 ("Second Supplemental Report"). It looked upon the fact that the parties had been able to reach agreement as an indication that even though the New Haven trustees were selling properties having no value as an operating entity, they nevertheless had enjoyed a degree of bargaining power by virtue of the requirement that Penn Central take in New Haven as a condition of the merger. 331 I. C. C., at 657. "[W]here a transaction is bargained at arm's length," said the Commission, "each side is presumably capable of determining its own best interest, and our primary function is to discover whether the transaction will be in the public interest." Id., at 656. The Commission then undertook its independent analysis of the value of the New Haven properties. Although the Purchase Agreement "carrie[d] some probative force as to the values of the properties involved, it [was] by no means controlling." Id., at 657. The Commission must still determine the price "on the basis of all the evidence pertaining thereto, not merely the agreement and supporting evidence." Id., at 660 n. 12. </s> Upon its independent review of the record, the Commission found that the asset value of the New Haven properties to be transferred to Penn Central and of the [399 U.S. 392, 413] consideration to be given in exchange was $125,000,000. The Commission concluded that payment of that sum by Penn Central to the New Haven estate would be both "just and reasonable" as a condition of the merger under 5 of the Interstate Commerce Act, and "fair and equitable" as part of a plan of reorganization under 77 of the Bankruptcy Act. Unwilling to defer the merger until inclusion could take place but recognizing that the danger of an end to all New Haven operations was "very real," 331 I. C. C., at 654, the Commission authorized financial aid from Penn Central to prop up the debtor during the interim period between merger and inclusion to ensure New Haven's continued functioning until its acquisition by Penn Central. See Penn-Central Merger Cases, 389 U.S., at 509 . </s> 4. The inclusion litigations. At this juncture the Commission's determination of the terms of inclusion was subjected to simultaneous judicial review in two separate forums. On January 23, 1968, eight days after this Court's approval of the merger and eight days before the merger itself, the New Haven bondholders commenced five actions in the United States District Court for the Southern District of New York to set aside the Commission's order. The three-judge District Court reconvened to hear the actions and shortly thereafter consolidated the five cases into one. On March 29, 1968, the Commission certified the first step of its plan for the reorganization of the New Haven - the sale of its assets to Penn Central - to the reorganization court. 47 Pursuant [399 U.S. 392, 414] to 77 (e) of the Bankruptcy Act, 11 U.S.C. 205 (e), the New Haven bondholders filed their objections to the Commission's plan following notice given by the reorganization court. Thus, the identical question of the price Penn Central would have to pay for the New Haven assets came at the same time before the three-judge District Court in New York and the single-judge District Court in Connecticut. </s> On July 10, 1968, the three-judge court, following extensive briefing and argument on the numerous issues underlying the price question, found itself unable to agree with the Commission in several major respects. It therefore vacated so much of the Commission's order as found the terms of Penn Central's acquisition of the New Haven's assets to be just and reasonable and remanded the cause for further proceedings. New York, N. H. & H. R. Co., First Mortgage 4% Bondholders' Committee v. United States, 289 F. Supp. 418. On August 13, 1968, also after extensive briefing and argument, the reorganization court independently returned the Commission's plan for further proceedings. In re New York, N. H. & H. R. Co., 289 F. Supp. 451. On the overriding question of price, the two courts were in accord: by fixing the worth of the New Haven at $125,000,000, the Commission had substantially understated the value of the properties to be transferred. The [399 U.S. 392, 415] three-judge court estimated the understatement to be on the order of $45,000,000 to $50,000,000; the reorganization court, $33,000,000 to $55,000,000. 289 F. Supp., at 440, 465. </s> Meanwhile, the continuing drain on the New Haven's dwindling cash reserves called for - and received - drastic action. Upon remanding the Commission's proposed plan under 77, the reorganization court ruled that unless the Commission ordered inclusion by January 1, 1969, the court would entertain a motion to dismiss the reorganization proceedings, resulting in termination of all the New Haven's train service. 289 F. Supp., at 459. The court recommended that the Commission direct the early inclusion of New Haven with a partial payment of the purchase price, deferring other issues to later resolution. Id., at 466. </s> On the remand, the Commission reopened the record for the reception of further evidence and briefing in accordance with the instructions of the two reviewing courts. Its revaluation of the New Haven properties, announced on November 25, 1968, resulted in an increase in total worth of some $37,700,000, yielding a new price of $162,700,000 for the properties to be transferred. Pennsylvania R. Co. - Merger - New York Central R. Co., 334 I. C. C. 25, 53 ("Fourth Supplemental Report"). But the Commission then invoked "other pricing considerations" not taken into account at the time of its prior report. Application of the new considerations effected a reduction of $22,081,000 from the newly calculated asset value, leaving a net value of $140,600,000 - $15,600,000 more than the Commission's initial estimate, but $17,400,000 less than the lowest range of value suggested by either of the two District Courts. In addition, the Commission required Penn Central to pay $5,000,000 toward the New Haven's interim operating expenses and, yielding to the directive of the reorganization [399 U.S. 392, 416] court, ordered Penn Central to take over the New Haven properties by January 1, 1969. 334 I. C. C., at 74, 76. </s> The Commission certified its revised plan to the reorganization court on December 2, 1968. Within three weeks the bondholders filed their objections. On December 24, 1968, the reorganization court released the assets of the debtor's estate to Penn Central without approving the price terms set by the Commission. The court reiterated that failure to include New Haven in Penn Central by January 1, 1969, would result in immediate termination of all New Haven train service. On December 31 the estate transferred its assets to Penn Central. </s> At once the bondholders pressed for judicial review of the Commission's revised evaluation. With their objections to the plan of reorganization already pending before the reorganization court, representatives of holders of the debtor's first and refunding mortgage 4% bonds commenced two separate actions against the United States and the Commission before the three-judge District Court in New York. The Manufacturers Hanover Trust Company and the Chase Manhattan Bank, trustees under other mortgage bonds, commenced two more actions against the same defendants. 48 The three-judge court consolidated the four cases and granted intervention - to the New Haven trustees as parties plaintiff and to Penn Central, the Commonwealth of Massachusetts, and the [399 U.S. 392, 417] States of Rhode Island, Connecticut, and New York as parties defendant. </s> On May 28, 1969, the reorganization court again rejected the plan submitted by the Commission. Although it accepted the Commission's determinations on some issues, the court overruled the Commission with respect to its valuation of the New Haven's Harlem River and Oak Point freight yards and its added deductions introduced for the first time on the remand. The court also instituted its own "underwriting" plan to ensure equivalent value for the estate with respect to the Penn Central common stock given in partial consideration for the transferred New Haven properties. In re New York, N. H. & H. R. Co., 304 F. Supp. 793. An order implementing decision and remanding to the Commission was entered on July 28, 1969. 304 F. Supp. 1136. </s> On June 18, 1969, the three-judge court filed its opinion in the bondholders' action. With one judge in dissent, the court upheld the Commission's valuation of the freight yards and its added deductions on the remand. The court also adopted the underwriting plan devised by the reorganization court. New York, N. H. & H. R. Co., First Mortgage 4% Bondholders' Committee v. United States, 305 F. Supp. 1049. A decree fixing the terms of judgment followed on September 11, 1969. 49 </s> [399 U.S. 392, 418] </s> With the two District Courts thus in agreement, after two rounds of judicial review, on many of the substantial issues that had come before them, but in disagreement on matters amounting to more than $28,000,000 in value, the bondholders took direct appeals to this Court from the judgment of the three-judge court. They also appealed from the order of the reorganization court to the United States Court of Appeals for the Second Circuit. The United States, the Commission, and Penn Central took no appeals from the decree of the three-judge court but cross-appealed to the Court of Appeals from the order of the reorganization court. The Court of Appeals consolidated the appeals from the reorganization court, and the parties then petitioned this Court to grant certiorari to the Court of Appeals in advance of its judgment, pursuant to 28 U.S.C. 1254 (1) and 2101 (e), and Rule 20 of this Court. We noted probable jurisdiction of the appeals from the order of the three-judge court and, with respect to the judgment of the reorganization court, granted certiorari to the Court of Appeals before judgment, accelerating briefing and argument to permit disposition of these cases at the current Term. 396 U.S. 1056 . 50 </s> [399 U.S. 392, 419] </s> II </s> We first consider the dual review to which the District Courts in New York and Connecticut subjected the price determinations of the Interstate Commerce Commission. From the outset all the parties in the three-judge court recognized that the pricing questions presented in the litigation there were also destined to come before the reorganization court under 77 of the Bankruptcy Act. 51 Confronted with the prospect of duplicate litigation, the New Haven bondholders asked the three-judge court to enjoin the Commission's certification of its plan of [399 U.S. 392, 420] reorganization to the District Court in Connecticut. Counsel urged that "if such certification is not restrained, the questions presented by the complaint herein under Section 5 (2) of the Interstate Commerce Act will also be before the Bankruptcy Court under Section 77 of the Bankruptcy Act . . . ." The three-judge court denied the bondholders' application for injunctive relief. In its view, "the balance of convenience tilt[ed] heavily in favor of allowing the Connecticut court to proceed to such extent as it is advised," since the grant of such an injunction could delay the reorganization proceedings for a substantial time. </s> In this ruling the three-judge court was correct. The jurisdiction of the reorganization court was not open to question. Upon its approval of the New Haven's petition for reorganization in 1961, that court had acquired "exclusive jurisdiction of the debtor and its property wherever located . . . ." Bankruptcy Act, 77 (a), 11 U.S.C. 205 (a). 52 Subject to the court's control, the trustees whom it appointed were empowered "to operate the business of the debtor." Id., 77 (c) (2), 11 U.S.C. 205 (c) (2). They were thus charged with the dual responsibility of conserving the debtor's estate for the benefit of creditors and preserving an ongoing railroad in the public interest. Massachusetts v. Bartlett, 384 F.2d 819, 821, cert. denied, 390 U.S. 1003 ; 5 Collier on Bankruptcy § 77.02, at 469-470 (14th ed. 1969). 53 </s> [399 U.S. 392, 421] With these goals in view, the statute bestowed a "broad and general" authority upon both the court and the trustees. Cf. Palmer v. Massachusetts, 308 U.S. 79, 85 . The provisions of 77 "doubtless suffice[d] to confer upon the [reorganization court] power appropriate for adjusting property rights in the railroad debtor's estate and, as to such rights, beyond that in ordinary bankruptcy proceedings." Id., at 85-86; cf. 5 Collier, supra, § 77.11, at 498-499. Together, the court and the Commission "unquestionably" had "full and complete power not only over the debtor and its property, but also, as a corollary, over any rights that [might] be asserted against it." Callaway v. Benton, 336 U.S. 132, 147 . 54 One such power was precisely that which the Commission was about to propose that the reorganization court exercise - the power to confirm a plan of reorganization providing for "the sale of all . . . of the property of the debtor . . . ." Bankruptcy Act, 77 (b) (5), 11 U.S.C. 205 (b) (5). To that end the Commission was required to certify its proposal to the court as a prerequisite to judicial approval. 77 (d), 11 U.S.C. 205 (d). Injunctive intervention by the three-judge court would thus have disrupted an essential statutory phase of the New Haven reorganization. </s> The United States also sought to avoid duplicate litigation - but by bypassing the New York rather than the Connecticut federal court. In a motion filed shortly [399 U.S. 392, 422] after the commencement of the New Haven bondholders' suit in the three-judge court, the Government moved to dismiss the complaints for lack of subject-matter jurisdiction. In support of the motion it was argued that (1) until the Commission certified the terms of inclusion to the reorganization court, Condition 8 under which Penn Central had pledged to take in New Haven was not satisfied and the Commission's order was not yet reviewable; (2) by virtue of the 77 aspects of the case, the reorganization court had exclusive jurisdiction over the pricing questions sought to be presented to the three-judge court; and (3) even on the assumption that the three-judge court had jurisdiction, it should stay its hand as a matter of equity to avoid an unnecessary interference with the proceedings before the reorganization court. </s> The Government's motion to dismiss was opposed by Penn Central, the New Haven trustees, the State of New York, and the bondholders. Significantly, the Commission did not oppose the motion. Indeed, the Commission agreed with the United States that "most (and perhaps all) of the issues raised by the plaintiffs in this three-judge Court will be reviewable by the Reorganization Court," conceded that "the resulting concurrent jurisdiction is awkward, at least in theory," and concluded tentatively that "the scope of judicial review . . . in the Reorganization Court would, as a practical matter[,] be the same as in this three-judge Court." The three-judge court denied the Government's motion to dismiss. The bondholders' actions, the court said, came within the letter of the statutes authorizing review of orders of the Commission. The court conceded there was "an area of overlap" between the work of the New York and Connecticut forums, but thought nothing in 77 or decisional law superseded that dual arrangement. See 289 F. Supp., at 424 n. 3. [399 U.S. 392, 423] </s> The three-judge court correctly observed that in ordering New Haven's inclusion in Penn Central the Commission had properly exercised its authority under both 5 of the Interstate Commerce Act and 77 of the Bankruptcy Act. The fact that the New Haven was in reorganization under the Bankruptcy Act did not preclude the Commission from exercising its statutory power, in passing on the merger application of two railroads, to require the inclusion of a third. Interstate Commerce Act, 5 (2) (d), 49 U.S.C. 5 (2) (d). 55 "The Commission can undoubtedly carry on 5 proceedings simultaneously with 77 reorganization proceedings . . . ." Callaway v. Benton, 336 U.S., at 140 . Here the transfer of the New Haven assets was as much a part of a merger under 5 as it was a plan of reorganization under 77. </s> Moreover, at the outset of the litigation, the jurisdiction of neither the New York nor the Connecticut court was "complete." On the one hand, the reorganization court lacked coercive power over Penn Central: under 77 it could neither approve nor disapprove the merger qua merger, and it could not compel Penn Central to purchase the New Haven assets. So far as 77 was concerned, Penn Central stood in the position of a potential purchaser, willing but not obliged to buy the New Haven properties. Cf. Callaway v. Benton, 336 U.S., at 137 ; Group of Institutional Investors v. Chicago, M., St. P. & P. R. Co., 318 U.S. 523 , [399 U.S. 392, 424] 550; Old Colony Bondholders v. New York, N. H. & H. R. Co., 161 F.2d 413, 434 n. 5 (Frank, J., dissenting), cert. denied sub nom. Protective Committee v. New York, N. H. & H. R. Co., 331 U.S. 858 ; In re New York, N. H. & H. R. Co., 54 F. Supp. 595, 619. On the other hand, the three-judge court could not by itself effect a conveyance of the New Haven properties to Penn Central, nor could it compel the debtor's trustees to do so without the consent of the reorganization court. </s> Moved largely by the concern that neither court might have jurisdiction over the entire case, the three-judge court was of the opinion that matters should proceed simultaneously in both forums with a view to bringing the 5 and 77 aspects before this Court at the same time. Given the complexities of the jurisdictional question and the importance of an expedited determination of the merits, the three-judge court produced an understandable solution to the problem insofar as it ensured that the entire case would come before this Court without the risk that the parties might have spent an extensive period litigating in the wrong forum. </s> But the circumstances of the case did not inexorably command review in two separate courts. There was no danger that application of the "fair and equitable" test under 77 (e) (1) would yield results different from those to be produced by the "just and reasonable" test of 5 (2) (b) for mergers or the "equitable" test for inclusions under 5 (2) (d). See Callaway v. Benton, 336 U.S., at 140 . 56 The reorganization statute mandates [399 U.S. 392, 425] that any disposition of the debtor's properties must not be "inconsistent with the provisions and purposes" of the Interstate Commerce Act, Bankruptcy Act, 77 (f), 11 U.S.C. 205 (f), and "the requisite findings under the two acts are equivalent." In re Chicago, R. I. & P. R. Co., 168 F.2d 587, 594, cert. denied sub nom. Texas v. Brown, 335 U.S. 855 . This Court has stressed that 77 incorporates the elements of 5, St. Joe Paper Co. v. Atlantic Coast Line R. Co., 347 U.S. 298, 310 , and we have ruled that where the Commission proposes a merger as part of a 77 plan of reorganization, it must act "in accordance with all the requirements and restrictions applicable to mergers" under the Interstate Commerce Act, id., at 309; cf. Ecker v. Western Pacific R. Co., 318 U.S. 448, 481 ; New England Coal & Coke Co. v. Rutland R. Co., 143 F.2d 179, 186. Here the Commission had demonstrated its awareness of the statutory interrelationship, specifically devising inclusion terms under 5 to satisfy the requirements of 77. Second Supplemental Report, 331 I. C. C., at 654. </s> Moreover, there was no reason to suppose that the reorganization court would be unable to adjudicate all the questions presented by the terms of the Commission's inclusion order. Although the three-judge court expressed concern that certain issues, such as a loss-sharing arrangement during the interim period between merger and inclusion, might not lie within the jurisdiction of the reorganization court, the reorganization court nevertheless reached those issues without, so far as the record discloses, jurisdictional objections from any party. </s> The three-judge court thus confronted a situation where it was asked to consider the same pricing questions, to be determined by recourse to the same standards of [399 U.S. 392, 426] review, as the reorganization court. "[N]ot only would it . . . involve . . . a duplication of labor to [accept] . . . jurisdiction but it might" - and in fact did - "result . . . in contradictory rulings upon the same issue[s]." Palmer v. Warren, 108 F.2d 164, 167, aff'd, 310 U.S. 132 . In these circumstances the three-judge court might well have stayed its hand under the traditional principle that "the court first taking over the res, draws to itself power to determine all claims upon it." Palmer v. Warren, supra; cf. Oklahoma v. Texas, 258 U.S. 574, 581 ; Palmer v. Texas, 212 U.S. 118, 126 , 129; Wabash R. Co. v. Adelbert College, 208 U.S. 38, 54 ; Farmers' Loan & Trust Co. v. Lake Street Elevated R. Co., 177 U.S. 51, 61 . We recognize that that principle has commonly applied in cases where both courts assert in rem jurisdiction over the property in dispute, and that here the three-judge court's jurisdiction was in personam in character. But the conflict was nonetheless one "between two coordinate courts of concurrent, overlapping jurisdiction, neither belonging to a class which by paramount law is categorically given a jurisdiction over the particular subject matter paramount to the jurisdiction of the other." In re New York, N. H. & H. R. Co., 26 F. Supp. 18, 24, aff'd sub nom. Palmer v. Warren, supra. And given that conflict, the three-judge court could have followed the settled proposition that "[t]he court which first acquired jurisdiction through possession of the property is vested, while it holds possession, with the power to hear and determine all controversies relating thereto." Lion Bonding & Surety Co. v. Karatz, 262 U.S. 77, 89 . </s> Surely a vesting of primary jurisdiction in the reorganization court comports with the basic purpose of 77. Congress enacted that statute in part "to prevent the notorious evils and abuses of consent receiverships," New England Coal & Coke Co. v. Rutland R. Co., 143 [399 U.S. 392, 427] F.2d, at 184, of which one of the more egregious was the requirement of an ancillary filing and order of appointment in the federal court for every district in which the debtor had property. See 5 Collier, supra, § 77.02, at 467. Although, of course, the jurisdiction of the three-judge court was not ancillary to that of the reorganization court in a technical sense, dual review of issues ultimately going only to the valuation of the debtor's estate would resurrect the discredited practice of the equity receivership - it "would tend greatly to foment conflicts between coordinate courts and compel creditors, in the protection of their interests, to ride the circuit, demonstrating the basis of their positions in successive courts." In re New York, N. H. & H. R. Co., 26 F. Supp., at 23. </s> But we need not decide the question exclusively on the grounds just set out. For in the circumstances in which the United States presented its motion to dismiss in this case, the course of prior litigation had left the three-judge court virtually nothing to decide. On January 15, 1968, this Court had upheld the validity of the Penn Central merger under 5 of the Interstate Commerce Act, conditioned on the inclusion of New Haven on terms subject to objections to be "registered and adjudicated in the bankruptcy court or upon judicial review as provided by law." Penn-Central Merger Cases, 389 U.S., at 511 . We had permitted a postponement of the inclusion of New Haven on the basis of Penn Central's acceptance of the inclusion requirement, id., at 509, and because by its act of merger Penn Central would "perforce accept . . . appropriate conditions respecting the New Haven . . . ." Id., at 510. </s> Two weeks later Penn Central merged. At that point the lack of jurisdictional "completeness" in the reorganization court, to which we have earlier referred, was cured; for there now remained no question of Penn Central's [399 U.S. 392, 428] obligation to take over the assets of the New Haven. With Penn Central having given its irrevocable consent to the inclusion of New Haven by its act of merger, it was evident that whatever terms the reorganization court might confirm, subject to review on appeal to the Court of Appeals followed by certiorari here, would bind Penn Central by virtue of its merger commitment. Of course, the terms of the inclusion must themselves be "just and reasonable" and "equitable" under 5. But those terms now involved only the value to be accorded the assets transferred, and resolution of that issue was the essence of the 77 process. "The heart of . . . a determination [of the validity of a plan of reorganization] is a finding of fact . . . as to the value of the debtor's property." In re New York, N. H. & H. R. Co., 147 F.2d 40, 49, cert. denied sub nom. Massachusetts v. New York, N. H. & H. R. Co., 325 U.S. 884 . See 5 Collier, supra, § 77.14, at 538-539; cf. Consolidated Rock Prods. Co. v. Du Bois, 312 U.S. 510, 524 -525; First National Bank v. Flershem, 290 U.S. 504, 527 ; Second Supplemental Report, 331 I. C. C., at 652. In short, with identical issues before the two courts, with those issues involving only questions going to the value of a 77 debtor's estate, with congruent standards of review, and with the irrevocable promise of Penn Central to take in New Haven, the three-judge court should have stayed its hand in the New Haven bondholders' litigation. 57 </s> [399 U.S. 392, 429] </s> Prior decisions of other three-judge courts, affirmed by this Court on direct appeal, lend support to the proposition that the three-judge court should have deferred to the reorganization court. In Chicago & N. W. R. Co. v. United States, 52 F. Supp. 65, the debtor railway company brought suit against the Commission in the United States District Court for the Northern District of Illinois, seeking three-judge-court review of a plan of reorganization previously approved by the Commission and the courts. The District Court noted its "limited power" under the statute providing for review by a court of three judges, 52 F. Supp., at 66. It conceded the "seemingly applicable language" of the three-judge-court statute to "any order of the Interstate Commerce Commission," but held that once the Commission has approved a plan of reorganization under 77, "appeal from Commission orders in connection with bankruptcy proceedings lies only to a district court (of one judge) sitting in bankruptcy, not to a district court (of three judges) assembled under the Urgent Deficiencies Act." Id., at 67. 58 On direct appeal, this Court summarily affirmed the District Court's judgment. 320 U.S. 718 . </s> Even closer in point is a case that arose during the first reorganization of the New Haven Railroad - Group of Boston & Providence R. Corp. Stockholders v. ICC, 133 F. Supp. 488. Shareholders of the Boston & Providence, also undergoing reorganization, sought judicial review before a three-judge court of the Commission's refusal to provide joint rates as between New Haven and Boston & Providence - exclusively an Interstate Commerce Act function. See Act, 1 (4), 15 (6), 49 [399 U.S. 392, 430] U.S.C. 1 (4), 15 (6). The court held that to grant the shareholders the ruling they sought would contravene the revenue-allocation formula already adopted by the New Haven's reorganization court and affirmed by the Court of Appeals and the Supreme Court. The three-judge court accepted the view of the Commission that "so long as the Boston & Providence lines are operated by the New Haven as lessee for the account of the lessor . . ., the Connecticut district court . . . has exclusive jurisdiction to pass on the accounting for such operation." 133 F. Supp., at 493. Again, this Court summarily affirmed. Boston & Providence R. Corp. Stockholders v. New York, N. H. & H. R. Co., 350 U.S. 926 . </s> We therefore hold that the three-judge court here should have granted the Government's motion to the extent of deferring to the reorganization court in proceedings ultimately involving only the price to be paid for the assets of the debtor's estate. 59 </s> [399 U.S. 392, 431] </s> III </s> In turning to the judgment of the reorganization court, we first review the standards under which that court passed upon the Commission's rulings. </s> After 35 years of 77, as amended, it is unnecessary to recanvass the two basic objectives of the statute - the conservation of the debtor's assets for the benefit of creditors and the preservation of an ongoing railroad in the public interest. See generally 5 Collier, supra, § 77.02, at 469-470. Central to the statutory objective that the reorganized company should, if at all possible, emerge as a "living, not a dying . . . enterprise," Van Schaick v. McCarthy, 116 F.2d 987, 993, is the understanding that "a railroad [is] not like an ordinary insolvent estate." Palmer v. Massachusetts, 308 U.S., at 86 . (Footnote omitted.) To the traditional equity jurisdiction of the bankruptcy court, 77 adds the oversight of the Interstate Commerce Commission, the agency "specially charged with the public interest represented by the transportation system." Ibid. The statute contemplates that "[t]he judicial functions of the bankruptcy court and the administrative functions of the Commission [will] work cooperatively in reorganizations." Warren v. Palmer, 310 U.S. 132, 138 . (Footnote omitted.) </s> In structuring the cooperative endeavor of agency and court, Congress "placed in the hands of the Commission the primary responsibility for the development of a suitable plan" for the debtor railroad. Ecker v. Western Pacific R. Co., 318 U.S., at 468 . As the Court said in Group of Institutional Investors v. Chicago, M., St. P. & P. R. Co., supra, "The ratio of debt to stock, the amount of fixed as distinguished from contingent interest, the kind of capital structure which a particular company needs to survive the vicissitudes of the business cycle - all these have been reserved by Congress for the expert [399 U.S. 392, 432] judgment and opinion of the Commission, which the courts must respect." 318 U.S., at 545 . See also In re New York, N. H. & H. R. Co., 54 F. Supp. 595, 604. In the development of the plan of reorganization, 77 also has accorded the Commission primary responsibility for determining wherein lies the "public interest," which does not refer generally to matters of public concern apart from the public interest in the maintenance of an adequate rail transportation system, cf. United States v. Lowden, 308 U.S. 225, 230 , but includes "in a more restricted sense," ibid., concern for "the amount and character of the capitalization of the reorganized corporation," Ecker v. Western Pacific R. Co., 318 U.S., at 473 -474; cf. Massachusetts v. Bartlett, 384 F.2d, at 821, as well as the "adequacy of transportation service, . . . its essential conditions of economy and efficiency, and . . . appropriate provision and best use of transportation facilities." Texas v. United States, 292 U.S. 522, 531 ; New York Central Securities Corp. v. United States, 287 U.S. 12, 25 . As is clear from the legislative history and 77 itself, the deference to the Commission as initiator of the plan of reorganization stems from the "recognition by everyone of the advantages of utilizing the facilities of the Commission for investigation into the many-sided problems of transportation service, finance and public interest involved in even minor railroad reorganizations and utilizing the Commission's experience in these fields for the appraisals of values and the development of a plan of reorganization, fair to the public, creditors and stockholders." Ecker v. Western Pacific R. Co., 318 U.S., at 468 . (Footnote omitted.) </s> But the respect given the Commission as draftsman of the plan of reorganization entails no abdication of judicial responsibility for the workings of the administrative agency. As we have had occasion to say in describing other aspects of the Commission's work, "`Congress did not purport to transfer its legislative power to [399 U.S. 392, 433] the unbounded discretion of the regulatory body.'" Burlington Truck Lines, Inc. v. United States, 371 U.S. 156, 167 . Far from displacing the judicial function, 77 strikes a "balance between the power of the Commission and that of the court." Ecker v. Western Pacific R. Co., supra, at 468. The chancellor remains "a necessary and important factor in railroad reorganization"; the statutory objective is "attained only through properly coordinated action between the Commission and the court." Id., at 474-475. (Footnote omitted.) It remains for the reorganization court to ascertain that the Commission "has given consideration to each element of value concerned in its over-all appraisal, and has not wrongly decided legal questions involved in the problems of valuation and of allotment of equivalent securities . . . ." Old Colony Bondholders v. New York, N. H. & H. R. Co., 161 F.2d, at 420. </s> But the reorganization court may also do more. Under 77 (c) (13), 11 U.S.C. 205 (c) (13), the court on its own motion may refer matters to a special master for the hearing of such evidence as the court may desire - a provision which permits the "building up of a group of men [entirely apart from the Commission] thoroughly informed in railroad reorganization matters." H. R. Rep. No. 1897, 72d Cong., 2d Sess., 6 (1933). And under 77 (e), 11 U.S.C. 205 (e), the court may itself hold hearings upon the Commission's certification of its plan of reorganization, at which the court is empowered to take evidence beyond that received by the Commission - a supplementary power, unknown to conventional judicial review, but deemed essential to the reorganization court's exercise of its extraordinary "cram down" powers. 60 See S. Rep. No. 1336, 74th Cong., 1st Sess., 3 [399 U.S. 392, 434] (1935); H. R. Rep. No. 1283, 74th Cong., 1st Sess., 3 (1935). The statutory authority to appoint special masters and to hold evidentiary hearings reflects the unique powers possessed by the reorganization court in passing upon the Commission's proposed plan of reorganization. </s> In sum, Congress has confided to the reorganization court the "power to review the plan to determine whether the Commission has followed the statutory mandates . . . and whether the Commission had material evidence to support its conclusions." Reconstruction Finance Corp. v. Denver & R. G. W. R. Co., 328 U.S. 495, 509 ; cf. Penn-Central Merger Cases, 389 U.S., at 498 -499. In the reorganization court reposes ultimate responsibility for determining that the plan presented to it by the Commission satisfies the "fair and equitable" requirement of 77. See In re New York, N. H. & H. R. Co., 16 F. Supp. 504, 507. And at the heart of that determination, as we have already noted, is the valuation of the debtor's property. Here, as elsewhere in the reorganization proceedings, the court must look to the conclusion recommended by the Commission. See Ecker v. Western Pacific R. Co., 318 U.S., at 472 -473; cf. Freeman v. Mulcahy, 250 F.2d 463, 472-473, cert. denied sub nom. Boston & Providence R. Co. v. New York, [399 U.S. 392, 435] N. H. & H. R. Co., 356 U.S. 939 ; In re New York, N. H. & H. R. Co., 54 F. Supp. 595, 600. And often the Commission's conclusion will entail less a statement of mathematical certainty than an estimate of what the market will say when it speaks to the subject. "But that estimate must be based on an informed judgment which embraces all . . . relevant . . . facts . . . ." Consolidated Rock Prods. Co. v. Du Bois, 312 U.S., at 526 . "The judicial function is to see to it that the Commission's `estimate' is not a mere `guess' but rests upon an informed judgment based upon an appraisal of all . . . relevant . . . facts . . ., and is not at variance with the statutory command." Freeman v. Mulcahy, 250 F.2d, at 473. In performing that function, the court must proceed with awareness that its review of the Commission's conclusion on valuation, as with every other important determination that the court is to make, calls for an "`informed, independent judgment'" of its own. Consolidated Rock Prods. Co. v. Du Bois, 312 U.S., at 520 ; National Surety Co. v. Coriell, 289 U.S. 426, 436 . </s> There remains to consider the scope of review in this Court in passing upon the judicial determinations of the reorganization court. That we have granted certiorari to the Court of Appeals in advance of the appellate court's judgment does not alter the fact that "our task is limited." Penn-Central Merger Cases, 389 U.S., at 498 . It is not for us to pass upon the myriad factual and legal issues as though we were trying the cases de novo. "It is not enough to reverse the District Court that we might have appraised the facts somewhat differently. If there is warrant for the action of the District Court, our task on review is at an end." Group of Institutional Investors v. Chicago, M., St. P. & P. R. Co., 318 U.S., at 564 . </s> IV </s> As we have earlier noted, the purchase and sale negotiated by Pennsylvania, New York Central, and the New [399 U.S. 392, 436] Haven trustees rested upon the estimated liquidation value of the New Haven properties to be transferred, rather than the earning power of the New Haven as an operating entity. Second Supplemental Report, 331 I. C. C., at 657. The parties to the Purchase Agreement thus gave recognition to the reality of New Haven's desperate financial situation, as well as to the power of the reorganization court to order the sale of the debtor's properties at not less than the "fair upset" price under 77 (b) (5) of the Bankruptcy Act. In approving the negotiators' approach to the price question, the Commission observed that asset value rather than earning power was the primary determinant because New Haven had "long been dry of earning power." 331 I. C. C., at 657. "If there is one thing on this record that is clear and undeniable," the Commission concluded, "it is that N[ew] H[aven] has neither earning power nor the prospect of earning power." Id., at 687. </s> In light of "the chronic deficit character" of the New Haven operation, id., at 658, the reorganization court understandably accepted the liquidation approach to valuation. "The concept of `going concern value' is fictional as applied to the New Haven," it said, "because it ignores the Railroad's long and continuing history of deficit operations." 289 F. Supp., at 455. (Footnote omitted.) </s> Before the Commission, the New Haven trustees and Penn Central submitted complete studies of the debtor's liquidation value, consisting of current assets, special funds, investments, real estate, and other assets. As the Commission described it, "Liquidation value as used by both the N[ew] H[aven] trustees and Penn-Central [was] the estimated market value that would be realized in a total liquidation, less the cost of dismantling properties and other liquidation costs and after discounting proceeds to present worth." 331 I. C. C., at 697; cf. [399 U.S. 392, 437] In re New York, N. H. & H. R. Co., 304 F. Supp., at 797-798. </s> The New Haven study, based on the assets held by the debtor as of December 31, 1965, was made over a nine-month period by persons who, the Commission found, were familiar with the railroad, its operating area, and the nature and condition of its properties. The Penn Central study valued the assets as of December 31, 1966; it was made in under two months by persons less familiar with the railroad. Both studies revealed that nearly half the New Haven's asset value consisted of its holdings in real estate. The New Haven study produced a gross value for all assets, exclusive of New Haven's interest in the Grand Central Terminal properties, of $230,290,000; the Penn Central study, $150,321,000. </s> Consistent with the liquidation hypothesis, both New Haven and Penn Central deducted from the gross value of the New Haven assets the expenses that would be incurred if a liquidation in fact took place. These included not only the estimated expenses of sale but, in the case of bridges, trestles, and culverts, removal costs for conversion of the realty to nonrailroad use - costs that often left the assets with a net negative value. The New Haven trustees hypothesized both a six- and a 10-year liquidation period, with expenses for liquidation operations plus taxes and interest aggregating $59,481,000 and $76,847,000, respectively; Penn Central estimated the expenses of a 10-year sale to be $62,172,000. The net liquidation value of the assets was arrived at by deducting the liquidation expenses and certain current assets not to be transferred to Penn Central, along with a further discount to present worth to reflect the hypothesis that receipts would be coming in over a six- or 10-year period. </s> The Commission concluded that once the New Haven estate embarked on a liquidation sale, it would dispose of the assets as quickly as practicable; the Commission [399 U.S. 392, 438] accordingly found that "the bulk of the liquidation could be completed within a period of 6 years." 331 I. C. C., at 663. The Commission also concluded that the 6% discount rate employed by New Haven and challenged as too low by Penn Central was offset by the conservative valuation of the assets themselves. Id., at 664. The Commission's ultimate finding was that the liquidation value of the New Haven assets to be conveyed to Penn Central "is about $125 million as of December 31, 1966." Id., at 688. </s> As we have noted earlier, the reorganization court did not accept the $125,000,000 figure, with a consequent remand and second round of review. The bulk of the Commission's valuation has now won the approval of the reorganization court and is not challenged by any of the parties here. There remains in dispute, however, the valuation of several items, aggregating nearly $200,000,000, and it is to those items that we now turn. </s> 1. The Grand Central Terminal properties. By far the largest component in the dispute over the liquidation value of the New Haven is the debtor's interest in the Grand Central Terminal properties. This real estate complex consists of several parcels in the area of midtown Manhattan bounded by 42d Street on the south, Madison Avenue on the west, 60th Street on the north, and Lexington Avenue on the east. Included in the properties are the Barclay, Biltmore, Commodore, Roosevelt, and Waldorf-Astoria hotels; the Pan American building as well as other office buildings along Park Avenue; and the Yale Club. The total assessed value of the Grand Central Terminal properties as of 1965 was $227,225,000. </s> The New Haven railroad acquired the right to run its trains into Manhattan in 1848, when it entered into an agreement for use of the tracks of the predecessor of the New York Central, to extend for the lives of the respective [399 U.S. 392, 439] charters of the two companies. In 1848 New Haven also acquired an easement over the tracks by legislation of the State of New York. See New York, N. H. & H. R. Co. v. ICC, 55 F.2d 1028, 1030. The 1848 agreement underlay various subsequent contracts in the 1870's, '80's, and '90's between the New York Central and the New Haven. </s> In 1903 and 1904 the State of New York enacted further legislation requiring the placement of the railroad tracks below ground through the 15-block stretch north of the present Terminal. It did not take the Central entrepreneurs long to realize that compliance with the legislative edict left the company a vast area of midtown Manhattan suitable for realty development. In 1907 Central entered into the basic contract with New Haven under which the present Grand Central Terminal was built. The 1907 instrument recited that it had become necessary to rebuild the Terminal, including yards and tracks, in order to provide facilities for the proper management and conduct of the two railroads. Central promised to buy needed land and rights-of-way; New Haven, to make payments in connection with the demolition of the old station and the construction of the new. The 1907 agreement further recited that nothing it contained should impair the rights of the parties under the 1848 agreement. It then went on to provide that Central "doth demise, let and lease" the use of the railroad terminal to New Haven in common with Central. "Railroad terminal" was defined to "mean and include the land, and interests in land, and all improvements thereon . . ., and all rights in any ways on which said land may abut . . . ." </s> Paragraph 4 of the 1907 agreement provided for joint contributions by New Haven and Central to Terminal maintenance and operation, calculated on the parties' respective car and locomotive usage of the station. The paragraph also obligated New Haven to a minimum [399 U.S. 392, 440] annual payment of $160,179.92 without regard to the percentage of its use of the Terminal. In addition, § 14 of the agreement stipulated that the manager of the enterprise should credit all rentals and other compensation received from the railroad terminal to "the fixed charges or to the cost of maintenance and operation of the said Railroad Terminal, as the same may be applicable." </s> In 1909, Central and New Haven began the joint financing of construction on the property referred to in the 1907 agreement, and in 1913, they entered into a supplemental agreement in order "to express more fully the intent of the parties hereto as to the right of the New Haven Company and the Central Company with respect to the construction, maintenance and use" of the Terminal properties. The supplemental agreement recited that New Haven's right of user included "the right . . . to join with . . . Central . . . in the construction, holding, maintenance and leasing of buildings . . . upon the land included within the Railroad Terminal." The heart of the 1913 amendment was a detailed provision for the sharing and reimbursement of construction and maintenance costs, along with a reaffirmation of the procedure established in § 14 of the 1907 agreement, under which all rentals were to be credited to the Terminal enterprise. In the following years the two parties entered into hundreds of subagreements relating to the leasing, financing, and sharing of rentals from buildings constructed in the Terminal area. Income from the buildings was credited to the fixed charges, and to the maintenance and operation of the Terminal itself. </s> None of the agreements between Central and New Haven expressly provided for the disposition of "excess income" left over after the satisfaction of the Terminal expenses. For half a century after the 1913 agreement, the "excess income" question was of academic interest only, since expenses annually exceeded revenues. But [399 U.S. 392, 441] in 1964, and in each succeeding year, the accounts showed excess income. New Haven demanded part of it, and Central refused. The trustees then brought a contract action in the New York Supreme Court to protect New Haven's interest in the income. </s> When the New Haven trustees first began negotiations with Pennsylvania and Central for the inclusion of the debtor's assets in Penn Central, they proposed that New Haven's interest in the nonoperating Terminal properties be excluded from the takeover, with final disposition deferred until the outcome of the then-pending litigation. But Central insisted it would not consider inclusion of New Haven in the merger unless it got absolute title to all the Terminal properties. The New Haven trustees thereupon sought the advice of legal counsel. They were told that under the agreements with Central, New Haven not only had no fee or leasehold interest in the properties, but had no rights at all that would survive cessation of its train service in and out of the Terminal other than the reimbursement of monies already advanced toward construction of buildings in the area. Although the New York lawsuit was pending to determine New Haven's right to participate in the excess income, the trustees concluded that as an alternative to risking "tremendous expense and long delay" in litigation, 289 F. Supp., at 462, resolution of the inclusion negotiations was of sufficient value to warrant their transferring the debtor's interest, whatever it might be, to Penn Central for no consideration whatever in exchange. </s> From the outset the bondholders dissociated themselves from the trustees on the question of the debtor's rights in the Terminal properties. Some of the New Haven creditors claimed the value of those rights to be $20,000,000 - the sum of unreimbursed advances for building construction and capital improvements as carried on the New Haven books. Others said it was $50,000,000 - the capitalization of one-half the excess income [399 U.S. 392, 442] at 5%. Still others argued for one-half the value of the fee itself - nearly $115,000,000. </s> In its Second Supplemental Report the Commission eschewed responsibility for determining the legal rights of New Haven in the properties and set out only to value the debtor's claim. Confronting the complex legal relationship between Central and New Haven, with the consequent unpredictability of litigation, and unwilling to defer valuation of New Haven's interest to the completion of all possible contract actions between the two parties, the Commission set the value of the claim at $13,000,000. It arrived at this figure by taking the average of two unrelated sums: $5,000,000, representing Penn Central's estimate of the nuisance value of New Haven's claim; and $20,000,000, representing the capitalization of New Haven's share of the average of the excess income in 1964 and 1965, based upon its proportional usage of the Terminal. </s> Faced with the Commission's disclaimer of responsibility for resolution of the legal controversy between Central and New Haven, and given the Commission's Draconian solution to the question of value, the reorganization court appointed a special master to consider New Haven's legal interest in the Terminal properties. 61 Based on his [399 U.S. 392, 443] study of the complex contractual relations between the two parties, of which we have touched above only on the salient features, the Special Master concluded that Central and New Haven had entered into a "joint venture or partnership . . . of some kind." The Special Master dismissed as untenable both Central's argument that by virtue of its sole ownership of the fee it would acquire full right, title, and interest in the Terminal properties upon the cessation of New Haven's train service, and the bondholders' argument that as a partner the debtor had an undivided one-half interest in the fee. In 1907, when the parties entered into the basic agreement, Central had had title to the realty, and New Haven had had a perpetual right to the use of the tracks by force of state legislation. New Haven thus had "not come to the bargaining table in 1907 in the posture of a supplicant." The two railroads together had joined in the design and construction of a Terminal complex greater than either needed for its own requirements; they had undertaken a "major real estate development to extend over a period of many years"; and to those ends they had provided for a sharing of the Terminal expenses on the basis of their respective car usage, along with a committal of Terminal revenues to the operation of the project. As the Special Master put it, "There can be no question that by mutual agreement these revenues from all of the Grand Central Terminal properties were pooled to apply on the fixed charges and maintenance and operational costs of the Terminal." </s> In light of the conclusion that Central and New Haven had embarked on an enterprise akin to a partnership, the Special Master concluded that once the Terminal revenues satisfied expenses, the excess income belonged equally to each of the railroads. In his view, the car-use formula of the 1907 agreement ceased to be effective once revenue met expenses, and the principle of equality between [399 U.S. 392, 444] partners took its place. The Special Master noted that the parties had not expressly dealt with the question whether New Haven's interest in the properties would end if New Haven ceased to use the Terminal. But he concluded that in such an event New Haven would still be entitled to half of the excess income; that right "would not and could not be terminated by the mere discontinuance of [New Haven] passenger service into and out of the Terminal." 62 </s> [399 U.S. 392, 445] </s> On the first round of review the reorganization court accepted the Special Master's report and incorporated it by reference in its own opinion. The court therefore remanded the matter to the Commission with instructions to value New Haven's one-half interest in the Terminal's future excess income. In addition, the court requested the Commission to "consider and make findings as to what value, if any, attaches to New Haven's present right to share in the income for the purpose of defraying its cost of operating in and out of the terminal." 289 F. Supp., at 463. </s> In its Fourth Supplemental Report the Commission accepted the determination of the reorganization court that New Haven would have retained a right to one-half the excess income even upon liquidation. 334 I. C. C., at 30-31. Following an extensive consideration of future Terminal expenses and office-building and hotel income, the Commission projected a future excess income of $4,550,000 a year, of which New Haven's 50% share, capitalized at 8%, amounted to $28,438,000. 334 I. C. C. at 39. The new figure thus came to more than twice that awarded by the Commission on the first round. </s> The Commission also complied with the request of the reorganization court that it consider the value of New Haven's right of access into the Terminal. The Commission concluded that the right would have no value to New Haven unless a buyer were willing to pay for it; that the only potential buyer in sight was the State of New York, which would not need to bid for use of the Terminal; and, accordingly, that New Haven's right of user was valueless. 334 I. C. C., at 32. The bondholders' claim of value for the right of access, the Commission said, amounted to a demand for one-half of all of the income free of the Terminal expenses. Id., at 32 n. 11. On the second round of review, the reorganization court agreed that the Commission's determinations must stand with respect to both the liquidation [399 U.S. 392, 446] value of New Haven's interest in the Terminal properties and its right of free access into the station. 63 </s> Many aspects of the controversy over the Grand Central Terminal properties have now dropped from contention. 64 The bondholders no longer claim that New Haven is entitled to one-half the value of the fee. Penn Central no longer claims that its fee ownership of the properties reduced New Haven's status to that of a mere grantee retaining only the privilege of entry into the Terminal. All parties accept New Haven's right to the capitalized value of one-half the excess income. 65 What [399 U.S. 392, 447] remains is the claim of the bondholders that New Haven is entitled to the capitalized value of its share not only of the excess income remaining after satisfaction of the Terminal expenses, but of the basic income meeting the expenses themselves. Yet the central finding of the reorganization court remains unrefuted: that by force of the agreements between New York Central and New Haven, the Terminal income was first to be devoted to meeting Terminal expenses; only then was the residue to become available for distribution to the two railroads. To be sure, the parties customarily referred to their respective shares of the Terminal revenues. But the Special Master found that the Terminal revenues were allocated to Central and New Haven on their respective car-use bases as an accounting convenience. The car-use formula established by the 1907 agreement "resulted, for accounting purposes, in the corresponding proportion of the revenue entering the Terminal Account being treated as the property of each railroad, and in each [399 U.S. 392, 448] railroad's being relieved pro tanto from the amount of its liability to meet the charges . . . ." </s> The bondholders argue that the basic income of the Terminal could somehow be "freed up" from the obligation to meet Terminal expenses. But the Special Master considered and rejected that theory. </s> "Both parties . . . committed themselves to pouring these revenues from the entire Grand Central complex into the Terminal Account under paragraph 14 of the Agreement of 1907. The revenues were to enter that account and were to be expended, superior to the individual interests of each railroad, by being applied on payment of the fixed charges and expenses of operation and maintenance of the Terminal. Those revenues were pledged to that purpose regardless of whether New Haven utilized one per cent or fifty per cent of the Terminal's passenger facilities, or whether it used any of those facilities at all. It was not contemplated that if either railroad discontinued passenger trains into Grand Central the other would be saddled with the entire expense of a terminal larger than either railroad needed without being credited with these entire revenues from the Grand Central Terminal properties to the extent that they were required to meet expenditures . . . ." </s> Nevertheless, Chase Manhattan argues that the commitment of revenues is merely a creature of the agreement between Central and New Haven as construed by the Special Master, and that the transfer of New Haven's Terminal interests on December 31, 1968 "wiped out" that agreement. "The agreement thereafter was no longer in existence," says Chase, "and Penn Central now has this [basic] income (both the former New York Central's share and the former New Haven's share) free and clear of any restriction against its use in any way [399 U.S. 392, 449] Penn Central sees fit." Stated in this fashion, the argument is self-defeating: since New Haven's right to the basic income derives solely from its agreement with Central, a "wiping out" of that agreement necessarily leaves New Haven without the right as well as without the obligation. But, more importantly, it simply is not true that Penn Central now has New Haven's former share in such income without "any restriction of any kind . . . ." Penn Central also has New Haven's loss operations into and out of the Terminal, and it must meet the expenses occasioned by those operations from some source. Since by definition New Haven's share of the basic income was, as an accounting matter, equal to its share of the Terminal expenses, by its 1968 transfer it has merely surrendered an amount equal to its gain: it has given up its share of the income pledged to the costs of operations at the Terminal, but it has relieved itself of the obligation to meet those costs. By the same token, Penn Central has gained New Haven's share of income, but with the matching loss of New Haven's expenses. </s> The bondholders' argument must be that entirely apart from the contractual arrangements with Central, New Haven had a valuable right of free access into the Terminal, which Penn Central has now taken over with no compensating payment in exchange. This argument, too, is without merit. It is a misnomer to describe New Haven's right of access to the Terminal as "free." New Haven had a right of entry, rather than a privilege, in the sense that it had access, independently of the consent of the fee owner of the tracks, by force of legislative edict. But the right bestowed by the legislature was conditioned "upon such terms . . . as [have] been or may hereafter be agreed upon by and between" New Haven and Central's predecessor. N. Y. Sess. Laws of 1848, c. 143, 6. Thus the New Haven right of access has never been free from the obligations imposed by the agreements with Central. [399 U.S. 392, 450] </s> But even if the access right were "free" in the sense that it could survive elimination of New Haven's agreements with Central, we agree with the reorganization court that the Commission correctly concluded it would have no value. And that is the case whether the right is deemed transferred to Penn Central, as in fact it was, on the date of inclusion, or whether, consistent with the liquidation hypothesis on which the parties valued New Haven's other assets, it is deemed to have been offered for sale to a third party upon New Haven's cessation of operations. In the former event, the analysis pertinent to New Haven's contract rights applies with equal force. Penn Central has in fact succeeded to New Haven's right of access, but it has also succeeded to New Haven's deficit operations. Conversely, New Haven has given up a right of entry in exchange for relief from the obligation to provide train service at the station. Indeed, to the extent that the expenses generated by New Haven's use of the Terminal exceeded the revenues attributable to that activity, Penn Central has lost and New Haven gained on the exchange. 66 </s> The same result is reached if New Haven is deemed to have gone into liquidation. For the bondholders have never shown that anyone would pay a penny for the right to carry on New Haven's deficit-ridden Terminal operation. If nobody would pay a liquidating New Haven for the right to lose money, the right is, again, [399 U.S. 392, 451] worthless. The Commission found that the only potential buyer would be the State of New York, moving to preserve the commuter service in the public interest. 334 I. C. C., at 32. Whether the State would have to pay Penn Central for the use of Penn Central's tracks and its share of Terminal expenses is not before us. On the liquidation hypothesis, the State would not have to pay Penn Central for New Haven's right of access, for Penn Central would not own it. And the State's paying New Haven depends on at least four independent contingencies: whether New Haven's right of access would survive liquidation; whether the right would exclude the power of Central to bestow a similar access right on a third party while New Haven's own went unused; whether, under the agreement with Central, the right would be capable of assignment; and whether the State, if required to pay New Haven anything to enter the Terminal, would choose instead to operate the commuter trains only to subway connections in the Bronx rather than all the way into Manhattan. We agree with the Commission and the reorganization court that these imponderables render the value of New Haven's right of access so speculative as to defy reasoned attribution of any value to it. </s> 2. The Bronx freight yards. One of New Haven's principal real estate holdings consisted of two freight yards located on some 160 acres in the south Bronx, New York, between the East River on the one side and the Major Deegan Expressway and Bruckner Boulevard on the other. The Harlem River yard occupies nearly 4,000,000 square feet across the East River from Manhattan and Queens; it has been described by a qualified appraiser as "a unique industrial facility that could be well used by any heavy industrial concern." About a mile north of the Harlem River yard, and connected to it by the existing trackage of New Haven's Harlem Division [399 U.S. 392, 452] line, lies the Oak Point yard, characterized by the appraiser as "one of the most desirable industrial facilities in New York City." </s> Two other facilities in the area are worthy of note. The first is the Hunts Point Market, located northeast of the Oak Point yard. The market is a $100,000,000 municipal installation and the central distribution area for the wholesaling of produce for the New York City metropolitan area. It lies on the promontory flanked by the Bronx and East Rivers, and is connected to the New Haven's Harlem Division line through a spur track owned by the city. The market is the largest receiver of rail traffic in the area, and plans are under way for further expansion. Fourth Supplemental Report, 334 I. C. C., at 43-44. The second facility is the former Port Morris yard of Penn Central, situated midway between the Harlem River and Oak Point yards and lying athwart the Harlem Division trackage that connects the two New Haven yards. Port Morris is linked by a branch line to Penn Central's Harlem Branch division, a principal element in the Penn Central System. An interchange track runs from the Port Morris branch line to the border of the Oak Point yard. </s> Before the Commission, the parties submitted five different estimates of the value of the Harlem River and Oak Point yards. The bondholders offered the testimony of an appraiser who thought the land would bring $32,000,000 for residential use and $26,000,000 for industrial use; the New Haven trustees offered the testimony of another appraiser who submitted two studies showing $22,650,000 and $18,090,990, both for industrial use; and Penn Central, that of a third appraiser who set the value, again for industrial use, at $15,585,000. In its Second Supplemental Report the Commission accepted the lower of the values proposed by the trustees' witness - $18,090,990. 331 I. C. C., at 668. [399 U.S. 392, 453] </s> On the first round of judicial review the reorganization court thought that on the present record "there was substantial evidence to support the Commission's valuation and not enough to show that it was unfair or inequitable," but concluded that a clarification of the basis of the Commission's valuation was desirable. 289 F. Supp., at 464. On the remand, controversy centered on the alternative appraisals offered by the trustees' witness. It soon became evident that in valuing the freight yards the Commission had pursued the liquidation hypothesis with a vengeance. The higher appraisal of the trustees' witness had rested on the premise that upon cessation of New Haven operations the Bronx yards would be available for continued industrial occupancy, with existing trackage and electrical facilities left in place. The presence of such facilities commanded at least a 10% premium in Bronx realty values. The witness' second appraisal had assumed that upon liquidation New Haven would strip the yards of these facilities, thereby depressing the value of the land and incurring substantial costs of removal. 334 I. C. C., at 42. Adoption of that assumption resulted in the loss of over $4,000,000 in value. 67 </s> [399 U.S. 392, 454] </s> In its Fourth Supplemental Report the Commission adhered to its acceptance of the lower of the witness' two estimates, reiterating its reliance upon the liquidation premise. That premise justified the assumption that New Haven would dismantle the yards once the rest of the railroad was scrapped, since with no link to Penn Central the yards would have no value either as operating facilities or for industrial use with railroad connections. </s> But the fact of the matter was that even on the liquidation hypothesis the New Haven yards did not lack rail connections to Penn Central. Penn Central already had in place a branch line running from its Port Morris yard to its Harlem Branch division. That Port Morris line, along with the interchange track running up to the border of the Oak Point yard and meeting the New Haven's line at that point, would have continued in place even upon a liquidation of New Haven. The trustees' witness acknowledged that in arriving at the lower of his two values for the New Haven yards, he had been unaware of the Penn Central link at Port Morris. Nevertheless, the Commission attributed no significance to the witness' unawareness of the Port Morris connection, because it concluded that even with the existing link to the New Haven yards, it was "extremely doubtful" that Penn Central would continue to provide service into the area after a New Haven liquidation. Once New Haven vanished, the Commission reasoned, Penn Central would be under no legal obligation to perform switching service beyond its own Port Morris line or to extend its line into the former New Haven yards. And the Commission accepted the testimony of a Penn Central witness that the company would have no economic incentive to provide service, because of the unprofitability of the perishable freight destined for the Hunts Point Market, as well as the absence of necessary track clearances and yard classifying facilities. 334 I. C. C., at 44-45. [399 U.S. 392, 455] </s> On the second round of review the reorganization court ruled that the Commission had erred in rejecting the higher of the witness' two appraisals. "It is undisputed that the Port Morris branch was and is there and operating and Penn Central has not been authorized to abandon it." 304 F. Supp., at 807. The court overruled the Commission's determination that Penn Central would cease to provide service not only to the industrial enterprises in the 160-acre area of the two yards, but to the Hunts Point Market as well. </s> "The great bulk of produce for feeding of the millions of residents of metropolitan New York is brought in by rail through these yards to this market and distribution point. To assume that the State and City of New York would stand idly by and permit the life line to its huge and costly enterprise to be cut, just as it is in the midst of planning its necessary enlargement, because it was unwilling or unable effectively to bring pressures to bear or take steps on its own to preserve the connection with Penn Central is absurd . . . ." 304 F. Supp., at 807-808. </s> The ruling of the reorganization court is, at the least, free from the error that would require us to overturn its judgment on this matter. As the Commission's own report makes evident, the agency based its startling conclusion that Penn Central could deny service to the area, not on the facts of record, but in adherence to the untenable assumption that on liquidation New Haven would have uprooted the valuable trackage and electrical facilities already in place. According to the Commission, "[t]he record does not support any finding of substantial need for Penn Central service that would justify the construction by that carrier of the trackage necessary to connect Harlem River and Oak Point yards [399 U.S. 392, 456] and the latter yard and Hunts Point, if N[ew] H[aven] were to be liquidated." 334 I. C. C., at 47. (Emphasis supplied.) Of course we may assume that Penn Central could not be forced to buy land and build track to provide service into areas, noncontiguous to its rail system, to which it did not hold itself out as a common carrier. But it is a far cry from that proposition to the statement that a common carrier could deny service to industrial and public activities simply because ownership of adjoining trackage had changed hands. 68 The record facts are that the trackage the Commission said Penn Central would have to construct is already in place, connecting the two yards and the market. 69 The Commission nonetheless continued to presuppose the removal of the New Haven's rail facilities. "On this record," the Commission reiterated, "and the assumption of N[ew] H[aven]'s liquidation and the dismantling of its system, Penn Central would not serve, and could not be compelled to serve, the Harlem River or Oak Point industries, or the Hunts Point Market." 334 I. C. C., at 47. (Emphasis supplied.) There is not a shred of record evidence to support the Commission's assumption as applied to the New Haven yards. It is not rational [399 U.S. 392, 457] to suppose that the managers of the hypothetical liquidation sale, devoted to obtaining the highest possible price for the assets of the debtor, would have ignored the best use of the yard facilities and stripped them of more than $4,000,000 in value. 70 </s> 3. The added deductions. On the remand the Commission recalculated the liquidation value of the New Haven, as directed by the reorganization court, and arrived at a new sum of $162,700,000. "A property value of this sort inheres in the assets," the Commission said, "if we assume that the railroad may immediately shut down and begin a 6-year program of selling off the road parcel-by-parcel, and virtually tie-by-tie." 334 I. C. C., at 53. But the Commission declined to approve the new figure as the proper liquidation value of the debtor. </s> "The liquidation value that results in this reopened proceeding exceeds the agreed price [of $125,000,000], obliging us to make a new determination [399 U.S. 392, 458] as to whether the price resulting from such a valuation is fair. </s> "The establishment of liquidation value as a pricing floor on this record must assume that the N[ew] H[aven] may be shut down at once and be liquidated in parcels. Such a pricing theory assumes that the public may be denied an opportunity to be heard. It is wholly inconsistent with the requirement we have imposed on Penn Central to absorb the N[ew] H[aven], which requirement rests entirely upon the public's need for a continuing N[ew] H[aven]. Any assumption that N[ew] H[aven] may be shut down and broken up must necessarily permit the conclusion that Penn Central may be relieved of its inclusion obligation. It is inequitable to conceive at the same time both a right in the bondholders to break up the N[ew] H[aven] and an obligation on Penn Central to keep it going. The demands of equity are no more satisfied by conceiving that the bondholders have a constitutional right to shut down the N[ew] H[aven] which is superior to the public's right to keep it going. </s> "The foregoing liquidation value assumes that this Commission has no function under the Interstate Commerce Act to decide whether public convenience and necessity permit the abandonment of N[ew] H[aven]'s entire line or portions of it. In view of our often repeated findings that there is a public need for the services of this railroad, there is no warrant for assuming that the creditors may now break up the railroad or devote the properties to another use. The estate is not relieved of its obligation to serve the public. A price that is premised on outright rejection of that obligation is inequitable [399 U.S. 392, 459] and awards the estate a windfall that is not supported by any record evidence." 334 I. C. C., at 54-55. </s> On the basis of this reasoning, the Commission then proceeded to take into account "other pricing considerations" - costs of liquidation it had not reached in its earlier report because of its conclusion that the $125,000,000 price arrived at by the parties was proper under the Interstate Commerce and Bankruptcy Acts. </s> "The alleged right to liquidation values derives from an alleged right to abandon; and there are recognized limitations on the right to abandon that in themselves limit the creditors' entitlement to the liquidation value we have computed under the court's instructions. Under section 1 (18) of the Interstate Commerce Act, the Commission is empowered to impose reasonable limitations on the abandonment right." 334 I. C. C., at 57. </s> The Commission's new "pricing considerations" consisted of two elements: a one-year delay the New Haven would have incurred in securing the approval of the Commission and the courts to abandon train operations; and a bulk-sale discount that a purchaser of all the debtor's assets, to whom the Commission could order the road to sell, would have commanded. Together the added deductions amounted to $22,081,000. </s> (a) The one-year delay. The Commission found that an application for a certificate of abandonment, as required by 1 (18) of the Interstate Commerce Act, would have precipitated a lengthy process of administrative action and judicial review resulting in at least a one-year delay in the commencement of actual liquidation operations. The Commission assumed that the year's delay would have occasioned a freeze on liquidation activity, following which the sell-off would have proceeded [399 U.S. 392, 460] as projected in the Second Supplemental Report. The abandonment delay, the Commission found, would have added costs of $4,940,000 in preserving the assets of the estate, $2,500,000 in real estate taxes, and $7,946,000 in a discount of the sale receipts back to present worth. </s> On review the reorganization court rejected the delay concept, ruling that the added deduction violated the liquidation hypothesis upon which the debtor's assets had been valued. Neither the parties nor the Commission had previously postulated the deduction now imposed, because the liquidation hypothesis itself had presupposed a lawful abandonment of service. 304 F. Supp., at 798. That presupposition was rooted in the hard fact that for more than three years prior to December 31, 1966, the New Haven had been kept alive, despite its hopeless financial condition, solely in the name of the public interest and in anticipation of inclusion in Penn Central. </s> "By late 1963 it was clear to the Trustees of the New Haven and to the Reorganization Court that only two courses were open: the Trustees must press to accomplish the inclusion in a Penn Central merger or they must press for liquidation. The former was obviously in the public interest and the latter was not. The course of inclusion was followed; but because the merger and the reorganization proceedings stretched out far beyond what was originally forecast, the `interim' became seven and a half years; and `losses reasonably incident to working out the solution most consistent with the public interest' eroded the debtor's estate in excess of $60 million. </s> . . . . . </s> "Like Laban of old, the Commission would now require further servitude of the debtor - in this case the creditors. But the duty of the debtor's creditors to suffer losses for an interim period has already [399 U.S. 392, 461] been fulfilled and the public interest has already been served to the extent that in fairness and equity the public had any right to demand." 304 F. Supp., at 800. (Footnote omitted.) </s> The Commission and Penn Central take issue with the reorganization court's disallowance of the deduction for delay. The dispute between them and the bondholders is not, however, broad in concept. It does not draw into question the right of the Commission to insist that New Haven obtain permission to abandon its operations: no one here quarrels with the proposition that in the event of a liquidation, New Haven would have been obliged to obtain a certificate from the Commission pursuant to 1 (18) of the Interstate Commerce Act. The parties agree that since a delay occasioned by abandonment proceedings before the Commission, followed by judicial review, inheres in the liquidation process, the Commission may exercise its expertise in gauging the extent and expense of such a delay, and Penn Central need not pay for the consequent diminution in the value of the assets of the debtor. The dispute is, rather, a a narrow one. It is simply whether, in the circumstances of this case, the valuation initially arrived at by the Commission already presupposed that the debtor had a certificate of abandonment in hand, so that assignment of a cost attributable to that factor amounts to an unwarranted double deduction. </s> Before this Court the Commission and Penn Central urge the view that until the remand the Commission had not taken the delay factor into account. They justify the deduction on the second round as a development of the governing liquidation hypothesis adopted on the first. Once we enter the world of a liquidation that [399 U.S. 392, 462] never occurred, they say, the Commission is more competent than the courts to project incidental costs and delays. On the remand the Commission merely refined the liquidation approach to reflect added expenses not initially considered because of the fairness of the price arrived at by the parties. The new price ordered by the courts compelled re-examination of the elements of liquidation, of which abandonment delay is surely one. And when it comes to predicting the likelihood of delay in passing on an application for a certificate of abandonment, the Commission is, as Penn Central puts it, "a uniquely qualified finder of fact . . . ." 71 </s> At once the "refinement" rationale confronts an imposing obstacle raised by the Commission's own Second Supplemental Report. That report makes clear that the Commission had the element of delay before it in making its original valuation, but declined to apply any deduction on its account. The Commission considered - and rejected - Penn Central's request "that an allowance be made to the earliest date at which a liquidation could reasonably be anticipated for the constant diminution of N[ew] H[aven]'s assets." 331 I. C. C., at 698. (Emphasis supplied.) That rejection necessarily implied that the Commission had recognized the cost attributable to the delay occasioned by an abandonment proceeding, but determined not to weigh it in the balance. Thus we deal, not with a delay factor brought to light for the first time on the second round, but with one taken into account [399 U.S. 392, 463] now even though deliberately excluded before. Justification, if any there be, must begin with the realization that the Commission changed its mind in midstream. </s> The reorganization court rejected the Commission's conclusion that the valuation date selected in the Second Supplemental Report - December 31, 1966 - represented the date on which New Haven would have sought a certificate of abandonment rather than the date on which the railroad would have commenced its six-year sale. In doing so, the court relied on more than the Commission's shift in position between its second and fourth reports. The court rested on its express finding of fact that "but for the adoption by the Trustees of a course to serve the public interest, abandonment proceedings could and would have been commenced in late 1963 and liquidation would have been started, certainly by the valuation date of December 31, 1966." 304 F. Supp., at 801. That finding comes to us from the federal judge who has presided over the second New Haven reorganization since its inception. "In view of the district judge's familiarity with the reorganization, this finding has especial weight with us." Reconstruction Finance Corp. v. Denver & R. G. W. R. Co., 328 U.S. 495, 533 . Not only are we unable to say the finding is erroneous; we do not see how the record of these proceedings permits any other conclusion. </s> Indeed, the Commission and Penn Central do not challenge that conclusion. Instead, they seek support for the delay deduction by urging that if confronted with an abandonment application, the Commission would have had to "hear the communities that would be affected by the abandonment. If there is hope of a public takeover of segments, we must allow time for the States and communities to present their plans." 334 I. C. C., at 58. [399 U.S. 392, 464] But apart from the fact that this Court itself once characterized the notion that the affected States or the Federal Government might take over the road and its operations as "sheer speculation," Penn-Central Merger Cases, 389 U.S., at 507 , the reorganization court specifically rejected the Commission's argument. </s> "During seven and one-half years, the Federal government, the states, the communities and the public in general were fully informed by the Trustees of the Railroad as to the inability of the New Haven to survive as an independent railroad. And, apart from seeking inclusion in a merged Penn Central, the Trustees were engaging in a holding operation to afford the public bodies, as the real guardians of the public interest, the opportunity to act - to take over or adopt measures to preserve the New Haven transportation system. Response to this was partial tax assistance and, in the latter half of the period, grants which covered about 1/3 of the annual passenger losses. . . . Otherwise nothing has come to the attention of this court, to indicate anything more than a highly speculative prospect, that any or all of the states concerned or their municipalities had the slightest interest in taking over and operating the New Haven or any segment of it. </s> "In spite of full awareness of the situation of the bankrupt line and with nothing to prevent their doing so, no standby legislation, for use if inclusion of the New Haven by Penn Central fell through, was ever enacted or sought to be passed in seven and one-half years by the Federal Government or by any of the states for the take over and operation of the New Haven freight and passenger system or a segment of it (except for the west-end and the Boston commuter services); nor was any plan ever [399 U.S. 392, 465] filed by the governmental bodies incorporating such take over and operation." 304 F. Supp., at 800-801. 72 </s> [399 U.S. 392, 466] </s> We think the reorganization court was entirely correct in concluding that: </s> "The policy of imposing an interim burden of losses, through its deficit operation, on a railroad in reorganization is to afford a reasonable opportunity to the responsible agencies to arrange the continuation of the railroad's operation, but the law does not require the furnishing of two or three or four opportunities. The duty was more than amply fulfilled by the New Haven. The public interest has had one huge bite of the apple; it is not entitled to another." 304 F. Supp., at 801. </s> It is argued that the Commission nonetheless should be permitted to tax New Haven with the cost of a one-year delay because in fact the debtor sought no abandonment certificate from the Commission. The Commission and Penn Central attribute this failure to New Haven's self-interest. "The fact is," the Commission said, "that both the creditors and the trustees exercised options, assuming the risks involved therein, and the bondholders may not now be heard to ascribe to someone else the responsibility for the selection of their course of action, or inaction." 334 I. C. C., at 58. (Footnote omitted.) But the continued operation of the New Haven as a railroad depleted the estate by at least $60,000,000. 304 F. Supp., at 800. We fail to see how the self-interest of either the estate or its creditors was bettered by that operation. </s> Nor is there any substance to the contention that by failing to press for immediate liquidation of the debtor, the bondholders somehow waived their right to object to the imposition of the deduction for delay. The record that shows the preservation of New Haven in the public interest long after it had ceased to be viable as an independent enterprise demonstrates at the most that the bondholders had resigned themselves to bearing the costs [399 U.S. 392, 467] of interim operations pending inclusion in Penn Central. It contains no support for the proposition that they consented to the imposition of more than $15,000,000 in hypothetical costs on top of the tens of millions in actual costs they were forced to bear. As the reorganization court put it, "[S]uch a second round of loss superimposed on the first, like Pelion on Ossa, is as unfair and inequitable as can be imagined . . . ." 304 F. Supp., at 801. It cannot be sustained under any construction of the Bankruptcy Act. 73 </s> [399 U.S. 392, 468] </s> (b) The bulk-sale discount. New Haven's land holdings consisted of over 25,000 acres located along its rights-of-way in four States. In its Second Supplemental Report the Commission accepted the New Haven trustees' appraisal of the realty. The New Haven analysis was prepared by the company's general real estate agent, who relied in some instances on the studies of outside appraisers. The agent drew on a fund of actual experience, for the New Haven had long had a real estate department engaged in the disposition of nonoperating properties. From the inception of the New Haven trusteeship through November 1966, that department had completed 853 separate realty sales for a gross consideration of some $13,900,000. The Commission found that the large volume of past sales provided a "firm base" for the New Haven estimate. 331 I. C. C., at 667. </s> The New Haven agent assumed that the company would sell off its lots in normal-sized parcels. He gave specific consideration to each part of the railroad's property and reached his values on a zone-by-zone basis. He based his estimates of fair market value on his expert judgment, sales in the area, existing tax valuations, and the adaptability of the land to nonrailroad use. He discounted by 50% whenever the New Haven's records indicated questionable title; on the six-year liquidation [399 U.S. 392, 469] hypothesis, he deducted $15,971,000 as the cost of operating the New Haven realty department; and on the further assumption that the debtor would have to sell some of the property during the final year at vastly reduced prices, he made a further deduction of $8,178,000. </s> On the remand, the Commission ordered a further deduction from the liquidation value of the estate, based on a hypothetical sale in bulk of all the New Haven's land assets. </s> "The liquidation value urged by the creditors assumes not only the immediate right to abandon, . . . but also the right to break up the railroad and sell the parcels for their highest and best price. We think such a right may be restricted when a buyer for the entire bulk of the N[ew] H[aven] properties appears who will continue the operation of needed services." 334 I. C. C., at 60. (Footnote omitted.) </s> The Commission calculated the deduction on the premise that "[t]he bulk-sale discount merely reflects a market appraisal of the risks that the estate avoids, and the bulk buyer assumes." Id., at 61. The Commission then credited the evidence that Penn Central had presented through a realty expert with respect to a bulk sale of the New Haven land properties. The expert testified to the premium to be charged by a "single purchaser of property who would, in turn, sell off the property probably to many users and who would obtain his profit by reason of its purchase and resale." On the basis of this testimony, the Commission found that a bulk buyer would command at least a 10.5% return on his investment, calculated as the sum of a 75% borrowing at 9% and a 25% self-financing at an internal charge of 15%, and that such an investment rate required an additional 4.5% discount of the New Haven land values over and above the 6% by which they had already been [399 U.S. 392, 470] reduced. This bulk-sale discount resulted in a further diminution of $6,695,000 in the valuation of the New Haven assets. 334 I. C. C., at 61-62. </s> On the second round of review the reorganization court rejected the bulk-sale deduction as "improper and without support in law or reason." 304 F. Supp., at 805. </s> "Value, under the circumstances of this case, can only be arrived at through the dismantling of the transportation plant and a piece by piece sale of the properties. It is clear from the record that a market existed for the disposition of the properties on this basis. Their value is the best price the market place will give the seller, less the costs and expenses relevant to the sale . . . . It makes no difference whether the purchaser wants to use the property as is, or to improve and develop it. The question is how much will the market place give for a particular item of property." Ibid. </s> The court answered the argument that the discount merely reflected the risk of nonsale that the seller transferred to the bulk buyer by pointing to the Commission's prior deduction of over $8,000,000 for that purpose. Moreover, the deduction violated the requirement that the sale price meet the "fair upset" minimum imposed by 77 (b) (5) of the Bankruptcy Act. "That lowest price is what the market would pay, which is implicit in the standard used here, i. e., fair liquidation value. Neither a trustee nor an equity receiver could, with the court's approval, sell for less." 304 F. Supp., at 806. </s> Penn Central now protests that the reorganization court has erred in rejecting the bulk-sale discount. It says its expert witness duplicated no discounts previously taken; he proceeded on the basis of all previous deductions. In addition, it is argued, his analysis took into account the problem of market absorption caused by the [399 U.S. 392, 471] mass marketing of some 1,700 sale parcels and the risk of further depression of land values occasioned by cessation of New Haven's operations - factors not considered by New Haven's witness. The hypothetical bulk sale, Penn Central says, was merely a construct for quantifying the risks that New Haven itself would have assumed in undertaking the sale of its realty; it afforded a means to determine "the minimum rates of return necessary to attract capital to the business of owning and disposing of the New Haven's land." Penn Central insists that the bulk-sale analysis thus constituted a "pricing out" of an additional cost of liquidation; it was "simply an analytical device for approximating risks that would occur if the land were retailed over time as promptly as possible . . . ." </s> We may assume that Penn Central's "pricing out" theory is a rational one. But the record demonstrates that the Commission rejected it as insufficient to justify application of the bulk-sale theory. Penn Central's analysis, said the Commission, </s> "overlooks what is necessarily the bondholders' position - namely that aside from principles of equity and fairness they have a fixed right to sell off N[ew] H[aven] in parcels, so that even a bulk buyer must pay the per-parcel price. Our answer is that we may compel the bulk sale and the bulk sale discount as a condition of an abandonment certificate, and, therefore, as a reduction of the present price. </s> ". . . We . . . might compel N[ew] H[aven], if it filed for abandonment, to sell in bulk and thereby make a bulk sale price appropriate." 334 I. C. C., at 61. </s> The Commission thus ruled that only by assuming an actual buyer in bulk who would take over the New Haven properties for continued railroad operations could it compel the transfer of the real property at the reduced [399 U.S. 392, 472] price. Far from setting forth a theory of compulsory transfer "completely independent" of a "pricing out" analysis, the Commission concluded that only its power to compel the sale of the real estate to a single buyer for continued operation justified the bulk-sale discount. </s> We do not consider whether the Commission could lawfully impose such a bulk-transfer obligation on a railroad in liquidation at the cost of reducing the per-parcel valuation of its assets. 74 For the record before us is devoid of evidence that a bulk buyer would agree to take over the New Haven properties for continued service at any price. When a railroad has a lengthy history of deficit operations with no prospect of improvement, and a consequent operating value of zero or even a negative figure, the Commission cannot rationally assume that a deus ex machina will emerge to spend millions for the opportunity to lose millions more. </s> Penn Central's witness gave no testimony in support of any such theory. He was a professional developer of real estate, not a railroad operator. And he testified to what extra charges he would levy, after all previous deductions for the costs and risks of sale, to assume the risk of nonsale as well as the entrepreneurial activity of retailing the realty parcels. His testimony established nothing more than that he would not undertake the task [399 U.S. 392, 473] of per-parcel sales that New Haven had assumed unless the company paid him a handsome fee. The Commission could hardly have compelled the New Haven trustees to turn over the assets of the debtor to such an entrepreneur, who would, on his own testimony, have proceeded himself to do just what the Commission said it was empowered to forbid the bondholders to do - dismantle the estate, rid himself of railroad-connected assets, and devote his talents to the disposition of the realty. </s> 4. The discount of liquidation factors. In its Second Supplemental Report the Commission accepted the projection offered by the New Haven trustees that they could substantially complete a liquidation sale in six years. 331 I. C. C., at 663. Accordingly, the Commission discounted the estimated receipts of sale over the six-year period to reflect their present value - a deduction of $17,563,000. Id., at 661. It did not, however, discount the estimated expenses of liquidation, although these, too, were projected to occur over the six-year period. The reorganization court was of the view that if future receipts were to be discounted to present value, future expenses should likewise be. 289 F. Supp., at 461; cf. id., at 427-428. On the remand the Commission concurred. It noted that the parties were very close in their estimates of the proper discount, and it concluded that $3,800,000 represented the correct figure. Fourth Supplemental Report, 334 I. C. C., at 39-40. </s> On the second round of review the reorganization court observed that despite three valuation changes netting a $6,600,000 reduction in estimated worth, the Commission had failed to adjust the old, inapplicable discount figure. Accordingly, the court directed the Commission to file "a new formulation and computation of the discount for present value of the New Haven's liquidation proceeds, in accordance with generally recognized [399 U.S. 392, 474] accounting principles and based upon the changes made in valuation items through and including those stated in the present opinion." 304 F. Supp., at 810-811. The court added that the Commission could submit its new formulation and computation in the form of a letter or short brief, and afforded other parties in interest one week to file their comments, as well as any formulations and computations of their own, also in a letter or brief. In accordance with this directive of the court, the Commission submitted its new calculations, and the bondholders replied. In its order adjudging the price to be paid, the reorganization court ruled that "[t]he sum of $2,415,899 should be added to liquidation value inasmuch as it was improperly deducted in applying the discount to present value found by the Commission . . . ." 304 F. Supp. 1136, 1137. </s> In its brief before this Court the Bondholders Committee states that the reorganization court's directive resulted from the Commission's continued failure to calculate discounts back to present value with respect to four items, three of them to the detriment of New Haven and one to the detriment of Penn Central. The first is the $8,177,633 deducted as the cost of hypothetical forced sales of New Haven realty during the last years of the liquidation. The Commission could have treated the item either as part of the value of the unsold land and then written it off as a cost of sale, with a discount back to present value for both sides of the balance sheet, or as a wash to be eliminated in computing both receipts and expenses. In fact the Commission did neither: it included the figure on both sides of the books, but discounted back only in the asset column. The result, says the Committee, is an error of $2,066,488. A similar shortcoming in determining the liquidation values of road property, such as ties and rails, added another error of $1,474,057. Third, says the Committee, the Commission [399 U.S. 392, 475] erroneously spread the sale of certain realty over the full six-year period when the undisputed evidence showed that New Haven could sell the land in 12 to 18 months; this resulted in an overstatement of $118,000 in the discount attributable to the net proceeds. Finally, the Commission assumed that New Haven could sell off $47,121,400 in equipment, investments, and materials during the first year of the liquidation, but failed to spread the assumed receipts over the entirety of that year, with a consequent understatement of $1,372,646 in the applicable discount. A netting of the four items, together with an added correction of $130,000 made by the Commission, results in the $2,415,899 adjustment ordered by the reorganization court. </s> The Commission does not dispute that it made the errors as alleged by the Committee. Its sole reply is that the bondholders have waived their claims in this regard by failing to present them to the Commission. Penn Central concedes that "the first two errors asserted by the bondholders represent miscomputations" in Penn Central's favor. But it argues that the amount of the fourth error and the existence of the third were the subject of conflicting testimony before the Commission, and it joins in the Commission's contention that the bondholders have waived the right to a resolution in their favor by failing to press a timely objection before the Commission when the agency first made its alleged mistakes. </s> The record demonstrates that the bondholders have the better of this argument. It is undisputed that both the bondholders and Penn Central presented witnesses to the Commission on the remand who agreed that the Commission had erred in its discounts and who differed only in minor amounts. See Fourth Supplemental Report, 334 I. C. C., at 40. But the Commission simply bypassed the agreement, unpersuaded that it had erred [399 U.S. 392, 476] in its prior opinion. Id., at n. 17. The bondholders then carried the persistent discounting error to the reorganization court on the second round and won corrective relief. The submission of proposed adjustments by way of a letter was not, as is suggested, an untimely filing of claims, but a proper presentation pursuant to the instruction of the court - an instruction made necessary by the Commission's failure to straighten out the discounts after two rounds of hearings and reports, with errors that the bondholders on one side and Penn Central on the other now frankly concede aggregate over $5,000,000. Of the four items advanced by the Committee, only the third is subject to any real doubt, and that $118,000 item can hardly be considered a substantial sum in the context of these cases. A further remand to the Commission to resolve the accuracy of such a figure would serve no useful purpose at this stage of the litigation. The reorganization court resolved the controversy in favor of the bondholders following extensive oral argument on the issue. We affirm its judgment on these issues as free from that degree of error that would require us to overturn its finding. </s> 5. The loan-loss formula. In its Second Supplemental Report the Commission, projecting a three-year interim period between merger and inclusion and concluding that a short-term lease would not be appropriate, required Penn Central to extend $25,000,000 in loans to the New Haven in exchange for first-priority trustees' certificates. 331 I. C. C., at 702-706. 75 In addition, it ordered Penn Central to share in New Haven's operating losses to the extent of 100% in the first year, 50% in the second, [399 U.S. 392, 477] and 25% in the third, not to exceed $5,500,000 in any one year. Id., at 718-719. On the first round of judicial review the sliding-scale aspect of the formula was disapproved as an improper deterrent to the bondholders' assertion of their legal rights, 289 F. Supp., at 444, pursuant to the suggestion of MR. JUSTICE DOUGLAS at an earlier stage of the proceedings, see Penn-Central Merger Cases, 389 U.S., at 557 -558 (separate opinion), and on the remand the Commission abandoned it. 334 I. C. C., at 71-72. </s> The $5,500,000 annual ceiling derived from the assumption, based on calculations provided by the New Haven trustees and accepted by the Commission, that despite the massive cash drain in 1967, future annual New Haven operating losses would be unlikely to exceed $5,400,000 in succeeding years. 331 I. C. C., at 718-719. Coupled with the sliding-scale formula, the annual ceiling thus proposed that Penn Central absorb the entirety of New Haven's 1968 cash loss. On the first round the reorganization court expressed the opinion that even with the abrogation of the sliding scale, Penn Central's share of that loss "should be a substantial percentage." 289 F. Supp., at 464. </s> By the time the parties returned to the Commission on the remand, it was evident that the trustees' appraisal of their ability to contain the New Haven's deficits had been far too optimistic. From February through December 1968, the trustees had already drawn down $14,000,000 of the $25,000,000 loan that was supposed to last for three years; at that rate they would exhaust the loan in another six or seven months. 334 I. C. C., at 72. The cash loss was equally grim: the projected 1968 cash deficit stood at $15,672,000, with an estimated operating deficit of $8,200,000. Despite the $2,800,000 increase in the operating deficit over the trustees' initial prediction, the Commission adhered to its original ceiling and, pro-rating [399 U.S. 392, 478] over the 11-month period from merger to inclusion, required Penn Central to pay $5,000,000. 334 I. C. C., at 74. On the second round of review the reorganization court affirmed without discussion. </s> The bondholders now urge that Penn Central be required to bear the entire operating loss from merger to inclusion. New Haven incurred that loss as an independent entity, say the bondholders, only because it remained outside of Penn Central after the merger, at Penn Central's request and for Penn Central's convenience. It is urged that the Commission's ceiling was originally calculated to place the entire loss of the first year on Penn Central, and that the original intention should be carried out. 76 </s> Penn Central denies responsibility for the fact that inclusion took place some 11 months after merger rather than along with it, and puts the blame at the door of the bondholders for their litigious insistence upon working out the terms of inclusion prior to the event. It also notes that it has been obliged to take over New Haven less than a year after its own formation, rather than at a later point in the three-year period originally envisaged by the Commission. [399 U.S. 392, 479] </s> While the issue is not free from doubt, we cannot say the reorganization court committed error in letting the Commission's action stand. Without ascribing fault to any party, we note the unfairness to the bondholders in requiring them to bear whatever portion of the operating loss Penn Central does not pay due to the inability of Penn Central and the trustees to negotiate an interim lease. On the other hand, there is a countervailing unfairness to Penn Central in requiring it to bear the full burden of New Haven's losses while it lacked exclusive and assured control over the operations of the debtor. The $5,000,000 paid by Penn Central is no drop in the bucket; it amounts to 61% of the operating loss as figured by the Commission and nearly one-third of the entire cash loss for the interim period. In no sense did Penn Central's contribution represent a payment for assets received; on the liquidation hypothesis, the Commission could rationally have declined to require any payment at all. Chase Manhattan argues that "[e]ither there was no equitable obligation on the part of Penn Central to pay any of the New Haven loss during the period from the date of the Penn Central merger to the date of its acquisition of the New Haven assets or there was an obligation to pay the entire loss." We cannot agree that the Commission was obliged to adopt such an all-or-nothing approach. Under the circumstances, the Commission's final disposition represents a pragmatic compromise of the competing interests, and in the abence of a controlling contrary principle of law we do not disturb the reorganization court's acceptance of the Commission's judgment. </s> 6. New Haven investments. The Bondholders Committee complains that New Haven has transferred its stock ownership in two concerns - the New York Connecting Railroad and the Railway Express Agency - with no value given in exchange. The Connecting Railroad [399 U.S. 392, 480] was owned jointly by New Haven and Penn Central on a 50-50 basis, Fourth Supplemental Report, 334 I. C. C., at 44 n. 20, and is now presumably a wholly owned subsidiary of the merged company. REA is owned by various railroads; at the time of inclusion New Haven held about 4.5% of the outstanding stock. </s> In both instances the Commission valued New Haven's investment interest on the liquidation hypothesis. A witness presented by the New Haven trustees, whose testimony the Commission accepted, stated that because of Connecting Railroad's $18,000,000 funded debt its stock would have no liquidation value whatever. As to the REA, he said that its stock would have little or no value because of pending litigation over a tender offer for the stock 77 as well as recent legislation increasing the permissible size and weight of parcel post packages. Second Supplemental Report, 331 I. C. C., at 678. </s> The Bondholders Committee does not attack the Commission's finding of zero value for the Connecting Railroad and REA stock. Instead, the Committee says that if the shares were worthless, the Commission erred in requiring their transfer to Penn Central. Were the stock to have had no value on the liquidation of New Haven, the Committee argues, the reorganization court would, in the absence of bids for the shares, have ordered their distribution to the creditors to do with as they pleased. Accordingly, the Committee calls for the return of the stock to New Haven. </s> The Committee's request overlooks the fact that even though the shares in question might be worthless to a New Haven undergoing liquidation, the Commission could nonetheless order their transfer on the ground of their value to an ongoing Penn Central required to take in New Haven as an operating entity. But entirely apart [399 U.S. 392, 481] from that consideration, and without pausing to assess the correctness of the zero valuation placed on the stock, we agree with Penn Central that the Committee's request for the return of the stock is foreclosed by res judicata. For the Committee - as well as all the other bondholders - took no appeal from the order of the reorganization court directing the transfer of the New Haven assets subject to a later determination of value. 78 </s> 7. "Going-concern" value. The bondholders urge that Penn Central should pay an added amount to reflect the "going-concern" value of the New Haven. This sum, it is stressed, would be calculated, not as an alternative to liquidation value, but as a supplement to it. Since it is universally agreed that the New Haven was a losing operation in the form in which Penn Central was obliged to take it over, the bondholders display considerable temerity in pressing for inclusion of what could prove, in an ultimate analysis, to be only a substantial negative figure. 79 </s> The Commission rejected the notion that the New Haven had a going-concern value over and above the liquidation value of its physical properties. In the Commission's view, the bondholders' estimate of $55,075,000 for such intangibles as organizational costs was premised on the replacement of a defunct railroad and [399 U.S. 392, 482] overlooked the probability that no one would ever have rebuilt the New Haven in its present form. More fundamentally, the Commission correctly repudiated the claims based on going-concern value as antithetical to the liquidation hypothesis on which the appraisal of the New Haven's assets had proceeded. As the Commission said, "It is not realistic to assume that a potential buyer would pay the liquidated value of the N[ew] H[aven] assets and then pay additional amounts representing elements of going concern value in the face of N[ew] H[aven]'s past deficit operations and its bleak prospects for the future." Second Supplemental Report, 331 I. C. C., at 686-687. </s> The Bondholders Committee concedes that the intangible assets in fact acquired by Penn Central "would be worthless to the New Haven in an assumed liquidation . . . ." That is enough to end the matter. The bondholders are not entitled to treat the New Haven as a liquidating enterprise with respect to certain items and as an operating railroad with respect to others, depending on which approach happens to yield the higher value. Nothing could be more unfair or inequitable to Penn Central than to permit the New Haven bondholders, at its expense, to have the best of both worlds. 80 </s> [399 U.S. 392, 483] </s> 8. The "underwriting" plan for the Penn Central stock. Thus far we have considered the disputes over the valuation of the New Haven assets transferred to Penn Central. We now reach the one issue raised in connection with the consideration given by Penn Central in exchange. The Purchase Agreement negotiated by Pennsylvania and New York Central on the one side and the New Haven trustees on the other provided that Penn Central should pay in part for the New Haven properties with 950,000 shares of its common stock. 81 As a New Haven trustee stated, "[O]ne of the principles for which we negotiated at considerable length was that the bulk of [399 U.S. 392, 484] the consideration should be in the form of common stock or, failing that, should be debt instruments having either conversion rights or options which would permit the claimants to the New Haven's Estate to participate in the benefits of the merger." In confirming the terms of the agreement, the Commission accepted the testimony of a New Haven trustee that the value of the stock could range anywhere from $75 to $100 a share on the date of closing and that the average, $87.50, represented his estimate of market value at the time of inclusion. 331 I. C. C., at 688-689. The Commission adopted the $87.50 per share value placed on the Penn Central stock by the trustee as reasonable. Id., at 689-690. </s> On the first round of review the reorganization court agreed that the $87.50 per share figure represented a fair value for the Penn Central stock, based on the Commission's calculation of the estimated future earning power of the new company and the testimony of the New Haven trustee, "a well qualified expert." The court saw "no reason why recent fluctuations in the market value of these shares should change the disposition of the matter . . . ." 289 F. Supp., at 462. </s> On the remand, the bondholders challenged the Commission's stock valuation. The Commission cursorily rejected the attack on the ground that the bondholders' witness was unfamiliar with Penn Central's operating and financial plans, gave undue weight to extraordinary past expenses, and generally neglected the future prospects of the company. 334 I. C. C., at 68 n. 40. </s> By the time of the second round of judicial review, inclusion had taken place and the Penn Central had given its consideration in exchange. The bondholders, renewing their charge that the Commission's prophecy had been erroneous, pointed to the actual market performance of the stock. As of the inclusion date, December 31, 1968, the market price stood at 63 3/8, more than [399 U.S. 392, 485] 20 points below the Commission's estimated value. If that date should be thought suspect because of year-end sell-offs, the bondholders noted that throughout 1968 the price had fluctuated between 53 1/2 and 86 1/2, with a mean price between February 1 and December 31 of 69 1/2. Thus, the bondholders contended, the primary component of their bundle of consideration had turned out to be worth anywhere from $17,000,000 to $23,000,000 less than it was supposed to be. </s> On the second round the reorganization court rejected the bondholders' contention that the Commission had predicted an $87.50 value as of the closing date. </s> "[T]he Commission, presumably in an effort to assure fairness to Penn Central, did not use the market value of December 31, 1966 or an average of the values at or about December 31, 1968, the actual date of transfer. Instead, it adopted the theory that, after all, the purpose of using stock in payment was to tap the expected future economic benefit of the Penn Central merger which would come to full fruition seven to ten years after its effective date on February 1, 1968, but would be reflected in an upward trend of the stock at the time of closing or transfer of New Haven's assets to Penn Central, then estimated to be in 1970. </s> . . . . . </s> "[T]he theory of giving recognition to an intrinsic value in the shares, which will be realized when the full economic benefits of the merger have been achieved, not only assists the Penn Central by relieving it of the need to divest itself of a crippling amount of cash, which would be prejudicial to its merger program, but affords the New Haven an opportunity to participate in probable future profits." 304 F. Supp., at 808-809. [399 U.S. 392, 486] </s> The court nonetheless recognized an element of unfairness to the New Haven bondholders in that the New Haven was compelled to accept the stock "at a substantial present loss on an assurance of future gain." As the court put it, "The nub of the unfairness and inequity is not the 87 1/2 fixed for present calculations, but the fact that the purchaser is getting assets of sure present value while the seller is asked to gamble for its payment on the future of the Penn Central." Id., at 809. The court concluded that this did not necessitate a change in price or an amendment to the valuations postulated by the Commission. "To be fair and equitable, however, it does require a supplemental provision fulfilling the implicit promise by the purchaser to pay $83.1 million as part of the price for the assets conveyed." Accordingly, the court provided that </s> "if at any time the market price of Penn Central common shares reaches and maintains 87 1/2 per share on the New York Stock Exchange for a period of five consecutive days on which the Exchange is open and doing business (not counting days on which the Exchange is closed to trading) between the date of final consummation of the plan of reorganization and February 1, 1978, then and in that event it will be conclusively presumed that Penn Central has, in transferring the shares to the New Haven, made payment of the $83.1 million of the purchase price represented by the shares. If, however, the common shares of Penn Central do not reach and maintain the price as aforesaid, then the value of the shares will be determined by the average of the means between high and low prices of Penn Central shares on the New York Stock Exchange for the 30 business days next preceding February 1, 1978, on which the Exchange is actually operating and there are [399 U.S. 392, 487] sales of Penn Central shares. Penn Central will forthwith become liable to pay in cash to the New Haven, or its successor or successors, the difference between said mean market prices of those 30 days and 87 1/2 for each share . . . ." 304 F. Supp., at 809-810. </s> The court provided that the benefit of Penn Central's underwriting of any difference between the mean market price and 87 1/2 would inure only to the New Haven and would not follow the shares into the hands of third-party buyers. </s> In addition, the court afforded Penn Central the option of relieving itself of the 1978 underwriting obligation in the following manner: </s> "The Penn Central is granted an option, operative between the date of final consummation of the plan and February 1, 1978, to discharge its obligation to underwrite and pay the difference between such average market price and the higher 87 1/2 at the end of the ten year period by paying on one or more blocks of 50,000 shares to the New Haven . . . the difference between the mean market prices for sales of Penn Central common shares and 87 1/2 per share as of a specific day of sales on the Exchange which shall previously have been designated by Penn Central in a written notice delivered to the New Haven at least 5 days prior to such market date." Id., at 810. </s> The underwriting plan of the reorganization court thus combined a series of essential findings and protective features. First, it ratified the Commission's determination that intrinsic value rather than market price should guide the appraisal of the worth of the Penn Central common stock; second, it predicted that that intrinsic value would be reflected in a market price of at least [399 U.S. 392, 488] $87.50 per share by the time Penn Central fully realized the benefits of its merger; third, it provided that Penn Central would secure the New Haven estate against the risk that the market price of its stock would not reflect that minimum intrinsic value within the first nine years after inclusion; and fourth, it contemplated that New Haven would be left free to participate in whatever future appreciations in value Penn Central's stock might enjoy. In sum, the reorganization court devised a plan that added to its assessment of present worth both a reasonable assurance of realization of such worth and the opportunity of additional gain. In so doing, the reorganization court in effect determined that postponement of immediate realization of $87.50 per share was offset by the possibility of even greater future market price of the stock, and that the package constituted fair compensation for the assets transferred to Penn Central. </s> On the basis of the record before the District Court at the time of its order, we would have no hesitancy in accepting its findings, conclusions, and proposed underwriting plan as consistent with the history of the reorganization proceedings and supported by substantial evidence. But we cannot avoid the impact of recent events in assessing the propriety of the decree that that court has entered. See United States v. Aluminum Co. of America, 148 F.2d 416, 445. And those events make it possible that this aspect of the reorganization court's decree may be wholly unrealistic. </s> The fairness and equity that are the essence of a 77 proceeding forbid our approval of a payment for the transferred New Haven properties that may be worth only a fraction of its purported value. And the same considerations of fairness and equity prevent imposing on Penn Central the burden of immediate payment in full, particularly when it is remembered that the New Haven bondholders have never objected to the receipt [399 U.S. 392, 489] of Penn Central stock in exchange for the New Haven assets. </s> Accordingly, we set aside the order of the Connecticut District Court insofar as it determines that an intrinsic value of $87.50 inheres in the Penn Central common stock and implements an underwriting plan to secure payment of that sum. Further proceedings before the Commission and the appropriate federal courts will be necessary to determine the form that Penn Central's consideration to New Haven should properly take and the status of the New Haven estate as a shareholder or creditor of Penn Central. </s> V </s> We turn finally to the contention of the bondholders that quite apart from the specific items that together go to make up the price to be paid for the New Haven assets, the plan of reorganization itself is not only unfair and inequitable under the Bankruptcy Act but violates the Fifth Amendment as a taking of property without just compensation. </s> The purchase price that the Commission and the reorganization court have required Penn Central to pay to the New Haven estate is based upon the liquidation value of the seller's assets, appraised as of December 31, 1966. That price hypothesizes a shutdown of New Haven followed by a sell-off of its assets at their highest and best value. In the circumstances of this case, and for the reasons we have already set out at length, we agree with the reorganization court that it would be unfair and inequitable to allow Penn Central to take the properties for any lesser sum. Moreover, we today require a reassessment of the consideration that Penn Central is to give in exchange for those properties. We thereby accord the bondholders the right to a liquidation and a per-parcel sale that is theirs by virtue [399 U.S. 392, 490] of their mortgage liens. The Bankruptcy Act does not require that they be given more. Nor is it necessary to consider the bondholders' claim that anything less than full liquidation value would amount to an uncompensated taking in violation of the Fifth Amendment. </s> But the Bondholders Committee presses another Fifth Amendment argument. It points to the Commission's own finding that from the inception of the New Haven reorganization through 1968 the debtor's estate had amassed more than $70,000,000 in administrative and pre-bankruptcy claims that take priority over the bondholders' liens. Fourth Supplemental Report, 334 I. C. C., at 126. The reorganization court itself noted that "`losses reasonably incident to working out the solution most consistent with the public interest' [have] eroded the debtor's estate in excess of $60 million." 304 F. Supp., at 800. (Footnote omitted.) Although the extent to which the ongoing deficit operation has impaired the bondholders' security is unclear, it is undeniable that the continued operation of the railroad into the late 1960's, together with the legal uncertainties engendered by the doubtful future of the company, have greatly depressed the value of the bondholders' interests. Cf. Penn-Central Merger Cases, 389 U.S., at 509 . 82 </s> A 77 reorganization court may not, of course, disregard a claim that injurious consequences will result to a secured creditor from the suspension of the right to enforce his lien against the property of a debtor. That claim, however, "presents a question addressed not to [399 U.S. 392, 491] the power of the court but to its discretion - a matter not subject to the interference of an appellate court unless such discretion be improvidently exercised." Continental Illinois National Bank & Trust Co. v. Chicago, R. I. & P. R. Co., 294 U.S. 648, 677 . Here the reorganization court recognized its duties under the Bankruptcy Act and the Constitution. In August 1968 it ruled as follows: </s> "In view of the history of this deficit operation from the time of the filing of the petition under 77 and even before, the size of the losses, the long period of time necessarily involved in seeking to work out a solution, short of liquidation, through inclusion in the Penn-Central, the present condition of the Railroad and the rate of loss and out-flow of cash in the recent past and in the foreseeable future, this court finds that the continued erosion of the Debtor's estate from operational losses after the end of 1968 will clearly constitute a taking of the Debtor's property and consequently the interests of the bondholders, without just compensation. It is therefore constitutionally impermissible, and obviously no reorganization plan which calls for such a taking can be approved." 289 F. Supp., at 459. </s> We do not doubt that the time consumed in the course of the proceedings in the reorganization court has imposed a substantial loss upon the bondholders. But in the circumstances presented by this litigation we see no constitutional bar to that result. The rights of the bondholders are not absolute. As we have had occasion to say before, security holders </s> "cannot be called upon to sacrifice their property so that a depression-proof railroad system might be created. But they invested their capital in a public [399 U.S. 392, 492] utility that does owe an obligation to the public. . . . [B]y their entry into a railroad enterprise, [they] assumed the risk that in any depression or any reorganization the interests of the public would be considered as well as theirs." Reconstruction Finance Corp. v. Denver & R. G. W. R. Co., 328 U.S. 495, 535 -536. </s> Only two Terms ago, when we last considered the Penn Central merger, we quoted approvingly the Commission's statement that "[i]t is a fundamental aspect of our free enterprise economy that private persons assume the risks attached to their investments, and the N[ew] H[aven] creditors can expect no less because the N[ew] H[aven]'s properties are devoted to a public use." Penn-Central Merger Cases, 389 U.S., at 510 . We added: </s> "While the rights of the bondholders are entitled to respect, they do not command Procrustean measures. They certainly do not dictate that rail operations vital to the Nation be jettisoned despite the availability of a feasible alternative. The public interest is not merely a pawn to be sacrificed for the strategic purposes or protection of a class of security holders . . . ." Id., at 510-511. </s> In this context we appraise the bondholders' claim that the continued operation of the New Haven from the inception of the reorganization proceeding in 1961 to the inclusion in Penn Central in 1968 worked an unconstitutional taking of their property. There is no longer room for dispute that the bondholders will receive the highest and best price for the assets of the debtor as of December 31, 1966. That price of course reflects the depreciation of the properties and the losses incurred in the operation of the railroad from the commencement of reorganization proceedings under 77 in the middle of 1961. But the Bondholders Committee does not tell [399 U.S. 392, 493] us what the depreciation and losses attributable to the prevaluation period are. Moreover, no bondholder formally petitioned the reorganization court to dismiss the proceedings and thereby permit a foreclosure on the mortgage liens until April 1967 - well after the 1966 valuation date. 83 </s> Nor can Penn Central be held liable for the further decline in New Haven's value from the valuation date to the actual inclusion. The new company did not even come into existence until midway through that period, and from the point of its own creation until it took in the New Haven, it contributed substantially to recompense the debtor for its operating losses. Moreover, the failure of the bondholders to press for early liquidation of the New Haven meant that their initial application for a dismissal of the reorganization proceedings came just as the objective of salvaging the New Haven appeared possible to achieve. As the reorganization court noted, only two of the several bondholder groups made that initial application; it was not joined by the trustees, nor was it endorsed by other representatives of the bondholders and creditors; and it came just as the Commission was about to certify a feasible plan of reorganization to the court. "To jettison everything achieved and turn back just as a glimmer of light begins to show at the end of a long dark tunnel," said the court, "not only carries with it an aura of unreality but borders on the fantastic." In re New York, N. H. & H. R. Co., 281 F. Supp., at 68. </s> On the other hand, we must also reject any lingering suggestion by Penn Central that the price it must pay for the New Haven assets is unfair in either a statutory or a constitutional sense. At first glance there is a [399 U.S. 392, 494] seeming anomaly in the requirement that Penn Central pay a liquidating value for property it must operate at a loss. But it is not correct to say that New Haven's right to liquidate is inconsistent with Penn Central's obligation to operate, or that if the New Haven's creditors had such a right, Penn Central must have it as well. The bondholders had the right by force of their state-created liens under the New Haven's mortgage obligations. Penn Central had no such right, because its merger was expressly conditioned on its assumption of responsibility for continued New Haven service. There was nothing inequitable in an arrangement that permitted the bondholders to recover the value of their liens on the property of the debtor at the same time that it required Penn Central to pay that value in exchange for the nearly $1,000,000,000 worth of benefits that the merger was then anticipated to produce. </s> As the Commission said at the time of its Second Supplemental Report, "Calling upon Penn-Central to pay more than the N[ew] H[aven] is worth as a going concern is not unreasonable within the meaning of section 5 (2). . . . The Penn-Central merger (which will bring substantial dollar savings to the merger applicants) was approved with the thought that some of the merger savings would be available specifically to ward off a liquidation and shutdown of the N[ew] H[aven] so that adequate transportation service would remain available to the public which now relies on the N[ew] H[aven]." 331 I. C. C., at 687-688. </s> The reorganization court made the point with clarity and force: </s> "The whole purpose of making the inclusion of the New Haven a condition of the merger was to require Penn-Central, which, in being permitted to merge, was granted the opportunity to realize tremendous economic benefits, to take over and operate [399 U.S. 392, 495] a helplessly sick but still needed railroad, which it could well afford to do. It is part of the price Penn-Central is called upon to pay for the right to merge. The right to merge was granted, the merger has taken place, and the price should be paid." 289 F. Supp., at 465-466. </s> For the reasons stated in this opinion, the judgment of the United States District Court for the District of Connecticut, reviewed on writs of certiorari in Nos. 914, 916, 920, 1038, and 1057, is affirmed in part and vacated and remanded in part. The judgment of the United States District Court for the Southern District of New York, appealed from in Nos. 915, 917, and 921, is vacated, and those cases are remanded with instructions to abstain pending the further proceedings before the Interstate Commerce Commission and the reviewing courts under 77 of the Bankruptcy Act. </s> It is so ordered. </s> MR. JUSTICE DOUGLAS took no part in the decision of these cases. </s> MR. JUSTICE MARSHALL and MR. JUSTICE BLACKMUN took no part in the consideration or decision of these cases. </s> Fn [399 U.S. 392, 399] On June 21, 1970, the Penn Central Transportation Company filed a petition for reorganization under 77 of the Bankruptcy Act, 11 U.S.C. 205, in the United States District Court for the Eastern District of Pennsylvania. Whether the financial obligations dealt with in the present opinion may become subject to modification in or because of those proceedings is a question with which the present opinion in no way deals. </s> Footnotes [Footnote 1 See Penn-Central Merger Cases, 389 U.S., at 494 ; Baltimore & Ohio R. Co. v. United States, 386 U.S. 372, 379 . </s> [Footnote 2 Pennsylvania R. Co. - Merger - New York Central R. Co., 327 I. C. C. 475, 479 ("Merger Report"). </s> [Footnote 3 Ibid. </s> [Footnote 4 Baltimore & Ohio R. Co. v. United States, 386 U.S., at 392 . </s> [Footnote 5 Penn-Central Merger Cases, 389 U.S., at 493 . </s> [Footnote 6 Ibid. </s> [Footnote 7 Baltimore & Ohio R. Co. v. United States, 386 U.S., at 380 . </s> [Footnote 8 Merger Report, 327 I. C. C., at 489. </s> [Footnote 9 Baltimore & Ohio R. Co. v. United States, 386 U.S., at 447 (separate opinion of DOUGLAS, J.). </s> [Footnote 10 Penn-Central Merger Cases, 389 U.S., at 493 ; Merger Report, 327 I. C. C., at 501. </s> [Footnote 11 As part of its initial merger order, the Commission had prescribed special traffic and indemnity provisions for the benefit of the Delaware & Hudson, Boston & Maine, and Erie-Lackawanna railroads. The Commission had not yet determined whether those three "protected carriers" should be included in either Penn Central or the recently formed Norfolk & Western, but concluded they required sheltering conditions if they were to survive the interim period pending decision as to their ultimate disposition. Merger Report, 327 I. C. C., at 531-532. On September 16, 1966, following objections to the initial order from various parties, the Commission abrogated the indemnity provisions originally prescribed for the protected carriers and announced it would reconsider its earlier decision, with possible modifications to be given retroactive effect. Pennsylvania R. Co. - Merger - New York Central R. Co., 328 I. C. C. 304 ("Reconsideration Report"). On October 4, 1966, a three-judge District Court in the Southern District of New York declined, one judge dissenting, to enjoin enforcement of the Commission's order. Erie-Lackawanna R. Co. v. United States, [399 U.S. 392, 401] 259 F. Supp. 964. Later, the District Court denied injunctive relief sought by bondholders of the New Haven railroad. Oscar Gruss & Son v. United States, 261 F. Supp. 386. On March 27, 1967, this Court reversed and remanded Erie-Lackawanna with instructions that the Commission complete its proceedings relating to the protected roads. Baltimore & Ohio R. Co. v. United States, 386 U.S. 372 . We later vacated and remanded Oscar Gruss for reconsideration in light of Baltimore & Ohio, 386 U.S. 776 . Ensuing developments are recounted in the text. </s> [Footnote 12 Pennsylvania R. Co. - Merger - New York Central R. Co., 330 I. C. C. 328 ("First Supplemental Report"). </s> [Footnote 13 Erie-Lackawanna R. Co. v. United States, 279 F. Supp. 316. </s> [Footnote 14 Penn-Central Merger Cases, 389 U.S. 486 . </s> [Footnote 15 Baltimore & Ohio R. Co. v. United States, 386 U.S., at 381 ; New York, N. H. & H. R. Co. Trustees Discontinuance of Passenger Service, 327 I. C. C. 77, 79-80 ("Suburban Discontinuance Case"). </s> [Footnote 16 New York, N. H. & H. R. Co., Trustees, Discontinuance of All Interstate Passenger Trains, 327 I. C. C. 151, 163 ("Interstate Discontinuance Case"). </s> [Footnote 17 Id., at 163-164. </s> [Footnote 18 Id., at 169. </s> [Footnote 19 Suburban Discontinuance Case, 327 I. C. C., at 80. </s> [Footnote 20 See generally Baltimore & Ohio R. Co. v. United States, 386 U.S., at 452 -454 (separate opinion of DOUGLAS, J.); L. Brandeis, Financial Condition of the New York, New Haven & Hartford Railroad Company and of the Boston & Maine Railroad (1907); L. Brandeis, Other People's Money 129-136 (1933); Report of the Joint New England Railroad Committee to the Governors of the New England States 53-73 (1923); E. Sunderland, A Brief History of the Reorganization of The New York, New Haven and Hartford Railroad Company 1-5 (1948); Capture of the New Haven, Fortune Magazine, April 1949, p. 86 et seq. </s> [Footnote 21 See In re New York, N. H. & H. R. Co., 169 F.2d 337, 338 n. 6, cert. denied sub nom. Mulcahy v. New York, N. H. & H. R. Co., 335 U.S. 867 . </s> [Footnote 22 See In re New York, N. H. & H. R. Co., 378 F.2d 635, 640. </s> [Footnote 23 Commission of Department of Public Utilities v. New York, N. H. & H. R. Co., 178 F.2d 559, cert. denied, 339 U.S. 943 ; In re New York, N. H. & H. R. Co., 163 F. Supp. 59. </s> [Footnote 24 In re New York, N. H. & H. R. Co., 278 F. Supp. 592, 606, aff'd, 405 F.2d 50, cert. denied sub nom. Abex Corp. v. Trustees, 394 U.S. 999 . </s> [Footnote 25 278 F. Supp., at 606. </s> [Footnote 26 Id., at 601. </s> [Footnote 27 In re New York, N. H. & H. R. Co., 289 F. Supp. 451, 456; In re New York, N. H. & H. R. Co., 281 F. Supp. 65. </s> [Footnote 28 In re New York, N. H. & H. R. Co., 278 F. Supp., at 606. </s> [Footnote 29 In re New York, N. H. & H. R. Co., 405 F.2d, at 52. </s> [Footnote 30 In re New York, N. H. & H. R. Co., 281 F. Supp., at 65-66. </s> [Footnote 31 Suburban Discontinuance Case, 327 I. C. C., at 79, 80, 106. </s> [Footnote 32 By this time the railroad's freight operations were also operating at deficit levels. The Commission explained this aspect of the problem as follows: </s> "Southern New England is a deficit area in terms of food, fuel, and the raw materials for industry. Accordingly, in serving this economy, the New Haven is a short haul railroad with a heavily unbalanced flow of traffic and equipment. As a terminal railroad it faces the constant problems and added costs of switching and deadheading foreign line freight cars to move them back off its own lines. Moreover, as a result of national and regional economic and industrial shifts, New England's outbound products have become increasingly high-value and light-weight in character. With the expansion in the region of a modern, comprehensive highway system during the past 20 years, this outbound freight traffic has become especially susceptible to diversion from rail to private and for-hire trucking service." Interstate Discontinuance Case, 327 I. C. C., at 170. </s> [Footnote 33 Id., at 164. </s> [Footnote 34 See id., at 175. </s> [Footnote 35 See Merger Report, 327 I. C. C., at 488. </s> [Footnote 36 Interstate Discontinuance Case, 327 I. C. C., at 152. </s> [Footnote 37 Id., at 172, 173. </s> [Footnote 38 Penn-Central Merger Cases, 389 U.S., at 507 . </s> [Footnote 39 In re New York, N. H. & H. R. Co., 281 F. Supp. 65. </s> [Footnote 40 In re New York, N. H. & H. R. Co., 278 F. Supp., at 602. </s> [Footnote 41 See Erie-Lackawanna R. Co. v. United States, 279 F. Supp., at 333. The three-judge court, writing in October 1967, expressed full agreement with these findings: </s> "No one has contested the forecast of the NH Trustees that their cash will run out at the end of 1967; no one has indicated any probable source of funds for that beleaguered property other than the merged Penn-Central. . . . For our part we are unwilling to take responsibility for such devastating hardship as even a temporary cessation of NH's operations would bring to New England and New York and in a lesser degree to other sections of the country when in our view there is no reason why the merger should not proceed; indeed we believe we have no right to do so. . . ." 279 F. Supp., at 355. "[W]ith the situation now so serious, there can hardly be doubt that it is better to accept what is good for the New Haven than permit the patient to die while in quest of the best." Id., at 335. </s> [Footnote 42 Pennsylvania R. Co. - Merger - New York Central R. Co., 331 I. C. C. 643, 651 ("Second Supplemental Report"). </s> [Footnote 43 Ibid. </s> [Footnote 44 Id., at 653. </s> [Footnote 45 The transfer was to be free and clear of all liens and encumbrances, with certain minor exceptions. The liens and encumbrances would shift to the proceeds of the sale and thus remain an obligation of the New Haven estate. </s> By negotiating a purchase and sale of the New Haven assets, the parties to the agreement elected not to attempt a recapitalization of New Haven, an enlarged merger that would bring New Haven into the Penn Central system as a corporate entity, or a lease of the New Haven operating assets. At one point, when it appeared the New Haven might not long survive, the Commission had directed the parties to negotiate a lease to be "immediately available upon consummation of the Penn-Central merger," but the negotiators reported they were unable to do so and instead suggested various loan-loss formulas. Penn-Central Merger Cases, 389 U.S., at 508 ; Erie-Lackawanna R. Co. v. United States, 279 F. Supp., at 334; Second Supplemental Report, 331 I. C. C., at 648. </s> [Footnote 46 Subsequent modifications to the Agreement were executed October 4, 1966, and December 20, 1967. </s> The bondholders were not bound by the trustees' acceptance of the Purchase Agreement. The trustees acted on behalf of the debtor, subject to the directive of the reorganization court, but [399 U.S. 392, 411] they never submitted the Agreement to that court for its approval. Moreover, they had stipulated with Pennsylvania and Central that they would not challenge the terms of the Purchase Agreement. The preliminary memoranda negotiated between the trustees and the two railroads contained a provision, substantially embodied in 11.7 of the Agreement itself, that New Haven would not make or file </s> "any further statement, stipulation or other document in the pending Pennsylvania-Central merger proceedings before the I. C. C. . . ., or any judicial review thereof, other than in connection with (a) a position relating to the New Haven taken by any other party . . ., or (b) a failure of the I. C. C. to find either (i) that the New Haven should be included in such merger or (ii) that jurisdiction is to be retained by the I. C. C. for later determination of any petition by the New Haven for such inclusion, provided, however, that any such statement, stipulation or other document made or filed by the Trustees shall not be inconsistent with the provisions and intent of this Agreement." </s> The reorganization court suggested that the bondholders rather than the trustees press for early inclusion due to the impropriety of the trustees' taking "any action which would be or appear to be a repudiation of [the contract's] letter or spirit." See Erie-Lackawanna R. Co. v. United States, 279 F. Supp., at 333; and see Oscar Gruss & Son v. United States, 261 F. Supp., at 393-394. </s> [Footnote 47 The reorganization court had authorized the New Haven trustees to pursue a "two-step" plan before the Commission, in which the debtor's estate would sell its assets to Penn Central and then the trustees would file a specification of the terms to be accorded the security holders. In 1967, the Court of Appeals for the Second Circuit affirmed the District Court's authorization order with certain modifications not here pertinent, postponing consideration of the [399 U.S. 392, 414] merits of the "two-step" plan because of the prematurity of the question as then presented. In re New York, N. H. & H. R. Co., 378 F.2d 635, 639. Pursuant to the plan of reorganization, the New Haven is to be reconstituted as a closed-end, nondiversified management investment company. See Pennsylvania R. Co. - Merger - New York Central R. Co., 334 I. C. C. 25, 93 ("Fourth Supplemental Report"). The reorganization court has withheld disposition of the second or "distributive" step of the plan pending this Court's resolution of the question of price. In re New York, N. H. & H. R. Co., 304 F. Supp. 1121, 1123-1124. </s> [Footnote 48 The United States Trust Company, as indenture trustee under the New Haven's Harlem River Division mortgage, had been one of the bondholder plaintiffs on the first round. At the suggestion of the reorganization court, 289 F. Supp., at 464, it received recognition of its secured status on the remand, when the Commission directed Penn Central to assume the Division bonds. 334 I. C. C., at 70. The trustee sought no further review. </s> [Footnote 49 In a Fifth Supplemental Report, decided July 10, 1969, and modified August 26, 1969, the Commission complied with the directive of the three-judge court to prepare and serve a proposed decree reflecting the changes ordered in that court's opinion of June 18, 1969. After making the required adjustments, the Commission ordered Penn Central to pay New Haven an additional $990,000 in stocks, bonds, and cash in the same relative percentages as provided in the Fourth Supplemental Report. In addition, the Commission called upon the parties to submit proposed terms of a detailed decree relating to the underwriting plan originated by the reorganization court and adopted by the three-judge court. 334 I. C. C. 528. The order of the Commission accompanying the [399 U.S. 392, 418] Fifth Supplemental Report does not appear to have undergone judicial review. At any rate, it is moot in light of the action we take today with respect to the judgments of the New York and Connecticut District Courts relating to the Second and Fourth Supplemental Reports. </s> [Footnote 50 At the same time we affirmed the judgment of the three-judge court in No. 919, Providence & Worcester Co. v. United States, 396 U.S. 555 , and denied certiorari in No. 918, Providence & Worcester Co. v. Smith, 396 U.S. 1062 . In these cases, companions to the main litigation, the Providence & Worcester Company sought plenary review of the District Courts' orders insofar as they had sustained the Commission (1) in requiring Penn Central to operate its trains over the Providence & Worcester tracks as a leased line under the conditions of a former long-term lease to New [399 U.S. 392, 419] Haven, subject to Penn Central's right to commence an abandonment proceeding before the Commission under 1 (18) of the Interstate Commerce Act, 49 U.S.C. 1 (18), and subject further to Providence & Worcester's securing a charter revision to eliminate voting restrictions against Penn Central as a principal shareholder; and (2) in limiting the liability of Penn Central with respect to certain claims of Providence & Worcester, both in rem and in personam, arising against the New Haven prior to the latter's inclusion in Penn Central. See Manufacturers Hanover Trust Co. v. United States, 300 F. Supp. 185 (opinion of three-judge court). </s> [Footnote 51 A similar problem had presented itself in the immediately preceding round of the litigation arising from the merger. There the Commission's order had embraced not only the Penn Central combination and the takeover of New Haven, but the inclusion of the "protected carriers" in the Norfolk & Western system as well. See n. 11, supra. Despite the variety of issues and the number of parties, the cases eventually came before a single District Court, and the danger of multiple litigation in six or more different courts was avoided. See Erie-Lackawanna R. Co. v. United States, 279 F. Supp., at 323-324, aff'd sub nom. Penn-Central Merger Cases, 389 U.S., at 497 n. 2, 503, 505 n. 4. Even earlier, when the Commission had first ordered inclusion of all New Haven service as a condition to the Penn Central merger, it had pointed out that "since New Haven is in bankruptcy, its inclusion will entail reorganization problems under section 77 of the Bankruptcy Act which must be resolved in conjunction with any inclusion proceeding herein." Merger Report, 327 I. C. C., at 525; see also id., at 527; and see Second Supplemental Report, 331 I. C. C., at 652. </s> [Footnote 52 Callaway v. Benton, 336 U.S. 132, 142 ; Meyer v. Fleming, 327 U.S. 161, 164 ; Thompson v. Magnolia Petroleum Co., 309 U.S. 478, 483 ; Continental Illinois National Bank & Trust Co. v. Chicago, R. I. & P. R. Co., 294 U.S. 648, 662 ; cf. Ex parte Baldwin, 291 U.S. 610, 615 ; Isaacs v. Hobbs Tie & Timber Co., 282 U.S. 734, 737 . </s> [Footnote 53 Cf. Continental Illinois National Bank & Trust Co. v. Chicago, R. I. & P. R. Co., 294 U.S., at 676 ; Van Schaick v. McCarthy, 116 F.2d 987, 992. </s> [Footnote 54 In Callaway, this Court stressed the control the reorganization court has over the debtor's property, including any leasehold estate: </s> "Clearly, control of the physical property must remain in the court which has the ultimate responsibility for operating it. And in order to protect the estate of the debtor from dissipation through losses suffered in the operation of the lessor's property, responsibility for the determination of the amount of the losses and provision for their recoupment from the lessor was properly lodged in the court supervising the reorganization of the debtor." 336 U.S., at 144 . </s> [Footnote 55 Section 5 (2) (d) provides: "The Commission shall have authority in the case of a proposed [merger] transaction under this paragraph involving a railroad or railroads, as a prerequisite to its approval of the proposed transaction, to require, upon equitable terms, the inclusion of another railroad or other railroads in the territory involved, upon petition by such railroad or railroads requesting such inclusion, and upon a finding that such inclusion is consistent with the public interest." </s> [Footnote 56 For the text of 5 (2) (d), see n. 55, supra. Section 5 (2) (b) provides in pertinent part: "If the Commission finds that, subject to such terms and conditions and such modifications as it shall find to be just and reasonable, the proposed [merger] transaction is within the scope of [an earlier subdivision of the statute] . . . and will be consistent with the public interest, it shall enter an order [399 U.S. 392, 425] approving and authorizing such transaction, upon the terms and conditions, and with the modifications, so found to be just and reasonable . . . ." </s> [Footnote 57 Such abstention would in no way have limited Penn Central's full participation in judicial review of the Commission proceedings. Penn Central came before the reorganization court as a "party in interest" under 77 (e) and did not oppose the order of the court making it a party to the proceeding; the company participated fully in all further hearings in the reorganization court; it took a protective appeal from the judgment of the court remanding the matter to the Commission after the first round of review, and it appealed again from the judgment of the court following the second round of review. At no time has anyone questioned Penn Central's [399 U.S. 392, 429] status as a party litigant in the reorganization court or challenged its right to make a full presentation of its case there, on appeal to the Court of Appeals, or on review by writ of certiorari in this Court. </s> [Footnote 58 The District Court also relied upon the prior adjudication of the validity of the plan. See 52 F. Supp., at 66 n. 1, 67. </s> [Footnote 59 It is noteworthy that when the Commission drafted the provision under which Penn Central was obligated to take in New Haven, it evidently contemplated that review would take place only in the reorganization court. Condition 8 of the Merger Report, the text of which is set out in the text above at 409, required Penn Central to take in New Haven with terms of inclusion to be "fair and equitable" - language peculiar to the Bankruptcy Act, and instinct with legal significance peculiar to that statute. See Case v. Los Angeles Lumber Prods. Co., 308 U.S. 106, 115 -119; Bankruptcy Act, 77 (e) (1), 11 U.S.C. 205 (e) (1). Condition 8 subjected the agreement negotiated by the parties to "the approval of the Bankruptcy Court and the Commission." And it also provided, in the event the parties were unable to agree to the elements of inclusion, for the imposition of "such fair and equitable terms and conditions as the Commission may impose, . . . subject to approval by the Bankruptcy Court . . . ." Repeated references to terms of art in bankruptcy law and to the bankruptcy court cannot be thought to lack meaning. Still less can we assume that the studied omission of any mention of the three-judge court was without significance. </s> [Footnote 60 Pursuant to 77 (e), 11 U.S.C. 205 (e), "the judge shall confirm the plan [of reorganization] if satisfied that it has been accepted by or on behalf of creditors of each class to which submission is required . . . holding more than two-thirds in amount of [399 U.S. 392, 434] the total of the allowed claims of such class which have been reported in said submission as voting on said plan, and by or on behalf of stockholders of each class to which submission is required . . . holding more than two-thirds of the stock of such class which has been reported in said submission as voting on said plan; and that such acceptances have not been made or procured by any means forbidden by law: Provided, That, if the plan has not been so accepted by the creditors and stockholders, the judge may nevertheless confirm the plan if he is satisfied and finds, after hearing, that it makes adequate provision for fair and equitable treatment for the interests or claims of those rejecting it; that such rejection is not reasonably justified in the light of the respective rights and interests of those rejecting it and all the relevant facts; and that the plan conforms to the [statutory] requirements . . . ." </s> [Footnote 61 Without pausing to assess the propriety of the method by which the Commission originally assessed the value of New Haven's interest in the Terminal properties, we think the reorganization court was correct in undertaking its own resolution of the contractual question. The validity of New Haven's claim "present[ed] a legal question which must necessarily be taken into account" in determining value. Old Colony Bondholders v. New York, N. H. & H. R. Co., 161 F.2d 413, 422, cert. denied sub nom. Protective Committee v. New York, N. H. & H. R. Co., 331 U.S. 858 . The legal question was one "to which the Commission's specialized skill and experience do not extend." 161 F.2d, at 429 (L. Hand, J., concurring). The authority of the court to take further evidence is unquestioned. Bankruptcy Act, 77 (c) (13), 77 (e), 11 U.S.C. 205 (c) (13), 205 (e). </s> [Footnote 62 In 1912 Central and New Haven had erected the Hotel Biltmore through a subsidiary, each railroad supplying half the funds, which were finally reimbursed in 1957. In 1958 Central sought to lease the Biltmore to a controlled subsidiary over New Haven's objection. When New Haven refused to sign the lease, Central claimed that New Haven had broken its agreement and thereby had forfeited all interest in that portion of the enterprise. Central brought suit in New York state court to secure a determination of the parties' respective interests in the property. See New York Central R. Co. v. New York, N. H. & H. R. Co., 24 Misc. 2d 414, 208 N. Y. S. 2d 605, aff'd as modified, 13 App. Div. 2d 309, 216 N. Y. S. 2d 928, aff'd per curiam, 11 N. Y. 2d 1077, 184 N. E. 2d 194. The conclusions of the New York courts paralleled those of the Special Master. The Supreme Court ruled that New Haven's right to share in rentals after credits to Terminal expenses survived reimbursement of its investment, 24 Misc. 2d, at 428, 208 N. Y. S. 2d, at 618. The Appellate Division agreed, holding that the parties had, "in effect, converted themselves into owners of the fee together" and that "the development of the lands over the tracks was but another step in the joint exploitation of the railroad properties made possible by the covering of the tracks . . . in which [properties] each party had a joint interest . . . ." 13 App. Div. 2d, at 318, 216 N. Y. S. 2d, at 936. The latter court rejected the notion that after paying large sums of money for the construction of buildings and assuming the risk of loss operations in the Terminal enterprise, New Haven should have acquired no right "except the right to join docilely in each of the decisions made by Central." Id., at 319, 216 N. Y. S. 2d, at 937. Although Central retained sole ownership in the fee, that fee was encumbered by the rights of New Haven. The Appellate Division concluded that New Haven's position vis-a-vis Central could be described as that of a partner. Id., at 320, 216 N. Y. S. 2d, at 937. </s> [Footnote 63 "The Special Master . . . concluded there was no value in the interest, principally because it is not the kind of interest that would survive liquidation; nor, if it did, could it be assigned. Moreover, there was no evidence that the expenses of maintaining the terminal would be any less. And the idea that the State of New York, or an interstate authority might pay, directly or indirectly, some consideration for availing itself of that use is highly speculative in view of the bargaining positions of the states and the disposition of the I. C. C. to require Penn Central to furnish such access free of charge to a state or public authority which assumed the commuter service, as a condition of Penn Central's getting rid of that much of the losing and burdensome passenger service. While mitigation of a burden may in some circumstances furnish a consideration, it is not a measurable one for the purpose of this issue in the case." 304 F. Supp., at 806. </s> [Footnote 64 At one stage the litigation over the value of New Haven's interest in the Terminal properties also involved disputes over which of four different sets of account books the Commission should use, the base period from which the Commission might extrapolate future income and expenses, the rate at which the projected income flow should be capitalized, and the probable income flow from a new office building to be constructed on the site of the railroad station. </s> [Footnote 65 The Bondholders Committee presses its challenge that the Commission has understated New Haven's share of excess income by $700,000 a year, with a capitalized loss of $8,750,000 in value. The challenge is predicated on the claim that the Commission improperly concluded that future hotel profits would not increase but would remain constant. 334 I. C. C., at 38. The reorganization court upheld the Commission in this regard, 304 F. Supp., at 806. We do [399 U.S. 392, 447] not overturn its judgment on a matter such as this, calling for an informed prediction of future income, expenses, and the rate of return on invested capital in a specific business activity uniquely located in midtown Manhattan. </s> In addition, it is suggested that upon a cessation of New Haven Terminal operations the costs of maintaining the station would decrease, with a consequent augmentation in the excess income. Of course the station revenues would decrease as well - perhaps as much as or more than the expenses. In the absence of any record evidence on the point, we cannot assume that liquidation would thus have benefited New Haven. </s> On the second round of review the reorganization court ordered Penn Central to pay New Haven the latter's share of accrued excess income for 1967 and 1968, as a separate sum apart from the purchase price. 304 F. Supp., at 806-807. The Bondholders Committee now asks us to award interest with respect to this payment. The reorganization court rejected the claim, doubtless because the uncertainty of New Haven's legal interest in the excess income precluded a finding that the amount represented a liquidated obligation owed by New York Central. We agree with the court's ruling. </s> [Footnote 66 The parties have devoted much discussion to Penn Central's negotiations with the States of New York and Connecticut for the transfer of the New Haven commuter service to a public authority. Manufacturers Hanover says the States have agreed to pay an annual toll to run the trains into the Terminal, thus demonstrating that the New Haven right of access does have value; Penn Central claims the States are to pay only for the use of the tracks and that it will give them a right of entry into the Terminal for nothing. Both sides point to newspaper articles in support of their arguments. None of this is record evidence, and we do not consider it. </s> [Footnote 67 "An example of the difference in approach in the trustees' two appraisals is afforded by the so-called REA Building in the Harlem River yard. This building was specially built for REA Express with four tracks running through the center of its ground floor. In the first, and higher, trustee appraisal the building was valued at $675,000 because of these tracks and the railroad service they provided. In the second, and lower appraisal, it was assumed that the tracks were dismantled. This would require reconstruction of the ground floor. The building would then be suitable only for an entirely different type of tenant. Without tracks, it would have a lower rental value. Its appraised value was, therefore, reduced to $400,000 in the second appraisal. Differences in the values of various other tenant-occupied buildings in the two yards resulted from following similar procedures in their appraisals." 334 I. C. C., at 43. (Footnote omitted.) </s> [Footnote 68 Under the Interstate Commerce Act, Penn Central is obliged to "provide and furnish transportation upon reasonable request therefor," 1 (4), 49 U.S.C. 1 (4), and to offer switch connections and cars for traffic to branch lines or private side track constructed by shippers to connect with the railroad wherever practicable and justified by the added business, 1 (9), 49 U.S.C. 1 (9). </s> [Footnote 69 Penn Central claims it could not provide service to the yards over the Port Morris branch because of clearance difficulties on the line. The reorganization court observed that Penn Central's own evidence largely refuted the contention. This finding of the District Court, based on its study of the record and its intimate familiarity with the subject matter, is free from clear error, and we do not disturb it. </s> [Footnote 70 Penn Central's own witnesses conceded the Port Morris connection would "doubtless" enable the industries at Harlem River and Oak Point to continue their rail usage even after a New Haven liquidation; that someone, whether the City of New York or a third party, would have to acquire access for rail service to the Hunts Point Market; and that the only rational way to provide such service would be to move cars from the Penn Central system via the Port Morris connection. The Commission itself found that during a test month in the summer of 1968 more than 2,300 cars passed from the Penn Central main lines to the market and yard industries via the Port Morris connection. 334 I. C. C., at 44. </s> At one point Penn Central claimed that even on the higher of the two appraisals, the record evidence required a downward adjustment of $461,000. The reorganization court made a partial correction to reflect a conceded duplication, but implicitly rejected Penn Central's argument as to the balance. Since Penn Central does not press the issue here, we do not consider it. </s> [Footnote 71 The Commission itself justified the refusal of the hearing examiner to take evidence on the question of delay by saying: "To the extent that evidence was proffered on the processing time of possible abandonment proceedings involving N[ew] H[aven], such matters are within our knowledge and evidence thereon was unnecessary." 334 I. C. C., at 29. </s> [Footnote 72 These findings comport with the observations of the reorganization court in February 1965, when the trustees sought permission to discontinue all passenger service: </s> "The record shows that the public interest has been thus far supported by the creditors of this estate with no substantial participation from the states. . . . </s> . . . . . </s> "Far from being indifferent to the public interest, the court has indulged that interest and allowed it to prevail over the creditors' rights for three and one-half years. </s> "In spite of this long interval, very little has been produced. Massachusetts never fulfilled its commitment to grant tax relief. New York, by conditioning future tax relief on a commitment by the Trustees to lease new equipment and conduct commutation service at present levels with no assurance that the deficits would be underwritten, has used it as a lash over the back of the debtor to compel it to do the State's will at a time when it has not had the strength to do so. Tax relief in Connecticut and Rhode Island was continued, but with a requirement that certain standards of service be met and, accordingly, that the passenger deficits continue to be incurred. </s> "If the public interest so urgently demands the continuance of the New Haven's passenger service, as the States seem suddenly to have discovered, they should have stopped taxing its property a long time ago. Commuters and other passengers demand better equipment and better service; the States insist upon imposing a continuing tax burden - everyone wants to draw the last ounces of blood out of this near corpse; but no one gives it the transfusion it so badly needs. It is now too late in the day to talk about saving the situation with tax relief. As the Railroad has not been able to use its vital cash for taxes, liens have been accumulating ahead of the creditors, forcing them further down the ladder of priorities, and accelerating and compelling the action which the court has taken today. If this tax burden continues to grow and the Railroad is not otherwise relieved, the creditors will be compelled to move for liquidation of the New Haven and the court will have no recourse but to order it. If the states wish essential passenger services continued, an underwriting which goes far beyond tax relief will be necessary." </s> [Footnote 73 What we have said disposes of the deduction for delay on the ground advanced by the reorganization court. Entirely apart from that explanation, a second line of reasoning leads to the same result. The delay deduction assumed the postponement of the commencement of liquidation for one year; the Commission postulated a one-year freeze prior to the beginning of sale. See 334 I. C. C., at 60 n. 2. But the Commission thereby assumed that during the one-year delay period nothing would happen; the trustees would sell no properties and enter into no contingent contracts for disposition of the debtor's assets. Absent Commission explanation, we cannot assume that the delay would have resulted in so total a suspension of the sales program during the first year, as well as a failure of the sale managers to expedite disposition of the properties and thereby shorten the contemplated six-year liquidation period. It is not for us to determine the extent to which imposition of a one-year pause at the outset would have enabled the trustees to accelerate the sale in the fifth and sixth years. But acceptance of the delay deduction in principle would compel a remand to the Commission for explanation of its tacit assumptions that the initial year would have been devoid of activity and the later years would merely have proceeded as before. </s> It is suggested that with the one-year freeze the delay concept may be viewed as a mere shifting of the valuation date to December 31, 1967. That date, it is said, is as rational as the date originally chosen. And so it may be. But the adjustments in value take into account only the expenses and depreciation attributable to a one-year pause, with no consideration to countervailing income and increases in capital value. The Commission says a comprehensive revaluation of the debtor's assets as of December 31, 1967, would produce a much greater loss than the $15,386,000 [399 U.S. 392, 468] actually deducted. But in the absence of proof we again cannot assume that that would be the case. For authority to that effect we need look no further than to the Commission itself, which, as we have earlier noted, rejected Penn Central's request on the first round for a further allowance for the "constant diminution of N[ew] H[aven]'s assets" to reflect the occurrence of abandonment delay. On that occasion the Commission noted that "a large portion of N[ew] H[aven] assets consists of land," and added: "We cannot assume that these values will diminish. It is at least as reasonable to presuppose that the values will increase." 331 I. C. C., at 698. If the Commission could not assume diminution in realty values at the time of the Second Supplemental Report, we do not see how, without some explanation, it could assume it at the time of the Fourth. </s> [Footnote 74 The Commission frequently requires an abandoning railroad to sell its properties in bulk to a party (typically a public authority) that will undertake continued operation of the service, but typically sets the sale price at "not less than net salvage value of the property sought to be acquired." See, e. g., Rutland R. Corp. Abandonment, 317 I. C. C. 393, 425; Chicago N. S. & M. R. Abandonment, 317 I. C. C. 191, 200, aff'd sub nom. Illinois v. United States, 213 F. Supp. 83, aff'd per curiam, 373 U.S. 378 ; Fort Dodge, D. M. & S. R. Co. Abandonment, 312 I. C. C. 708, 712; Chicago A. & E. R. Corp. Abandonment, 312 I. C. C. 533, 537; Arkansas & O. R. Corp. Abandonment, 312 I. C. C. 501, 505. </s> [Footnote 75 In its Fourth Supplemental Report the Commission provided for payment of the trustees' certificates by cancellation against the price adjustments provided for in the Purchase Agreement. 334 I. C. C., at 70. </s> [Footnote 76 In addition, the bondholders contend the calculation of the operating loss upon which the formula is based is itself unfair. Chase Manhattan and the Committee say the calculation excludes items such as rent for leased roads and interest paid during bankruptcy, aggregating some $2,600,000. The Commission refused to include such items because it thought them "more nearly capital charges, that is, costs of providing the railroad plant . . . ." Second Supplemental Report, 331 I. C. C., at 718. Chase Manhattan attacks the Commission's ruling on the ground that New Haven paid out the monies in question in 1968 only because it had not yet been included in Penn Central. But the test for an operating loss as opposed to a capital charge is not whether a cash disbursement took place; the Commission could properly limit Penn Central's liability to the former category. </s> [Footnote 77 See Denver & R. G. W. R. Co. v. United States, 387 U.S. 485 . </s> [Footnote 78 The Bondholders Committee raised the question in its petition for certiorari whether the reorganization court had erred in its assignment of zero value to the certificates of contingent beneficial interest issued in connection with the reorganization of the Boston & Providence Railroad. See 304 F. Supp., at 810. The Committee has not revived the issue in its brief, nor has it responded in its reply brief to the Government's contention that it has abandoned the claim. Accordingly, we do not consider the matter further. </s> [Footnote 79 In 1968 the New Haven suffered an estimated operating deficit of $8,200,000. That figure, capitalized at 8%, amounts to more than $100,000,000. </s> [Footnote 80 The decisions of the New York state courts relied upon by the bondholders are inapposite. In In re City of New York, 18 N. Y. 2d 212, 219 N. E. 2d 410, appeal dismissed sub nom. Fifth Avenue Coach Lines v. City of New York, 386 U.S. 778 , the city had condemned the Fifth Avenue Coach lines. The trial court treated the takeover as one of a going concern and fixed the award at reproduction cost new less depreciation. The Court of Appeals agreed that since Fifth Avenue had demonstrated a capacity for profitable operations under reasonable rates, it was entitled to going-concern value, but that the trial court had erred in excluding evidence of value of the "intangible going concern assets, that is, the component of value in the business which in addition to the value of the tangible assets reflects an efficient operation." Id., at 220, 221, 219 N. E. 2d, [399 U.S. 392, 483] at 412, 413. The opinion of the Court of Appeals does not disclose whether payment of liquidating value would have yielded a higher price. In In re Port Authority Trans-Hudson Corp., 20 N. Y. 2d 457, 231 N. E. 2d 734, cert. denied sub nom. Port Authority Trans-Hudson Corp. v. Hudson Rapid Tubes Corp., 390 U.S. 1002 , the Court of Appeals dealt with a public taking of railroad tunnels under the Hudson River owned by a company in reorganization and having only a "dim financial future . . . ." 20 N. Y. 2d, at 465, 231 N. E. 2d, at 736. The tunnels, which required only $88,000 to be put in working order, had cost $32,000,000 to build, and would have cost $400,000,000 to replace; their liquidating value was a negative figure, because of costs that would have been incurred in plugging them up. Id., at 467 and n. 2, 470, 231 N. E. 2d, at 737 and n. 2, 739. Because the Port Authority was taking the tunnels for continued operation, the Court of Appeals held the proper valuation was depreciated original cost plus the value of intangible assets also attributable to the operation as a going concern. Id., at 471-472, 231 N. E. 2d, at 740. In neither of these cases did the New York courts require the taking authorities to pay both an operating and a liquidating value. Rather, they awarded the owners the value reflecting the highest and best price for their properties - precisely the treatment accorded the New Haven here. </s> [Footnote 81 At the time of the Second Supplemental Report, an issue of 950,000 Penn Central common shares to New Haven would have given the debtor 4% of the total shareholder equity in the new company. 331 I. C. C., at 689. </s> [Footnote 82 As previously noted, the holders of the Harlem River Division bonds have received satisfactory security by Penn Central's assumption of the mortgage. See n. 48, supra. We are informed that the right of the holders of the General Income bonds to participate in the reorganized company depends on the outcome of this litigation. The holders of the First and Refunding Mortgage bonds stand somewhere in between. See 289 F. Supp., at 442 n. 18. </s> [Footnote 83 As late as October 1966 the reorganization court noted that the policy of preserving the New Haven as an ongoing railroad "has been concurred in by the bondholders . . . ." </s> MR. JUSTICE BLACK, with whom MR. JUSTICE HARLAN joins, dissenting. </s> The central issue in these cases, easily lost I fear in the 98-page opinion of the Court, can in my judgment be briefly and simply stated. After this Court's decision in the Penn-Central Merger Cases, 389 U.S. 486 , the Interstate Commerce Commission assumed its difficult statutory task of determining the liquidation value of the assets of the New Haven Railroad, a determination which if upheld by the courts would decide the purchase price [399 U.S. 392, 496] Penn Central would have to pay for the bankrupt New Haven. The Commission made that valuation determination, and the question before this Court is whether, under the appropriate standards of court review, the Commission's valuation of the New Haven's properties should have been sustained or rejected by the reviewing courts. This question comes here from two federal district courts, both of which were called upon to review the Commission's valuation of the New Haven properties, (1) a bankruptcy court convened under 77 of the Bankruptcy Act, 11 U.S.C. 205, to consider the reorganization of the New Haven, and (2) a three-judge merger court convened under 28 U.S.C. 1336 (a), 2321-2325, to review the Commission's merger and inclusion orders. Both district courts had jurisdiction under these statutes to examine the Commission's valuation decisions. And the proper scope for each court's review was the same: were the Commission's findings supported by substantial evidence and consistent with applicable statutory requirements? Yet the reception the Commission's determination received from the two courts on the final round of review was dramatically different. The bankruptcy court took issue with several of the Commission's important findings as to the New Haven's liquidation value and, substituting its own ideas of the proper method of appraising the railroad's properties, increased by over $28,000,000 the value the Commission had placed on the assets of the New Haven. 304 F. Supp. 793. In sharp contrast, the three-judge merger court noted the "severe limitations" on the scope of its review of valuation matters, 305 F. Supp. 1049, 1053, and, after carefully examining the Commission plan, sustained the agency's determinations. 1 Judge Friendly, writing for the three-judge [399 U.S. 392, 497] merger court, stated the fundamental reason for that court's disagreement with the bankruptcy court: </s> "Essentially, we think our disagreements . . . reflect a difference in view concerning how far we are at liberty to substitute our own notions for the decisions the Commission has taken in what we regard as a sincere effort to comply with the tasks both courts assigned it on remand." 305 F. Supp., at 1065. </s> I </s> Both district court decisions are now properly before this Court for our review, and, contrary to the position taken by the Court today, it is my view that the Court has an obligation to pass upon both those judgments, not just one. As the quoted passage from Judge Friendly's opinion for the three-judge merger court indicates, the answer to the question whether this Court should follow the three-judge court and sustain the Commission's valuation of the New Haven properties turns largely on the proper scope of judicial inquiry into the agency determination. Our previous cases make it clear that the scope of judicial review of the Commission's appraisal of such properties is narrowly limited to ensuring that the agency findings are supported by material evidence and consistent with statutory standards. The federal courts, this Court included, should defer whenever possible to Commission expertise on complex questions of valuation. It is my position, elaborated in what follows, that the application of this test to the record before the Commission in these cases can only lead to the conclusion that the Commission did not abuse its discretion in valuing the New Haven and, accordingly, that the three-judge court was correct in sustaining its determinations and the bankruptcy court wrong in rejecting them. The three-judge court's excellent opinion is, in my view, compelling support for the idea that a reasonable reviewing court exercising [399 U.S. 392, 498] the proper scope of review would find that the Commission acted wholly within its discretion. Moreover, I find myself in agreement with Judge Friendly that the bankruptcy court greatly exceeded its reviewing authority and in so doing improperly substituted its own views on valuation for those of the Commission. 2 </s> The Court today reaches conclusions completely at odds with those stated above and affirms the decision of the bankruptcy court. I do not think the Court could reach the result it does but for its mistaken assumption that the bankruptcy court was somehow the more appropriate of the two courts to review the Commission's valuation determinations and that, accordingly, the excellent opinion of the three-judge court could be simply ignored on the ground that that court should have abstained in favor of the bankruptcy court. Congress has granted jurisdiction to review the Commission findings to both courts under the peculiar circumstances presented in these cases, and the Court offers only make-weight arguments to support its holding that the three-judge court should have abstained from reaching the valuation questions. In my view, both courts were obligated to fulfill their statutory mandate to review the Commission's valuation findings, and this Court has an obligation to treat with equal dignity the decisions of each of those courts. For this reason I cannot agree that the Court is justified in proceeding as if Judge Friendly's opinion for the three-judge merger court simply did not exist. [399 U.S. 392, 499] Nor can I accept the Court's position that in reviewing the conclusions of the bankruptcy court it should apply a standard of review that attaches great weight to the conclusions of that court rather than to those of the Commission. Our prior cases indicate that the correct rule is just the opposite. In sum, the Court first disposes of the three-judge court's opinion by assuming that that court should have abstained, and it then adopts a deferential posture toward the conclusions of the bankruptcy court. In so doing the Court clears the way for its affirmance of the bankruptcy court. The Court's approach and the result it reaches are intimately related, and I regret that I cannot agree with either. </s> II </s> On the question of valuing the New Haven's assets, the tasks which the three-judge merger court and the bankruptcy court were called upon to perform in these cases were virtually identical, and for both courts that task was a narrowly circumscribed one. The statutes governing review in both courts provide the same flexible standard: under 77 (e) of the Bankruptcy Act the bankruptcy court was to determine if the terms for the sale of the New Haven's assets were "fair and equitable," and under 5 (2) (b) and (d) of the Interstate Commerce Act the three-judge court was to ensure that the terms of the merger and inclusion were "just and reasonable" and "equitable." More important, our previous cases leave no doubt that the two district courts and, accordingly, this Court are permitted only a limited scope for their review of the Commission's valuation findings. In Ecker v. Western Pacific R. Co., 318 U.S. 448, 472 , this Court emphasized that under 77 (e) of the Bankruptcy Act, "Valuation is a function limited to the Commission, without the necessity of approval [399 U.S. 392, 500] by the [bankruptcy] court." The Court elaborated its holding this way: </s> "The function of valuation thus left to the Commission is the determination of the worth of the property valued, whether stated in dollars, in securities or otherwise. One of the primary objects of the bill was the elimination of obstructive litigation on the issue of valuation and the form finally chosen approached as near to that position as seemed to the draftsmen legally possible. Judicial reexamination was not considered desirable . . . . The language chosen leaves to the Commission, we think, the determination of value without the necessity of a reexamination by the court, when that determination is reached with material evidence to support the conclusion and in accordance with legal standards." 318 U.S., at 472 -473. </s> See also Reconstruction Finance Corp. v. Denver & R. G. W. R. Co., 328 U.S. 495, 508 -509; Group of Institutional Investors v. Chicago, M., St. P. & P. R. Co., 318 U.S. 523, 536 -542. These cases make it clear that Congress delegated the valuation function to the Commission and that the Commission's determinations can be reviewed by the federal courts under 77 (e) only to determine whether they are supported by substantial evidence and conform to the applicable statutory standards. </s> The scope of review of the three-judge merger court under 5 of the Interstate Commerce Act is virtually identical to that of the reorganization court under 77. The function of the three-judge court is only to determine if the Commission's actions "are based upon substantial evidence and to guard against the possibility of gross error or unfairness." Penn-Central Merger Cases, 389 U.S. 486, 524 . If a court finds the Commission's [399 U.S. 392, 501] "conclusions to be equitable and rational," it should not, as it seems to me this Court does today, "second-guess each step in the Commission's process of deliberation." Ibid. </s> The reasons compelling such judicial restraint lie not only in the accumulated expertise of the Commission but also in the inherent uncertainty of the valuation process itself. "An intelligent estimate of probable future values . . ., and even indeed of present ones, is at best an approximation . . . . There is left in every case a reasonable margin of fluctuation and uncertainty." Dayton Power & Light Co. v. Public Utilities Comm'n, 292 U.S. 290, 310 . These inevitable uncertainties of a complex valuation were greatly magnified in this case, for here the Commission was called upon to determine what values the New Haven properties would have, as the three-judge court put it, in "a liquidation that never happened, that in the world as we know it scarcely could have happened, and that, if it had happened, could have happened in any one of a number of equally imaginary ways . . . ." 305 F. Supp., at 1056. Given the extremely hypothetical context in which the Commission made its determinations, it is impossible for any reviewing court to know if the Commission's findings even approximated the true liquidation value of the railroad. Because of this enhanced uncertainty, the area in which the Commission was required to exercise its judgment in this case was unusually wide, and a reviewing court could properly upset its conclusions in only the clearest instances of abuse. </s> I indicated previously that when these criteria for judicial review are taken into account, it becomes impossible for me to believe that the Commission abused its discretion in deciding as it did the exceedingly complex and difficult valuation issues discussed at length in the Court's opinion. The three-judge merger court concluded [399 U.S. 392, 502] that the Commission's findings in this regard were supported by substantial evidence and consistent with relevant principles, and, after reviewing the record and the opinion of the Commission, I find myself in wholehearted agreement with the three-judge court's conclusion. Judge Friendly's fine opinion leaves no doubt in my mind that the court for which he wrote was fully aware of both the limited scope of its reviewing power and also its obligation within those limits to scrutinize carefully each of the significant decisions of the Commission. Thus, the court assumed that "[i]f the Commission made demonstrable errors, it is our duty to correct these . . .," but, unlike the Court today, it refused "to re-examine every judgment made by the Commission and to substitute our own whenever we think it better." 305 F. Supp., at 1056. The three-judge court's opinion sets out fully and adequately the reasons why the Commission should be affirmed on each of the disputed points, and there is nothing to be gained from my repeating those reasons here. </s> III </s> The Court's opinion affirming the bankruptcy court attempts to avoid the force of the foregoing considerations by first holding that the three-judge court should have abstained from reaching the valuation issue and then assuming for some reason which is not clear to me that this Court should apply a limited scope of review to the valuation findings of the bankruptcy court rather than to the Commission's findings. This approach is, I submit, premised on erroneous assumptions. </s> A </s> There can be no question but that under relevant federal statutes both the three-judge merger court and the bankruptcy court had jurisdiction to review the Commission's determination of the New Haven's liquidation [399 U.S. 392, 503] value. See 11 U.S.C. 205; 28 U.S.C. 1336 (a), 2321-2325. The Court today does not really dispute this conclusion, but argues instead that the bankruptcy court might have had "primary jurisdiction" to decide the valuation issues, citing to support this idea several quite inapposite cases dealing with in rem jurisdiction, and, alternatively, that the three-judge court should have "abstained" because the only remaining issue was "the value to be accorded the assets transferred, and resolution of that issue was the essence of the 77 process." Ante, at 428. Actually, the only "primary jurisdiction" involved here was the primary jurisdiction of the Commission to decide questions of valuation. Moreover, the question of the New Haven's value may well have been central to the 77 proceedings, but, in ordering the New Haven's inclusion in Penn Central, the Commission exercised authority under both 5 of the Interstate Commerce Act and 77 of the Bankruptcy Act. The question of the New Haven's value was equally central to the requirement under 5 that the Commission determine before issuing an inclusion order that the terms of the inclusion are "equitable." 49 U.S.C. 5 (2) (d). Review of the Commission's valuation was therefore as appropriate on the merger and inclusion side as on the bankruptcy side, and the Court's argument to the contrary is completely conclusory. Accordingly, I think the three-judge merger court was correct when it decided that, "unfortunate as the duplicitous system of review may be, we see no basis on which we can properly decline to exercise the jurisdiction conferred upon us . . . ." 289 F. Supp. 418, 425. </s> B </s> The Court also errs, I think, when it assumes that it should defer to the findings of the bankruptcy court rather than to those of the Commission. The reasoning [399 U.S. 392, 504] behind this novel approach is never clearly stated. At times, the Court seems to take the view that the proper role of the bankruptcy court on valuation questions lies somewhere between that of a trial court charged with the responsibility of making a fair estimate of the value of the New Haven properties and an appellate court whose responsibility is limited to reviewing the Commission's valuation. The adoption of this hybrid role for the bankruptcy court is strenuously urged upon us in some of the briefs in this case. Such a theory arguably justifies a deferential attitude on the part of this Court toward the reorganization court's determinations and also provides at least a partial justification for the bankruptcy court's de novo valuation estimates. However, the notion that the bankruptcy court has special powers in reviewing Commission valuations and in weighing the public interest is completely untenable in light of Western Pacific and the cases following it. Those cases make it clear that while the bankruptcy court does have certain special functions in 77 reorganizations, the role of the bankruptcy court in the areas of concern here is simply that of an appellate court. As we said in Reconstruction Finance Corp. v. Denver & R. G. W. R. Co., 328 U.S. 495, 508 : </s> "[T]he experience and judgment of the Commission must be relied upon for final determinations of value and of matters affecting the public interest, subject to judicial review to assure compliance with constitutional and statutory requirements." </s> To like effect was the conclusion reached in Chicago, R. I. & P. R. Co. v. Fleming, 157 F.2d 241, 245, a case following Western Pacific: </s> "[T]he Commission is allowed wide discretion in reaching its conclusions, and if its findings are supported by substantial evidence and follow [399 U.S. 392, 505] legal standards they must be affirmed by the courts . . . ." </s> In my opinion these and other cases preclude the notion that the bankruptcy court has special factfinding and interest-weighing functions sufficient to justify this Court's viewing it as a quasi-trial court. </s> Alternatively, the majority's position might be that even though the reorganization court had no special review powers, this Court should still give great weight to its conclusions concerning the Commission's price determinations. This position might have some force were there grounds for confidence that the bankruptcy court in this case applied the correct scope of review in examining the Commission determinations, but no such grounds for confidence exist here. This Court has an obligation to examine carefully the opinion of the bankruptcy court to determine if that court did in fact apply the correct scope of review. Such an inquiry necessarily involves the Court in determining if the agency's decisions are consistent with applicable law and supported by substantial evidence. As I indicated earlier, the record in this case simply does not support the conclusion that the reorganization court stayed within its proper scope of review of the Commission determinations. Since the reorganization court applied the wrong reviewing standard, there is no justification for this Court's giving any deference to the valuation determinations of that court. </s> The Court's opinion is thus poised between two equally unsatisfactory alternatives. Its conclusions must either rest on the theory that the reorganization court has extraordinary reviewing powers, a theory which I think is precluded by Western Pacific and the cases which follow it, or the Court must take the position that the reorganization court correctly applied the Western Pacific standard, a conclusion which seems to me untenable in [399 U.S. 392, 506] light of the record in these cases and the opinion of the three-judge merger court. </s> IV </s> Today's decision will have the effect of greatly burdening the Penn Central by increasing the amount that company owes to the New Haven bondholders by an additional $28,000,000. The imposition of this additional burden can only bring about a further deterioration of the Penn Central's already seriously compromised financial position 3 and will further reduce the ultimate chances of success of this venture in which the public has a considerable stake. The public interest in these cases certainly lies in establishing and maintaining the Penn Central as a viable private enterprise with reasonable rates and efficient services. Here the Commission had a duty "to plan reorganizations with an eye to the public interest as well as the private welfare of creditors and stockholders." Reconstruction Finance Corp. v. Denver & R. G. W. R. Co., 328 U.S. 495, 535 . See also the Penn-Central Merger Cases, 389 U.S. 486, 510 -511. Because Penn Central's economic soundness will be vitally affected by the price it has to pay for the New Haven assets, the Commission had an obligation, which I think it fulfilled in these cases, to prevent an overvaluation of the New Haven assets which might unnecessarily jeopardize the newly merged Penn Central system. If the Commission resolved close and fairly debatable issues of valuation in favor of Penn Central rather than the New Haven bondholders, the agency's actions were wholly justifiable in terms of its statutory mandate to protect the public. Although the courts must review Commission determinations [399 U.S. 392, 507] of value to guarantee that those valuations are "fair and equitable" to the bondholders, that reviewing authority does not permit a court to substitute its views for those of the Commission. Judicial review of Commission valuations must be exercised in light of the fact that "Congress has entrusted the Commission, not the courts, with the responsibility of formulating a plan of reorganization which `will be compatible with the public interest.' 77 (d)." Group of Institutional Investors v. Chicago, M., St. P. & P. R. Co., 318 U.S. 523, 544 . Here the Commission struck a balance between public and private interests that was clearly within its discretion, and I think it is both improper and unwise for this Court to upset that balance and place an additional $28,000,000 burden on the Penn Central, a burden that I fear may ultimately be borne by the consumers of the Penn Central's services or by the Federal Treasury. </s> For the reasons stated above, I would affirm the judgment of the three-judge merger court on the valuation issue and would reverse the judgment of the bankruptcy court to the extent that it is inconsistent with the three-judge court. </s> [Footnote 1 The three-judge merger court corrected the Commission's findings on minor valuation points which are not relevant here. The Commission has subsequently made findings consistent with the three-judge court opinion on these questions. 334 I. C. C. 528. </s> [Footnote 2 Of course, the bankruptcy court and the three-judge merger court agreed on many of the issues that were presented to them, some of which were questions of valuation and some of which were not. Apart from the question of the underwriting plan, ante, at 488-489, the Court today affirms both district courts on those issues on which both agreed, and I concur in that result. I differ with the Court, however, on its handling of all those questions of valuation over which the two district courts disagreed. </s> [Footnote 3 As the Court notes in a footnote to its opinion, ante, at 399, the Penn Central Transportation Company has filed a petition for reorganization under 77 of the Bankruptcy Act in the United States District Court for the Eastern District of Pennsylvania. </s> [399 U.S. 392, 508]

United States Supreme Court F. P. C. v. SIERRA PACIFIC POWER CO.(1956) No. 51 Argued: November 8, 1955Decided: February 27, 1956 </s> A supplier of electric power which is a "public utility" subject to regulation under Part II of the Federal Power Act entered into a contract, duly filed with the Federal Power Commission, to supply electric power to a distributor at a special low rate for 15 years. Before expiration of the contract and without the consent of the distributor, the supplier filed with the Commission under 205 (d) of the Act a schedule purporting to increase its rate to the distributor. Acting under 205 (e), the Commission conducted proceedings to determine the reasonableness of the new rate, denied the distributor's motion to reject the filing on the ground that the supplier could not thus unilaterally change the contract, and held the new rate not to be "unjust, unreasonable, unduly discriminatory, or preferential." Held: </s> 1. These proceedings were not effective to supersede the supplier's contract with the distributor. United Gas Pipe Line Co. v. Mobile Gas Service Corp., ante, p. 332. Pp. 352-353. </s> 2. The requirements of 206 (a), which provides that, if the Commission finds an existing rate to be "unjust, unreasonable, unduly discriminatory or preferential," it may determine a "just and reasonable rate" and fix the same by order, were not satisfied by the Commission's statement that, "if a finding on the lawfulness of the [existing] contract rate were necessary or appropriate, on the record before us that finding would have to be that the [existing] rate is unreasonably low and therefore unlawful. For none of the evidence in this record warrants a finding that any rate would be reasonable that would produce a return of substantially less than the 4.75% resulting from the proposed rate, which is the minimum [the supplier] is willing to accept." Pp. 353-355. </s> (a) Under 206 (a), the Commission has undoubted power to prescribe a change in contract rates whenever it determines [350 U.S. 348, 349] them to be unlawful; but its power is limited to prescribing the rate "to be thereafter observed," and it can effect no change prior to the date of the order. P. 353. </s> (b) If the proceedings here satisfied in substance the requirements of 206 (a), it would seem immaterial that the investigation was begun as one into the reasonableness of the proposed rate rather than the existing contract rate. P. 353. </s> (c) The purpose of the power given the Commission under 206 (a) is the protection of the public interest, as distinguished from the private interest of the utilities, and a contract may not be said to be either "unjust" or "unreasonable" simply because it is unprofitable to the public utility. Pp. 354-355. </s> 3. The order of the Court of Appeals setting aside the Commission's approval of the new rate and remanding the case to the Commission is affirmed with instructions to remand the case to the Commission for such further proceedings, not inconsistent with this opinion, as the Commission may deem desirable. P. 355. </s> 96 U.S. App. D.C. 140, 223 F.2d 605, affirmed. </s> [Footnote * Together with No. 53, Pacific Gas & Electric Co. v. Sierra Pacific Power Co., also on certiorari to the same court. </s> Howard E. Wahrenbrock argued the cause for petitioner in No. 51. With him on the brief were Solicitor General Sobeloff, Assistant Attorney General Burger, Melvin Richter, Lionel Kestenbaum, Willard W. Gatchell, William J. Grove and Drexel D. Journey. </s> F. T. Searls argued the cause for petitioner in No. 53. With him on the brief were Robert H. Gerdes, Robert E. May and John C. Morrissey. </s> William C. Chanler argued the cause and filed a brief for respondent. </s> MR. JUSTICE HARLAN delivered the opinion of the Court. </s> This case presents questions under Title II of the Federal Power Act, 49 Stat. 847, 16 U.S.C. 824 et seq., which are in part similar to those we have decided today under the Natural Gas Act in United Gas Pipe Line Co. v. Mobile Gas Service Corp., ante, p. 332. [350 U.S. 348, 350] The pertinent provisions of the Federal Power Act, set forth in the margin, 1 are 205 (c), (d), and (e), and 206 (a), which are substantially identical to 4 (c), [350 U.S. 348, 351] (d), and (e), and 5 (a), respectively, of the Natural Gas Act. 2 </s> Respondent Sierra Pacific Power Company (Sierra) distributes electricity to consumers in northern Nevada and eastern California. For many years, it has purchased the major part of its electric power from petitioner Pacific Gas and Electric Company (PG&E), a "public utility" subject to regulation under Part II of the Federal Power Act. In 1947 Sierra, faced with increased postwar demands and consumer agitation for cheaper power, began [350 U.S. 348, 352] negotiating for power from other sources, including the Federal Bureau of Reclamation, which at the time had unused capacity at Shasta Dam. To forestall the potential competition, PG&E offered Sierra a 15-year contract for power at a special low rate, which offer Sierra finally accepted in June 1948. The contract was duly filed with the Federal Power Commission. </s> Early in 1953, when power from Shasta Dam was no longer available to Sierra, PG&E, without the consent of Sierra, filed with the Commission under 205 (d) of the Federal Power Act a schedule purporting to increase its rate to Sierra by approximately 28%. The Commission, acting under 205 (e), suspended the effective date of the new rate until September 6, 1953, and initiated a proceeding to determine its reasonableness. Sierra was permitted to intervene in the proceeding but its motion to reject the filing on the ground that PG&E could not thus unilaterally change the contract was denied. After completion of the hearings, the Commission, by order dated June 17, 1954, reaffirmed its refusal to reject the filing and held the new rate not to be "unjust, unreasonable, unduly discriminatory, or preferential." 7 P. U. R. 3d 256. On Sierra's petition for review, the Court of Appeals for the District of Columbia, holding that the contract rate could be changed only upon a finding by the Commission that it was unreasonable, set aside the Commission's order and remanded the case with instructions to the Commission to dismiss the 205 (e) proceeding, but without prejudice to its instituting a new proceeding under 206 (a) to determine the reasonableness of the contract rate. 96 U.S. App. D.C. 140, 223 F.2d 605. We brought the case here because of the importance of the questions involved in the administration of the Federal Power Act. 349 U.S. 937 . </s> The first question before us is whether PG&E's unilateral filing of the new rate under 205 (d), and the [350 U.S. 348, 353] approval of the new rate by the Commission under 205 (e), were effective to supersede PG&E's contract with Sierra. We think not. As the parties concede, the provisions of the Federal Power Act relevant to this question are in all material respects substantially identical to the equivalent provisions of the Natural Gas Act. In United Gas Pipe Line Co. v. Mobile Gas Service Corp., supra, decided today, we construed the Natural Gas Act as not authorizing unilateral contract changes, and that interpretation is equally applicable to the Federal Power Act. Accordingly, for the reasons there given, we conclude that neither PG&E's filing of the new rate nor the Commission's finding that the new rate was not unlawful was effective to change PG&E's contract with Sierra. </s> This case, however, raises a further question not present in the Mobile case. The Commission has undoubted power under 206 (a) to prescribe a change in contract rates whenever it determines such rates to be unlawful. While this power is limited to prescribing the rate "to be thereafter observed" and thus can effect no change prior to the date of the order, the Commission's order here, if based on the necessary findings, could have been effective to prescribe the proposed rate as the rate to be in effect prospectively from the date of the order, June 17, 1954. If the proceedings here satisfied in substance the requirements of 206 (a), it would seem immaterial that the investigation was begun as one into the reasonableness of the proposed rate rather than the existing contract rate. </s> The condition precedent to the Commission's exercise of its power under 206 (a) is a finding that the existing rate is "unjust, unreasonable, unduly discriminatory or preferential." Petitioners contend that the Commission did in fact make such a finding. It was stipulated in the proceedings before the Commission that 5.5% was normally a reasonable rate of return for PG&E's operations, [350 U.S. 348, 354] that the contract rate would produce a 2.6% rate of return, and that the proposed rate would produce a 4.75% rate of return. The Commission concluded that the proposed rate was not unreasonably high because it provided no more than a fair return and was not unreasonably low because the 0.75% deficiency of its yield from the stipulated reasonable rate of return was not being made up on other sales and was justified in order to retain business the loss of which by PG&E would result in idle facilities. It also concluded that the proposed rate was not unduly discriminatory or preferential, despite substantial differences between it and the rates being charged other customers. While no further findings were necessary in view of the Commission's interpretation of the Act as permitting unilateral contract changes, the Commission went on to say: </s> "However, we may point out that if a finding on the lawfulness of the 1948 contract rate were necessary or appropriate, on the record before us that finding would have to be that the 1948 rate is unreasonably low and therefore unlawful. For none of the evidence in this record warrants a finding that any rate would be reasonable that would produce a return of substantially less than the 4.75% resulting from the proposed rate, which is the minimum PG&E is willing to accept." </s> It is contended that by this statement the Commission in substance found that the existing contract rate was "unreasonable" and fixed the proposed rate as "the just and reasonable rate," thereby satisfying the requirements of 206 (a). </s> But even accepting this statement as a finding of unreasonableness of the contract rate, the Commission's conclusion appears on its face to be based on an erroneous standard. In short, the Commission holds that the [350 U.S. 348, 355] contract rate is unreasonable solely because it yields less than a fair return on the net invested capital. But, while it may be that the Commission may not normally impose upon a public utility a rate which would produce less than a fair return, it does not follow that the public utility may not itself agree by contract to a rate affording less than a fair return or that, if it does so, it is entitled to be relieved of its improvident bargain. Cf. Arkansas Natural Gas Co. v. Railroad Comm'n, 261 U.S. 379 . In such circumstances the sole concern of the Commission would seem to be whether the rate is so low as to adversely affect the public interest - as where it might impair the financial ability of the public utility to continue its service, cast upon other consumers an excessive burden, or be unduly discriminatory. That the purpose of the power given the Commission by 206 (a) is the protection of the public interest, as distinguished from the private interests of the utilities, is evidenced by the recital in 201 of the Act that the scheme of regulation imposed "is necessary in the public interest." When 206 (a) is read in the light of this purpose, it is clear that a contract may not be said to be either "unjust" or "unreasonable" simply because it is unprofitable to the public utility. </s> Whether under the facts of this case the contract rate is so low as to have an adverse effect on the public interest is of course a question to be determined in the first instance by the Commission. We shall therefore affirm the order of the Court of Appeals, with instructions to remand the case to the Federal Power Commission for such further proceedings, not inconsistent with this opinion, as the Commission may deem desirable. </s> It is so ordered. </s> Footnotes [Footnote 1 "SEC. 205. . . . (c) Under such rules and regulations as the Commission may prescribe, every public utility shall file with the Commission, within such time and in such form as the Commission may designate, and shall keep open in convenient form and place for public inspection schedules showing all rates and charges for any transmission or sale subject to the jurisdiction of the Commission, and the classifications, practices, and regulations affecting such rates and charges, together with all contracts which in any manner affect or relate to such rates, charges, classifications, and services. </s> "(d) Unless the Commission otherwise orders, no change shall be made by any public utility in any such rate, charge, classification, or service, or in any rule, regulation, or contract relating thereto, except after thirty days' notice to the Commission and to the public. Such notice shall be given by filing with the Commission and keeping open for public inspection new schedules stating plainly the change or changes to be made in the schedule or schedules then in force and the time when the change or changes will go into effect. The Commission, for good cause shown, may allow changes to take effect without requiring the thirty days' notice herein provided for by an order specifying the changes so to be made and the time when they shall take effect and the manner in which they shall be filed and published. </s> "(e) Whenever any such new schedule is filed the Commission shall have authority, either upon complaint or upon its own initiative without complaint, at once, and, if it so orders, without answer or formal pleading by the public utility, but upon reasonable notice, to enter upon a hearing concerning the lawfulness of such rate, charge, classification, or service; and, pending such hearing and the decision thereon, the Commission, upon filing with such schedules and delivering to the public utility affected thereby a statement in writing of its reasons for such suspension, may suspend the operation of such schedule and defer the use of such rate, charge, classification, or service, but not for a longer period than five months beyond the time when it would otherwise go into effect; and after full hearings, either completed before or after the rate, charge, classification, or service goes into effect, the Commission may make such orders with reference thereto as would be proper in a proceeding initiated after it had become effective. If the proceeding has not been concluded [350 U.S. 348, 351] and an order made at the expiration of such five months, the proposed change of rate, charge, classification, or service shall go into effect at the end of such period, but in case of a proposed increased rate or charge, the Commission may by order require the interested public utility or public utilities to keep accurate account in detail of all amounts received by reason of such increase, specifying by whom and in whose behalf such amounts are paid, and upon completion of the hearing and decision may by further order require such public utility or public utilities to refund, with interest, to the persons in whose behalf such amounts were paid, such portion of such increased rates or charges as by its decision shall be found not justified. At any hearing involving a rate or charge sought to be increased, the burden of proof to show that the increased rate or charge is just and reasonable shall be upon the public utility, and the Commission shall give to the hearing and decision of such questions preference over other questions pending before it and decide the same as speedily as possible." 49 Stat. 851-852, 16 U.S.C. 824d. </s> "SEC. 206. (a) Whenever the Commission, after a hearing had upon its own motion or upon complaint, shall find that any rate, charge, or classification, demanded, observed, charged, or collected by any public utility for any transmission or sale subject to the jurisdiction of the Commission, or that any rule, regulation, practice, or contract affecting such rate, charge, or classification is unjust, unreasonable, unduly discriminatory or preferential, the Commission shall determine the just and reasonable rate, charge, classification, rule, regulation, practice, or contract to be thereafter observed and in force, and shall fix the same by order." 49 Stat. 852, 16 U.S.C. 824e. </s> [Footnote 2 Set forth as footnote 1 to the opinion in the Mobile case, ante, p. 334. </s> [350 U.S. 348, 356]

United States Supreme Court GUAM v. OLSEN(1977) No. 76-439 Argued: March 29, 1977Decided: May 23, 1977 </s> Provision of 22 of the 1950 Organic Act of Guam that the District Court of Guam "shall have such appellate jurisdiction as the [Guam] legislature may determine" held not to authorize the Guam Legislature to divest the District Court's appellate jurisdiction under the Act to hear appeals from local Guam courts, and to transfer that jurisdiction to the newly created Guam Supreme Court, but to empower the legislature to "determine" that jurisdiction only in the sense of the selection of what should constitute appealable causes. This conclusion is supported not only by the text of 22, which expressly authorizes only a "transfer" of the District Court's original local jurisdiction, but also by the absence of any clear signal from Congress that it intended to allow the Guam Legislature to foreclose appellate review by Art. III courts, including this Court, of territorial courts' decision in federal-question cases; by the Act's legislative history; and by the fact that if the word "determine" were read as giving Guam the power to transfer the District Court's appellate jurisdiction to the Guam Supreme Court and at the same time to authorize Guam to deny review of the District Court's decisions by any Art. III tribunal, Congress would have given Guam a power not granted to any other Territory. Pp. 199-204. </s> 540 F.2d 1011, affirmed. </s> BRENNAN, J., delivered the opinion of the Court, in which BURGER, C. J., and WHITE, BLACKMUN, and POWELL, JJ., joined. MARSHALL, J., filed a dissenting opinion, in which STEWART, REHNQUIST, and STEVENS, JJ., joined, post, p. 204. </s> Charles H. Troutman, Attorney General of Guam, argued the cause for petitioner. With him on the briefs was Charles D. Stake, Assistant Attorney General. </s> Howard Trapp argued the cause for respondent. With him on the brief were Laurence Vogel and Norman Dorsen. [431 U.S. 195, 196] </s> Walter S. Ferenz argued the cause and filed a brief for the Guam Bar Assn. as amicus curiae urging affirmance. </s> MR. JUSTICE BRENNAN delivered the opinion of the Court. </s> The question for decision in this case is whether the provision of 22 of the 1950 Organic Act of Guam that the District Court of Guam "shall have such appellate jurisdiction as the [Guam] legislature may determine" authorizes the Legislature of Guam to divest the appellate jurisdiction of the District Court under the Act to hear appeals from local Guam courts, and to transfer that jurisdiction to the Supreme Court of Guam, newly created by the Guam Legislature. </s> I </s> Section 22 (a) of the Organic Act, 64 Stat. 389, before an amendment not relevant here, provided: </s> "There is hereby created a court of record to be designated the `District Court of Guam,' and the judicial authority of Guam shall be vested in the District Court of Guam and in such court or courts as may have been or may hereafter be established by the laws of Guam. The District Court of Guam shall have, in all causes arising under the laws of the United States, the jurisdiction of a district court of the United States as such court is defined in section 451 of title 28, United States Code, and shall have original jurisdiction in all other causes in Guam, jurisdiction over which has not been transferred by the legislature to other court or courts established by it, and shall have such appellate jurisdiction as the legislature may determine. The jurisdiction of and the procedure in the courts of Guam other than the District Court of Guam shall be prescribed by the laws of Guam." 1 (Emphasis supplied.) [431 U.S. 195, 197] </s> In 1951, under the authority of the Organic Act, the Guam Legislature created three local courts for local matters and defined cases appealable from those courts to the District Court. 2 That structure continued without substantial change for 23 years until 1974 when the Guam Legislature adopted the Court Reorganization Act of 1974. Guam Pub. L. 12-85. The former Island, Police, and Commissioners' Courts, were replaced by a Guam Superior Court with "original jurisdiction in all cases arising under the laws of Guam, civil or criminal, in law or equity, regardless of the amount in controversy, except for causes arising under the Constitution, treaties, laws of the United States and any matter involving the Guam Territorial Income Tax." 3 The Act also repealed the provisions of the Guam Code of Civil Procedure governing appeals to the District Court, 4 and created the Supreme Court of [431 U.S. 195, 198] Guam. The Act transferred to the Supreme Court essentially the same appellate jurisdiction as had previously been exercised by the District Court, providing that the Supreme Court "shall have jurisdiction of appeals from the judgments, orders and decrees of the Superior Court in criminal cases . . . and in civil causes." Pub. L. 12-85, 3. Other provisions of the Reorganization Act amended various territorial laws to change the references to the Supreme Court of Guam from the Appellate Division of the District Court as the appellate court. </s> Respondent was convicted of criminal charges in the Superior Court, and appealed to the District Court of Guam. The District Court dismissed the appeal on the authority of a divided panel decision of the Court of Appeals for the Ninth Circuit holding that the 1974 Court Reorganization Act validly divested the District Court of its appellate jurisdiction and transferred that jurisdiction to the newly created Supreme Court. Agana Bay Dev. Co. (Hong Kong) Ltd. v. Supreme Court of Guam, 529 F.2d 952 (1976). In this case, however, the Court of Appeals for the Ninth Circuit, overruled en banc 5 the panel decision in Agana Bay, and reversed the dismissal of respondent's appeal. 540 F.2d 1011 (1976). The Court of Appeals held that "the appellate jurisdiction of the district court may not be transferred without congressional authorization and pursuant to such provisions and safeguards as Congress may provide." Id., at 1012. Certain judgments of the appellate division of the District Court were made appealable to the Court of Appeals for the Ninth Circuit, and to this Court, by 23 of the Organic Act of Guam of 1950, as [431 U.S. 195, 199] amended, 65 Stat. 726, 6 but Congress has not similarly provided for appeals from judgments of the Supreme Court of Guam. In that circumstance, the Court of Appeals held that 22 (a) did not authorize the transfer of the District Court's appellate jurisdiction to the Supreme Court of Guam because, under existing statutes "litigation in the territorial court [that] may involve substantial federal questions . . . cannot be reviewed by the United States Supreme Court or by any other Article III court . . . ." 540 F.2d, at 1012. We granted certiorari, 429 U.S. 959 (1976). We affirm. </s> II </s> We emphasize at the outset that the 1974 Court Reorganization Act in no respect affects the exclusive 7 original federal-question [431 U.S. 195, 200] jurisdiction of the District Court granted by the first clause of the second sentence of 22 (a), which now provides that the "District Court of Guam shall have the jurisdiction of a district court of the United States in all causes arising under the constitution, treaties, and laws of the United States . . . ." 48 U.S.C. 1424 (a). Decisions in such cases brought in the District Court are appealable to the Court of Appeals for the Ninth Circuit or to this Court. 8 The question presented for decision here rather concerns appeals to the District Court from decisions of local courts in cases arising under local law. The language we must construe immediately follows in the same sentence, providing that the District Court "shall have original jurisdiction in all other causes in Guam, jurisdiction over which has not been transferred by the legislature to other court or courts established by it, and shall have such appellate jurisdiction as the legislature may determine." (Emphasis supplied.) </s> We first observe that Congress used different language in its grant of power to the Guam Legislature over the District Court's original jurisdiction from its grant of power over that court's appellate jurisdiction. The Act expressly provides that original jurisdiction might be "transferred" to "other court or courts" created by the legislature. As to appellate jurisdiction, however, the wording is that the District Court "shall have such appellate jurisdiction as the legislature may determine." The question immediately arises why, if Congress contemplated authority to eliminate the District Court's appellate jurisdiction by transferring it to a local court, Congress did not, as in the case of "original jurisdiction," explicitly provide that appellate jurisdiction too might be "transferred." Moreover, if Congress contemplated such a broad grant of authority, it might be expected that it would have referred, as in the case of original jurisdiction, to "other court or courts" that would be established to assume the appellate jurisdiction [431 U.S. 195, 201] transferred from the District Court. Clearly, the word "determine" is not used as a synonym for "transfer," and it is not obvious that the power to "determine" the appellate jurisdiction of the District Court includes the power to abolish it by "transfer" to another court. We fully agree with Judge Kennedy dissenting in Agana Bay, 529 F.2d, at 959, that Congress used "determine" because Congress "more likely intended to permit the local legislature to decide what cases were serious enough to be appealable," and we note that the Guam Legislature found no broader authority in the term for the 23 years from 1951 to 1974. We therefore conclude that Congress expressly authorized a "transfer" of the District Court's original jurisdiction but withheld a like power respecting the court's appellate jurisdiction, empowering Guam to "determine" the District Court's appellate jurisdiction only in the sense of the selection of what should constitute appealable causes. 9 </s> Other considerations besides our reading of the bare text support the conclusion that the power to "determine" should not be construed to include the power to "transfer" without more persuasive indicia of a congressional purpose to clothe the Guam Legislature with this authority. </s> First, we should be reluctant without a clear signal from Congress to conclude that it intended to allow the Guam Legislature to foreclose appellate review by Art. III courts, including this Court, of decisions of territorial courts in cases that may turn on questions of federal law. Important federal issues can be presented in cases which do not fall within the District Court's federal-question jurisdiction, because they do not "arise under" federal law, but instead fall within the exclusive jurisdiction vested in the Superior and Supreme Courts by the Reorganization Act. For example, criminal convictions [431 U.S. 195, 202] returned in the Superior Court and appealable under the Court Reorganization Act only to the Supreme Court, may be challenged as violating federal constitutional guarantees. It is no answer that rejection of a federal constitutional defense by the Guam courts, though not presently directly reviewable by the Court of Appeals for the Ninth Circuit or by this Court, may nevertheless be reviewable in federal habeas corpus. Tr. of Oral Arg. 9. Habeas corpus review has different historical roots from direct review and different jurisprudential functions and limitations. See, e. g., Fay v. Noia, 372 U.S. 391 (1963). As respects civil cases, though the "arising under" jurisdiction vested in the District Court by 22 (a) tracks the general federal-question statute, 28 U.S.C. 1331 (a), clearly - whatever may be the ambiguities of the phrase "arising under" - it does not embrace all civil cases that may present questions of federal law. See, e. g., Gully v. First Nat. Bank, 299 U.S. 109 (1936); Cohen, The Broken Compass: The Requirement that a Case Arise "Directly" under Federal Law, 115 U. Pa. L. Rev. 890 (1967). We are therefore reluctant to conclude that, merely because power to "determine" may as a matter of dictionary definition include power to "transfer," Congress intended to confer on the Guam Legislature the power to eliminate review in Art. III courts of all federal issues presented in cases brought in the local courts. </s> Second, nothing in the legislative history of the Organic Act of 1950 even remotely suggests that Congress intended by its use of the word "determine" to give the Guam Legislature the option of creating a local Supreme Court having the power of ultimate review of cases involving local matters. Rather, the legislative history points the other way. Three bills introduced in the 81st Congress provided for a judicial system for Guam. Hearings on S. 185, S. 1892, and H. R. 7273 before the Subcommittee of the Senate Committee on Interior and Insular Affairs, 81st Cong., 2d Sess., 1-25 (1950) (hereafter Hearings). All three provided for appellate review by Art. III [431 U.S. 195, 203] courts of territorial court decisions. The bill that became the Organic Act, H. R. 7273, originally established a Supreme Court of Guam whose decisions were to be reviewable by the Court of Appeals for the Ninth Circuit and by this Court. Hearings 22-23. The proposal for a congressionally created Supreme Court was rejected in favor of a Federal District Court. This was done in part to provide "litigants in the Western Pacific with direct access to the federal court system." Agana Bay Dev. Co., Ltd. v. Supreme Court of Guam, supra, at 961 (Kennedy, J., dissenting); S. Rep. No. 2109, 81st Cong., 2d Sess., 4 (1950). But another concern accounts for the provision giving the District Court jurisdiction in local matters. Our independent review of the pertinent legislative materials confirms, and we therefore adopt, Judge Kennedy's conclusion expressed in dissent in Agana Bay, supra, at 961: </s> "Because of concern that there would not be sufficient federal question litigation to justify a separate district court in Guam, the court was given original jurisdiction in local matters. It was also envisioned that the district court would serve as an appellate body once local courts were established. The apparent reason for eliminating the provision for a local supreme court was to avoid duplicative judicial machinery, rather than to allow local authorities to put certain controversies beyond review by the federal court system." </s> Third, if the word "determine" is to be read as giving Guam the power to transfer the District Court's appellate jurisdiction to the Supreme Court and, by the same stroke, to authorize Guam to deny review of the court's decisions by any Art. III tribunal, Congress has given Guam a power not granted any other Territory. Congress has consistently provided for appellate review by Art. III courts of decisions of local courts of the other Territories. 10 What history there [431 U.S. 195, 204] is points to a purpose to create a similar system for Guam. Hearings, supra; S. Rep. No. 2109, 81st Cong., 2d Sess. (1950). We are unwilling to say that Congress made an extraordinary exception in the case of Guam, at least without some clearer indication of that purpose than the word "determine" provides. Moreover, we should hesitate to attribute such a purpose to Congress since a construction that denied Guam litigants access to Art. III courts for appellate review of local-court decisions might present constitutional questions. See generally Hart, The Power of Congress to Limit the Jurisdiction of Federal Courts: An Exercise in Dialectic, 66 Harv. L. Rev. 1362 (1953). </s> Affirmed. </s> Footnotes [Footnote 1 The "District Court of Guam" rather than "United States District Court of Guam" was chosen as the court's title, since it was created under [431 U.S. 195, 197] Art. IV, 3, of the Federal Constitution rather than under Art. III, and since 22 vested the court with original jurisdiction to decide both local and federal-question matters. S. Rep. No. 2109, 81st Cong., 2d Sess., 12 (1950). </s> [Footnote 2 The local courts were the Commissioners' Courts, the Police Court, and the Island Court. Guam Code Civ. Proc. 81-278 (1953). The District Court was vested with a wide-ranging appellate jurisdiction respecting criminal and civil decisions of the Island Court. 62, 63, 82. A single judge constituted the District Court as a trial court. However, 65 constituted the appellate division as a court of three judges. Congress approved this measure in a 1958 amendment to 22 of the Act, 72 Stat. 178. See Corn v. Guam Coral Co., 318 F.2d 622, 627 (CA9 1963); letter of Judge Albert B. Maris, judicial advisor to Guam, to Chairman, Committee on Interior and Insular Affairs, House of Representatives, Mar. 14, 1957, reproduced in S. Rep. No. 1582, 85th Cong., 2d Sess., 7-9 (1958); id., at 4-5. </s> [Footnote 3 The Court of Appeals for the Ninth Circuit held that the Superior Court's original jurisdiction is exclusive and not concurrent with the District Court. Agana Bay Dev. Co. (Hong Kong) Ltd. v. Supreme Court of Guam, 529 F.2d 952, 955 n. 4 (1976). This holding is not contested here. </s> [Footnote 4 The Code of Civil Procedure provisions repealed by the Court Reorganization Act had provided that the District Court "shall have [431 U.S. 195, 198] jurisdiction of appeals from the judgments, orders and decrees of the Island Court in criminal causes as provided in the Penal Code, Part II, Title VIII, and in civil causes . . . ." Guam Code Civ. Proc. 63 (1953). </s> [Footnote 5 The Court of Appeals convened en banc after respondent unsuccessfully sought certiorari before judgment in this Court. 425 U.S. 960 (1976). </s> [Footnote 6 Section 23 (a), as enacted in 1950, authorized appeals from final judgments of the District Court of Guam to the Court of Appeals in federal question, habeas corpus, and "all other civil cases where the value in controversy exceed[ed] $5,000 . . . ." Congress repealed this provision in 1951, 65 Stat. 729, but transferred its coverage to 28 U.S.C. 1291 and thus expanded appealability to criminal cases raising only issues of local law, and to civil cases raising only issues of local law with value in controversy of less than $5,000. 65 Stat. 726. Review of certain interlocutory orders was also authorized by including the District Court of Guam within the coverage of 28 U.S.C. 1292. 65 Stat. 726. See S. Rep. No. 1020, 82d Cong., 1st Sess., 16 (1951). Under 23 (b) as enacted in 1950 direct appeals from the District Court to this Court were available in cases to which the United States was a party and in which the District Court held an Act of Congress unconstitutional. This provision was continued without significant change in 1951 by including the District Court of Guam within the coverage of 28 U.S.C. 1252. 65 Stat. 726. </s> [Footnote 7 The Organic Act of 1950 does not on its face require that the original jurisdiction of the District Court over questions arising under federal law be exclusive, but the implementing legislation passed by Guam in 1951 left federal-question jurisdiction exclusively in the District Court by granting jurisdiction to the Guam courts only over cases arising under local law. Guam Code Civ. Proc. 82, 102, 112 (1953). This interpretation in Agana Bay Dev. Co. (Hong Kong) Ltd. v. Supreme Court of Guam, supra, at 954, is also not contested here. See n. 3, supra. </s> [Footnote 8 See n. 6, supra. </s> [Footnote 9 This case does not present, and we intimate no view upon, the question of what categories of cases the Guam Legislature is authorized to determine are nonappealable under 22 of the Act. </s> [Footnote 10 See, e. g., 31 Stat. 141 ( 86), 36 Stat. 1087, 43 Stat. 936 (Hawaii); 31 Stat. 321 ( 504, 507) (Alaska); 31 Stat. 77 ( 35), 38 Stat. 803, 39 [431 U.S. 195, 204] Stat. 951 ( 42, 43) (Puerto Rico); 76A Stat. 51 (Canal Zone); 39 Stat. 1132 ( 2), 43 Stat. 936, 49 Stat. 1807 ( 25, 30), 48 U.S.C. 1612, 90 Stat. 2899 (Virgin Islands); 90 Stat. 263 ( 402, 403) (Northern Mariana Islands). We note that Pub. L. 94-584, enacted in 1976 about a month before our grant of certiorari in this case, authorizes Guam to adopt a constitution for its own self-government but expressly provides that a provision of the territorial constitution establishing a system of local courts "shall become effective no sooner than upon the enactment of legislation regulating the relationship between the local courts of Guam with the Federal judicial system." 2 (b) (7), 90 Stat. 2899. This suggests that Congress contemplates that Guam's judiciary should be treated like the judiciaries of other Territories whose judgments are subject to review by Art. III courts. The Guam Legislature has already enacted legislation to provide for a constitutional convention. Act of Dec. 10, 1976, Guam Pub. L. 13-202. Although this may eventually produce a judicial system complying with 2 (b) (7) of Pub. L. 94-584 and subject to appellate review in Art. III courts, we perceive nothing in this prospect that should cause us to abstain from decision of the issues presented in this case. </s> MR. JUSTICE MARSHALL, with whom MR. JUSTICE STEWART, MR. JUSTICE REHNQUIST, and MR. JUSTICE STEVENS join, dissenting. </s> Although this case may at first glance seem unimportant to anyone but the residents of Guam, the result of the Court's [431 U.S. 195, 205] decision is perhaps unprecedented in our history. The Court today abolishes the Supreme Court of Guam, a significant part of the system of self-government established by some 85,000 American citizens through their freely elected legislature. 1 </s> The Court's error, in my view, lies in its misinterpretation of the Organic Act of Guam. I do not doubt that Congress has the authority in the exercise of its plenary power over Territories of the United States, Art. IV, 3, to reverse Guam's decision to reorganize its local court system. In this case, however, Congress has plainly authorized enactment of the challenged legislation, while there has been no corresponding delegation to this Court of the congressional power to veto such laws. Because "our judicial function" is limited "to apply[ing] statutes on the basis of what Congress has written, not what Congress might have written," United States v. Great Northern R. Co., 343 U.S. 562, 575 (1952), I must respectfully dissent. </s> In reaching its decision, the Court focuses exclusively on the meaning of the second half of the second sentence of 22 (a) of the Organic Act of Guam, 64 Stat. 389. 2 With all respect, this approach ignores the horse while concentrating on minute details of the cart's design. If the sentences of 22 [431 U.S. 195, 206] (a) are simply read in the order in which they are written, their meaning is plain without resort to complex exegesis. </s> The first sentence creates the federal "District Court of Guam." It goes on to provide that "the judicial authority of Guam shall be vested in the District Court of Guam and in such court or courts as may have been or may hereafter be established by the laws of Guam." This language is strikingly similar to the familiar words of Art. III, 1: "The judicial Power of the United States, shall be vested in one supreme Court, and in such inferior Courts as the Congress may from time to time ordain and establish." Both provisions describe the bodies that will exercise the judicial power. They name one court and mandate its establishment. They leave the creation of the remainder of the court system to the legislature. But there is one key distinction: Where Art. III expressly describes the relationship among the courts, making one "supreme" and the others "inferior," 22 (a) is silent. </s> The only reasonable conclusion that can be drawn from this distinction is that the Organic Act, unlike our Constitution, was intended to allow the elected representatives of the people governed by the courts to control the relationship among the courts. The absence of any indication of a superior-inferior structure in 22 (a) also indicates that there is no reason to consider the federal and local courts other than co-equal in matters as to which they share jurisdiction, i. e., cases that might be appealed. Rather, the conspicuously incomplete emulation of the well-known Art. III model suggests that the people of Guam may terminate the District Court's appellate jurisdiction. </s> The Court ascribes great significance to the different language used to describe the legislature's power to "transfer" trial jurisdiction to the local courts, as contrasted with the power to "determine" appellate jurisdiction. The words, read in context, seem to me to be no more than alternative expressions for the same concept, used in the interest of avoiding [431 U.S. 195, 207] repetition. Thus, the first sentence of 22 (a) gives Guam the authority to establish any courts it deems necessary. The last sentence of the section, also ignored in the Court's analysis, gives Guam the power to prescribe the "jurisdiction of and procedure in" such local courts. "Determine" as used in the context of the second sentence of 22 (a) is an obvious synonym for "grant." If the Guam Legislature may grant the District Court appellate jurisdiction in the first instance, it has the converse power to withdraw it. Read as a whole, 22 (a) plainly encompasses the power to give all appellate jurisdiction to a local court. </s> The Court relies on the fact that this interpretation of the Organic Act might insulate decisions of the local courts that involve questions of federal constitutional or statutory law from review in Art. III courts, something which other territorial charters have apparently not granted. With respect to the latter point, it is worth nothing that Guam is a small and isolated possession that Congress might well have wished to give unusual autonomy in local affairs. No doubt, too, Congress' sense of the proper way to govern far-distant citizens has changed considerably in recent decades from the expansionist ethic which prevailed when Hawaii was annexed, the Spanish possessions (including Guam) ceded, and the Virgin Islands purchased. It is thus not surprising to find a broad authorization for self-government granted by the Organic Act passed in 1950. And it speaks well for the good sense of the people of Guam that they observed the functioning of the judicial system on their island for 23 years before deciding that a local appellate court would best serve their needs. This hiatus, therefore, does not indicate that Guam lacked the power to act, as the Court assumes, ante, at 201, but rather that the people deemed it unwise at that stage in their development to do so. Moreover, as careful analysis of the relevant sections of other territorial charters demonstrates, see Agana Bay Dev. Co., Ltd. v. Supreme Court of Guam, 529 F.2d 952, [431 U.S. 195, 208] 957-958 (CA9 1976), "the Guam Organic Act is unique and it delegates the widest powers of any of the territories to the legislature for the creation of appellate courts." Id., at 957. </s> If there are constitutional problems with this interpretation of the Organic Act, see ante, at 201-202, 204, they do not arise from the action of the Guam Legislature in creating a local appellate court. Rather, they stem from the absence of a statute expressly providing for appeals from the Guam courts to an Art. III tribunal. As petitioner notes, Brief for Petitioner 15-19, Congress has in its dealings with Guam historically reacted to the developing legal needs of the island rather than anticipating them. See, e. g., Corn v. Guam Coral Co., 318 F.2d 622, 624-627 (CA9 1963). This is not surprising; since the Organic Act did not set up a local court structure, it was impossible for Congress to foresee the manner in which the system as actually established would mesh with the Art. III courts. Most recently, Congress authorized Guam to design a local court system as part of the drafting of a new constitution, recognizing that it would thereafter be necessary to enact legislation "regulating the relationship between the local courts of Guam and the Federal judicial system." Pub. L. No. 94-584, 90 Stat. 2899, 2 (b) (7). </s> In view of the willingness of Congress to accommodate both the aspirations of the people of Guam and the requirements of federal jurisdiction, I think there is no need to search for constitutional questions where none yet exist. 3 In the meantime, we should not eviscerate the court system carefully devised by the people of Guam in the exercise of their right of self-government. </s> I respectfully dissent. </s> [Footnote 1 See U.S. Dept. of Commerce, Statistical Abstract of the United States 855, 856 (1976); 8 U.S.C. 1407; Guam Govt. Code 2056 (1970). </s> [Footnote 2 This statute, prior to a 1958 amendment, provided in pertinent part: "There is hereby created a court of record to be designated the `District Court of Guam', and the judicial authority of Guam shall be vested in the District Court of Guam and in such court or courts as may have been or may hereafter be established by the laws of Guam. The District Court of Guam shall have, in all causes arising under the laws of the United States, the jurisdiction of a district court of the United States as such court is defined in section 451 of title 28, United States Code, and shall have original jurisdiction in all other causes in Guam, jurisdiction over which has not been transferred by the legislature to other court or courts established by it, and shall have such appellate jurisdiction as the legislature may determine. The jurisdiction of and the procedure in the courts of Guam other than the District Court of Guam shall be prescribed by the laws of Guam." </s> [Footnote 3 Nowhere in respondent's presentation to this Court is there any claim of federal constitutional or statutory infirmities in his conviction for violation of the laws of Guam. </s> [431 U.S. 195, 209]

United States Supreme Court UNITED STATES v. GENERIX DRUG CORP.(1983) No. 81-1222 Argued: November 3, 1982Decided: March 22, 1983 </s> The Federal Food, Drug, and Cosmetic Act (Act) prohibits the marketing of a "new drug" without the prior approval of the Food and Drug Administration (FDA). Section 201(p) of the Act defines a "new drug" as "any drug . . . [which] is not generally recognized . . . as safe and effective . . . or . . . which has not, otherwise than in [safety and effectiveness] investigations, been used to a material extent or for a material time." Section 201(g)(1) defines the term "drug" as, inter alia, "articles intended for use in the diagnosis, cure, mitigation, treatment, or prevention of disease in man or in other animals." The Government brought an action in Federal District Court to enjoin respondent Generix Drug Corp. (respondent) from distributing a number of generic drug products containing specified active ingredients, alleging that the FDA had never approved "new drug" applications with respect to such products. Holding that a generic drug product containing the same active ingredients as a previously approved pioneer drug marketed under a brand name is a "new drug" if there is a reasonable possibility that the differences in inactive "excipients" between the generic product and the pioneer drug will make the generic product less safe and effective, and finding that the Government had established a reasonable possibility that the safety and effectiveness of respondent's generic drug products might be affected by differences between their inactive "excipients" and those found in approved products, the court enjoined respondent from distributing the products in question. The Court of Appeals vacated the injunction and remanded with instructions to dismiss the complaint, holding that the statutory prohibition against the sale of a "new drug" without prior FDA approval does not apply to a drug product having the same active ingredients as a previously approved drug product, regardless of any differences in "excipients." </s> Held: </s> A generic product is a "drug" within the meaning of the indicated definition in 201(g)(1). That definition is broad enough to encompass entire drug products, complete with their active and inactive ingredients. Accordingly, a generic drug product is a "new drug," subject to prior FDA approval, until the product (and not merely its active ingredients) no longer falls within the terms of 201(p). Pp. 457-461. </s> 654 F.2d 1114, reversed. </s> STEVENS, J., delivered the opinion for a unanimous Court. [460 U.S. 453, 454] </s> Jerrold J. Ganzfried argued the cause for the United States. With him on the briefs were Solicitor General Lee, Assistant Attorney General Baxter, Deputy Solicitor General Claiborne, John J. Powers III, Nancy C. Garrison, and Jeffrey B. Springer. </s> Robyn Greene argued the cause and filed a brief for respondents. * </s> [Footnote * Briefs of amici curiae urging reversal were filed by Joel E. Hoffman and Robert M. Lichtman for the Pharmaceutical Manufacturers Association; by Richard Ayres Givens for the Generic Pharmaceutical Industry Association; and by Michael R. Sonnenreich, Michael X. Morrell, and William H. Kenety for Medicine in the Public Interest. </s> Clark M. Clifford, Robert A. Altman, and Daniel F. O'Keefe, Jr., filed a brief for the Proprietary Association as amicus curiae. </s> JUSTICE STEVENS delivered the opinion of the Court. </s> The question presented is whether the statutory prohibition against the marketing of a "new drug" without the prior approval of the Food and Drug Administration (FDA) requires respondent Generix Drug Corp. to have approved new drug applications (NDA's) before it may market its generic drug products. In statutory terms, we are required to determine whether the term "drug" as used in the relevant sections of the Federal Food, Drug, and Cosmetic Act (Act), as amended, 21 U.S.C. 301 et seq. (1976 ed. and Supp V), refers only to the active ingredient in a drug product or to the entire product. We hold that Congress intended the word to have the broader meaning. </s> I </s> The active ingredients in most prescription drugs constitute less than 10% of the product; inactive "excipients" (such as coatings, binders, and capsules) constitute the rest. The term "generic drug" is used to describe a product that contains the same active ingredients but not necessarily the same excipients as a so-called "pioneer drug" that is marketed [460 U.S. 453, 455] under a brand name. 1 Respondent Generix is a distributor of generic drugs manufactured by other firms. </s> The Government initiated this action to enjoin Generix from distributing in interstate commerce a number of generic drug products that contain eight specified active ingredients. 2 It alleged that the FDA had never approved new drug applications with respect to any of those products. 3 </s> The District Court held that a generic drug product containing the same active ingredients as a previously approved pioneer drug is a "new drug," requiring an NDA, only if there is a reasonable possibility that the differences in excipients between the generic product and the pioneer will make the generic product less safe and effective. 498 F. Supp. 288, 292. The court found clear evidence in support of the general proposition that differences in excipients may affect the safety and effectiveness of drug products. Excipients may affect the rate at which the active ingredient is delivered to a diseased organ. If delivery is too fast, the patient may be harmed just as if he received an overdose; if delivery is too slow, the treatment of the disease may be ineffective. Id., at 291. [460 U.S. 453, 456] </s> In this case, the District Court found that the Government had established a reasonable possibility that the safety and effectiveness of six of respondent's generic drug products might be affected by differences between their excipients and those found in approved products. 4 Accordingly, it enjoined the defendants from further distribution of products containing the designated active ingredients. </s> The Court of Appeals for the Fifth Circuit, now the Eleventh Circuit, vacated the District Court's injunction and remanded with instructions to dismiss the complaint. 654 F.2d 1114. It held that the statutory prohibition against the sale of a "new drug" without prior approval does not apply to a drug product having the same active ingredients as a previously approved drug product, regardless of any differences in excipients. It based that conclusion on its view that the statutory requirement of evaluating the safety and effectiveness of new drugs must normally relate to active ingredients, because the precise technique of formulating the finished drug is not part of the information generally known to the medical or scientific community. Moreover, it believed that the legislative history suggested that Congress had not intended to create a product-by-product licensing system. Since the active ingredients at issue had all received the necessary approval, the Court of Appeals concluded that the Government was entitled to no relief at all. </s> Because the question is obviously important and because it has been decided differently in other Circuits, 5 we granted certiorari. 455 U.S. 988 . 6 </s> [460 U.S. 453, 457] </s> II </s> In resolving the narrow issue presented, the Court of Appeals misread the statutory text. </s> Section 201(p) of the Act defines a "new drug" to be "any drug . . . [which] is not generally recognized . . . as safe and effective . . . or . . . which has not, otherwise than in [safety and effectiveness] investigations, been used to a material extent or for a material time . . . ." 7 The Court of Appeals did not rest its decision on a finding that Generix's products are generally recognized as safe and effective; rather, its conclusion rested on the proposition that the statutory phrase "any drug" does not include a complete drug product, but only an active ingredient. That proposition is simply untenable. </s> The original Federal Food and Drugs Act of June 30, 1906, 34 Stat. 768, prohibited the sale of adulterated or misbranded [460 U.S. 453, 458] foods or drugs. The definition of the term "drug" in that statute was plainly broad enough to describe a completed drug product. It provided: </s> "That the term `drug,' as used in this Act, shall include all medicines and preparations recognized in the United States Pharmacopoeia or National Formulary for internal or external use, and any substance or mixture of substances intended to be used for the cure, mitigation, or prevention of disease of either man or other animals." 34 Stat. 769. </s> In 1938, Congress passed the new statute, which requires that an application be submitted to the FDA before any "new drug" may be introduced into interstate commerce. Federal Food, Drug, and Cosmetic Act of 1938, 52 Stat. 1040, 21 U.S.C. 301 et seq. (1976 ed. and Supp. V). The new Act's definition of the term "drug" is even broader than the old one: </s> "201.(g)(1) The term `drug' means (A) articles recognized in the official United States Pharmacopoeia, official Homoeopathic Pharmacopoeia of the United States, or official National Formulary, or any supplement to any of them; and (B) articles intended for use in the diagnosis, cure, mitigation, treatment, or prevention of disease in man or other animals; and (C) articles (other than food) intended to affect the structure or any function of the body of man or other animals; and (D) articles intended for use as a component of any article specified in clauses (A), (B), or (C) of this paragraph; but does not include devices or their components, parts, or accessories." 52 Stat. 1041, as amended, and as set forth in 21 U.S.C. 321(g) (1). </s> In examining this statutory definition, the Court of Appeals was persuaded that only active ingredients come within the terms of subsection (A). 654 F.2d, at 1116. 8 Unfortunately, [460 U.S. 453, 459] the court did not analyze the entire definition. If it had done so, it would have noted both that the terms of subsections (A), (B), and (C) are plainly broad enough to include more than just active ingredients, and that they must do so unless subsection (D) is to be superfluous. Because the definition is disjunctive, generic drug products are quite plainly drugs within the meaning of the Act. </s> The natural reading of this definition is corroborated by other sections of the Act. Section 501(a) provides that a "drug" is deemed adulterated "if [it is a drug which] bears or contains, for purposes of coloring only, a color additive which is unsafe." 52 Stat. 1049, as amended, 21 U.S.C. 351(a) (4). Section 502(e) provides that a "drug . . . fabricated from two or more ingredients" shall be deemed to be misbranded unless its label includes, "whether active or not, the established name and quantity or proportion of any bromides, ether, chloroform, [etc.]." 52 Stat. 1050-1051, as amended, 21 U.S.C. 352(e)(1). And 505(b) requires that an application for new drug approval contain "a full list of the articles used as components of such drug [and] a full statement of the composition of such drug." 52 Stat. 1052, 21 U.S.C. 355(b). The term "drug" is plainly intended throughout the Act to include entire drug products, complete with active and inactive ingredients. 9 </s> Neither the Court of Appeals nor respondents have pointed to anything in the text of the Act that is inconsistent [460 U.S. 453, 460] with our reading of its plain language. 10 The respondents make a number of arguments based upon legislative history and administrative practice regarding the marketing of generic prescription and over-the-counter drugs that lend support to the proposition that two products need not have precisely the same molecular structure in order to be the same "drug." 11 None of those arguments, however, warrants the conclusion that the term "drug" means only the active ingredient in a product. </s> In this case we are not required to determine what types of differences between drugs would be significant or insignificant under the statute. Respondent Generix argues only [460 U.S. 453, 461] that its products are not new drugs under the theory that "drug" means "active ingredient"; it does not argue that its complete products - active ingredients and excipients together - are the same as previously approved products. The latter argument would, of course, have been unavailing on the facts before us; for the respondent has not questioned the District Court's finding of a reasonable possibility that its products are not bioequivalent to any previously approved products. 12 We thus do not reach the issue of whether two demonstrably bioequivalent products, containing the same active ingredients but different excipients, might under some circumstances be the same "drug." </s> In summary, a generic drug product is a "drug" within the meaning of 201(g)(1) of the Act. Such a product is therefore a "new drug," subject to the requirements of 505, until the product (and not merely its active ingredient) no longer falls within the terms of 201(p). The judgment of the Court of Appeals is accordingly </s> Reversed. </s> Footnotes [Footnote 1 Generic drugs, also called "copycat" or "me-too" drugs, are usually marketed at relatively low prices because their manufacturers do not incur the research, development, and promotional costs normally associated with the creation and marketing of an original product. </s> [Footnote 2 The eight ingredients were: allopurinol, spironolactone with hydrochlorothiazide, furosemide, diethylpropion hydrochloride, chlorothiazide with reserpine, amitriptyline with perphenazine, prochlorperazine maleate, and chlorthalidone. The District Court explained the use of each of these ingredients, noting that furosemide is one of the most widely used drugs in the United States, it being used to treat hypertension and edema. 498 F. Supp. 288, 289-290. </s> [Footnote 3 Section 505(a) of the Act, 52 Stat. 1052, as amended, 76 Stat. 784, 21 U.S.C. 355(a), provides: </s> "(a) Necessity of effective approval of application </s> "No person shall introduce or deliver for introduction into interstate commerce any new drug, unless an approval of an application filed pursuant to subsection (b) of this section is effective with respect to such drug." </s> [Footnote 4 Since no evidence concerning the safety and effectiveness of formulations containing prochlorperazine maleate or chlorthalidone was presented at the hearing, no relief was granted with respect to products containing those ingredients. 498 F. Supp., at 294. </s> [Footnote 5 Premo Pharmaceutical Laboratories, Inc. v. United States, 629 F.2d 795 (CA2 1980). </s> [Footnote 6 Respondent Generix has argued that the case is moot because almost its entire store of products containing the disputed active ingredients is no longer salable, and in the future it intends only to sell generic drugs that [460 U.S. 453, 457] have FDA approval. The possibility that respondent may change its mind in the future is sufficient to preclude a finding of mootness. See City of Mesquite v. Aladdin's Castle, Inc., 455 U.S. 283, 288 -289 (1982); United States v. W. T. Grant Co., 345 U.S. 629, 632 (1953). </s> [Footnote 7 The full text of 201(p), 52 Stat. 1041-1042, as amended, 76 Stat. 781, 21 U.S.C. 321(p), reads as follows: </s> "The term `new drug' means - </s> "(1) Any drug (except a new animal drug or an animal feed bearing or containing a new animal drug) the composition of which is such that such drug is not generally recognized, among experts qualified by scientific training and experience to evaluate the safety and effectiveness of drugs, as safe and effective for use under the conditions prescribed, recommended, or suggested in the labeling thereof, except that such a drug not so recognized shall not be deemed to be a `new drug' if at any time prior to June 25, 1938, it was subject to the Food and Drugs Act of June 30, 1906, as amended, and if at such time its labeling contained the same representations concerning the conditions of its use; or </s> "(2) Any drug (except a new animal drug or an animal feed bearing or containing a new animal drug) the composition of which is such that such drug, as a result of investigations to determine its safety and effectiveness for use under such conditions, has become so recognized, but which has not, otherwise than in such investigations, been used to a material extent or for a material time under such conditions." </s> [Footnote 8 But cf. The United States Pharmacopeia 2 (20th rev. ed. 1980) ("article" is an item for which a monograph exists; monographs may exist for the [460 U.S. 453, 459] "finished, or partially finished . . . preparation or product of one or more official substances [active ingredients or excipients] formulated for use on or for the patient"). </s> [Footnote 9 At oral argument, respondents suggested that it would be nonsensical to understand the word "drug" in 502(i) of the Act, 52 Stat. 1051, 21 U.S.C. 352(i), to mean "drug product," because any generic drug is "an imitation of another drug." Tr. of Oral Arg. 41-42. But 502(i) is intended to prohibit a company from passing an imitation off as the original; if "imitation" is understood with that in mind, it becomes apparent that the word "drug" can and should mean "drug product" in 502(i), as well. </s> [Footnote 10 Both the respondents and the Court of Appeals have suggested that if the term "new drug" referred to complete drug products, as opposed to active ingredients, then 201(p)(2) of the Act would be superfluous. See 654 F.2d, at 1116-1117. That section (set forth in n. 7, supra) establishes that before a drug may drop out of regulation, it must - in addition to being generally recognized among experts as safe and effective for the prescribed use - have been used to a material extent or for a material time other than in scientific investigations. The argument appears to rest on the premise that the only regulatory burden associated with being a new drug is the need to file a new drug application. Since an application must be filed before a drug can receive general public use, the argument is that nothing would be gained by deregulation because the only regulatory burden would have been sustained before one could be exempted from that burden. But the premise is flawed. Significant recordkeeping and reporting burdens are lifted when the "new drug" status terminates. See 505(j) of the Act, 76 Stat. 782-783, 21 U.S.C. 355(j). See also 21 CFR 310.300-310.303 (1982). </s> [Footnote 11 They argue (1) that legislative history suggests that the 1938 Congress rejected a product-by-product licensing system, (2) that in 1938 many pharmacists compounded their own pills with excipients of their choice and were not expected to file NDA's for each pill or every time they used a new excipient, (3) that between 1938 and 1968 the FDA advised drug manufacturers that certain generic products were not "new drugs" and therefore did not require NDA's to be marketed, (4) that the 1962 amendments reveal a congressional interest in promoting the availability of generic drugs in order to reduce the price of prescription drugs for consumers, (5) that in applying the 1962 amendments, the FDA took the position that, for some purposes, generic drug products were covered by NDA's of the pioneer [460 U.S. 453, 461] drugs that they copied, and (6) that since 1972 the FDA has used a "monograph" system to permit the marketing of over-the-counter drugs that meet prescribed standards and contain "suitable" excipients. </s> [Footnote 12 Because the Government did not cross-appeal from the District Court's refusal to grant relief as to products containing prochlorperazine maleate and chlorthalidone, see n. 4, supra, we have no occasion to pass on the District Court's conclusion that the FDA has the burden of showing a "reasonable possibility" that a drug product is not bioequivalent to an approved product in order to enjoin distribution. </s> [460 U.S. 453, 462]

United States Supreme Court GIBSON v. U.S.(1946) No. 23 Argued: October 23, 1946Decided: December 23, 1946 </s> [329 U.S. 338, 340] Mr.Hayden Covington, of Brooklyn, N.Y., for petitioners. Mr. Irving S. Shapiro, of Washington, D.C., for respondent. </s> Mr. Justice RUTLEDGE delivered the opinion of the Court. These cases carry forward another step the sequence in decision represented by Falbo, Billings, Estep and Smith. 1 Each petitioner has been convicted for violating 11 of the Selective Training and Service Act, 54 Stat. 894, 50 U.S.C.App. 311, 50 U.S.C.A.Appendix, 311, Dodez for failing to report for work of national importance after being ordered to do so and Gibson for having unlawfully deserted the camp to which he had been assigned for such work. 2 </s> [329 U.S. 338, 341] In each instance the conviction was sustained on appeal3 and certiorari was granted because of the importance of the questions presented for the administration of the Act. No. 23, 326 U.S. 708 , 66 S.Ct. 96, restored to the docket for reargument before a full bench, 66 S.Ct. 677; No. 86, 328 U.S. 828 , 66 S.Ct. 1017 </s> The principal issues relate to the time of completing the administrative selective process and the effect in each case of what was done in this respect upon the petitioner's right to make defense in the criminal proceedings on various grounds going to the validity of the classification. In both cases tendered defenses of this character were excluded in the trial court and the exclusion was sustained on appeal. The effect was, in Gibson's case, to rule that although he had completed the administrative process by reporting to the camp, pursuant to the requirement of the Falbo decision, nevertheless his remedy if any, on account of the alleged misclassification was by habeas corpus, not by defense in the criminal cause. 8 Cir., 149 F.2d 751. In Dodez' case it was held that by refusing to report for service at the amp he had failed to exhaust his administrative remedies and therefore under the Falbo doctrine he could not question his classification in the criminal suit. 6 Cir., 154 F.2d 637.4 </s> I </s> Both petitioners are Jehovah's Witnesses. Each has claimed consistently since the time of his registration that he is a minister of religion and therefore exempt from [329 U.S. 338, 342] training and service under the Act. 5 Each was denied this classification ( IV-D), being classified instead as a conscientious objector (IV-E).6 Administrative appeals were exhausted. Pursuant to the classifications given and the applicable statutory provisions and regulations, Dodez and Gibson were assigned to work of national importance and ordered to report for such work at designated camps. Dodez refused to go to the camp. But Gibson, thinking the Falbo decision required him to report there in order to exhaust his administrative remedies, went to the camp, remained for five days, and then departed without leave. It is undisputed that he intended at no time to submit to the camp's jurisdiction or authority and that he at all times made this intent clear. Everything he did was done solely to make sure that the administrative process had been finished and with a view to avoiding the barrier Falbo encountered in his trial when he sought to question his classification. Obviously the petitioners have sought to reach the same point, namely, the place at which the selective process is exhausted administratively, but have differed concerning its exact location. Dodez maintains that the point was reached, under the applicable regulations,7 when his preinduction physical examination had been given and he was found acceptable for service by the Selective Serv- [329 U.S. 338, 343] ice system. This was on February 21, 1944, two months prior to the date ( April 21, 1944) when he was ordered to report for work and refused to go. On the other hand, Gibson argues that until the preliminaries to actual service, including physical examination, were completed at the camp, he was not foreclosed by going through with them from exercising his choice not to submit to the camp's jurisdiction, cf. Billings v. Truesdell, 321 U.S. 542 , 64 S.Ct. 737, or, upon doing so, from asserting the invalidity of his classification in a criminal trial either for failing to report for service or for desertion from the camp, Cf. Estep v. United States, 327 U.S. 114 , 66 S.Ct. 423; Smith v. United States, ibid. Clearly, on the facts and the issues, the question as to Dodez, like that in Falbo's case, is whether he went far enough to exhaust the administrative process; while as to Gibson it is said that he went too far, that is, beyond the point of completing that process, and that this cut off the right of defense concededly available to him at that point. </s> II </s> If these cases were controlled in all respects by the regulations effective when Falbo's case was decided, Dodez would seem clearly to fall within the decision's proscription. The Court there said: 'Completion of the functions of the local boards and appellate agencies, important as are those functions, is not the end of the selective service process. The selectee may still be rejected at the induction center and the conscientious objector who is opposed to noncombatant duty may be rejected at the civilian public service camp. The connected series of steps into the national service which begins with registration with the local board does not end until the registrant is accepted by the army, navy or civilian public service camp. Thus a board order to report is no more than a necessary intermediate step in a united and continuous process designed to [329 U.S. 338, 344] raise an army speedily and efficiently.' 320 U.S. at page 553, 64 S.Ct. at page 348. Since acceptability for service was not finally determined under the regulations then applicable until the registrant had reached camp, had there undergone or waived the specified physical examinations, and thereupon had been found acceptable,8 and since Falbo had not taken those steps, the Court held he was not entitled to question his classification and therefore sustained his conviction. However, intermediate the Falbo decision and issuance of the order to Dodez to report, the regulations governing the procedure relating to selection for service were changed and in a manner which Dodez says relieved him from the necessity of going to the camp in order to complete the administrative process. The Government now concedes, we think properly, 9 that Dodez is right in this view. It is not necessary to review in detail the regulations which were governing in Falbo's case, since they are [329 U.S. 338, 345] not controlling in either of the present ones. Although it is now argued that the Court misconceived their effect,10 we need only to note that it was within the registrant's power to secure a physical examination by the camp physician by indicating a change in his physical condition, it could not be known in advance in any case whether he would demand it, and until this was determined it could not be known finally and irrevocably whether he would be 'accepted for work of national importance.' 11 The decision therefore correctly ruled that 'the conscientious objector who is opposed to noncombatant duty may be rejected at the civilian public service camp' and that the board's order to report there for service was no more than a necessary intermediate step' in the continuous selective process, which was not ended until the last possibility for rejection had been exhausted. Under those regulations there was no final and conclusive acceptance for service until after those procedures at the camp were c mpleted. It was exactly in this respect, however, that the changes made in the regulations immediately after the Falbo decision12 and shortly prior to issuance of Dodez' order to [329 U.S. 338, 346] report, together with still others made later but prior to the order to Gibson, were effective. The changes were extensive and important. The altered regulations are lengthy. We therefore give a summary in the margin, noting the more important differences between those applicable to Dodez and those in effect as to Gibson. 13 </s> It is of some importance to note that the changes affecting both registrants were made in consequence of the enactment of 5 of Public Law 197, 78th Congress, approved December 5, 1943, 57 Stat. 596, 599, 50 U.S.C. Appendix, 304a, 50 U.S.C.A.Appendix, 304a. This required preinduction physical examinations to be given before the registrant was ordered to [329 U.S. 338, 347] report for induction and service. 14 Previously he first had been ordered to report for induction, was then given his preinduction examination by the armed forces and, on being found acceptable, was inducted at once. 15 The major changes in the regulations giving effect to 5 were made on January 10, 1944, one week aft r the Falbo decision came down, some taking effect on that date,16 others on February 2d following. These applied to Dodez. Still others not applicable to him but operative as to Gibson took effect on June 7, 1944.17 The changed regulations, following out the command of 5 of Public Act 197, provided for a preinduction physical examination to be given before issuance of the order to report for induction, rather than afterward. Section 629.1 of Amendment No. 200(9 F.R. 400-442), effective January 10, 1944.18 This was the basic amendment. It applied to all registrants subject to call for service, includ- [329 U.S. 338, 348] ing those classified IV-E. Moreover, by Amendment No. 210(9 F.R. 1416), effective February 2, 1944, 653.11 of the Regulations applicable to men so classified was changed to eliminate the previously effective paragraph ( c) providing for physical examination by the camp physician on indication of changed condition and consequent possible rejection at the camp. Instead the amended regulation stated simply that (a) when the 'assignee' had reported to the camp, the camp director should 'complete the Order to Report for Work of National Importance (Form 50)'; and (b) place, as specified, on the assignee's papers, 'a statement that the registrant is accepted' for work at the designated camp, stating also the date and place of acceptance; (c) the local board, 'upon receiving notice that a registrant has been accepted for work,' should not 'change his classification but shall not the fact of his acceptance' on Form 100; and ( d), if the assignee failed to report when required, the camp director was to notify the Director of Selective Service. 19 (Emphasis added.) [329 U.S. 338, 349] The effect of the statute and the amended regulation was to place the order to report for service nearer the end of the administrative process than it had been previously, so far as concerned the power of the registrant to take action which might result in the rejection. The elimination of the provision permitting medical examination at the camp, by Amendment No. 210, removed and chance the registrant formerly had to secure rejection by demanding examination there, and left to be performed at the camp only the formal entries of 'completing the order to report' and noting the fact, time and place of 'acceptance' upon the assignee's papers, together with the duties of notifying the local board of acceptance or the Director of Selective Service of failure to report. Although the amended regulations thus speak of 'completing the Order to Report' and placing on his papers 'a statement that a registrant is accepted,' we agree that these were only formal matters to be performed by camp officials, and left nothing to be done by them or by the applicant after reaching the camp which might result in his being rejected or released from the duty to remain and perform the further duties imposed on him. To construe [329 U.S. 338, 350] the regulations otherwise would be to force the registrant not only to perform all requirements affording possibility of relief but also to go through with purely formal steps to be taken by camp officials offering no such possibility. Exacting this would stretch the requirement of exhausting the administrative process beyond any reason supporting it. Cf. Levers v. Anderson, 326 U.S. 219 , 66 S.Ct. 72. And, as appears from Gibson's experience, by going through with those formalities Dodez would have found himself confronted with the Government's contention that he had gone too far. We hold therefore, in accordance with Dodez' view and the Government's concession, that he was not required to report to the camp, under the Regulations effective when his order to report became operative, in order to complete the administrative process; and that he therefore was not foreclosed by the Falbo decision from making any defense open to him in his criminal trial under the statute or the Constitution aside from the effect of that decision. Estep v. United States, 327 U.S. 114 , 66 S.Ct. 423; Smith v. United States, ibid.; cf. Billings v. Truesdell, 321 U.S. 542 , 64 S.Ct. 737. This view requires reversal of the judgment in No. 86 and remanding the cause to the District Court for a further trial. Dodez insists however that we should go further and determine the case finally upon the merits. He urges that the evidence properly tendered and admissible upon the excluded defenses, as well as that adduced,20 would support no other verdict than one of acquittal and that therefore the trial court should have sustained his motion to dismiss the cause. 21 Accordingly [329 U.S. 338, 351] he asks or a judgment here directing that such relief be given. In the Estep and Smith cases, after holding that the petitioners had been wrongfully denied opportunity to defend by attacking the validity of their classifications, this Court reversed the convictions and remanded the causes for new trials, stating: 'We express no opinion on the merits of the defenses which were tendered. Since the petitioners were denied the opportunity to show that their local boards exceeded their jurisdiction, a new trial must be had in each case.' 327 U.S. at pae 125, 66 S.Ct. at page 429. Dodez' situation is identical, in this respect, with those of Estep and Smith. 22 Accordingly we remand the cause, as was done in the Smith and Estep cases, for further proceedings in the trial court, without expressing opinion upon those further issues. </s> III </s> The government urges that the conclusion we have accepted for Dodez forces the contrary result in Gibson's case No. 23. The argument, as we have pointed out, is [329 U.S. 338, 352] not that Gibson fell short of exhausting the administrative process, for he clearly had done this. It is rather that he went beyond what was required for that purpose, thereby became subject to the camp's jurisdiction, and in doing this irrevocably foreclosed himself from defending against the charge of desertion on the ground that his classification was invalid. The Government's position is founded upon analogy to the cases which hold that one who has been inducted into the armed forces, although wrongfully, becomes subject to military jurisdiction, is thereafter amenable to its processes, 23 and can secure his release from service or military custody only by resort to habeas corpus. 24 </s> Applying the analog , the Government insists that when Gibson went to the camp and there went through the preliminary formalities for becoming a member, he became 'inducted' as a camp member, just as one becomes a member of the armed forces by undergoing the induction ceremony, cf. Billings v. Truesdell, supra, even though the induction is in violation of his rights. Thereafter, the argument continues, Gibson became subject to the camp's 'jurisdiction,' just as the wrongfully inducted soldier would become subject to military jurisdiction; and, like the latter, cannot raise the illegality of his induction as a defense to a charge of violating any duty imposed upon inducted members; but must seek his relief, if any, by the [329 U.S. 338, 353] writ of habeas corpus. Since the Act and the regulations laid upon camp members a duty to remain and perform the further duties prescribed for them,25 Gibson's departure without leave amounted to desertion; his defense of wrongful classification is no more open to him than a defense of illegal induction would be open to a wrongfully inducted soldier violating a military order; and his remedy, if any, is to apply for release from the camp through habeas corpus. The argument is supported by extensive reference to the regulations in force when Gibson was ordered to report, including the changes affecting Dodez and the others which became effective June 7, 1944, by Amendment No. 236 (9 F.R. 6207). The important changes this amendment made were two, namely: (1) to reintroduce into 653.11, the provision applicable in Falbo's case but eliminated as to Dodez by Amendment No. 210, effective February 2, 1944,26 for medical examinations to be given at the camp to determine change in condition; and (2) to add to the preexisting requirement for the camp director's noting the fact of acceptance on the registrant's papers27 the explicit new provision that this should be done 'irrespective of the determination which is made as a result of the examination.' 28 </s> [329 U.S. 338, 354] The Government also emphasizes two other regulations. One is 652.12 requiring the local board to provide transportation for registrants reporting to it for transportation to the camp. The other, 652.13, providing that a Class IV-E registrant 'after he has left the local board in accordance with 652.12 for work of national importance under civilian direction is under the jurisdiction of the camp to which he is assigned.' 29 (Emphasis added.) [329 U.S. 338, 355] The short effect of 653.11, as altered at the time of Gibson's order to report was to retain the requirements for formal entries of 'acceptance' and giving notice, at the camp, which applied to Dodez; to reintroduce the provision for physical examination there; but at the same time to nullify the possibility this presented in Falbo's case for giving relief, by providing that the camp director should note the fact of acceptance 'irrespective of the determination made as the result of' this examination. Taking account of revised 653.11 as precluding any possibility for securing administrative relief at the camp, the Government regards 652. 13 as marking the precise and crucial line for crossing from the board's jurisdiction into that of the camp, namely, at the point where the registrant begins his journey to the camp. To take this step, it says, is equivalent to the oath in the induction ceremony prescribed for men entering the armed forces, cf. Billings v. Truesdell, supra; and produces the same consequences for foreclosing the defense of illegal classification, regardless of intention to submit to the camp's jurisdiction, indeed in spite of Gibson's unwavering manifestation of intention not to submit. 30 </s> Much of the argument was devoted to whether, on the basis of the Government's analogy, 652.13 could be [329 U.S. 338, 356] taken to fix the end of the 'interval of choice,' cf. Billings v. Truesdell, supra, in view of the constantly changing character of the regulations, the absence of any prescribed induction ceremony such as the Billings case involved, and the consequent difficulty confronting one seeking to comply with the Falbo decision in ascertaining the exact location of such a line. 31 We do not find it necessary to consider the conflicting contentions in this respect, or therefore to scrutinize the regulations with a view to locating such a point. More fundamental considerations are controlling. We have said that the Government's argument is founded entirely upon analogy, because no case has ruled that one who becomes subject to the 'jurisdiction' of a work camp under the Selective Service procedure thereby forfeits his right to defend against a charge of desertion or other breach of duty, on the ground that his classification was invalid. Nor has it been held that his only recourse for release from the camp is by way of habeas corpus. Furthermore, we think there are compelling reasons why the analogy does not hold true. [329 U.S. 338, 357] In the first place, there are obvious and important differences between the two situations which it is sought to connect by the claimed resemblance. Not the least is that in the one instance the person concerned crosses the vast gulf between civil and military jurisdiction, with all the attendant consequences for change in status and rights, whereas in the other no such chasm is traversed. The alleged transfer of 'jurisdiction' is only from one civilian agency to another, both branches of the Selective Service System, and there is none at all from the authority of the civilian courts as agencies for the enforcement of obligations imposed by the law. There is in fact no change in 'jurisdiction' whatsoever, except in the sense that from the time he becomes a camp member the registrant's duties are different and his orders come through different channels of the same agency. Unlike the man 'actually inducted,' the person classified IV-E remains a civilian; his duties are not military in character; he is not subject to military discipline or authority; and for violation of duties or orders he cannot be tried by court martial or military tribunal. On the contrary the Selective Service Act expressly provides the same civil penalties and mode of trial for violating duties arising when he enters the camp as for those arising before that time. 32 </s> There is therefore no such profound change in rights, duties and status as occurs when one crosses the line between civil and military jurisdiction by being 'actually inducted' under the rule of Billings v. Truesdell, supra. It was this change and the consequences it entailed together with the statute's command that no one should be tried by military or naval court martial in any case arising under the Act until he had been actually inducted,33 which [329 U.S. 338, 358] we there held to require placing the line precisely, not only for exhausting administrative remedies under the Falbo rule, but also for marking the point of actual induction at which the registrant's right ends to choose between going forward into the service and incurring the civil liability for breach of that duty. The person classified as conscientious objector is never confronted with that choice. He is relived by the Act from any duty to perform military service. He is not threatend with induction. He is in fact farther removed from military status or jurisdiction after he is finally assigned to civilian public service of national importance, and for this reason is rejected for military service, than he was before that time. His choice is not between going into service and taking the civil penalty laid for violating that duty. It is between performing civilian service under civilian authority and incurring the civil penalty for refusing to do so. Moreover, in the case of one entering the armed forces, the loss of civil rights, including those of recourse to the civil courts other than by way of habeas corpus,34 results altogether by virtue of the change from civilian to military status. The reasons underlying those rulings do not apply in the case of one who does not undergo that change, remains at all times a civilian, subject only to civilian duties and to civil penalties for violating them. There is not the [329 U.S. 338, 359] same necessity or compulsion in such a case for bringing about forfeiture of civilian rights, including remedies for questioning the validity of the order the registrant is charged with violating. That compulsion arises from the necessity for preventing interruption of military processes by intrusion of the civil courts beyond the essential minimum of keeping open the habeas corpus channel to show that the military authority has exceeded its jurisdiction in dealing with the individual. 35 It is on this foundation that the forfeiture of other civil remedies is held to take place. But there is no such necessity, or therefore any such foundation for forfeiture, in the case of one classified as a conscientious objector and assigned for work of national importance. Serious as are the consequences of his refusal to perform that work, dealing with such breaches of duty by the civil courts does not involve, in the remotest sense, interruption or interference by civilian authority with military processes or jurisdiction. Entirely wanting therefore is any such foundation for forfeiture of civil rights as exists in the case of one inducted into the armed services. Without such a foundation the analogy dissolves and with it the asserted forfeiture. This becomes even more clear when it is recalled that one basis for the forfeiture, which the Government has maintained, is that habeas corpus is available for the person classified IV-E and wrongfully denied classification and exemption as a minister of religion. This remedy, it was asserted originally, is adequate and exclusive, and therefore should be held to foreclose resort to other forms of relief. But here again the asserted analogy fails. It has been clearly established that the remedy by way of habeas corpus is open to the wrongfully inducted member of the [329 U.S. 338, 360] armed forces to secure his release. 36 But at the argument it was conceded that neither the camp director nor other officials of the Selective Service system are authorized to use force to arrest or restrain one who refuses to remain in the camp. And this, it was also admitted, would make doubtful the availability of relief by way of habeas corpus. 37 Indeed it might well be urged that the remedy is not available for one charged with violation of any duty, whether failure to report to the camp, to reamin there, or to perform other obligations, since the only compulsion laid upon such a person by the Act or otherwise is the force of the legal command plus the provision for criminal penalty in case of disobedience. We need not decide this question, however, and we express no opinion upon it. For it is enough to destroy the analogy the Government seeks to draw that the remedy by habeas corpus is an uncertain one. Should it be found unavailable and at the same time we should rule that petitioner's defense could not be made in the criminal proceeding, he would be left entirely without remedy, a result consistent neither with our decision in the cases of Estep and Smith, supra, nor with the statute. No more, we think, is it consistent with the Act or those rulings to foreclose the right of defense upon the basis of uncertainty whether the habeas corpus remedy might be had. Finally, Congress has provided expressly for enforcing the duty to report to the camp for work and duties arising thereafter through the criminal proceedings and penalties [329 U.S. 338, 361] prescribed by 11. In its view these were adequate for the purpose. Nothing in the section or the statute, in the light of our prior decisions, can be taken to indicate that Congress intended persons charged with violating such duties to be deprived of their rights of defense on the ground of invalid classification, either absolutely should haveas corpus prove unavailable or contingently depending upon how the doubt concerning that remedy's availability might be resolved. The Government concedes that Congress intended some remedy to be available. We know of no way by which this can be assured, in such a case as Gibson's, otherwise than by permitting the defense to be raised in the criminal trial. The analogy failing, for both of the reasons we have stated, by which it is sought to confine the remedy to habeas corpus, we think the defense has been left open for presentation in this case and should have been allowed. Estep v. United States, 327 U.S. 114 , 66 S.Ct. 423; Smith v. United States, ibid. 38 </s> Gibson, like Dodez, and for similar reasons, insists that we should dispose of the case upon the merits, by examining and sustaining his defense. The same course should be followed for Gibson in this respect as was directed for Dodez. We express no opinion concerning whether a different result might follow for one in Gibson's position if he should [329 U.S. 338, 362] remain at the camp for a substantially longer period and then depart without leave. 39 </s> The question raised concerning venue has been determined adversely to Gibson's contention by our decision in United States v. Anderson, 328 U.S. 699 , 66 S.Ct. 1213. The judgments are reversed and the causes are remanded to the District Courts from which they came, for further proceedings consistent with this opinion. Mr. Justice MURPHY joins in the opinion of the Court for the reasons stated therein and for the additional reasons set forth in his dissenting opinion in Falbo v. United States, 320 U.S. 549, 555 , 64 S.Ct. 346, 349, and in his concurring opinion in Estep v. United States, 327 U.S. 114, 125 , 66 S.Ct. 423, 429. Reversed and remanded. </s> Footnotes </s> [Footnote 1 Falbo v. United States, 320 U.S. 549 , 64 S.Ct. 346; Billings v. Truesdell, 321 U.S. 542 , 64 S.Ct. 737; Estep v. United States, 327 U.S. 114 , 66 S.Ct. 423; Smith v. United States, ibid. [Footnote 2 Section 11 provides, in part: 'Any person charged as herein provided with the duty of carrying out any of the provisions of this Act, or the rules or regulations made or directions given thereunder, who shall knowingly fail or neglect to perform such duty, ... shall, upon conviction in the district court of the United States having jurisdiction thereof, be punished by imprisonment for not more than five years or a fine of not more than $10,000, or by both such fine and imprisonment ....' Section 652.11(a) of the Regulations imposes the duty on persons classified IV-E to comply with the order to report for work of national importance; and by 653.12 assignees are required to report to the camp to which they are assigned and to remain therein until released or transferred elsewhere by proper authority, except when on authorized missions or leave. </s> [Footnote 3 8 Cir., 149 F.2d 751; 6 Cir., 154 F.2d 637. [Footnote 4 Apparently in both cases the important changes in the applicable regulations made after the Falbo decision were not called to the attention of the trial courts or the Circuit Courts of Appeals. </s> [Footnote 5 The exemption is provided by 5(d) of the Act, 54 Stat. 885, 888, 50 U.S.C.A.Appendix, 305(d), as follows: 'Regular or duly ordained ministers of religion, and students who are preparing for the ministry in theological or divinity schools recognized as such for more than one year prior to the date of enactment of this Act, shall be exempt from training and service (but not from registration) under this Act.' [Footnote 6 Pursuant to 5(g) of the Act, which provides that persons so classified shall be assigned to noncombatant service or, if conscientiously opposed to this, then to 'work of national importance under civilian direction.' [Footnote 7 See text Part II infra at note 19; also note 13. </s> [Footnote 8 At that time 653.11(c) of the Selective Service Regulations provided: 'If the assignee indicates that his physical condition has changed since his final type physical examination for registrants in Class IV-E, the camp physician shall examine him with reference thereto. If the assignee is not accepted for work of national importance, the Camp Director will indicate the reason therefor, and the assignee, pending instructions from the Director of Selective Service will be retained in the camp or hospitalized when necessary.' Cf. note 10. This provision, effective by Amendment No. 40 on March 16, 1942 (7 F. R. 2093), was eliminated entirely by Amendment No. 210 (9 F.R. 1416), effective February 2, 1944, a little more than two months prior to the date specified for Dodez to report for work, namely, April 21, 1944; but was restored in modified form on June 7, 1944, by Amendment No. 236 (9 F.R. 6207), nearly two months before Gibson was ordered to report on August 21 of that year. [Footnote 9 A confession of error on the part of the United States 'does not relieve this Court of the performance of the judicial function. The considered judgment of the law enforcement officers that reversible error has been committed is entitled to great weight, but our judicial obligations compel us to examine independently the errors confessed.' Young v. United States, 315 U.S. 257, 258 , 259 S., 62 S.Ct. 510, 511. </s> [Footnote 10 The contention is that 653.11(c) of the Regulations as it then stood, see note 8, provided for physical examination at the camp and possible rejection there only if the registrant on reporting indicated a change in his physical condition and that this was effective only as to persons sustaining such a change, not to others, of whom Falbo was one. The argument assumes that the registrant's actual condition, not the possibility that a change might occur and be found in any case, was controlling not only to determine the outcome of the examination, but to foreclose the possibility that change might be 'indicated' and, in that event, final determination of acceptability would be made after the examination. [Footnote 11 The Regulation clearly contemplated that upon receipt of such instructions from the Director of Selective Service, the registrant might be rejected or released. [Footnote 12 The decision was rendered January 3, 1944. The basic changes in the regulations were made January 10, 1944. See text infra at notes 13-17. </s> [Footnote 13 After a registrant has been classified IV-E he is given a preinduction physical examination. Reg. 629.1, 629.2. If found acceptable for service he is issued a certificate of fitness. Reg. 629. 32. Thereafter the local board notifies the Director of Selective Service that the registrant is available for assignment to work of national importance, Reg. 652.1, and such an assignment is sent to the local board. Upon receipt thereof, the local board issues to the registrant an order to report for work of national importance commanding him to report at a designated time and place, Reg. 652.12. When the registrant reports, transportation to a camp for work of national importance is furnished, Reg . 652.12. Thereafter he 'is under the jurisdiction of the camp to which he is assigned.' The local board then can take no further steps with regard to such registrant without instructions from the Director of Selective Service, but should report any information to the Director of Selective Service which might affect the registrant's status, Reg. 652. 13. Upon arrival at the camp the registrant (now called assignee in the regulations) is given a physical examination, although at the time the case of Dodez arose specific provision for such an examination was not made in the regulations. See note 8. It was merely provided that 'the camp director shall, on the bottom of page 4 of the Original and First Copy of the Report of Physical Examination and Induction (Form 221), place a statement that a registrant is accepted for work of national importance at the civilian public service camp to which the registrant has been assigned.' Reg. 653.11(b). However, this regulation subsequently was amended in the form applicable to the case of Gibson. See note 28 infra. </s> [Footnote 14 The statute, in so far as is now material, provided: 'Any registrant within the categories herein defined when it appears that his induction will shortly occur shall, upon request, be ordered by his local board in accordance with schedules authorized by the Secretary of War, the Secretary of the Navy, and the Director of Selective Service, to any regularly established induction station for a preinduction physical examination, subject to reexaminations. 'The commanding officer of such induction station where such physical examination is conducted under this provision shall issue to the registrant a certificate showing his physical fitness or lack thereof, and this examination shall be accepted by the local board, subject to periodic reexamination. Those registrants who are classified as I-A at the time of such physical examination and who are found physically qualified for military service as a result thereof, shall remain so classified and report for induction in regular order.' </s> [Footnote 15 Compare the procedure outlined in Billings v. Truesdell, 321 U.S. 542 , 64 S.Ct. 737. [Footnote 16 See notes 18, 19, infra, and text for the principal changes. [Footnote 17 These are noted specifically infra at note 28 and text. [Footnote 18 Pertinently the basic regulation provided: 'Every registrant before he is ordered to report for induction, shall be given a preinduction physical examination under the provisions of this part unless ; (1) he signs a Request for Immediate Induction (Form 219), or (2) he is delinquent. ...' </s> [Footnote 19 Because 653.11 as changed by Amendment No. 210 is crucial in Dodez' case, the exact language is quoted: '(a) When the assignee has reported to camp, the camp director shall complete the Order to Report for Work of National Importance (Form 50). Four copies of the completed Order to Report for Work of National Importance (Form 50) shall be sent to the Director of Selective Service; one copy will be retained by the camp director. The Director of Selective Service will forward two copies of the Order to Report for Work of National Importance (Form 50) to the appropriate State Director of Selective Service, who will retain one copy for his files and mail the other copy to the local board for filing in the registrant's Cover Sheet (Form 53). '(b) The camp director shall, on the bottom of page 4 of the Original and First Copy of the Report of Physical Examination and Induction (Form 221), place a statement that a registrant is accepted for work of national importance at the civilian public service camp to which the registrant has been assigned. The statement shall specify the date and place of such acceptance and shall be signed by the camp director who shall retain the First Copy of the Report of Physical Examination and Induction (Form 221) and shall forward the Original to the Director of Selective Service. </s> '(c) Upon receiving notice that a registrant has been accepted for work of national importance, the local board shall not change his classification but shall note the fact of his acceptance for such work in the Classification Record (Form 100). </s> '(d) In the event an assignee does not report to the camp at the time prescribed in his Order to Report for Work of National Importance (Form 50) or pursuant to the instructions of the local board, the camp director will report such fact to the Director of Selective Service.' (Emphasis added.) </s> [Footnote 20 The trial court permitted Dodez to introduce de novo evidence intended to show that as of the time of the trial he was a minister. But the court, over objection, declined to allow this evidence to go to the jury. [Footnote 21 The question was also raised by motion for a directed verdict, which was overruled. </s> [Footnote 22 In case each the tendered defenses were substantially two, namely, ( 1) that a full and fair hearing had been denied in the selective service proceedings, particularly before the local board; and (2) that the undisputed evidence would sustain no other conclusion than that the registrant was a minister of religion. In each case also evidence was tendered and excluded in the trial court to sustain the first of these defenses. Appropriate determination of that defense would require not only reception and consideration of evidence properly tendered upon the issue, but also in consequence thereof determination of issues of fact, including credibility and inferential conclusions, properly to be made in the trial court rather than by an appellate tribunal. Since issues of credibility also may be involved in determining whether the evidence would support no other conclusion than that the registrant was a minister, that question too is more appropriately determinable in the first instance in the trial court. Moreover, it is not certain that another trial will be had or that the identical issues will be presented if one is held. </s> [Footnote 23 See, e.g., In re Morrissey, 137 U.S. 157 , 11 S.Ct. 57; In re Miller, 5 Cir., 114 F. 838; United States v. Reaves, 5 Cir., 126 F. 127; In re Carver, C.C., 142 F. 623; In re Scott, 6 Cir., 144 F. 79; Moore v. United States, 5 Cir., 159 F. 701; Dillingham v. Booker, 4 Cir., 163 F. 696, 18 L.R.A.,N.S., 956, 16 Ann.Cas. 127; United States ex rel. Laikund v. Williford, 2 Cir., 220 F. 291; Ex parte Romano, D.C., 251 F. 762; Ex parte Tinkoff, D.C., 254 F. 912; Ex parte Kerekes, D.C., 274 F. 870. But cf. Ver Mehren v. Sirmyer, 8 Cir., 36 F.2d 876; Ex parte Beck, D. C., 245 F. 967. Cf. Kurtz v. Moffitt, 115 U.S. 487 , 6 S.Ct. 148. [Footnote 24 See In re Grimely, 137 U.S. 147 , 11 S.Ct. 54; Stingle's Case, Fed. Cas. No. 13,458; United States ex rel. Turner v. Wright, Fed. Cas. No. 16,778. See also cases cited in note 23. </s> [Footnote 25 See note 2. [Footnote 26 See text at notes, 18, 19. Under 653.11, as reintroduced, the physical examination at the camp was given to all 'assignees,' regardless of whether they indicated a change in physical condition. Cf. note 8. [Footnote 27 Cf. note 19, 653.11(b). [Footnote 28 The alterations made in 653.11 by Amendment No. 236 will appear from comparing the text of the section prior to the amendment, see note 19, with the following quoted portions, following the amendment: '(b) As soon as possible after the assignee has reported to camp, the camp physician shall give him a physical examination and shall determine whether there has been any change in the assignee's physical or mental condition since his preinduction physical examination. If a camp physician is not available, the camp director, to the extent that he is capable of doing so, shall, by observing and questioning the assignee, make such determination. The camp physician or the camp director, as the case may be, shall, on the bottom of page 4 of the Original and First Copy of the Report of Physical Examination and Induction (Form 221), make a record of such determination. </s> '(c) Irrespective of the determination which is made as a result of the examination of an assignee made under the provisions of paragraph (b) of this section, the camp director shall, on the bottom of page 4 of the Original and First Copy of the Report of Physical Examination and Induction (Form 221), place a statement that a registrant is accepted for work of national importance at the civilian public service camp to which the registrant has been assigned. The statement shall specify the date and place of such acceptance and shall be signed by the camp director who shall retain the First Copy of the Report of Physical Examination and Induction (Form 221) and shall forward the Original to the Director of Selective Service.' (Emphasis added.) </s> The reintroduced provision of 653.11 became subsection (b) of the amended section and the former subsection (b) became subsection (c) with the added initial provision, ' rrespective of the determination ...,' etc. </s> [Footnote 29 The regulation, 652.13, reads as follows: 'A registrant in Class IV-E who has reported for work of national importance pursuant to this part shall be retained in Class IV-E by the local board. Such registrant after he has left the local board in accordance with 652.12 for work of national importance under civilian direction is under the jurisdiction of the camp to which he is assigned. The local board shall take no further steps with regard to such registrant without instructions from the Director of Selective Service, but should report any information to the Director of Selective Service which might affect the registrant's status.' ( Emphasis added.) 7 F.R. 113. Section 652.13 was adopted December 24, 1941, became effective February 1, 1942, and therefore was in effect as to Falbo as well as to Estep, Smith, Dodez and Gibson. </s> [Footnote 30 The Government does not urge that Gibson waived his rights by submitting to 'indaction,' in the sense of voluntarily surrendering them; it is rather that he acted at his peril in taking steps beyond those required to complete the administrative remedial process, even though he mistakenly thought them necessary for that purpose. The argument is essentially one of forfeiture rather than of waiver. The facts would sustain no implication of intention to submit to 'induction' or to surrender any rights. </s> [Footnote 31 It is Gibson's position that had he not gone to the civilian public service camp and subjected himself to the physical examination given by the camp physician, see note 29, the courts might subsequently have held that in a prosecution under 11 he was foreclosed by the Falbo doctrine from making the defense that his classification was illegal. He says further that the regulations applicable to Falbo and those applicable to him were so similar that no reasonable person reading them could have determined that under the latter it was not necessary to undergo the physical examination given at the camp in order to complete the administrative process. Indeed, he asserts that in some ways the later regulations were more compelling than those applicable to Falbo, since at the time Falbo was ordered to report the physical examination was required only for those who indicated a change in their physical condition, whereas when he was ordered to report all assignees were required to be given physical examinations. Cf. notes 8, 26. </s> [Footnote 32 See 11, note 2 supra. [Footnote 33 Section 11 of the Selective Training and Service Act reads in part: 'No person shall be tried by any military or naval court martial in any case arising under this Act unless such person had been actually inducted for the training and service prescribed under this Act or unless he is subject to trial by court martial under laws in force prior to the enactment of this Act.' It was held in the Billings case that in view of the leg slative history Congress could not be presumed 'to have restored by the second 'unless' clause in 11 what it took away by the first 'unless' clause.' Section 11 rather indicated 'a purpose to vest in the civil courts exclusive jurisdiction over all violations of the Act prior to actual induction.' 321 U.S. at page 547, 64 S.Ct. at page 741. </s> [Footnote 34 See notes 23, 24, supra, and text. </s> [Footnote 35 Ibid. </s> [Footnote 36 Billings v. Truesdell, 321 U.S. 542 , 64 S.Ct. 737; and see the authorities cited in note 24, supra. [Footnote 37 Cf. Wales v. Whitney, 114 U.S. 564 , 5 S.Ct. 1050; Stallings v. Splain, 253 U.S. 339 , 40 S.Ct. 537, 64 L.Ed 940; McNally v. Hill, 293 U.S. 131, 137 , 138 S., 55 S.Ct. 24, 26, 27; Weber v. Squier, 315 U.S. 810 , 62 S.Ct. 800; Tornello v. Hudspeth, 318 U.S. 792 , 63 S.Ct. 990; Zimmerman v. Walker, 319 U.S. 744 , 63 S.Ct. 1027; United States ex rel. Innes v. Crystal, 319 U.S. 755 , 63 S.Ct. 1164; United States ex rel. Lynn v. Downer, 322 U.S. 756 , 64 S.Ct. 1263; Baker v. Hunter, 323 U.S. 740 , 65 S.Ct. 44. </s> [Footnote 38 In this case, as in the Estep and Smith cases, the United States in a criminal prosecution is asking judicial enforcement of a draft board's command or order. In the Estep case, though the Act provided that the order of the draft board should be 'final,' limited judicial review was permitted. Section 11 of the Selective Service and Training Act does not distinguish between one order of a board and another. Provided that he has exhausted his administrative remedies, the registrant who has not been actually inducted into the armed forces may in defense to a criminal prosecution attack a board's order as arbitrary and illegal. </s> [Footnote 39 See note 30.

United States Supreme Court LOUISIANA PUBLIC SERVICE COMM'N v. FCC(1986) No. 84-871 Argued: January 13, 1986Decided: May 27, 1986 </s> [Footnote * Together with No. 84-889, California et al. v. Federal Communications Commission et al.; No. 84-1054, Public Utilities Commission of Ohio et al. v. Federal Communications Commission et al.; and No. 84-1069, Florida Public Service Commission v. Federal Communications Commission et al., on certiorari to the same court. </s> The Communications Act of 1934 (Act) grants to the Federal Communications Commission (FCC) broad authority to develop and regulate "interstate and foreign commerce in wire and radio communication," 47 U.S.C. 151, but also provides that "nothing in this chapter shall be construed to apply or to give the Commission jurisdiction with respect to (1) charges, classifications, practices, services, facilities, or regulations for or in connection with intrastate communication service," 152(b). In 1980 and 1981, the FCC issued orders changing its prior rules concerning practices for depreciating telephone plant and equipment. Subsequently, upon the petition of private telephone companies, the FCC ruled that 220 of the Act, which expressly directs the FCC to prescribe depreciation practices, operated to pre-empt inconsistent state depreciation regulations for intrastate ratemaking purposes, and that, as an alternative ground, federal displacement of state regulation was justified as being necessary to avoid frustration of validly adopted federal policies. The Court of Appeals affirmed. </s> Held: </s> Section 152(b) bars federal pre-emption of state regulation over depreciation of dual jurisdiction property for intrastate ratemaking purposes. Pp. 368-379. </s> (a) Sections 151 and 152(b) are naturally reconciled to define a national goal of the creation of a rapid and efficient telephone service, and to enact a dual regulatory system to achieve that goal. P. 370. </s> (b) Neither the legislative history of 152(b) nor the Act's structure supports the view that the words "charges," "classifications," and "practices," as used in 152(b), were intended to refer only to "customer charges" for specific services and not to depreciation charges. Those words are terms of art that are to be interpreted by reference to [476 U.S. 355, 356] the trade to which they apply, and thus they embrace depreciation. Pp. 371-373. </s> (c) There is no merit to the argument that 152(b) does not control because the plant involved is used interchangeably to provide both interstate and intrastate service, and that 152(b)'s reservation of authority to state commissions should be confined to intrastate matters that do not substantially affect interstate communication. Although state regulation will generally be displaced to the extent that it stands as an obstacle to the accomplishment of the full purposes and objectives of Congress, a federal agency may pre-empt state law only when and if it is acting within the scope of its congressionally delegated authority. Here, 152(b) constitutes a congressional denial of power to the FCC to require state commissions to follow FCC depreciation practices for intrastate ratemaking purposes, and the FCC may not take "pre-emptive" action merely because it thinks such action will best effectuate federal policy. Moreover, the Act itself establishes a process designed to resolve "jurisdictional separations" matters, by which process it may be determined what portion of an asset is employed to produce or deliver interstate as opposed to intrastate service, 47 U.S.C. 410(c). Thus it is possible to apply different rates and methods of depreciation to plant once the correct allocation between interstate and intrastate use has been made. Pp. 373-376. </s> (d) Nor is there merit to the argument that 220, which directs the FCC to prescribe the classes of property for which depreciation charges may be included under operating expenses in fixing rates, and which prohibits carriers from departing from FCC-set regulations respecting depreciation, requires automatic pre-emption of all state regulation respecting depreciation. The meaning of 220 is not so unambiguous or straightforward as to override 152(b)'s command that "nothing in this chapter shall be construed to apply or to give the Commission jurisdiction" over intrastate service. Pp. 376-378. </s> 737 F.2d 388, reversed and remanded. </s> BRENNAN, J., delivered the opinion of the Court, in which WHITE, MARSHALL, REHNQUIST, and STEVENS, JJ., joined. BURGER, C. J., and BLACKMUN, J., dissented. POWELL and O'CONNOR, JJ., took no part in the consideration or decision of the cases. </s> Lawrence G. Malone argued the cause for appellant in No. 84-871 and petitioners in Nos. 84-889, 84-1054, and 84-1069. With him on the briefs for petitioners in No. 84-889 were David E. Blabey, Margery F. Baker, Janice E. Kerr, J. Calvin Simpson, Gretchen Dumas, Jack [476 U.S. 355, 357] Shreve, Steven W. Hamm, Raymon E. Lark, Jr., Christopher K. Sandberg, Philip Stoffregen, Patrick Nugent, Frank J. Kelley, Attorney General of Michigan, Louis J. Caruso, Solicitor General, Don L. Keskey and Leo H. Friedman, Assistant Attorneys General, Lynda S. Mounts, Stuart J. Bassin, William Paul Rodgers, Jr., Joel B. Shifman, Kenneth O. Eikenberry, Attorney General of Washington, Larry V. Rogers, Assistant Attorney General, Irwin I. Kimmelman, Attorney General of New Jersey, Carla Vivian Bello, Deputy Attorney General, Joseph I. Lieberman, Attorney General of Connecticut, William B. Gundling, Peter J. Jenkelunas, and Phyllis E. Lemell, Assistant Attorneys General, Brian Moline, Howard C. Davenport, Lloyd N. Moore, Jr., Steven M. Schur, and Robert Waldrum. Michael R. Fontham, Marshall B. Brinkley, William S. Bilenky, Paul Sexton, Anthony J. Celebrezze, Jr., Attorney General of Ohio, Robert S. Tongren and Mary R. Brandt, Assistant Attorneys General, and Richard P. Rosenberry filed briefs for appellant in No. 84-871 and petitioners in Nos. 84-1054 and 84-1069. </s> Solicitor General Fried argued the cause for the federal parties. With him on the brief were Deputy Solicitor General Wallace, Christopher J. Wright, Jack D. Smith, Daniel M. Armstrong, and Jane E. Mago. </s> Michael Boudin argued the cause for respondents American Telephone and Telegraph Co. et al. With him on the brief for the American Telephone and Telegraph Co. et al. were Donald McG. Rose, John Wohlstetter, W. Preston Granbery, Albert H. Kramer, Mark J. Mathis, D. Michael Stroud, Vincent L. Sgrosso, William O'Keefe, Carolyn C. Hill, Thomas J. Reiman, Alfred Winchell Whittaker, and John B. Messenger. William R. Malone, Richard McKenna, and Philip A. Lacovara filed a brief for GTE Service Corp. et al.Fn </s> Fn [476 U.S. 355, 357] Briefs of amici curiae urging reversal were filed for the State of Alabama et al. by Charles A. Graddick, Attorney General of Alabama, and [476 U.S. 355, 358] Stephen L. Skipper, William James Samford, Jr., and Susan Shirock DePaola; for the State of Louisiana et al. by William J. Guste, Jr., Attorney General of Louisiana, Richard M. Troy and J. David McNeill III, Assistant Attorneys General, John L. Gubbins, Philip S. Shapiro, Barry Zitser, Corinne K. A. Watanabe, Attorney General of Hawaii, Ronald Shigekane, Deputy Attorney General, and Brian Burnett, Assistant Attorney General of Utah; for the State of Maine et al. by William E. Furber, James E. Tierney, Attorney General of Maine, Joseph G. Donahue, Mary L. Vanderpan, Assistant Attorney General of South Dakota, Michael J. Bowers, Attorney General of Georgia, James O. Llewellyn, Senior Assistant Attorney General, Michael J. Henry, Assistant Attorney General, Steven Clark, Attorney General of Arkansas, John Doehm, Assistant Attorney General of Nebraska, John E. Archibold, Special Assistant Attorney General of Colorado, Kirk J. Emge, and Ellyn Elise Crutcher; for the National Conference of State Legislatures et al. by Benna Ruth Solomon and Joyce Holmes Benjamin; and for the Telephone Ratepayers Association for Cost-Based and Equitable Rates by Jack L. Landau. </s> Briefs of amici curiae urging affirmance were filed for MCI Telecommunications Corp. by Laurence H. Silberman and Henry D. Levine; and for the United States Telephone Association by Jack E. Herington, Joseph R. Fogarty, H. Russell Frisby, Jr., and Marcia Spielholz. [476 U.S. 355, 358] </s> JUSTICE BRENNAN delivered the opinion of the Court. </s> In these consolidated cases, we are asked by 26 private telephone companies and the United States to sustain the holding of the Court of Appeals for the Fourth Circuit that orders of the Federal Communications Commission (FCC or Commission) respecting the depreciation of telephone plant and equipment pre-empt inconsistent state regulation. They are opposed by the Public Service Commissions of 23 States, backed by 30 amici curiae, who argue that the Communications Act of 1934 (Act), 48 Stat. 1064, as amended, 47 U.S.C. 151 et seq., expressly denied the FCC authority to establish depreciation practices and charges insofar as they relate to the setting of rates for intrastate telephone service. </s> Respondents suggest that the heart of the cases is whether the revolution in telecommunications occasioned by the federal policy of increasing competition in the industry will be thwarted by state regulators who have yet to recognize or [476 U.S. 355, 359] accept this national policy and who thus refuse to permit telephone companies to employ accurate accounting methods designed to reflect, in part, the effects of competition. We are told that already there may be as much as $26 billion worth of "reserve deficiencies" on the books of the Nation's local telephone companies, a reserve which, it is insisted, represents inadequate depreciation of a magnitude that threatens the financial ability of the industry to achieve the technological progress and provide the quality of service that the Act was passed to promote. Petitioners answer that the Act clearly establishes a system of dual state and federal authority over telephone service. They contend that the Act vests in the States exclusive power over intrastate rate-making, which power, petitioners argue, includes final authority over how depreciation shall be calculated for the purpose of setting those intrastate rates. Petitioners note also that the Due Process Clause of the Fourteenth Amendment necessarily represents a check on the power of the States to set depreciation rates at what would amount to confiscatory levels, and that respondents therefore overstate the danger of the States crippling the financial vitality of phone companies. </s> In deciding these cases, it goes without saying that we do not assess the wisdom of the asserted federal policy of encouraging competition within the telecommunications industry. Nor do we consider whether the FCC should have the authority to enforce, as it sees fit, practices which it believes would best effectuate this purpose. Important as these issues may be, our task is simply to determine where Congress has placed the responsibility for prescribing depreciation methods to be used by state commissions in setting rates for intrastate telephone service. In our view, the language, structure, and legislative history of the Act best support petitioners' position that the Act denies the FCC the power to dictate to the States as it has in these cases, and accordingly, we reverse. [476 U.S. 355, 360] </s> I </s> The Act establishes, among other things, a system of dual state and federal regulation over telephone service, and it is the nature of that division of authority that these cases are about. In broad terms, the Act grants to the FCC the authority to regulate "interstate and foreign commerce in wire and radio communication," 47 U.S.C. 151, while expressly denying that agency "jurisdiction with respect to . . . intrastate communication service . . . ." 47 U.S.C. 152(b). However, while the Act would seem to divide the world of domestic telephone service neatly into two hemispheres - one comprised of interstate service, over which the FCC would have plenary authority, and the other made up of intrastate service, over which the States would retain exclusive jurisdiction - in practice, the realities of technology and economics belie such a clean parceling of responsibility. This is so because virtually all telephone plant that is used to provide intrastate service is also used to provide interstate service, and is thus conceivably within the jurisdiction of both state and federal authorities. Moreover, because the same carriers provide both interstate and intrastate service, actions taken by federal and state regulators within their respective domains necessarily affect the general financial health of those carriers, and hence their ability to provide service, in the other "hemisphere." </s> In 1980 and 1981, the FCC issued two orders that ultimately sparked this litigation. In the 1980 order the FCC changed two depreciation practices affecting telephone plant. Property Depreciation, 83 F. C. C. 2d 267, reconsideration denied, 87 F. C. C. 2d 916 (1981). First, the order altered how carriers could group property subject to depreciation. Because carriers employ so many individual items of equipment in providing service, it would be impossible to depreciate each item individually, and property is therefore classified and depreciated in groups. The order permitted companies the option of grouping plant for depreciation purposes [476 U.S. 355, 361] based on its estimated service life (the "equal life" approach). This replaced the FCC's prior practice of requiring companies to classify and depreciate property according to its year of installation (the "vintage year" method). This change was made to allow depreciation to be based on smaller and more homogeneous groupings, which, the FCC concluded, would result in more accurate matching of capital recovery with capital consumption. </s> The 1980 order further sought to promote improved accounting accuracy by replacing "whole life" depreciation with the "remaining life" method. Under remaining life, and unlike the treatment under a whole life regime, if estimates upon which depreciation schedules are premised prove erroneous, they may be corrected in midcourse in a way that assures that the full cost of the asset will ultimately be recovered. </s> The third FCC-mandated change in plant depreciation was announced in a 1981 order, and involved the cost of labor and material associated with the installation of wire inside the premises of a business or residence. The new rule provided that this so-called "inside wiring" no longer be treated as a capital investment to be depreciated over time, but rather as a cost to be "expensed" in the year incurred. Uniform System of Accounts, 85 F. C. C. 2d 818. </s> Later in 1981, the National Association of Regulatory Utility Commissioners (NARUC) petitioned the FCC for a "clarification" of its order respecting inside wiring. Specifically, NARUC sought a declaration that the FCC's order did not restrict the discretion of state commissions to follow different depreciation practices in computing revenue requirements and rates for intrastate services. </s> On April 27, 1982, the FCC issued a memorandum opinion and order in which it agreed with NARUC that its order respecting the depreciation of inside wiring did not preclude state regulators "from using their own accounting and depreciation procedures for intrastate ratemaking purpose[s] [476 U.S. 355, 362] . . . ." Uniform System of Accounts, 89 F. C. C. 2d 1094, 1095. In reaching this conclusion, the FCC declared that it had not intended the 1981 order to "have any preemptive effect that does not arise by operation of law," and added that "[n]o policy of this Commission would be furthered by requiring state commissions to adhere to the rules we have adopted for the purposes of computing the interstate revenue requirement." Id., at 1097. The FCC then examined the language and legislative history of sections of the Act dealing with jurisdiction and depreciation and found that they did not support the position that unwilling state commissions either were required by operation of law or could be required in the discretion of the FCC to follow all accounting and depreciation methods prescribed by the Commission. Two commissioners issued a written dissent in which they argued that the FCC had, in its 1981 order, intended to pre-empt inconsistent state depreciation practices, and that deference to the States was especially inappropriate where an important federal policy - that of nuturing a "brave new world" of competition in the industry - was at stake. </s> Respondents petitioned for reconsideration of the order, and the FCC reversed itself and held that 220 of the Act, which deals expressly with depreciation, does operate automatically to pre-empt inconsistent state action where the Commission has acted to prescribe depreciation rates for a carrier. Amendment of Part 31, 92 F. C. C. 2d 864 (1983). As an alternative ground in support of pre-emption, the FCC asserted that federal displacement of state regulation is justifiable under the Act when necessary "to avoid frustration of validly adopted federal policies." Id., at 875. Applying this standard to the facts before it, the FCC then found pre-emption appropriate. It noted that "adequate capital recovery is important to `make available, so far as possible, to all the people of the United States a rapid, efficient, Nationwide, world-wide wire and radio communication service with [476 U.S. 355, 363] adequate facilities at reasonable charges . . .' 47 U.S.C. 151," and that "[s]tate depreciation rate prescriptions that do not adequately provide for capital recovery in the competitive environment, which constitutes this Commission's policy in those markets found capable of supporting competition, would frustrate the accomplishment of that policy and are preemptable by this Commission." 92 F. C. C. 2d, at 876. </s> The Fourth Circuit affirmed. Virginia State Corporation Comm'n v. FCC, 737 F.2d 388 (1984). 1 It acknowledged that the Act "does reserve to the states the authority to prescribe rates for intrastate telephone service," but determined that "reservation [of authority] is not to be read as preserving the states' sphere of intrastate jurisdiction at the expense of an efficient, viable interstate telecommunications network." Id., at 392. The court then noted that the FCC had intended to pre-empt state practices, held that the authority to do so was statutorily entrusted to the FCC, and found that the regulations at issue were reasonably designed to ensure that federal objectives would not be frustrated. The Court of Appeals did not reach the Commission's holding that 220 of the Act automatically operates to pre-empt state-prescribed depreciation at odds with depreciation ordered by the FCC. We granted certiorari to review the decision of the Court of Appeals. 472 U.S. 1025 (1985). 2 </s> [476 U.S. 355, 364] </s> II </s> Both petitioners and respondents characterize this litigation as one in which two different persons seek to drive one car, a condition the parties agree is unsatisfactory. 3 Where the parties disagree is with respect to who ought to be displaced from the controls. In order to address the contentions, it is appropriate to consider not only the structure of the Act and how it divides authority, but also the nature and function of depreciation as a component of utility regulation. </s> Depreciation is defined as the loss in service value of a capital asset over time. In the context of public utility accounting and regulation, it is a process of charging the cost of depreciable property, adjusted for net salvage, to operating expense accounts over the useful life of the asset. Thus, accounting practices significantly affect, among other things, the rates that customers pay for service. This is so because a regulated carrier is entitled to recover its reasonable expenses and a fair return on its investment through the rates [476 U.S. 355, 365] it charges its customers, and because depreciation practices contribute importantly to the calculation of both the carrier's investment and its expenses. See Knoxville v. Knoxville Water Co., 212 U.S. 1, 13 -14 (1909). See generally, 1 A. Priest, Principles of Public Utility Regulation (1969); P. Garfield & W. Lovejoy, Public Utility Economics (1964); 1 A. Kahn, Economics of Regulation (1970). </s> The total amount that a carrier is entitled to charge for services, its "revenue requirement," is the sum of its current operating expenses, including taxes and depreciation expenses, and a return on its investment "rate base." The original cost of a given item of equipment enters the rate base when that item enters service. As it depreciates over time - as a function of wear and tear or technological obsolescence - the rate base is reduced according to a depreciation schedule that is based on an estimate of the item's expected useful life. Each year the amount that is removed from the rate base is included as an operating expense. In the telephone industry, which is extremely capital intensive, depreciation charges constitute a significant portion of the annual revenue requirement recovered in rates; the parties agree that depreciation charges amount to somewhere between 10% to 15% of the intrastate revenue requirement. </s> In essence, petitioners' argument is that the plain and unambiguous language of 152(b) denies the FCC power to compel the States to employ FCC-set depreciation practices and schedules in connection with the setting of intrastate rates. In part, that section provides: </s> "[N]othing in this chapter shall be construed to apply or to give the Commission jurisdiction with respect to (1) charges, classifications, practices, services, facilities, or regulations for or in connection with intrastate communication service by wire or radio of any carrier . . . ." </s> Petitioners maintain that "charges," "classifications," and "practices" are "terms of art" which denote depreciation and accounting, and thus that the question presented by these [476 U.S. 355, 366] cases is expressly answered by the statute. They argue also that the legislative history shows on a more general level that 152(b) was intended to reserve to the States exclusive regulatory jurisdiction over intrastate service, especially intrastate ratemaking, and that given the importance of depreciation to ratemaking, to require state regulators to follow FCC depreciation practices would frustrate the statutory design of preserving the States' ratemaking authority over intrastate service. Petitioners maintain that to confer this power on the FCC would be, in effect, to write the jurisdictional limitation of 152(b) out of the Act. </s> Where petitioners focus on 152(b), respondents' principal argument is that this litigation turns on 220 of the Act, which they insist constitutes an unambiguous grant of power to the FCC exclusively to regulate depreciation. Their argument is that once the FCC has acted pursuant to that section, States are automatically precluded from prescribing different depreciation practices or rates. Section 220(b) states: </s> "The Commission shall, as soon as practicable, prescribe for such carriers the classes of property for which depreciation charges may be properly included under operating expenses, and the percentages of depreciation which shall be charged with respect to each of such classes of property, classifying the carriers as it may deem proper for this purpose. The Commission may, when it deems necessary, modify the classes and percentages so prescribed. Such carriers shall not, after the Commission has prescribed the [classes] of property for which depreciation charges may be included, charge to operating expenses any depreciation charges on classes of property other than those prescribed by the Commission, or after the Commission has prescribed percentages of depreciation, charge with respect to any class of property a percentage of depreciation other than that prescribed therefor by the Commission. No such carrier shall in any case include in any form under its [476 U.S. 355, 367] operating or other expenses any depreciation or other charge or expenditure included elsewhere as a depreciation charge or otherwise under its operating or other expenses." </s> Respondents assert that their understanding of 220(b) is bolstered by other substantive provisions of 220. They note, for example, that under 220(g), once the FCC has prescribed the "forms and manner of keeping accounts," it is "unlawful . . . to keep any other accounts . . . than those so prescribed . . . or to keep the accounts in any other manner than that prescribed or approved by the Commission," and that subsections (d) and (e) of 220 provide for civil and criminal penalties for failing to keep accounts as determined by the Commission. Moreover, 220(h) permits the FCC in its discretion, if it finds such action to be "consistent with the public interest," to "except the carriers of any particular class or classes in any State from any of the requirements" under the section "in cases where such carriers are subject to State commission regulation with respect to matters to which this section relates." Respondents argue that this provision strongly suggests that unless the FCC affirmatively acts to waive or delegate its authority, i. e., to "except" carriers from its regulation, then under 220(h) the States impliedly cannot adopt inconsistent regulations. Respondents also assert that 220(i) makes clear that the role of the States in depreciation is essentially advisory only. That section provides that the FCC, before exercising its authority, "shall notify" the state commissions and provide an opportunity to the States to "present [their] views" and also instructs the FCC to "consider such views and recommendations." According to respondents, "Congress gave the states an opportunity to present their views because it expected them to be bound by the resulting prescriptions." Joint Brief for Listed Private Respondents 14 (Joint Brief). In sum, the position of respondents is that "Congress clearly intended that there be one regime - rather than multiple regimes - of depreciation [476 U.S. 355, 368] for each subject carrier. The FCC was given responsibility for establishing such a regime, and its depreciation decisions have to be respected unless and until it relinquishes authority to the states in individual instances. The states' interest is recognized but their role is confined to providing their `views and recommendations.'" Ibid. </s> Although respondents rely primarily on 220 to support pre-emption, they also urge as an alternative and independent ground the reasoning relied on by the Court of Appeals, namely that the FCC is entitled to pre-empt inconsistent state regulation which frustrates federal policy. It is in the context of this argument that respondents most forcefully contend that state regulators must not be permitted to jeopardize the continued viability of the telecommunications industry by refusing to permit carriers to depreciate plant in a way that allows for accurate and timely recapturing of capital. This argument, which is pressed especially by the Solicitor General, relies largely on 151, which in broad terms directs the FCC to develop a rapid and efficient national telephone network. </s> III </s> The Supremacy Clause of Art. VI of the Constitution provides Congress with the power to pre-empt state law. Pre-emption occurs when Congress, in enacting a federal statute, expresses a clear intent to pre-empt state law, Jones v. Rath Packing Co., 430 U.S. 519 (1977), when there is outright or actual conflict between federal and state law, e. g., Free v. Bland, 369 U.S. 663 (1962), where compliance with both federal and state law is in effect physically impossible, Florida Lime & Avocado Growers, Inc. v. Paul, 373 U.S. 132 (1963), where there is implicit in federal law a barrier to state regulation, Shaw v. Delta Air Lines, Inc., 463 U.S. 85 (1983), where Congress has legislated comprehensively, thus occupying an entire field of regulation and leaving no room for the States to supplement federal law, Rice v. Santa Fe Elevator Corp., 331 U.S. 218 (1947), or where the state law stands as [476 U.S. 355, 369] an obstacle to the accomplishment and execution of the full objectives of Congress. Hines v. Davidowitz, 312 U.S. 52 (1941). Pre-emption may result not only from action taken by Congress itself; a federal agency acting within the scope of its congressionally delegated authority may pre-empt state regulation. Fidelity Federal Savings & Loan Assn. v. De la Cuesta, 458 U.S. 141 (1982); Capital Cities Cable, Inc. v. Crisp, 467 U.S. 691 (1984). </s> In the present cases, two of these "varieties" of pre-emption are alleged. As noted above, respondents argue that 220 by its terms confers exclusive regulatory power over depreciation on the FCC, thus raising a claim that Congress has expressly manifested a clear intent to displace state law. In addition, respondents maintain that the refusal of the States to accept the FCC-set depreciation schedules and rules will frustrate the federal policy of increasing competition in the industry, and thus that state regulation "stands as an obstacle to the accomplishment and execution of the full purposes and objectives of Congress." In our view, the jurisdictional limitations placed on the FCC by 152(b), coupled with the fact that the Act provides for a "separations" proceeding to determine the portions of a single asset that are used for interstate and intrastate service, 47 U.S.C. 410(c), answer both pre-emption theories. </s> The critical question in any pre-emption analysis is always whether Congress intended that federal regulation supersede state law. Rice v. Santa Fe Elevator Corp., supra. The Act itself declares that its purpose is "regulating interstate and foreign commerce in communication by wire and radio so as to make available, so far as possible, to all the people of the United States a rapid, efficient, Nation-wide, and world-wide wire and radio communication service with adequate facilities at reasonable charges . . . ." 47 U.S.C. 151. In order to accomplish this goal, Congress created the FCC to centralize and consolidate the regulatory responsibility that had previously been the province of the Interstate Commerce Commission [476 U.S. 355, 370] and the Federal Radio Commission under predecessor statutes. See generally McKenna, Pre-Emption Under the Communications Act, 37 Fed. Comm. L. J. 1, 12-18 (1985). To this degree, 151 may be read as lending some support to respondents' position that state regulation which frustrates the ability of the FCC to perform its statutory function of ensuring efficient, nationwide phone service may be impliedly barred by the Act. </s> We might be inclined to accept this broad reading of 151 were it not for the express jurisdictional limitations on FCC power contained in 152(b). Again, that section asserts that "nothing in this chapter shall be construed to apply or to give the Commission jurisdiction with respect to (1) charges, classifications, practices, services, facilities, or regulations for or in connection with intrastate communication service . . . ." By its terms, this provision fences off from FCC reach or regulation intrastate matters - indeed, including matters "in connection with" intrastate service. Moreover, the language with which it does so is certainly as sweeping as the wording of the provision declaring the purpose of the Act and the role of the FCC. </s> In interpreting 151 and 152(b), we are guided by the familiar rule of construction that, where possible, provisions of a statute should be read so as not to create a conflict. Washington Market Co. v. Hoffman, 101 U.S. 112 (1879). We agree with petitioners that the sections are naturally reconciled to define a national goal of the creation of a rapid and efficient phone service, and to enact a dual regulatory system to achieve that goal. Moreover, were we to find the sections to be in conflict, we would be disinclined to favor the provision declaring a general statutory purpose, as opposed to the provision which defines the jurisdictional reach of the agency formed to implement that purpose. </s> Respondents advance a number of arguments to counter the view that 152(b) forbids the FCC to prescribe depreciation [476 U.S. 355, 371] practices and charges in the context of ratemaking for intrastate service. We address each in turn. </s> A </s> Respondents assert that the legislative history of 152(b), as well as the structure of the Act, shows that "charges" and "classifications" refer only to "customer charges," not depreciation charges, and thus that 152(b) does not purport to limit the FCC power to regulate depreciation. They seek to support this narrow reading of 152(b) by noting that the words "charges," "classifications," "practices," and "regulations" appear throughout the Act in contexts where it is clear that what is meant is charges which relate directly to carriers' rate and service relationships with their customers, rather than depreciation or accounting charges. See 201-205. Reading the sections in pari materia, we are told, makes it apparent that Congress was concerned in 152(b) with preserving state autonomy over the rates charged by carriers for specific services, not over depreciation. According to respondents, this reading is bolstered by the legislative history of the section, which reveals that the provision was proposed by state regulators in reaction to this Court's decision in the so-called Shreveport Rate Case, Houston, E. & W. T. R. Co. v. United States, 234 U.S. 342 (1914), which held, among other things, that the Interstate Commerce Commission had the power to order an increase in specific intrastate railroad rates charged to customers in order to avoid discrimination against interstate commerce. "In other words, Section 2(b)(1) was from the outset concerned with protection against federal preemption of the states' setting of individual customer charges for specific intrastate services." Joint Brief 34. </s> We reject this narrow reading of 152(b). "Charges," "classifications," and "practices" are terms often used by accountants, regulators, courts, and commentators to denote depreciation treatment, see, e. g., United Railways & Electric [476 U.S. 355, 372] Co v. West, 280 U.S. 234, 262 (1930); Smith v. Illinois Bell Telephone Co., 282 U.S. 133, 158 (1930); Wheat, The Regulation of Interstate Telephone Rates, 51 Harv. L. Rev. 846, 859 (1938); A. Kahn, Economics of Regulation (1970), and in accordance with the rule of construction that technical terms of art should be interpreted by reference to the trade or industry to which they apply, Corning Glass Works v. Brennan, 417 U.S. 188 (1974), we find that they do embrace depreciation. It is worth noting that the FCC itself, in the very orders underlying this litigation, used "charges" to mean "depreciation charges." E. g., Property Depreciation, 83 F. C. C. 2d, at 275. </s> Nor does the Shreveport Rate Case carry the load that respondents ask of it. In that case, this Court interpreted the constitutional and statutory authority of the Interstate Commerce Commission to include the power to regulate, indeed, set, intrastate rates in order to prevent discrimination against interstate traffic. It is certainly true, as respondents assert, that when Congress was drafting the Communications Act, 152(b) was proposed and supported by the state commissions in reaction to what they perceived to be the evil of excessive federal regulation of intrastate service such as was sanctioned by the Shreveport Rate Case; but we find no authority in the legislative history to support respondents' position that the sole concern of the state commissioners was with "protection against federal preemption of the states' setting of individual customer charges for specific intrastate services." Joint Brief 34. Rather, the legislative history reveals that representatives from the industry and the States were fully aware that what was at stake in the Act were broad powers to regulate, including, but not limited to, the setting of individual rates, and that "[t]he question of an appropriate division between federal and state regulatory power was a dominating controversy in 1934." McKenna, 37 Fed. Comm. L. J., at 2. In other words, while we agree that provisions in both the Senate and House bills were designed [476 U.S. 355, 373] to overrule the Shreveport Rate Case, we are not persuaded that it was anyone's understanding that this "overruling" could or should be accomplished by merely including in the Act one section which forbade the FCC to establish specific rates for certain intrastate services; had this been the intention, it would hardly have been necessary to deny the FCC the jurisdiction over "charges, classifications, practices, services, facilities, or regulations for or in connection with intrastate communication service . . . ." Presumably, it would have sufficed simply to deny the FCC jurisdiction over "rates." In sum, given the breadth of the language of 152(b), and the fact that it contains not only a substantive jurisdictional limitation on the FCC's power, but also a rule of statutory construction ("[N]othing in this chapter shall be construed to apply or to give the Commission jurisdiction with respect to . . . intrastate communication service . . ."), we decline to accept the narrow view urged by respondents, and hold instead that it denies the FCC the power to pre-empt state regulation of depreciation for intrastate ratemaking purposes. </s> B </s> Accordingly, we cannot accept respondents' argument that 152(b) does not control because the plant involved in this case is used interchangeably to provide both interstate and intrastate service, and that even if 152(b) does reserve to the state commissions some authority over "certain aspects" of intrastate communication, it should be "confined to intrastate matters which are `separable from and do not substantially affect' interstate communication." Joint Brief 36. With respect to the present cases, respondents insist that the refusal of the States to employ accurate measures of depreciation will have a severe impact on the interstate communications network because investment in plant will be recovered too slowly or not at all, with the result that new investment will be discouraged to the detriment of the entire network. Numerous decisions of the Courts of Appeals are cited as authority [476 U.S. 355, 374] for the proposition that 152(b) applies as a jurisdictional bar to FCC pre-emptive action only when two factors are present; first, when the matter to be regulated is purely local and second, when interstate communication is not affected by the state regulation which the FCC would seek to pre-empt. E. g., North Carolina Utilities Comm'n v. FCC, 537 F.2d 787 (CA4), cert. denied, 429 U.S. 1027 (1976); North Carolina Utilities Comm'n v. FCC, 552 F.2d 1036 (CA4), cert. denied, 434 U.S. 874 (1977); Puerto Rico Telephone Co. v. FCC, 553 F.2d 694 (CA1 1977); New York Telephone Co. v. FCC, 631 F.2d 1059 (CA2 1980). </s> The short answer to this argument is that it misrepresents the statutory scheme and the basis and test for pre-emption. While it is certainly true, and a basic underpinning of our federal system, that state regulation will be displaced to the extent that it stands as an obstacle to the accomplishment and execution of the full purposes and objectives of Congress, Hines, 312 U.S., at 67 , it is also true that a federal agency may pre-empt state law only when and if it is acting within the scope of its congressionally delegated authority. This is true for at least two reasons. First, an agency literally has no power to act, let alone pre-empt the validly enacted legislation of a sovereign State, unless and until Congress confers power upon it. Second, the best way of determining whether Congress intended the regulations of an administrative agency to displace state law is to examine the nature and scope of the authority granted by Congress to the agency. Section 152(b) constitutes, as we have explained above, a congressional denial of power to the FCC to require state commissions to follow FCC depreciation practices for intrastate ratemaking purposes. Thus, we simply cannot accept an argument that the FCC may nevertheless take action which it thinks will best effectuate a federal policy. An agency may not confer power upon itself. To permit an agency to expand its power in the face of a congressional limitation on its jurisdiction would be to grant to the agency [476 U.S. 355, 375] power to override Congress. This we are both unwilling and unable to do. </s> Moreover, we reject the intimation - the position is not strongly pressed - that the FCC cannot help but pre-empt state depreciation regulation of joint plant if it is to fulfill its statutory obligation and determine depreciation for plant used to provide interstate service, i. e., that it makes no sense within the context of the Act to depreciate one piece of property two ways. The Communications Act not only establishes dual state and federal regulation of telephone service; it also recognizes that jurisdictional tensions may arise as a result of the fact that interstate and intrastate service are provided by a single integrated system. Thus, the Act itself establishes a process designed to resolve what is known as "jurisdictional separations" matters, by which process it may be determined what portion of an asset is employed to produce or deliver interstate as opposed to intrastate service. 47 U.S.C. 221(c), 410(c). Because the separations process literally separates costs such as taxes and operating expenses between interstate and intrastate service, it facilitates the creation or recognition of distinct spheres of regulation. See Smith v. Illinois Bell Telephone Co., 282 U.S. 133 (1930). As respondents concede, and as the Court of Appeals itself acknowledged, 737 F.2d, at 396, it is certainly possible to apply different rates and methods of depreciation to plant once the correct allocation between interstate and intrastate use has been made, 4 Brief for Respondent [476 U.S. 355, 376] GTE 36, just as it is possible to determine that, for example, 75% of an employee's time is devoted to the production of intrastate service, and only one quarter to interstate service, and to allocate the cost of that employee accordingly. Respondents maintain that if the FCC and the States apply different depreciation practices to the same property, then the "whole purpose of depreciation, which is to match depreciation charges of the equipment with the revenues generated by its use," will be frustrated. Ibid. But this is true and a concern only to the degree that the principles, judgments, and considerations that underlie depreciation rules reflect only "real world" facts, rather than choices made by regulators partially on the basis of fact and partially on the basis of such factors as the perceived need to improve the industry's cash flow, spur investment, subsidize one class of customer, or any other policy factor. What is really troubling respondents, of course, is their sense that state regulators will not allow them sufficient revenues. While we do not deprecate this concern, 152(b) precludes both the FCC and this Court from providing the relief sought. As we so often admonish, only Congress can rewrite this statute. </s> C </s> We also reject respondents' argument that 220, which deals specifically 5 and expressly with depreciation, requires [476 U.S. 355, 377] automatic pre-emption of all state regulation respecting depreciation. As noted above, 220 directs the FCC to prescribe the classes of property for which depreciation charges may be included under operating expenses, and prohibits carriers from departing from FCC-set regulations respecting depreciation. While it is, no doubt, possible to find some support in the broad language of the section for respondents' position, we do not find the meaning of the section so unambiguous or straightforward as to override the command of 152(b) that "nothing in this chapter shall be construed to apply or to give the Commission jurisdiction" over intrastate service. We note, for example, that a very strict reading of 220 - which is what respondents urge and upon which they ultimately rely - is simply untenable. There can be no dispute, for example, regarding the fact that taxing authorities of the Federal Government are entitled to require the carriers to employ, for tax purposes, depreciation practices and schedules different from those which might be ordered by the FCC for interstate ratemaking purposes. We are advised by petitioners that carriers do, as a routine matter, keep "separate" books in this connection. Were respondents' reading of 220 correct, this practice would violate the Act, and taxing authorities would be compelled to compute taxation on the basis of depreciation schedules employed by the FCC for ratemaking purposes. Moreover, despite the sweeping language of 220, nowhere does it even allude to, let alone expressly refer to, depreciation as a component of state ratemaking. Nor is the word "pre-emption" used. </s> It is thus at least possible, as some petitioners argue, that the section was intended to do no more than spell out the authority of the FCC over depreciation in the context of interstate regulation. It is similarly plausible, as other [476 U.S. 355, 378] petitioners contend, that the section, which is captioned "Accounts, records, and memoranda," was addressed to the plenary authority of the FCC to dictate how the carriers' books would be kept for the purposes of financial reporting, in order to ensure that investors and regulators would be presented with an accurate picture of the financial health of the carriers. In any event, we need not, in order to decide these cases, define fully the scope of the section, and we hold only that 220 does not operate to pre-empt state depreciation regulation for intrastate ratemaking purposes. 6 </s> [476 U.S. 355, 379] </s> Like many statutes, the Act contains some internal inconsistencies, vague language, and areas of uncertainty. It is not a perfect puzzle into which all the pieces fit. Thus, it is with the recognition that there are not crisp answers to all of the contentions of either party that we conclude that 152(b) represents a bar to federal pre-emption of state regulation over depreciation of dual jurisdiction property for intrastate ratemaking purposes. </s> For the reasons stated above, the judgment of the Court of Appeals for the Fourth Circuit is reversed, and the cases are remanded for further proceedings consistent with this opinion. </s> It is so ordered. </s> THE CHIEF JUSTICE and JUSTICE BLACKMUN dissent. </s> JUSTICE POWELL and JUSTICE O'CONNOR took no part in the consideration or decision of these cases. </s> Footnotes [Footnote 1 Exclusive jurisdiction over final FCC orders lies with the courts of appeals. 28 U.S.C. 2342(1). </s> [Footnote 2 We originally postponed jurisdiction in No. 84-871, which came to us by way of appeal, rather than certiorari. A potential jurisdictional issue in that case arose as a result of the contention of the Government and the telephone companies that an appeal did not lie under 28 U.S.C. 1254(2) because the decision of the Court of Appeals did not expressly strike down any particular state ratemaking order. </s> We need not address or resolve whether an appeal is proper in No. 84-871. The Louisiana Public Service Commission has asked that its jurisdictional statement be treated as a petition for a writ of certiorari, and we clearly have certiorari jurisdiction under 28 U.S.C. 1254(1) to decide the case. We have, moreover, granted the petitions for certiorari in [476 U.S. 355, 364] Nos. 84-889, 84-1054, and 84-1069, 472 U.S. 1025 (1985). In accordance with our customary practice, see, e. g., Renton v. Playtime Theatres, Inc., 475 U.S. 41, 43 -44, n. 1 (1986), we dismiss the appeal in No. 84-871 and, treating the papers as a petition for certiorari, grant the writ of certiorari. </s> [Footnote 3 Petitioners suggest that overreaching by the FCC has resulted in a situation where one person has a foot on the accelerator of a car while another person is attempting to steer. Tr. of Oral Arg. 9, 21. Although it is not evident from the metaphor whether petitioners' position is that the hand or the foot belongs to the FCC - whether, in other words, the FCC has stepped on the States' authority, or, heavy-handedly grabbed the wheel - the notion is that it is the States' responsibility under the Act to value property and to ascertain a rate base, and that it is inconsistent to confer depreciation authority - which is, according to the States, integrally bound up with valuation considerations and the determination of the rate base - on the FCC. </s> Respondents assert that this is "the case of two hands on the steering wheel," id., at 40, by which, presumably, they mean to suggest that the hands belong to two different entities. Their position is that it makes no sense to have both the FCC and the state regulators depreciating the same piece of plant in two different ways. </s> [Footnote 4 Thus, these cases are readily distinguishable from those in which FCC pre-emption of state regulation was upheld where it was not possible to separate the interstate and the intrastate components of the asserted FCC regulation. See, e. g., North Carolina Utilities Comm'n v. FCC, 537 F.2d 787 (CA4), cert. denied, 429 U.S. 1027 (1976), and North Carolina Utilities Comm'n v. FCC, 552 F.2d 1036 (CA4), cert. denied, 434 U.S. 874 (1977) (Where FCC acted within its authority to permit subscribers to provide their own telephones, pre-emption of inconsistent state regulation prohibiting subscribers from connecting their own phones unless used [476 U.S. 355, 376] exclusively in interstate service upheld since state regulation would negate the federal tariff). </s> [Footnote 5 Respondents maintain that since "[s]pecific terms prevail over the general," Fourco Glass Co. v. Transmirra Products Corp., 353 U.S. 222, 228 (1957), and 220 deals specifically with depreciation, the general language of 152(b) should not be read to bar FCC regulation of depreciation. The rule of construction cited by respondents is simply inapplicable in the context of these cases. First, 152(b) deals with jurisdiction, and thus addresses a different subject than 220, which respondents correctly characterize as involving depreciation. Thus, while 152(b) may be more "general' than 220, the sections are not general or specific with respect to each other. Second, 152(b) not only imposes jurisdictional limits on the power of a federal agency, but also, by stating that nothing in the Act shall [476 U.S. 355, 377] be construed to extend FCC jurisdiction to intrastate service, provides its own rule of statutory construction. In other words, the Act itself, in 152(b), presents its own specific instructions regarding the correct approach to the statute which applies to how we should read 220. </s> [Footnote 6 Respondents insist that the legislative history of the section proves that it was intended to provide the FCC with power to pre-empt state regulation over depreciation practices. They rely in particular on the fact that Congress, in drafting 220, reenacted, almost verbatim, 20(5) of the Interstate Commerce Act, 49 U.S.C. App. 20(5), which, respondents contend, had already been construed to require the ICC to prescribe depreciation for both telephone companies and railroads. Telephone and Railroad Depreciation Charges, 118 I. C. C. 295 (1926). Respondents note further that during hearings on an early version of the Act, state commissioners testifying before Congress argued that reenactment of 20(5) and other provisions would permit the FCC to usurp "[a]ll matters of depreciation . . . without regard to the action upon the same subject by the State Commission." Hearings on S. 6 before the Senate Committee on Interstate Commerce, 71st Cong., 2d Sess., pt. 15, p. 2243 (1930) (resolution of Montana Commission). They also note that state regulators did manage - initially - to persuade the drafters of the Act to add a new 220(j), which expressly permitted the States to prescribe their own depreciation practices for the purposes of determining intrastate rates. The act that this section was rejected by the Conference Committee, despite the strong support of the States, we are told, is strong evidence that Congress intended to preserve in the FCC the broad power over depreciation that had been conferred on the ICC. </s> We are not persuaded. First, 20(5) of the Interstate Commerce Act had never been interpreted to prohibit state commissioners from requiring carriers to keep additional records for the purposes of intrastate ratemaking. As the FCC itself noted in its 1982 order denying preemption, Uniform System of Accounts, 89 F. C. C. 2d 1094, 1101, it was only in dictum that the ICC suggested that it possessed authority under 20(5) to prescribe depreciation for all property that might be used in interstate commerce, and that dictum did not even purport to address [476 U.S. 355, 379] whether federal prescription of depreciation would pre-empt the States from prescribing additional depreciation practices for its regulatory purposes. Moreover, that is how this Court read the ICC order. Smith v. Illinois Bell Telephone Co., 282 U.S. 133, 159 (1930). And in Northwestern Bell Telephone Co. v. Nebraska State Railway Comm'n, 297 U.S. 471, 478 (1936), we expressly left open whether an ICC prescription, if issued, would be pre-emptive of state regulation. </s> Moreover, while it is true that Congress rejected the state-proposed 220(j), again, as the FCC noted in its order denying pre-emption, respondents make too much of too little. "The record of the Congressional hearings indicates little more than that the supporters of original section 220(j) believed that the provision was desirable to resolve a previous unsettled point of law under the predecessor provision of the Interstate Commerce Act. . . . At most, this legislative history indicates that the 1934 Congress was not sure whether reenactment of the Interstate Commerce Act language would or would not preempt state accounting and depreciation rules and did not choose to resolve the question at that time." 89 F. C. C. 2d, at 1103, 1106. </s> [476 U.S. 355, 380]

United States Supreme Court TRANSPORTATION UNION v. LONG ISLAND R. CO.(1982) No. 80-1925 Argued: January 20, 1982Decided: March 24, 1982 </s> Respondent Railroad, formerly under private ownership, was acquired by New York State in 1966 and is engaged in interstate commerce. Some 13 years later, petitioner Union, representing the Railroad's employees, and the Railroad failed to reach an agreement after conducting collective-bargaining negotiations pursuant to the Railway Labor Act, and mediation efforts also failed to produce agreement. This triggered a 30-day cooling-off period under that Act, at the expiration of which the Act permits a union to resort to a strike. Anticipating that New York would challenge the Railway Labor Act's applicability to the Railroad, the Union sued in Federal District Court, seeking a declaratory judgment that the labor dispute was covered by that Act and not the Taylor Law, the New York law prohibiting strikes by public employees. The Railroad then filed suit in a New York state court, seeking to enjoin an impending strike by the Union under the Taylor Law. Before the state court acted, the Federal District Court held that the Railroad was subject to the Railway Labor Act and that that Act, rather than the Taylor Law, was applicable. The District Court rejected the Railroad's argument that application of the Railway Labor Act to a state-owned railroad was inconsistent with National League of Cities v. Usery, 426 U.S. 833 , wherein it was held that Congress could not impose the requirements of the Fair Labor Standards Act on state and local governments. The Court of Appeals reversed, holding that the operation of the Railroad was an integral state governmental function, that the Railway Labor Act displaced "essential governmental decisions" involving that function, and that the State's interest in controlling the operation of the Railroad outweighed the federal interest in having the federal Act apply. </s> Held: </s> Application to a state-owned railroad of Congress' acknowledged authority to regulate labor relations in the railroad industry does not so impair a state's ability to carry out its constitutionally preserved sovereign function as to come in conflict with the Tenth Amendment. Pp. 682-690. </s> (a) One of the requirements under National League of Cities, supra, at 852, for a successful claim that congressional commerce power is invalid is that a state's compliance with federal law would directly impair its ability to "structure integral operations in areas of [455 U.S. 678, 679] traditional governmental functions." Operation of a railroad engaged in interstate commerce is clearly not an integral part of traditional state activities generally immune from federal regulation. And federal regulation of state-owned railroads, whether freight or passenger, simply does not impair a state's ability to function as a state. Pp. 683-686. </s> (b) To allow individual states, by acquiring railroads, to circumvent the federal system of railroad collective bargaining, or any of the other elements of federal regulation of railroads, would destroy the longstanding and comprehensive uniform scheme of federal regulation of railroads and their labor relations thought essential by Congress and would endanger the efficient operation of the interstate rail system. Moreover, a state acquiring a railroad does so knowing that the railroad is subject to such scheme of federal regulation. Here, New York knew of and accepted federal regulation, and, in fact had operated under it for 13 years without claiming any impairment of its traditional sovereignty. Pp. 686-690. </s> 634 F.2d 19, reversed and remanded. </s> BURGER, C. J., delivered the opinion for a unanimous Court. </s> Edward D. Friedman argued the cause for petitioner. With him on the briefs were Robert Hart and Harold A. Ross. </s> Lewis B. Kaden argued the cause for respondents. With him on the brief were Mary P. Bass and Thomas M. Taranto. </s> Joshua I. Schwartz argued the cause for the United States as amicus curiae urging reversal. With him on the brief were Solicitor General Lee, Deputy Solicitor General Geller, T. Timothy Ryan, Jr., Lois G. Williams, Joseph Woodward, and Ronald M. Etters. * </s> [Footnote * J. Albert Woll, Laurence Gold, and George Kaufmann filed a brief for the American Federation of Labor and Congress of Industrial Organizations as amicus curiae urging reversal. Briefs of amici curiae urging affirmance were filed by William T. Coleman, Jr., Donald T. Bliss, and Zoe E. Baird for the American Public Transit Association; by Henry W. Underhill, Jr., Benjamin L. Brown, John Dekker, James B. Brennan, George Agnost, Roger F. Cutler, Lee E. Holt, George F. Knox, Jr., Walter M. Powell, Allen G. Schwartz, J. Lamar Shelley, John W. Witt, Max P. Zall, Conard B. Mattox, Jr., and [455 U.S. 678, 680] Charles S. Rhyne for the National Institute of Municipal Law Officers; and by Ross D. Davis for the National League of Cities. Martin L. Barr, Jerome Thier, and Anthony Cagliostro filed a brief for the New York State Public Employment Relations Board as amicus curiae. [455 U.S. 678, 680] </s> CHIEF JUSTICE BURGER delivered the opinion of the Court. </s> We granted certiorari to decide whether the Tenth Amendment prohibits application of the Railway Labor Act to a state-owned railroad engaged in interstate commerce. </s> I </s> The Long Island Rail Road (the Railroad), incorporated in 1834, provides both freight and passenger service to Long Island. 1 In 1966, after 132 years of private ownership and a period of steadily growing operating deficits, the Railroad was acquired by New York State through the Metropolitan Transportation Authority. </s> Thereafter, the Railroad continued to conduct collective bargaining pursuant to the procedures of the Railway Labor Act. 44 Stat. (part 2) 577, as amended, 45 U.S.C. 151 et seq. The United Transportation Union, petitioner in this case, represents the Railroad's conductors, brakemen, switchmen, firemen, motormen, collectors, and related train crew employees. In 1978, the Union notified the Railroad that it desired to commence negotiations and the parties began collective bargaining as provided by the Act. They failed to reach agreement during preliminary negotiations [455 U.S. 678, 681] and, in April 1979, the Railroad and the Union jointly petitioned the National Mediation Board for assistance. Seven months of mediation efforts by the Board failed to produce agreement, however, and the Board released the case from mediation. This triggered a 30-day cooling-off period under the Act; absent Presidential intervention, the Act permits the parties to resort to economic weapons, including strikes, upon the expiration of the cooling-off period. </s> The Union anticipated the State's challenge to the applicability of the Act to the Railroad; on December 7, 1979, one day before the expiration of the 30-day cooling-off period, it sued in federal court seeking a declaratory judgment that the dispute was covered by the Railway Labor Act and not the Taylor Law, New York's law governing public employee collective bargaining and prohibiting strikes by public employees. 2 The next day, the Union commenced what was to be a brief strike. Pursuant to the Act, the President of the United States intervened on December 14, thus imposing an additional 60-day cooling-off period which was to expire on February 13, 1980. 3 A few days before the expiration of the 60-day period, the State converted the Railroad from a private stock corporation to a public benefit corporation, apparently believing that the change would eliminate Railway Labor Act coverage and bring the employees under the umbrella of the Taylor Law. </s> The Railroad then filed suit in state court on February 13, 1980, seeking to enjoin the impending strike under the Taylor Law. Before the state court acted, the United States District Court for the Eastern District of New York heard and decided the Union's suit for declaratory relief, holding that the Railroad was a carrier subject to the Railway Labor Act, [455 U.S. 678, 682] that the Act, rather than the Taylor Law, was applicable, and that declaratory relief was in order. 509 F. Supp. 1300 (1980). </s> In a footnote the District Court rejected the argument now presented to this Court that application of the Act to a state-owned railroad was inconsistent with National League of Cities v. Usery, 426 U.S. 833 (1976). 509 F. Supp., at 1306, n. 4. The District Court noted that in National League of Cities, the Supreme Court "specifically held that the operation of a railroad in interstate commerce is not an integral part of governmental activity" and affirmed the rulings in California v. Taylor, 353 U.S. 553 (1957), and United States v. California, 297 U.S. 175 (1936), which held that the Railway Labor Act and the Safety Appliance Act could be applied to state-owned railroads. 509 F. Supp., at 1306, n. 4. </s> The Court of Appeals reversed, holding that the operation of the Railroad was an integral state governmental function and that the federal Act displaced "essential governmental decisions" involving that function. 634 F.2d 19 (CA2 1980). The court applied a balancing approach and held that the State's interest in controlling the operation of its railroad outweighed the federal interest in having the federal Act apply. </s> We granted certiorari, 452 U.S. 960 (1981), and we reverse. </s> II </s> There can be no serious question that, as both the District Court and the Court of Appeals held, the Railroad is subject to the terms of the Railway Labor Act, 4 or that the Commerce [455 U.S. 678, 683] Clause grants Congress the plenary authority to regulate labor relations in the railroad industry in general. 5 This dispute concerns the application of this acknowledged congressional authority to a state-owned railroad; we must decide whether that application so impairs the ability of the State to carry out its constitutionally preserved sovereign function as to come into conflict with the Tenth Amendment. 6 </s> A </s> The Railroad claims immunity from the Railway Labor Act, relying on National League of Cities v. Usery, supra, where we held that Congress could not impose the requirements of the Fair Labor Standards Act on state and local governments. 7 The Fair Labor Standards Act generally requires covered employers to pay employees no less than a minimum hourly wage and to pay them at one and one-half times their regular hourly rate for all time worked in any workweek in excess of 40 hours. Prior to 1974, the Act excluded most governmental employers. However in that year Congress amended the law to extend its provisions in somewhat modified form to "public agencies," including state governments and their political subdivisions. 8 We held that the 1974 amendments were invalid "insofar as [they] operate to directly displace the States' freedom to structure integral operations in areas of traditional governmental functions . . . ." 426 U.S., at 852 . (Emphasis supplied.) [455 U.S. 678, 684] </s> Only recently we had occasion to apply the National League of Cities doctrine in Hodel v. Virginia Surface Mining & Reclamation Assn., Inc., 452 U.S. 264 (1981). In holding that the Surface Mining and Reclamation Act of 1977, 30 U.S.C. 1201 et seq. (1976 ed., Supp. IV), did not violate the Tenth Amendment by usurping state authority over land-use regulations, we set out a three-prong test to be applied in evaluating claims under National League of Cities: </s> "[I]n order to succeed, a claim that congressional commerce power legislation is invalid under the reasoning of National League of Cities must satisfy each of three requirements. First, there must be a showing that the challenged regulation regulates the `States as States.' [426 U.S.], at 854. Second, the federal regulation must address matters that are indisputably `attributes of state sovereignty.' Id., at 845. And third, it must be apparent that the States' compliance with the federal law would directly impair their ability `to structure integral operations in areas of traditional governmental functions.' Id., at 852." 452 U.S., at 287 -288. 9 </s> The key prong of the National League of Cities test applicable to this case is the third one, which examines whether "the States' compliance with the federal law would directly impair their ability `to structure integral operations in areas of traditional governmental functions.'" </s> B </s> The determination of whether a federal law impairs a state's authority with respect to "areas of traditional [state] functions" may at times be a difficult one. In this case, however, we do not write on a clean slate. As the District Court [455 U.S. 678, 685] noted, in National League of Cities we explicitly reaffirmed our holding in United States v. California, 297 U.S. 175 (1936), and in two other cases involving federal regulation of railroads: 10 </s> "The holding of United States v. California . . . is quite consistent with our holding today. There California's activity to which the congressional command was directed was not in an area that the States have regarded as integral parts of their governmental activities. It was, on the contrary, the operation of a railroad engaged in `common carriage by rail in interstate commerce . . . .' 297 U.S., at 182 ." 426 U.S., at 854 , n. 18. </s> It is thus clear that operation of a railroad engaged in interstate commerce is not an integral part of traditional state activities generally immune from federal regulation under National League of Cities. See also Lafayette v. Louisiana Power & Light Co., 435 U.S. 389, 422 -424 (1978) (concurring opinion). 11 The Long Island is concededly a railroad engaged in interstate commerce. </s> The Court of Appeals undertook to distinguish the three railroad cases discussed in National League of Cities, noting [455 U.S. 678, 686] that they dealt with freight carriers rather than primarily passenger railroads such as the Long Island. That distinction does not warrant a different result, however. Operation of passenger railroads, no less than operation of freight railroads, has traditionally been a function of private industry, not state or local governments. 12 It is certainly true that some passenger railroads have come under state control in recent years, as have several freight lines, but that does not alter the historical reality that the operation of railroads is not among the functions traditionally performed by state and local governments. Federal regulation of state-owned railroads simply does not impair a state's ability to function as a state. </s> III </s> In concluding that the operation of a passenger railroad is not among those governmental functions generally immune from federal regulation under National League of Cities, we are not merely following dicta of that decision or looking only to the past to determine what is "traditional." In essence, National League of Cities held that under most circumstances federal power to regulate commerce could not be exercised in such a manner as to undermine the role of the states in our federal system. This Court's emphasis on traditional governmental functions and traditional aspects of state sovereignty was not meant to impose a static historical view of state functions generally immune from federal regulation. Rather it was meant to require an inquiry into whether the federal regulation affects basic state prerogatives [455 U.S. 678, 687] in such a way as would be likely to hamper the state government's ability to fulfill its role in the Union and endanger its "separate and independent existence." 426 U.S., at 851 . </s> Just as the Federal Government cannot usurp traditional state functions, there is no justification for a rule which would allow the states, by acquiring functions previously performed by the private sector, to erode federal authority in areas traditionally subject to federal statutory regulation. Railroads have been subject to comprehensive federal regulation for nearly a century. 13 The Interstate Commerce Act - the first comprehensive federal regulation of the industry - was passed in 1887. 14 A year earlier we had held that only the Federal Government, not the states, could regulate the interstate rates of railroads. Wabash, St. L. & P. R. Co. v. Illinois, 118 U.S. 557 (1886). The first federal statute dealing with railroad labor relations was the Arbitration Act of 1888; 15 the provisions of that Act were invoked by President Cleveland in reaction to the Pullman strike of 1894. Federal mediation of railroad labor disputes was first provided by the Erdman Act of 1898 16 and strengthened by the Newlands Act of 1913. 17 In 1916, Congress mandated the 8-hour day in the railroad industry. 18 After federal operation of the railroads during World War I, Congress passed the Transportation Act of 1920, 19 which further enhanced federal involvement in [455 U.S. 678, 688] railroad labor relations. Finally, in 1926, Congress passed the Railway Labor Act, which was jointly drafted by representatives of the railroads and the railroad unions. 20 The Act has been amended a number of times since 1926, but its basic structure has remained intact. The Railway Labor Act thus has provided the framework for collective bargaining between all interstate railroads and their employees for the past 56 years. There is no comparable history of longstanding state regulation of railroad collective bargaining or of other aspects of the railroad industry. </s> Moreover, the Federal Government has determined that a uniform regulatory scheme is necessary to the operation of the national rail system. In particular, Congress long ago concluded that federal regulation of railroad labor relations is necessary to prevent disruptions in vital rail service essential to the national economy. A disruption of service on any portion of the interstate railroad system can cause serious problems throughout the system. Congress determined that the most effective means of preventing such disruptions is by way of requiring and facilitating free collective bargaining between railroads and the labor organizations representing their employees. [455 U.S. 678, 689] </s> Rather than absolutely prohibiting strikes, Congress decided to assure equitable settlement of railroad labor disputes, and thus prevent interruption of rail service, by providing mediation and imposing cooling-off periods, thus creating "an almost interminable" collective-bargaining process. Detroit & T. S. L. R. Co. v. Transportation Union, 396 U.S. 142, 149 (1969). "[T]he procedures of the Act are purposely long and drawn out, based on the hope that reason and practical considerations will provide in time an agreement that resolves the dispute." Railway & Steamship Clerks v. Florida E. C. R. Co., 384 U.S. 238, 246 (1966). 21 To allow individual states, by acquiring railroads, to circumvent the federal system of railroad bargaining, or any of the other elements of federal regulation of railroads, would destroy the uniformity thought essential by Congress and would endanger the efficient operation of the interstate rail system. </s> In addition, a state acquiring a railroad does so knowing that the railroad is subject to this longstanding and comprehensive scheme of federal regulation of its operations and its [455 U.S. 678, 690] labor relations. See California v. Taylor, 353 U.S., at 568 . Here the State acquired the Railroad with full awareness that it was subject to federal regulation under the Railway Labor Act. At the time of the acquisition, a spokesman stated: </s> "We just have a new owner and a new board of directors. We're under the Railway Labor Act, just as we've always been. The people do not become state employes, they remain railroad employes and retain all the benefits and drawbacks of that." </s> The parties proceeded along those premises for the next 13 years, with both sides making use of the procedures available under the Railway Labor Act, and with Railroad employees covered by the Railroad Retirement Act, the Railroad Unemployment Insurance Act, and the Federal Employers' Liability Act. Conversely, Railroad employees were not eligible for any of the retirement, insurance, or job security benefits of state employees. </s> The State knew of and accepted the federal regulation; moreover, it operated under federal regulation for 13 years without claiming any impairment of its traditional sovereignty. Indeed, the State's initial response to this suit was to acknowledge that the Railway Labor Act applied. It can thus hardly be maintained that application of the Act to the State's operation of the Railroad is likely to impair the State's ability to fulfill its role in the Union or to endanger the "separate and independent existence" referred to in National League of Cities v. Usery, 426 U.S., at 851 . </s> Accordingly, the judgment of the Court of Appeals is reversed, and the case is remanded for proceedings consistent with this opinion. </s> Reversed and remanded. </s> Footnotes [Footnote 1 The Railroad's western terminus is Pennsylvania Station in Manhattan; there it connects with lines of railroads which serve other parts of the country. The eastern terminus is at Montauk Point, at the tip of Long Island, but most of its main and branch line traffic originates in the western half of Long Island, in the boroughs of Brooklyn and Queens, and in the suburbs of Nassau and western Suffolk Counties. By far the bulk of the Railroad's business is carrying commuters between Long Island's suburban communities and their places of employment in New York City. However, the Railroad supplies Long Island's only freight service; it does a significant volume of freight business, with 1979 freight revenue of over $12 million. </s> [Footnote 2 On January 17, 1980, the Railroad responded to the Union's suit for declaratory judgment by asserting that no justiciable controversy existed because the Railroad did not believe the Taylor Law applied and therefore had no intention to invoke its provisions. </s> [Footnote 3 The Presidential intervention also triggered the creation of a Presidential Emergency Board to investigate and report on the matter. </s> [Footnote 4 The Railroad acknowledges in its brief that its freight service, which is admittedly engaged in interstate commerce, "eliminat[es] any dispute regarding its coverage by the RLA." Brief for Respondents 23. In the Court of Appeals, the Railroad maintained that Congress did not intend the Act to apply to state-owned passenger railroads. 634 F.2d, at 23. Whatever merit that claim may have had, it is no longer tenable. After that court rendered its decision, Congress amended the Act to add 9a, 95 Stat. 681, 45 U.S.C. 159a (1976 ed., Supp. V). Section 9a [455 U.S. 678, 683] establishes special procedures to be applied to any dispute "between a publicly funded and publicly operated carrier providing rail commuter service . . . and its employees." </s> [Footnote 5 See Texas & N. O. R. Co. v. Railway & Steamship Clerks, 281 U.S. 548 (1930). </s> [Footnote 6 The Tenth Amendment provides: "The powers not delegated to the United States by the Constitution, nor prohibited by it to the States, are reserved to the States respectively, or to the people." </s> [Footnote 7 The Fair Labor Standards Act is codified at 29 U.S.C. 201 et seq. </s> [Footnote 8 88 Stat. 55. The 1974 amendments modified several of the definitions contained in 29 U.S.C. 203. </s> [Footnote 9 However, even if these three requirements are met, the federal statute is not automatically unconstitutional under the Tenth Amendment. The federal interest may still be so great as to "justif[y] state submission." 452 U.S., at 288 , n. 29. Cf. Case v. Bowles, 327 U.S. 92 (1946). </s> [Footnote 10 Parden v. Terminal R. Co., 377 U.S. 184 (1964); California v. Taylor, 353 U.S. 553 (1957). </s> [Footnote 11 "[T]here [is] certainly no question that a State's operation of a common carrier, even without profit and as a `public function,' would be subject to federal regulation under the Commerce Clause. . . . . . . . . "The National League of Cities opinion focused its delineation of the `attributes of sovereignty' . . . on a determination as to whether the State's interest involved `functions essential to separate and independent existence.' [426 U.S., at 845, quoting Coyle v. Oklahoma, 221 U.S. 559, 580 (1911). It should be evident, I would think, that the running of a business enterprise is not an integral operation in the area of traditional government functions. . . . Indeed, the reaffirmance of the holding in United States v. California, supra, by National League of Cities, supra, at 854, n. 18, strongly supports this understanding." 435 U.S., at 422 -424 (BURGER, C. J., concurring in part and in judgment). </s> [Footnote 12 At the time of this suit, there were 17 commuter railroads in the United States; only 2 of those railroads were publicly owned and operated, both by the Metropolitan Transportation Authority. American Public Transit Assn., Transit Fact Book 74-75 (1979). Those two public railroads - the Long Island and the Staten Island - were originally private railroads. The Staten Island was founded in 1899 and acquired by the Metropolitan Transportation Authority in 1971. Moody's Transportation Manual 97 (1979). </s> [Footnote 13 The initial exercise of the federal authority over railroads occurred before the completion of the first transcontinental railroad. See the Pacific Railroad Act of 1862. 12 Stat. 489. Of course, federal regulation of interstate transportation goes back many more years than that. See the 1793 Act regulating coastal trade discussed in Gibbons v. Ogden, 9 Wheat. 1 (1824). </s> [Footnote 14 24 Stat. 379. </s> [Footnote 15 Ch. 1063, 25 Stat. 501. </s> [Footnote 16 30 Stat. 424. </s> [Footnote 17 Ch. 6, 38 Stat. 103. </s> [Footnote 18 Adamson Act of 1916, ch. 436, 39 Stat. 721. </s> [Footnote 19 41 Stat. 456. </s> [Footnote 20 Railway Labor Act of 1926, 44 Stat. (part 2) 577, as amended, 45 U.S.C. 151 et seq. The purposes of the Railway Labor Act are set out in 2 of the Act, 45 U.S.C. 151a: "The purposes of the chapter are: (1) To avoid any interruption to commerce or to the operation of any carrier engaged therein; (2) to forbid any limitation upon freedom of association among employees or any denial, as a condition of employment or otherwise, of the right of employees to join a labor organization; (3) to provide for the complete independence of carriers and of employees in the matter of self-organization to carry out the purposes of this chapter; (4) to provide for the prompt and orderly settlement of all disputes concerning rates of pay, rules, or working conditions; (5) to provide for the prompt and orderly settlement of all disputes growing out of grievances or out of the interpretation or application of agreements covering rates of pay, rules, or working conditions." </s> [Footnote 21 Under the recent amendments to the Act, adding a new 9a, 95 Stat. 68, 45 U.S.C. 159a (1976 ed., Supp. V), the process has been made even more "long and drawn out" insofar as it applies to publicly owned commuter rail lines such as the Long Island. The law now provides for a "cooling-off period" of up to 240 days after failure of mediation. Any party to the dispute, or the Governor of any state through which the rail service operates, may request appointment of a Presidential Emergency Board to investigate and report on the dispute. If the dispute is not settled within 60 days after creation of the Emergency Board, the National Mediation Board must hold a public hearing at which each party must appear and explain any refusal to accept the Emergency Board's recommendations. The law then requires appointment of a second Emergency Board at the request of any party or Governor of an affected state. That Emergency Board must examine the final offers submitted by each party and must determine which is the most reasonable. Finally, if a work stoppage occurs, substantial penalties are provided against the party refusing to accept the offer determined by the Emergency Board to be most reasonable. </s> [455 U.S. 678, 691]

United States Supreme Court O'BRIEN v. SKINNER(1974) No. 72-1058 Argued: November 6, 1973Decided: January 16, 1974 </s> Appellants, who are incarcerated in jail as convicted misdemeanants or pretrial detainees unable to make bail but who are under no voting disability under state law, and who requested but were denied the right to register and vote under mobile registration, absentee voting, or other procedures, brought this action challenging the constitutionality of the New York election laws. The contested statutes allow qualified persons to register and vote by absentee measures if precluded from personally doing so because of illness, physical disability, their duties, occupation, or business, and permit absentee voting (but not registration) if the voters are vacationing away from their residence on election day or are confined in a veterans' hospital. The state trial and intermediate appellate courts initially viewed appellants' confinement as physical disability and held that they were entitled to vote by absentee ballot. The New York Court of Appeals reversed that determination, concluding that the disability imposed by incarceration did not come within the terms of the statute. Held: The challenged provisions as thus construed, which raise no question of disenfranchisement of persons convicted of criminal conduct and permit incarcerated persons to register and vote by absentee means if confined in a county where they are not residents, violate the Equal Protection Clause of the Fourteenth Amendment, as they arbitrarily discriminate between categories of qualified voters. Pp. 528-531. </s> 31 N. Y. 2d 317, 291 N. E. 2d 134, reversed and remanded. </s> BURGER, C. J., delivered the opinion of the Court, in which DOUGLAS, BRENNAN, STEWART, WHITE, MARSHALL, and POWELL, JJ., joined. MARSHALL, J., filed a concurring opinion, in which DOUGLAS and BRENNAN, JJ., joined, post, p. 531. BLACKMUN, J., filed a dissenting opinion, in which REHNQUIST, J., joined, post, p. 535. </s> William D. Eggers argued the cause for appellants. With him on the brief were David N. Kunkel, Ruth B. Rosenberg, Burt Neuborne, and Melvin L. Wulf. [414 U.S. 524, 525] </s> Michael K. Consedine argued the cause and filed a brief for appellees. * </s> [Footnote * Louis J. Lefkowitz, pro se, Attorney General of New York, Ruth Kessler Toch, Solicitor General, and William J. Kogan, Assistant Attorney General, filed a brief for the Attorney General of New York as amicus curiae urging affirmance. </s> MR. CHIEF JUSTICE BURGER delivered the opinion of the Court. </s> This is an appeal from the judgment of the Court of Appeals of New York taken by 72 persons who were at the time of the trial of the original action, detained in confinement. Some are simply detained awaiting trial, others are confined pursuant to misdemeanor convictions; none is subject to any voting disability under the laws of New York. </s> The Court of Appeals of New York, 1 by divided vote, held that failure of the State to provide appellants with any means of registering and voting was not a violation of the New York statutes and not a denial of any federal or state constitutional right. </s> Before the November 1972 general elections in New York, the appellants applied to the authorities of Monroe County, including the Board of Elections, to establish a mobile voters registration unit in the county jail in compliance with a mobile registration procedure which had been employed in some county jails in New York State. This request was denied and appellants then requested that they be either transported to polling places under appropriate restrictions or, in the alternative, that they be permitted to register and vote under New York's absentee voting provisions which, essentially, provide that qualified voters are allowed to register and vote by absentee measures if they are unable to appear personally because of illness or physical disability, or because of [414 U.S. 524, 526] their "duties, occupation or business." The statutes also allow absentee voting, but not registration, if the voter is away from his residence on election day because he is confined in a veterans' hospital or is away on vacation. 2 </s> [414 U.S. 524, 527] The election authorities denied the request, taking the position that they were under no obligation to permit the appellants to register or to vote in person and that inmates did not qualify for absentee voting under the provisions of the New York statutes. </s> The Supreme Court for Monroe County in New York considered the claims presented by the appellants and treated them as a proceeding in the nature of mandamus. The conclusion reached by that court was that the legislature of New York had provided for absentee registration and voting by any voter unable to appear personally because of confinement in an institution (other than a mental institution). The court concluded that the election laws should be construed to apply to an inmate confined in jail and not otherwise disenfranchised since this constituted a "physical disability" in the sense that he was physically disabled from leaving his confinement to go to the polls to vote, and that the statute therefore entitled such persons to vote by absentee ballot. However, the court noted that there was no showing that any of the persons claiming these rights had timely filed all the necessary forms but that this could yet be accomplished in time for voting by absentee ballot in November 1972. The Appellate Division of the Fourth Judicial Department of the Supreme Court of New York on review gave a similar construction to the election laws, stating: </s> "We believe that petitioners, being so confined, are physically disabled from voting and should be permitted to do so by casting absentee ballots." 40 App. Div. 2d 942, 337 N. Y. S. 2d 700 (1972). </s> On appeal to the New York Court of Appeals, however, these holdings were reversed, that court stating: </s> "The right to vote does not protect or insure against those circumstances which render voting impracticable. [414 U.S. 524, 528] The fact of incarceration imposes many other disabilities, some private, others public, of which voting is only one. Under the circumstances, and in view of the Legislature's failure to extend these absentee provisions to others similarly disadvantaged, it hardly seems plausible that petitioners' right to vote has been arbitrarily denied them. It is enough that these handicaps, then, are functions of attendant impracticalities or contingencies, not legal design." 31 N. Y. 2d 317, 320-321, 291 N. E. 2d 134, 136-137. </s> Judge Fuld dissented, being of the view that 117-a and 153-a of the Election Law of New York should be read in the manner announced by the Appellate Division. Judge Burke, joining Judge Fuld, agreed, stating additionally that any construction of the election law precluding appellants from exercising their right to register and vote violated the equal protection guarantees of the Fourteenth Amendment. </s> It is important to note at the outset that the New York election laws here in question do not raise any question of disenfranchisement of a person because of conviction for criminal conduct. As we noted earlier, these appellants are not disabled from voting except by reason of not being able physically - in the very literal sense - to go to the polls on election day or to make the appropriate registration in advance by mail. The New York statutes are silent concerning registration or voting facilities in jails and penal institutions, except as they provide for absentee balloting. If a New York resident eligible to vote is confined in a county jail in a county in which he does not reside, paradoxically, he may secure an absentee ballot and vote and he may also register by mail, presumably because he is "unavoidably absent from [414 U.S. 524, 529] the county of his residence." N. Y. Election Law 117 (1) (b) (1964). 3 </s> Thus, under the New York statutes, two citizens awaiting trial - or even awaiting a decision whether they are to be charged - sitting side by side in the same cell, may receive different treatment as to voting rights. As we have noted, if the citizen is confined in the county of his legal residence he cannot vote by absentee ballot as can his cellmate whose residence is in the adjoining county. Although neither is under any legal bar to voting, one of them can vote by absentee ballot and the other cannot. </s> This Court had occasion to examine claims similar to those presented here in McDonald v. Board of Election Comm'rs, 394 U.S. 802 (1969). There a state statute provided for absentee voting by persons "medically incapacitated" and for pretrial detainees who were incarcerated outside their county of residence. Unlike the present case, however, in McDonald "there [was] nothing in the record to show that appellants [were] in fact absolutely prohibited from voting by the State . . .," id., at 808 n. 7, since there was the possibility that the State might furnish some other alternative means of voting. Id., at 808. Essentially the Court's disposition of the claims in McDonald rested on failure of proof. </s> More recently in Goosby v. Osser, 409 U.S. 512 (1973), the Court again considered the problem of inmate voting and concluded that, unlike the voting restrictions in the McDonald case, the statute there in question was an [414 U.S. 524, 530] absolute bar to voting because of a specific provision that "persons confined in a penal institution" were not permitted to vote by absentee ballot. It is clear, therefore, that the appellants here, like the petitioners in Goosby, bring themselves within the precise fact structure that the McDonald holding foreshadowed. </s> New York's election statutes, as construed by its highest court, discriminate between categories of qualified voters in a way that, as applied to pretrial detainees and misdemeanants, is wholly arbitrary. As we have noted, New York extends absentee registration privileges to eligible citizens who are unable to appear personally because of "illness or physical disability," and to citizens required to be outside their counties of residence on normal registration days because of their "duties, occupation or business." In addition, New York extends absentee voting privileges to those voters unable to get to the polls because of illness or physical disability, to those who are inmates of veterans' bureau hospitals, and to those who are absent from their home county on election day either because of "duties, occupation or business" or vacation. Indeed, those held in jail awaiting trial in a county other than their residence are also permitted to register by mail and vote by absentee ballot. Yet, persons confined for the same reason in the county of their residence are completely denied the ballot. The New York statutes, as construed, operate as a restriction which is "so severe as itself to constitute an unconstitutionally onerous burden on the . . . exercise of the franchise." Rosario v. Rockefeller, 410 U.S. 752, 760 (1973). Appellants and others similarly situated are, as we have noted, under no legal disability impeding their legal right to register or to vote; they are simply not allowed to use the absentee ballot and are denied any alternative means of casting their vote although they are legally qualified to vote. [414 U.S. 524, 531] </s> The construction given the New York statutes by its trial court and the Appellate Division may well have been a reasonable interpretation of New York law, but the highest court of the State has concluded otherwise and it is not our function to construe a state statute contrary to the construction given it by the highest court of a State. We have no choice, therefore, but to hold that, as construed, the New York statutes deny appellants the equal protection of the laws guaranteed by the Fourteenth Amendment. </s> Reversed and remanded for further proceedings not inconsistent with this opinion. </s> It is so ordered. </s> Footnotes [Footnote 1 31 N. Y. 2d 317, 291 N. E. 2d 134 (1972). </s> [Footnote 2 At the time this permit was sought, N. Y. Election Law 153-a (Supp. 1971-1972) provided, in pertinent part: "1. A voter residing in an election district in which the registration is required to be personal or in an election district in a county or city in which permanent personal registration is in effect, and who is unable to appear personally for registration because he is confined at home or in a hospital or institution, other than a mental institution because of illness or physical disability or because his duties, occupation or business require him to be outside the county of residence, or if a resident of the city of New York, outside said city, on such days, may be registered in the manner provided by this section. A voter residing in an election district in which personal registration is not required may file an application for absentee registration in accordance with the provisions of this section and also may be registered in the manner otherwise provided by law." Effective January 1, 1973, 153-a was repealed, and replaced by N. Y. Election Law 153 (Supp. 1972-1973), which contains substantially identical provisions. N. Y. Election Law 117-a (1964) provides, in pertinent part: "1. A qualified voter, who, on the occurrence of any general election, may be unable to appear personally at the polling place of the election district in which he is a qualified voter because of illness or physical disability, may also vote as an absentee voter under this chapter . . . ." N. Y. Election Law 117 (1964) provides, in pertinent part: "1. A qualified voter, who, on the occurrence of any general election, may be - "a. unavoidably absent from his residence because he is an inmate of a veterans' bureau hospital, or "b. unavoidably absent from the county of his residence, or, if a resident of the city of New York from said city, because his duties, occupation or business require him to be elsewhere on the day of election, or "c. absent from the county of his residence, or, if a resident of the city of New York from said city, because he is on vacation elsewhere on the day of election, "may vote as an absentee voter under this chapter." </s> [Footnote 3 At oral argument, counsel for the appellees conceded that Monroe County election officials have interpreted the portions of New York Election Laws 117 and 153-a that extend absentee voting and registration privileges to those whose "duties, occupation or business" requires absence from their home counties as including convicted misdemeanants and pretrial detainees incarcerated outside Monroe County. </s> MR. JUSTICE MARSHALL, with whom MR. JUSTICE DOUGLAS and MR. JUSTICE BRENNAN join, concurring. </s> While I join the opinion of the Court, my analysis of the issues presented here requires further elaboration. </s> I fully agree with the Court's holding that the Court of Appeals' reliance on our decision in McDonald v. Board of Election Comm'rs, 394 U.S. 802 (1969), was misplaced. Although we rejected in McDonald a claim similar to that presented by appellants here, the crux of our decision was our conclusion that the rational-basis test was the proper standard to apply in evaluating the prisoners' equal protection claims. We relied heavily in McDonald on the fact that there was no evidence that the State made it impossible for the appellants to exercise their right to vote. As the Court noted, </s> "[T]he record is barren of any indication that the State might not, for instance, possibly furnish the jails with special polling booths or facilities on election day, or provide guarded transportation to the polls themselves for certain inmates, or entertain motions for temporary reductions in bail to allow [414 U.S. 524, 532] some inmates to get to the polls on their own." Id., at 808 n. 6. </s> The Court therefore characterized the appellants' claim by saying "[i]t is thus not the right to vote that is at stake here but a claimed right to receive absentee ballots." Id., at 807. Because of the relatively trivial inconvenience encountered by a voter unable to vote by absentee ballot when other means of exercising the right to vote are available, the Court properly rejected appellants' contention that strict scrutiny of the statutory classifications was required. </s> In this case, however, the New York Court of Appeals has made clear that the fundamental premises on which McDonald was based are absent. See Goosby v. Osser, 409 U.S. 512, 518 -522 (1973). The New York court "reject[ed] out of hand" any alternative which would permit appellants to vote without using absentee ballots. 1 In this posture, it can no longer be contended that this case involves "merely a claimed right to absentee ballots" and "not the right to vote," or that the challenged statutes "have no direct impact on [appellants'] right to vote," as the Court of Appeals, relying on McDonald, argued, 31 N. Y. 2d 317, 320, 291 N. E. 2d 134, 136; such statements, in the context of this case, fly in the face of reality. Nor can it be contended that denial of absentee ballots to appellants does not deprive them [414 U.S. 524, 533] of their right to vote any more than it deprives others who may "similarly" find it "impracticable" to get to the polls on election day, see id., at 320-321, 291 N. E. 2d, at 136-137; here, it is the State which is both physically preventing appellants from going to the polls and denying them alternative means of casting their ballots. Denial of absentee registration and absentee ballots is effectively an absolute denial of the franchise to these appellants. </s> It is well settled that "if a challenged statute grants the right to vote to some citizens and denies the franchise to others, `the Court must determine whether the exclusions are necessary to promote a compelling state interest.'" Dunn v. Blumstein, 405 U.S. 330, 337 (1972), quoting Kramer v. Union Free School District, 395 U.S. 621, 627 (1969); see also Cipriano v. City of Houma, 395 U.S. 701, 704 (1969); City of Phoenix v. Kolodziejski, 399 U.S. 204, 205 , 209 (1970). It is this standard of review which must be employed here. </s> New York law provides for absentee registration and voting by numerous categories of voters who may be unable to appear in person at the polls. New York permits absentee registration and voting by, inter alia, those who are unable to appear personally because of illness or physical disability, or those whose duties, occupation, or business takes them out of their county of residence. Absentee ballots are even available to those who are on vacation outside the county on election day. Significantly, it is also conceded that pretrial detainees and convicted misdemeanants residing in Monroe County but confined outside the county may register and vote by mail. 2 </s> [414 U.S. 524, 534] </s> In light of these extensive provisions for participation in the electoral process through the mail by others, New York's exclusion of pretrial detainees and convicted misdemeanants confined in the county of their residence cannot withstand analysis. The only basis even suggested for this discrimination is the possibility recognized by the Court in McDonald "that without the protection of the voting booth, local officials might be too tempted to try to influence the local vote of in-county inmates." 394 U.S., at 810 . Though protection of the integrity of the ballot box is surely a legitimate state concern, I frankly find something a bit disturbing about this approach to the problem. It is hard to conceive how the State can possibly justify denying any person his right to vote on the ground that his vote might afford a state official the opportunity to abuse his position of authority. If New York truly has so little confidence in the integrity of its state officers, the time has come for the State to adopt stringent measures to prevent official misconduct, not to further penalize its citizens by depriving them of their right to vote. There are surely less burdensome means to protect inmate voters against attempts to influence their votes - the alternatives suggested by the Court in McDonald, for example. </s> I thus have little difficulty in concluding that the asserted state interest is insufficient to justify the statutes' discrimination against pretrial detainees and convicted misdemeanants under the compelling-state-interest test. I think it is clear that the State's denial of all opportunity for appellants to register and vote deprives them of the [414 U.S. 524, 535] right to vote on an equal basis with other citizens guaranteed under the Equal Protection Clause. </s> [Footnote 1 The Court of Appeals stated: "We reject out of hand any scheme which would commit respondents to a policy of transporting such detainees to public polling places; would assign them the responsibility of providing special voting facilities under such conditions [or] would threaten like hazards embraced by such schema." 31 N. Y. 2d 317, 319, 291 N. E. 2d 134, 135 (1972). Presumably this includes a flat rejection of the possibility of temporary reductions in bail to allow detainees to vote suggested by the Court in McDonald. </s> [Footnote 2 As the Court emphasizes, New York law does not disenfranchise either convicted misdemeanants or persons being held for trial on criminal charges. Indeed, it appears that the New York Constitution does not permit such disenfranchisement. Article II, 1, of the [414 U.S. 524, 534] Constitution provides that "[e]very citizen shall be entitled to vote" and Art. II, 3, excludes only those "convicted of bribery or of any infamous crime." We therefore need not confront in this case the very substantial constitutional problems presented if a State did seek to exclude these classes from the franchise. </s> MR. JUSTICE BLACKMUN, with whom MR. JUSTICE REHNQUIST joins, dissenting. </s> Once again, we are confronted with a claim, fashionable of late, that a state statute which, because of its positive provisions, Rosario v. Rockefeller, 410 U.S. 752 (1973); Kusper v. Pontikes, ante, p. 51; see Goosby v. Osser, 409 U.S. 512 (1973), or because of its failure to provide particular persons particular relief, as here, is an unconstitutional deprivation of the right to vote. And once again the Court strikes down the state statutes. </s> Because I think the Court is unnecessarily and unwisely elevating and projecting constitutional pronouncement into an area - and into distant and obscure corners of that area - that, for me, should be a domain reserved for the State's own housekeeping, I dissent. </s> I join, and with some emphasis, the Court's observations and those of MR. JUSTICE MARSHALL in his concurring opinion, to the effect that the much-amended New York statutes here under challenge cut unevenly. Surely, no one would claim that they are now a model of the draftsman's art. The absentee-voting privilege appears to be available for the voter who is an inmate of a veterans' bureau hospital, N. Y. Election Law 117 (1964), but not, seemingly, due to the statute's silence (unless he can otherwise qualify "because of illness or physical disability," id., 117-a), for the voter who is just as nonambulatory, and just as confined, in some municipal or denominational institution. It is available, under 117, for the voter, "unavoidably absent" on business, and even for the voter "absent" on vacation, but not, seemingly, for the voter who is absent attending a wedding or visiting a seriously [414 U.S. 524, 536] ill relative in the next State. And it is concededly available for the occupant of the county jail who resides in another New York county but not for the occupant who resides in the local county. </s> These are irritating and less-than-thoughtful sub silentio distinctions, and the temptation to eliminate them by striking down the statutes is strong and appealing. I am not convinced, however, that we should be so ready to interfere. New York's present statutory structure has developed by successive remedial amendments, each designed to correct a then-apparent gap. The State, after all, as a matter of constitutional requirement, need not have provided for any absentee registration or absentee voting. And </s> "a legislature traditionally has been allowed to take reform `one step at a time, addressing itself to the phase of the problem which seems most acute to the legislative mind,' Williamson v. Lee Optical of Oklahoma, Inc., 348 U.S. 483, 489 (1955); and a legislature need not run the risk of losing an entire remedial scheme simply because it failed, through inadvertence or otherwise, to cover every evil that might conceivably have been attacked. . . ." McDonald v. Board of Election Comm'rs, 394 U.S. 802, 809 (1969). </s> See also Jefferson v. Hackney, 406 U.S. 535, 546 (1972). </s> Furthermore, this fallout from the New York statutes is minor and collateral and not of great, let alone constitutional, import. There is bound to be a dividing line somewhere, intended or unintended (as I suspect this was). If that dividing line operates to deprive a person of what he feels is his right to vote, his reaction will be critical. Whether he has a constitutional claim, however, is something else again. Line drawing is necessary, as the Court conceded in Dunn v. Blumstein, 405 U.S. 330 , [414 U.S. 524, 537] 348 (1972), and by the very process of line drawing, someone will be left out or treated differently. </s> I feel, therefore, that any unequal effect of the New York statutes is largely incidental and wholly a function of the State's failure to extend its remedial provisions a little further. These appellants are affected, to be sure, but they are affected because it was their misfortune to be detainees or convicted misdemeanants serving their sentences in the county jail on the critical day. The misdemeanants were in jail through their own doing, just as the petitioners in Rosario v. Rockefeller, supra, found themselves unable to vote because of their failure to meet an enrollment deadline. The plight of detainees elicits concern, of course, for a detainee may not be guilty of the offense with which he is charged. Yet the statutes' effect upon him, although unfortunate, produces a situation no more critical than the situation of the voter, just as unfortunate, who on election day is away attending the funeral of a loved one in a distant State. These are inequalities, but they are the incidental inequalities of life, and I do not regard them as unconstitutional. </s> I would refrain from continued tampering and interference with the details of state election laws. If details are deserving of cure, the State's legislature, not this Court, ought to be the curative agent. </s> [414 U.S. 524, 538]

United States Supreme Court NATIONAL BANK v. REPUBLIC OF CHINA(1955) No. 30 Argued: November 9, 1954Decided: March 7, 1955 </s> 1. The Republic of China sued an American bank in a Federal District Court of recover $200,000 deposited in the bank by a governmental agency of the Republic. The bank interposed counterclaims seeking an affirmative judgment for $1,634,432 on defaulted treasury notes of the Republic. The Republic pleaded sovereign immunity. Held: The counterclaims should not have been dismissed. Pp. 357-366. </s> (a) Having been recognized as a sovereign by the Executive, the Republic of China and its governmental agencies enjoy a foreign sovereign's immunities to the same extent as any other country recognized by the United States. p. 358. </s> (b) This case does not involve an attempt to bring a recognized foreign government into court as a defendant. A foreign government is invoking our law but resisting a claim against it which fairly would curtail its recovery. Pp. 361-362. </s> (c) The contention that the counterclaim here involved is not based on the subject matter of the Republic's suit does not require a different result. Pp. 364-365. </s> 2. That the bank, on certiorari, dropped its demand for affirmative relief did not reduce the counterclaim to a mere defense or deprive this Court of jurisdiction. P. 358, n. 2. </s> 208 F.2d 627, reversed and remanded. </s> Wm. Harvey Reeves argued the cause for petitioner. With him on the brief was Chauncey B. Garver. </s> Louis J. Gusmano argued the cause for respondents. With him on a brief for the Republic of China were Cletus Keating and Robert E. Kline, Jr. [348 U.S. 356, 357] </s> MR. JUSTICE FRANKFURTER delivered the opinion of the Court. </s> The Shanghai-Nanking Railway Administration, an official agency of respondent Republic of China, established a $200,000 deposit account in 1948 with the New York head office of petitioner National City Bank of New York. Subsequently, respondent sought to withdraw the funds, but petitioner refused to pay, and respondent brought suit in Federal District Court under 48 Stat. 184, as amended, 12 U.S.C. 632. </s> In addition to various defenses, petitioner interposed two counterclaims seeking an affirmative judgment for $1,634,432 on defaulted Treasury Notes of respondent owned by petitioner. 1 After a plea of sovereign immunity, the District Court dismissed the counterclaims, 108 F. Supp. 766, and entered judgment on them pursuant to Rule 54 (b), Federal Rules of Civil Procedure. Petitioner appealed, and while the appeal was pending sought leave from the District Court to amend the counterclaims by denominating them setoffs and including additional data. The District Court denied leave. 14 F. R. D. 186. The Court of Appeals for the Second Circuit affirmed the dismissal and the denial on the ground that the counterclaims were not based on the subject matter of respondent's suit (whether they be treated as requests for affirmative [348 U.S. 356, 358] relief or as setoffs) and, therefore, it would be an invasion of respondent's sovereign immunity for our courts to permit them to be pursued. 208 F.2d 627. Because of the importance of the question and its first appearance in this Court, we granted certiorari. 2 </s> 347 U.S. 951 . </s> The status of the Republic of China in our courts is a matter for determination by the Executive and is outside the competence of this Court. Accordingly, we start with the fact that the Republic and its governmental agencies enjoy a foreign sovereign's immunities to the same extent as any other country duly recognized by the United States. See Guaranty Trust Co. v. United States, 304 U.S. 126, 137 -138. </s> The freedom of a foreign sovereign from being haled into court as a defendant has impressive title-deeds. Very early in our history this immunity was recognized, De Moitez v. The South Carolina, Bee 422, 17 Fed. Cas. 574, No. 9,697 (Admiralty Court of Pa., 1781, Francis Hopkinson, J.), and it has since become part of the fabric of our law. It has become such solely through adjudications of this Court. Unlike the special position accorded our States as party defendants by the Eleventh Amendment, [348 U.S. 356, 359] the privileged position of a foreign state is not an explicit command of the Constitution. It rests on considerations of policy given legal sanction by this Court. To be sure, the nonsuability of the United States without its consent is likewise derived from considerations of policy. But these are of a different order from those that give a foreign nation such immunity. It is idle to repeat or rehearse the different considerations set forth in Mr. Chief Justice Marshall's classic opinion in The Schooner Exchange v. M'Faddon, 7 Cranch 116. </s> But even the immunity enjoyed by the United States as territorial sovereign is a legal doctrine which has not been favored by the test of time. It has increasingly been found to be in conflict with the growing subjection of governmental action to the moral judgment. A reflection of this steady shift in attitude toward the American sovereign's immunity is found in such observations in unanimous opinions of this Court as "Public opinion as to the peculiar rights and preferences due to the sovereign has changed," Davis v. Pringle, 268 U.S. 315, 318 ; "There is no doubt an intermittent tendency on the part of governments to be a little less grasping than they have been in the past . . .," White v. Mechanics Securities Corp., 269 U.S. 283, 301 ; ". . . the present climate of opinion . . . has brought governmental immunity from suit into disfavor . . .," Keifer & Keifer v. Reconstruction Finance Corp., 306 U.S. 381, 391 . This chilly feeling against sovereign immunity began to reflect itself in federal legislation in 1797. 3 At that early day Congress decided that when the United States sues an individual, the individual can set off all debts properly due him from the sovereign. And because of the objections to ad hoc legislative allowance of private claims, Congress a hundred [348 U.S. 356, 360] years ago created the Court of Claims, 4 where the United States, like any other obligor, may affirmatively be held to its undertakings. This amenability to suit has become a commonplace in regard to the various agencies which carry out "the enlarged scope of government in economic affairs," Keifer & Keifer v. Reconstruction Finance Corp., supra, at 390. The substantive sweep of amenability to judicial process has likewise grown apace. 5 </s> The outlook and feeling thus reflected are not merely relevant to our problem. They are important. The claims of dominant opinion rooted in sentiments of justice and public morality are among the most powerful shaping-forces in lawmaking by courts. Legislation and adjudication are interacting influences in the development of law. A steady legislative trend, presumably manifesting a strong social policy, properly makes demands on the judicial process. See James M. Landis, Statutes and the Sources of Law, in Harvard Legal Essays (1934), p. 213 et seq.; Harlan F. Stone, The Common Law in the United States, 50 Harv. L. Rev. 4, 13-16. </s> More immediately touching the evolution of legal doctrines regarding a foreign sovereign's immunity is the restrictive policy that our State Department has taken toward the claim of such immunity. As the responsible agency for the conduct of foreign affairs, the State Department is the normal means of suggesting to the courts that a sovereign be granted immunity from a particular suit. Ex parte Republic of Peru, 318 U.S. 578, 581 . Its failure or refusal to suggest such immunity has been accorded significant weight by this Court. See Compania Espanola de Navigacion Maritima, S. A. v. The Navemar, [348 U.S. 356, 361] 303 U.S. 68 ; Republic of Mexico v. Hoffman, 324 U.S. 30 . And this for the reason that a major consideration for the rule enunciated in The Schooner Exchange is the embarrassing consequences which judicial rejection of a claim of sovereign immunity may have on diplomatic relations. Recently the State Department has pronounced broadly against recognizing sovereign immunity for the commercial operations of a foreign government, 26 Dept. State Bull. 984 (1952), despite the fact that this Court thirty years earlier rejected the weighty opinion of Judge Mack in The Pesaro, 277 F. 473 (see, also his opinion in The Gloria, 286 F. 188), for differentiating between commercial and war vessels of governments. Berizzi Bros. Co. v. Steamship Pesaro, 271 U.S. 562 . </s> And so we come to the immediate situation before us. The short of the matter is that we are not dealing with an attempt to bring a recognized foreign government into one of our courts as a defendant and subject it to the rule of law to which nongovernmental obligors must bow. We have a foreign government invoking our law but resisting a claim against it which fairly would curtail its recovery. 6 It wants our law, like any other [348 U.S. 356, 362] litigant, but it wants our law free from the claims of justice. It becomes vital, therefore, to examine the extent to which the considerations which led this Court to bar a suit against a sovereign in The Schooner Exchange are applicable here to foreclose a court from determining, according to prevailing law, whether the Republic of China's claim against the National City Bank would be unjustly enforced by disregarding legitimate claims against the Republic of China. As expounded in The Schooner Exchange, the doctrine is one of implied consent by the territorial sovereign to exempt the foreign sovereign from its "exclusive and absolute" jurisdiction, the implication deriving from standards of public morality, fair dealing, reciprocal self-interest, and respect for the "power and dignity" of the foreign sovereign. 7 </s> [348 U.S. 356, 363] </s> (a) The Court of Claims is available to foreign nationals (or their governments) on a simple condition: that the foreign national's government can be sued in its courts on claims by our citizens. 8 An American or a Chinese 9 could sue in the Court of Claims for default on a United States bond, 28 U.S.C. 1491 (4), or could counterclaim - to the extent of the Government's claim - in a suit by the United States in any court, 28 U.S.C. 2406; see United States v. Wilkins, 6 Wheat. 135; cf. United States v. Bank of the Metropolis, 15 Pet. 377; United States v. United States F. & G. Co., 309 U.S. 506, 511 . Thus it seems only fair to subject a foreign sovereign, coming into our courts by its own choice, to a liability substantially less than our own Government long ago willingly assumed. </s> (b) The Republic of China is apparently suable on contract claims in its own courts, 10 and Americans have the same rights as Chinese in those courts. 11 No parochial bias is manifest in our courts which would make it an affront to the "power and dignity" of the Republic of China for us to subject it to counterclaims in our courts when it entertains affirmative suits in its own. Decisions of the Chinese courts which seem to grant absolute [348 U.S. 356, 364] immunity from direct suit to foreign sovereign 12 are inapposite in this context and in light of our State Department's reluctance to raise the defense of sovereign immunity in foreign courts, see 26 Dept. State Bull. 984, 985 (1952); cf. 41 Stat. 527, 46 U.S.C. 747. </s> (c) Respondent urges that fiscal management falls within the category of immune operations of a foreign government as defined by the State Department's 1952 pronouncement. This is not to be denied, but it is beside the point. A sovereign has freely come as a suitor into our courts; our State Department neither has been asked nor has it given the slightest intimation that in its judgment allowance of counterclaims in such a situation would embarrass friendly relations with the Republic of China. </s> (d) It is recognized that a counterclaim based on the subject matter of a sovereign's suit is allowed to cut into the doctrine of immunity. 13 This is proof positive that the doctrine is not absolute, and that considerations of fair play must be taken into account in its application. But the limitation of "based on the subject matter" is too indeterminate, indeed too capricious, to mark the bounds of the limitations on the doctrine of sovereign immunity. There is great diversity among courts on what is and what is not a claim "based on the subject matter of the suit" or "growing out of the same transaction." See Clark, Code Pleading (2d ed.), 653-660; cf. United States v. National City Bank of New York, 83 F.2d 236 (C. A. 2d Cir.). No doubt the present counterclaims cannot fairly be deemed to be related to the [348 U.S. 356, 365] Railway Agency's deposit of funds except insofar as the transactions between the Republic of China and the petitioner may be regarded as aspects of a continuous business relationship. The point is that the ultimate thrust of the consideration of fair dealing which allows a setoff or counterclaim based on the same subject matter reaches the present situation. The considerations found controlling in The Schooner Exchange are not here present, and no consent to immunity can properly be implied. This conclusion was anticipated by Mr. Justice Washington on circuit four years after he had been of the Court which decided The Schooner Exchange. 14 </s> [348 U.S. 356, 366] </s> The judgment of the Court of Appeals must be reversed and the case remanded to the District Court with directions to reinstate the counterclaims and for further proceedings not inconsistent with this opinion. </s> Reversed. </s> MR. JUSTICE DOUGLAS took no part in the consideration or decision of this case. </s> Footnotes [Footnote 1 The Treasury Note on which the first counterclaim is based was pledged by the Republic of China in 1920 to secure a loan to the Pacific Development Company by a banking syndicate in which petitioner participated. The loan was not repaid, and during the liquidation of the Development Company the syndicate bought the collateral at a public sale. The Treasury Notes on which the second counterclaim is based were purchased by petitioner's Shanghai branch at the time of issue in 1947-1948. The record allows us to assume that the petitioner gave full value as its share of the loan to the Development Company and bought the notes in the second counterclaim at par. </s> [Footnote 2 At the outset respondent argues that since petitioner on certiorari has dropped its demand for affirmative relief, the case is not properly before us. It is conceded that dismissal of independent counterclaims would ordinarily contain the requisite finality on which to base our jurisdiction, but respondent contends that when petitioner reduced its counterclaims to mere demands for setoff, the claims became defenses and, as such, non reviewable until the respondent's suit had been concluded below. We reject this view. A counterclaim does not dwindle to a defense solely because it is confined - as a result of the accepted jurisprudence of sovereign immunity, see United States v. Shaw, 309 U.S. 495 - to reducing the sovereign's recovery. The District Court's judgment, as affirmed by the Court of Appeals, terminated a separable and distinct segment of the litigation. </s> [Footnote 3 Act of Mar. 3, 1797, 3, 4, 1 Stat. 514-515. The present version appears in 28 U.S.C. 2406. </s> [Footnote 4 Act of Feb. 24, 1855, 10 Stat. 612, as amended, 12 Stat. 765, 14 Stat. 9; see United States v. Jones, 119 U.S. 477 . </s> [Footnote 5 The most recent development is the subjection of the Government to tort liability. Act of Aug. 2, 1946, now 28 U.S.C. 1346 (b). </s> [Footnote 6 Those cases that have dealt with the problem include: Republic of China v. American Express Co., 195 F.2d 230 (C. A. 2d Cir.); United States v. National City Bank of New York, 83 F.2d 236 (C. A. 2d Cir.); In re Patterson-MacDonald Shipbuilding Co., 293 F. 192 (C. A. 9th Cir.); Kingdom of Roumania v. Guaranty Trust Co., 250 F. 341 (C. A. 2d Cir.); Hungarian People's Republic v. Cecil Associates, Inc., 118 F. Supp. 954 (D.C. S. D. N. Y.); Republic of China v. Pang-Tsu Mow, 105 F. Supp. 411 (D.C. D.C.); United States v. National City Bank of New York, 90 F. Supp. 448 (D.C. S. D. N. Y.); United States v. New York Trust Co., 75 F. Supp. 583 (D.C. S. D. N. Y.); Kingdom of Norway v. Federal Sugar Refining Co., 286 F. 188 (D.C. S. D. N. Y., Mack, J.); French Republic v. Inland Nav. Co., 263 F. 410 (D.C. E. D. Mo.); Union of Soviet Republics v. Belaiew, 42 T. L. R. 21 (K. B. Div.); South African Republic v. La Compagnie Franco-Belge, 1898. 1 Ch. 190; cf. Guaranty Trust Co. v. United States, 304 U.S. 126 ; Dexter & Carpenter, [348 U.S. 356, 362] Inc. v. Kunglig Jarnvagsstyrelsen, 43 F.2d 705 (C. A. 2d Cir.); Strousberg v. Republic of Costa Rica, 44 L. T. R. (N. S.) 199 (C. A.); Claim of the Russian Volunteer Fleet against the British Admiralty, Annual Digest of Public International Law Cases 1925-1926, p. 210 (British Admiralty Transport Arbitration Board; affirmed by Court of Appeal). </s> Of the cited American decisions, only two district court cases directly involved the dismissal of counterclaims not based on the subject matter of the sovereign's suit and not seeking affirmative judgment: Republic of China v. Pang-Tsu Mow, supra, and United States v. New York Trust Co., supra. </s> [Footnote 7 7 Cranch, at 136-137, 143-144. For a comprehensive critique of the doctrine as it has subsequently been applied, see Lauterpacht, The Problem of Jurisdictional Immunities of Foreign States, 28 Brit. Y. B. Int'l L. 220. </s> The Privy Council recently rejected the view of Lord Justice Scrutton in The Jupiter, 1924. P. 236 (C. A.), that the mere assertion of a claim by a foreign government to property the subject of an action by a private party compels the court to stay the action and decline jurisdiction. Juan Ysmael & Co. v. Republic of Indonesia, 1954. 3 W. L. R. 531. Earl Jowitt reviewed the decisions and indicated some of the subtleties into which the doctrine has led the English courts. Cf. Republic of Mexico v. Hoffman, 324 U.S. 30, 38 -42 (concurring opinion). </s> [Footnote 8 28 U.S.C. 2502. The earliest version of this statute appears in 15 Stat. 243 (Act of July 27, 1868); see United States v. O'Keefe. 11 Wall. 178; cf. 43 Stat. 1113, 46 U.S.C. 785; Westfal-Larsen & Co. v. United States, 41 F.2d 550 (D.C. N. D. Calif.). That an American citizen can sue the Chinese Government in Chinese courts, see Judicial Yuan Interpretation No. 6 (Feb. 16, 1929). </s> [Footnote 9 See Treaty of Nov. 4, 1946, Art. VI, 4, 63 Stat. 1305. </s> [Footnote 10 Judicial Yuan Interpretation No. 373 (Dec. 15, 1930); Supreme Court Uniform Interpretation No. 1933 (Peking, June 22, 1925), 3 China L. Rev., No. 2, p. 84; cf. Judicial Yuan Interpretation No. 6 (Feb. 16, 1929); Constitution of the Republic of China, Art. 24 (1947). </s> [Footnote 11 Treaty of Nov. 4, 1946, Art. VI, 4, 63 Stat. 1305. </s> [Footnote 12 See Rizaeff Freres v. The Soviet Mercantile Fleet, 3 China L. Rev., No. 6, p. 14 (Provisional Court of Shanghai 1927). </s> [Footnote 13 E. g., Hungarian People's Republic v. Cecil Associates, Inc., 118 F. Supp. 954 (D.C. S. D. N. Y.); French Republic v. Inland Nav. Co., 263 F. 410 (D.C. E. D. Mo.); cf. Republic of China v. American Express Co., 195 F.2d 230 (C. A. 2d Cir.). </s> [Footnote 14 The case is King of Spain v. Oliver, 1 Pet. C. C. 276, 14 Fed. Cas. 572, No. 7,813 (C. C. D. Pa.). The King of Spain had sued two Americans for duties he alleged they owed him on shipments of goods they had made to the Spanish American colonies under royal licenses. The defendants replied that they had obtained the licenses from and paid the duties to Hope & Co., a Dutch concern which had a commercial concession from the King in return for which it had promised, inter alia, to pay duties on shipments to the colonies. Hope had also negotiated a loan for the King in what appears to have been an unrelated transaction, and the King had pledged all his public revenues to repay the loan. Instead of handing over the duties received from defendants to the King, Hope applied them to reduce the debt due from the King on the loan. </s> Mr. Justice Washington directed a verdict for the defendants. First he held that there was no privity of contract between the defendants and the King, so that payment to Hope discharged them. But assuming that there was privity he ruled that the duties had been properly applied by Hope to reduce the King's debt to it. "Let it be, as was argued, that the consent of the Spanish government, under the administration of Joseph [Bonaparte, who had, while in power, agreed that the duties be applied to reduce the debt], was invalid and of no obligation upon Ferdinand; still, Ferdinand, as the successor of his father [Charles IV, to whom the loan had been made], and the nation, were and are bound to pay the debt due in Holland; and if it has been in part discharged, out of funds charged with the payment of it [because they were public revenues], in the hands of Hope and Co., the payments of the duties, have in effect been made to the plaintiff, [348 U.S. 356, 366] because he owes, of the debt due in Holland, less than what was originally due, by the amount of duties which were applied to its discharge by Hope and Co. After such an application, which I repeat it, Hope and Co. were authorised to make, under all the circumstances of the case, this action cannot be supported, to recover the amount of the duties so appropriated." 1 Pet. C. C., at 289-290, 14 Fed. Cas., at 577. </s> MR. JUSTICE REED, with whom MR. JUSTICE BURTON and MR. JUSTICE CLARK join, dissenting. </s> Some data must be premised if discussion is to be confined to a reasonable space. We start with the postulate that the sovereign is released from the jurisdiction of its own courts except as it may specifically submit itself to their power. 1 </s> That does not create a situation of irresponsibility. Satisfaction of sovereign liability may be had through the legislative organ which recognizes a moral obligation to pay the creditors of the government and to compensate those injured by it. </s> A sovereign's freedom from judicial control does not arise from or depend upon the will of the courts. As was said in The Schooner Exchange in speaking of the immunity of a foreign government, it depends upon "the will of the sovereign of the territory." ". . . all exemptions [348 U.S. 356, 367] from territorial jurisdiction, must be derived from the consent of the sovereign . . . ." 7 Cranch 116, 138, 143. The immunity rests on the ground that no enforceable right exists "against the authority that makes the law on which the right depends." 2 </s> The reason for the sovereign's consent to the exclusion of foreign sovereignties from the general jurisdiction of its courts was said by Chief Justice Marshall to rest on this proposition: </s> "The world being composed of distinct sovereignties, possessing equal rights and equal independence, whose mutual benefit is promoted by intercourse with each other, and by an interchange of those good offices which humanity dictates and its wants require, all sovereigns have consented to a relaxation in practice, in cases under certain peculiar circumstances, of that absolute and complete jurisdiction within their respective territories which sovereignty confers. </s> "This consent may, in some instances, be tested by common usage, and by common opinion, growing out of that usage." 7 Cranch, at 136. </s> It might be summarized by the word "comity." 3 The local sovereign may, of course, withdraw such consent. </s> "Without doubt, the sovereign of the place is capable of destroying this implication. He may claim and exercise jurisdiction either by employing force, or by subjecting such vessels to the ordinary tribunal. But until such power be exerted in a manner not to be misunderstood, the sovereign cannot be considered [348 U.S. 356, 368] as having imparted to the ordinary tribunal a jurisdiction, which it would be a breach of faith to exercise." Id., at 146. 4 </s> An ancillary principle of law is that, in determining whether a defendant is a sovereign, the courts follow the guidance of the political branch. 5 In this case the sovereignty of the Republic of China is not questioned. Furthermore, the Chinese Government Treasury Note and its 36th Year Short Term Treasury Notes upon which the City Bank's counterclaims rest are sovereign obligations, jure imperii in form, of the highest public character. Consequently, the attitude of the Department of State as to the desirability of relaxing the strict rule of immunity as to acts of commerce, jure gestionis, is inapplicable. See 26 Dept. State Bull. 984 (1952), referred to in the Court's opinion, p. 361. </s> If the foregoing statements of law are sound, the Republic of China as a foreign sovereign is free from direct suits in our courts on the notes here in question unless the Congress of the United States has enacted a statute that restricts its immunity. This it has not done. The question in this case thus comes down to whether the Republic of China, by bringing this suit for the recovery of a bank deposit, waived its immunity and subjected itself to a counterclaim under the Fed. Rules Civ. Proc., Rule 13. Under the words of (c) of that Rule, judgment over against the Republic of China would seem to be authorized if the counterclaim were for more than plaintiff's claim. But there would be no jurisdiction to render such judgment in an American court. It would violate the [348 U.S. 356, 369] immunity of a foreign sovereign to do so. 6 In the present case, the Court evidently feels that, since the counterclaims is limited to the amount of the Republic of China's claim, there is jurisdiction to allow a setoff to that extent. But the mere fact that a judgment over is not sought should not be relied upon to avoid the jurisdictional immunity of a foreign sovereign. I find no justification for the Court's restricting that immunity in the absence of legislative or executive action. 7 </s> [348 U.S. 356, 370] </s> Affirmative legislative action was necessary to allow such a limited setoff against the United States. 8 Action of a similar nature should be required to authorize this setoff. The comity that gave the foreign sovereign full immunity from process was, as The Schooner Exchange pointed out, p. 146, only to be withdrawn "in a manner not to be misunderstood." That is by legislation. 9 The judicial creation of such jurisdiction over the property of a friendly nation might well merit the stricture of Chief Justice Marshall: </s> "A nation would justly be considered as violating its faith, although that faith might not be expressly plighted, which should suddenly and without previous notice, exercise its territorial powers in a manner not consonant to the usages and received obligations of the civilized world." 7 Cranch, at 137. </s> International relations are pre-eminently a matter of public policy. Judicial views of supposed public interests are not the touchstone whereby to determine the law. 10 </s> [348 U.S. 356, 371] The change from a generous to a parsimonious application of the principle of sovereign immunity should come from Congress or the Executive. Our courts possess great powers and have solemn obligations. Our country allots power to the judiciary in the confidence that, in view of the separation of powers, judicial authority will not undertake determinations which are the primary concern of other branches of our Government. Differences of view exist as to the desirable scope of sovereign immunity and the necessity for non judicial determinations. 11 But surely it is better that the decisions be left to those organs of Government that have the responsibility for determining public policy in carrying out foreign affairs. The establishment of political or economic policies is not for the courts. Such action would be an abuse of judicial power. It is only by a conscious and determined purpose to keep the functions of the various branches of government separate that the courts can most effectively carry out their duties. I would leave this question of the jurisdictional immunity of foreign sovereigns to the other branches. </s> The Court determines, however, that the question of changing the limitation of the immunity of foreign sovereigns pertains to its functions. Even on the assumption that such is a proper matter for judicial concern, I would reach a different conclusion than does the Court. If a direct suit cannot be brought against a foreign sovereign (as is conceded), why should we allow the same claim to be used as an offset to destroy the sovereign's right to recover? Why should the City Bank be able to assert its notes against the Republic of China, even defensively, when other noteholders not obligated to the sovereign are prevented from collecting their notes? [348 U.S. 356, 372] Here we have an entirely disconnected claim on overdue national notes brought forward as a defense to an action to recover a bank deposit. The Court recognizes that the counterclaim is not related to China's cause of action against the City Bank. It says: </s> "The point is that the ultimate thrust of the consideration of fair dealing which allows a setoff or counterclaim based on the same subject matter reaches the present situation." </s> The counterclaim here is of much the same character as a suit against a foreign sovereign. Deposits may be the lifeblood necessary for national existence. It is not wise for us to tell the nations of the world that any assets they may have in the United States, now or in the future, upon which suit must be brought, are subject to every counterclaim their debtors can acquire against them at par or at a discount. It is unfair to our foreign friends and detrimental to our own financial and mercantile interests. For fairness we need not go beyond the allowance of counterclaims arising out of transactions foreign sovereigns seek to enforce in our courts. It seems to me that the Court sanctions a circuitous evasion of the well-established rule prohibiting direct suits against foreign sovereigns. </s> I would affirm. </s> [Footnote 1 United States v. Clarke, 8 Pet. 436, 444; Kansas v. United States, 204 U.S. 331, 341 ; Larson v. Domestic & Foreign Com. Corp., 337 U.S. 682, 703 . </s> [Footnote 2 Kawananakoa v. Polyblank, 205 U.S. 349, 353 ; United States v. Shaw, 309 U.S. 495, 501 . Cf. Duff Development Co. v. Government of Kelantan, 1924. A. C. 797. </s> [Footnote 3 Compania Naviera Vascongado v. S. S. Cristina, 1938. A. C. 485, 498. </s> [Footnote 4 See Berizzi Bros. Co. v. S. S. Pesaro, 271 U.S. 562, 571 et seq. </s> [Footnote 5 Ex parte Peru, 318 U.S. 578, 588 ; Mexico v. Hoffman, 324 U.S. 30, 35 . Cf. Duff Development Co. v. Government of Kelantan, supra, at 815. </s> [Footnote 6 Cf. United States. v. Shaw, 309 U.S. 495, 502 . In South African Republic v. La Compagnie Franco-Belge, 1898. 1 Ch. 190, 198, a foreign sovereign sued to enjoin the use of deposited funds. On a counterclaim not connected with the issue concerning the funds, Mr. Justice North held the foreign government could not be sued, citing Duke of Brunswick v. King of Hanover, 6 Beav. 68, and Strousberg v. Republic of Costa Rica, 29 Weekly Reporter 125, 44 L. T. R. (N. S.) 199. </s> [Footnote 7 Probably because it is obvious that there is no tenable distinction between the setoff of an unrelated claim, a proceeding for a judgment over on a counterclaim, and a direct suit against a foreign sovereign, few cases have dealt with this phase of the immunity of a foreign sovereign from claims. None that have discussed the issue have reached the result which the Court takes today. In addition to the two cases cited in note 6 of the majority opinion, the same issue here presented was considered and decided in accord with my position in the only foreign case discussing the issue that has come to my attention. In The State of Belgium v. E. A. G. de Badts, Nederlandsche Jurisprudentie, 1923, p. 618, Ann. Dig. of Pub. Int'l Law Cases 1919-1922, p. 129, the Belgian Government, a foreign sovereign, brought suit in the Dutch courts for an account of the sale of a certain cargo of wheat. The defendant sought to set off an entirely unrelated claim which he had against the Belgian Government. The court held: </s> "That the Court had no jurisdiction to take cognisance of the counterclaim against the Belgian State. A State which is entitled to claim immunity from foreign jurisdiction does not lose this right by the fact that it submits to that jurisdiction in another suit. The correctness of this statement is not impaired by the circumstance that the two actions are, for the sake of convenience, joined in the same proceedings, [348 U.S. 356, 370] since the counter-claim does not lose, in consequence thereof, its independent character. This is so particularly in cases in which the plaintiff Government bases its claim on a private law title, but in counter-claim is sued for acts performed in its sovereign capacity." </s> Nor can the majority derive much support from King of Spain v. Oliver, 1 Pet. C. C. 276, cited on p. 365, n. 14, of the Court's opinion. The question of sovereign immunity was not considered or even mentioned in that case, since no setoff or counterclaim was asserted against the foreign sovereign. The court simply held that payment, in the manner and under the circumstances there presented, was a good defense to a suit on a debt. </s> [Footnote 8 See United States v. Shaw, 309 U.S. 495, 501 . </s> [Footnote 9 See Lauterpacht, The Problem of Jurisdictional Immunities of Foreign States, British Year Book of International Law, 1951, vol. XXVIII, at pp. 239, 269; Mexico v. Hoffman, 324 U.S. 30, 38 ; Berizzi Bros. Co. v. S. S. Pesaro, 271 U.S. 562, 573 , 576. </s> [Footnote 10 Vidal v. Philadelphia, 2 How. 127, 197-198; Muschany v. United States, 324 U.S. 49, 66 . </s> [Footnote 11 Dissents in Great Northern Ins. Co. v. Read, 322 U.S. 47, 57 , and Larson v. Domestic & Foreign Corp., 337 U.S. 682, 723 ; concurring opinion in Mexico v. Hoffman, 324 U.S. 30, 40 . </s> [348 U.S. 356, 373]

United States Supreme Court BALTIMORE DEPT. OF SOCIAL SERVS. v. BOUKNIGHT(1990) No. 88-1182 Argued: November 7, 1989Decided: February 20, 1990 </s> Based on evidence that respondent Bouknight had abused petitioner Maurice M., her infant son, petitioner Baltimore City Department of Social Services (BCDSS) secured a juvenile court order removing Maurice from Bouknight's control. That order was subsequently modified to return custody to Bouknight pursuant to extensive conditions and subject to further court order. After Bouknight violated the order's conditions, the court granted BCDSS' petition to remove Maurice from her control and held her in civil contempt when she failed to produce the child as ordered. Rejecting her subsequent claim that the contempt order violated the Fifth Amendment's guarantee against self-incrimination, the court stated that the contempt would be purged by the production of Maurice and was issued not because Bouknight refused to testify but because she failed to obey the production order. In vacating the juvenile court's judgment upholding the contempt order, the State Court of Appeals found that that order unconstitutionally compelled Bouknight to admit through the act of production a measure of continuing control over Maurice in circumstances in which she had a reasonable apprehension that she would be prosecuted. </s> Held: </s> A mother who is the custodian of her child pursuant to a court order may not invoke the Fifth Amendment privilege against self-incrimination to resist a subsequent court order to produce the child. Pp. 554-562. </s> (a) Although the privilege applies only when an accused is compelled to make an incriminating testimonial communication, the fact that Bouknight could comply with the order through the unadorned act of producing Maurice does not necessarily deprive her of the privilege, because the act of complying may testify to the existence, possession, or authenticity of the thing produced. See, e. g., United States v. Doe, 465 U.S. 605 . Pp. 554-555. </s> (b) Even assuming that the act of production would amount to a communication regarding Bouknight's control over, and possession of, Maurice that is sufficiently incriminating and testimonial in character, she may not invoke the privilege to resist the production order in the [493 U.S. 549, 550] present circumstances. The ability to invoke the privilege is greatly diminished when invocation would interfere with the effective operation of a generally applicable regulatory regime constructed to effect the State's public purposes unrelated to the enforcement of its criminal laws, see, e. g., California v. Byers, 402 U.S. 424, 430 , and when a person assumes control over items that are the legitimate object of the government's noncriminal regulatory powers, cf. Shapiro v. United States, 335 U.S. 1 . Here, Maurice's care and safety became the particular object of the State's regulatory interest once the juvenile court adjudicated him a child in need of assistance. Moreover, by taking responsibility for such care subject to the custodial order's conditions, Bouknight submitted to the regulatory system's routine operation, agreed to hold Maurice in a manner consonant with the State's interests, and accepted the incident obligation to permit inspection. Furthermore, the State imposes that obligation as part of a broadly directly, noncriminal regulatory regime governing children cared for pursuant to custodial orders. Persons who care for such children are not a selective group inherently suspect of criminal activities. Similarly, the efforts of BCDSS and the judiciary to gain access to the children focus primarily on the children's well-being rather than on criminal conduct, and are enforced through measures unrelated to criminal law enforcement. Finally, production in the vast majority of cases will embody no incriminating testimony. Pp. 555-561. </s> (c) The custodial role that limits Bouknight's ability to resist the production order may give rise to corresponding limitations upon the State's ability to use the testimonial aspects of her act of production directly or indirectly in any subsequent criminal proceedings. See, e. g., Braswell v. United States, 487 U.S. 99, 118 , and n. 11. Pp. 561-562. </s> 314 Md. 391, 550 A. 2d 1135, reversed and remanded. </s> O'CONNOR, J., delivered the opinion of the Court, in which REHNQUIST, C. J., and WHITE, BLACKMUN, STEVENS, SCALIA, and KENNEDY, JJ., joined. MARSHALL, J., filed a dissenting opinion, in which BRENNAN, J., joined, post, p. 563. </s> [Footnote * Together with No. 88-6651, Maurice M. v. Bouknight, also on certiorari to the same court. </s> Ralph S. Tyler III argued the cause for petitioner in No. 88-1182. With him on the briefs were J. Joseph Curran, Jr., Attorney General of Maryland, and Andrew H. Baida and Carmen M. Shepard, Assistant Attorneys General. Mitchell Y. Mirviss argued the cause for petitioner in No. 88-6651. With him on the briefs were Susan Dishler Shubin, Stuart R. Cohen, Kathi Grasso, and M. Gayle Hafner. [493 U.S. 549, 551] </s> George E. Burns, Jr., argued the cause for respondent. With him on the brief were Jose F. Anderson, George M. Lipman, Gary S. Offutt, Robin Parsons, and M. Christina Gutierrez.Fn </s> Fn [493 U.S. 549, 551] Briefs of amici curiae urging reversal were filed for the Commonwealth of Massachusetts et al. by James M. Shannon, Attorney General of Massachusetts, Judy G. Zeprun, Judith Fabricant, and Countess C. Williams, Assistant Attorneys General, and by the Attorneys General for their respective States as follows: Douglas B. Baily of Alaska, Robert A. Corbin of Arizona, John K. Van de Kamp of California, John J. Kelly of Connecticut, Charles M. Oberly III of Delaware, Neil F. Hartigan of Illinois, Gordon Allen of Iowa, Robert T. Stephan of Kansas, William J. Guste, Jr., of Louisiana, Frank J. Kelley of Michigan, Hubert H. Humphrey III of Minnesota, Mike Moore of Mississippi, Brian McKay of Nevada, Jeffrey Howard of New Hampshire, Peter N. Perretti, Jr., of New Jersey, Hal Stratton of New Mexico, Nicholas Spaeth of North Dakota, Dave Frohnmayer of Oregon, Ernest D. Preate, Jr., of Pennsylvania, T. Travis Medlock of South Carolina, Roger A. Tellinghuisen of South Dakota, Jeffrey L. Amestoy of Vermont, Mary Sue Terry of Virginia, Charlie Brown of West Virginia, and Joseph B. Meyer of Wyoming; for Advocates for Children and Youth Inc. by Cheri Wyron Levin; for the Criminal Justice Legal Foundation by Kent S. Scheidegger; for the Juvenile Protective Association by Thomas H. Morsch; and for the U.S. Conference of Mayors et al. by Benna Ruth Solomon, Melvin Spaeth, and Donald O. Beers. </s> William L. Grimm filed a brief for Charles M. as amicus curiae. </s> JUSTICE O'CONNOR delivered the opinion of the Court. </s> In this action, we must decide whether a mother, the custodian of a child pursuant to a court order, may invoke the Fifth Amendment privilege against self-incrimination to resist an order of the juvenile court to produce the child. We hold that she may not. </s> I </s> Petitioner Maurice M. is an abused child. When he was three months old, he was hospitalized with a fractured left femur, and examination revealed several partially healed bone fractures and other indications of severe physical abuse. In the hospital, respondent Bouknight, Maurice's mother, [493 U.S. 549, 552] was observed shaking Maurice, dropping him in his crib despite his spica cast, and otherwise handling him in a manner inconsistent with his recovery and continued health. Hospital personnel notified the Baltimore City Department of Social Services (BCDSS), petitioner in No. 88-1182, of suspected child abuse. In February 1987, BCDSS secured a court order removing Maurice from Bouknight's control and placing him in shelter care. Several months later, the shelter care order was inexplicably modified to return Maurice to Bouknight's custody temporarily. Following a hearing held shortly thereafter, the juvenile court declared Maurice to be a "child in need of assistance," thus asserting jurisdiction over Maurice and placing him under BCDSS' continuing oversight. BCDSS agreed that Bouknight could continue as custodian of the child, but only pursuant to extensive conditions set forth in a court-approved protective supervision order. The order required Bouknight to "cooperate with BCDSS," "continue in therapy," participate in parental aid and training programs, and "refrain from physically punishing [Maurice]." App. to Pet. for Cert. 86a. The order's terms were "all subject to the further Order of the Court." Id., at 87a. Bouknight's attorney signed the order, and Bouknight in a separate form set forth her agreement to each term. </s> Eight months later, fearing for Maurice's safety, BCDSS returned to juvenile court. BCDSS caseworkers related that Bouknight would not cooperate with them and had in nearly every respect violated the terms of the protective order. BCDSS stated that Maurice's father had recently died in a shooting incident and that Bouknight, in light of the results of a psychological examination and her history of drug use, could not provide adequate care for the child. App. 33-34. On April 20, 1988, the court granted BCDSS' petition to remove Maurice from Bouknight's control for placement in foster care. BCDSS officials also petitioned for judicial relief from Bouknight's failure to produce Maurice or reveal where he could be found. Id., at 36-39. The petition [493 U.S. 549, 553] recounted that on two recent visits by BCDSS officials to Bouknight's home, she had refused to reveal the location of the child or had indicated that the child was with an aunt whom she would not identify. The petition further asserted that inquiries of Bouknight's known relatives had revealed that none of them had recently seen Maurice and that BCDSS had prompted the police to issue a missing persons report and referred the case for investigation by the police homicide division. Also on April 20, the juvenile court, upon a hearing on the petition, cited Bouknight for violating the protective custody order and for failing to appear at the hearing. Bouknight had indicated to her attorney that she would appear with the child, but also expressed fear that if she appeared the State would "`snatch the child.'" Id., at 42, 54. The court issued an order to show cause why Bouknight should not be held in civil contempt for failure to produce the child. Expressing concern that Maurice was endangered or perhaps dead, the court issued a bench warrant for Bouknight's appearance. Id., at 51-57. </s> Maurice was not produced at subsequent hearings. At a hearing one week later, Bouknight claimed that Maurice was with a relative in Dallas. Investigation revealed that the relative had not seen Maurice. The next day, following another hearing at which Bouknight again declined to produce Maurice, the juvenile court found Bouknight in contempt for failure to produce the child as ordered. There was and has been no indication that she was unable to comply with the order. The court directed that Bouknight be imprisoned until she "purge[d] herself of contempt by either producing [Maurice] before the court or revealing to the court his exact whereabouts." App. to Pet. for Cert. 82a. </s> The juvenile court rejected Bouknight's subsequent claim that the contempt order violated the Fifth Amendment's guarantee against self-incrimination. The court stated that the production of Maurice would purge the contempt and that "[t]he contempt is issued not because she refuse[d] to [493 U.S. 549, 554] testify in any proceeding . . . [but] because she has failed to abide by the Order of this Court, mainly [for] the production of Maurice M." App. 150. While that decision was being appealed, Bouknight was convicted of theft and sentenced to 18 months' imprisonment in separate proceedings. The Court of Appeals of Maryland vacated the juvenile court's judgment upholding the contempt order. In re Maurice M., 314 Md. 391, 550 A. 2d 1135 (1988). The Court of Appeals found that the contempt order unconstitutionally compelled Bouknight to admit through the act of production "a measure of continuing control and dominion over Maurice's person" in circumstances in which "Bouknight has a reasonable apprehension that she will be prosecuted." Id., at 403-404, 550 A. 2d, at 1141. CHIEF JUSTICE REHNQUIST granted BCDSS' application for a stay of the judgment and mandate of the Maryland Court of Appeals, pending disposition of the petition for a writ of certiorari. 488 U.S. 1301 (1988) (in chambers). We granted certiorari, 490 U.S. 1003 (1989), and we now reverse. </s> II </s> The Fifth Amendment provides that "No person . . . shall be compelled in any criminal case to be a witness against himself." The Fifth Amendment's protection "applies only when the accused is compelled to make a testimonial communication that is incriminating." Fisher v. United States, 425 U.S. 391, 408 (1976); see Doe v. United States, 487 U.S. 201, 207 , 209-210, n. 8 (1988) (Doe II); Schmerber v. California, 384 U.S. 757, 761 (1966) ("[T]he privilege protects an accused only from being compelled to testify against himself, or otherwise provide the State with evidence of a testimonial or communicative nature"). The juvenile court concluded that Bouknight could comply with the order through the unadorned act of producing the child, and we thus address that aspect of the order. When the government demands that an item be produced, "the only thing compelled is the act of producing [493 U.S. 549, 555] the [item]." Fisher, supra, at 410, n. 11; see United States v. Doe, 465 U.S. 605, 612 (1984) (Doe I). The Fifth Amendment's protection may nonetheless be implicated because the act of complying with the government's demand testifies to the existence, possession, or authenticity of the things produced. See Doe II, supra, at 209; Doe I, supra, at 612-614, and n. 13; Fisher, supra, at 410-413. But a person may not claim the Amendment's protections based upon the incrimination that may result from the contents or nature of the thing demanded. Doe I, 465 U.S., at 612 , and n. 10; id., at 618 (O'CONNOR, J., concurring); Fisher, supra, at 408-410. Bouknight therefore cannot claim the privilege based upon anything that examination of Maurice might reveal, nor can she assert the privilege upon the theory that compliance would assert that the child produced is in fact Maurice (a fact the State could readily establish, rendering any testimony regarding existence or authenticity insufficiently incriminating, see Fisher, supra, at 411). Rather, Bouknight claims the benefit of the privilege because the act of production would amount to testimony regarding her control over, and possession of, Maurice. Although the State could readily introduce evidence of Bouknight's continuing control over the child - e. g., the custody order, testimony of relatives, and Bouknight's own statements to Maryland officials before invoking the privilege - her implicit communication of control over Maurice at the moment of production might aid the State in prosecuting Bouknight. </s> The possibility that a production order will compel testimonial assertions that may prove incriminating does not, in all contexts, justify invoking the privilege to resist production. See infra, at 556-558. Even assuming that this limited testimonial assertion is sufficiently incriminating and "sufficiently testimonial for purposes of the privilege," Fisher, supra, at 411, Bouknight may not invoke the privilege to resist the production order because she has assumed custodial duties related [493 U.S. 549, 556] to production and because production is required as part of a noncriminal regulatory regime. </s> The Court has on several occasions recognized that the Fifth Amendment privilege may not be invoked to resist compliance with a regulatory regime constructed to effect the State's public purposes unrelated to the enforcement of its criminal laws. In Shapiro v. United States, 335 U.S. 1 (1948), the Court considered an application of the Emergency Price Control Act of 1942 and a regulation issued thereunder which required licensed businesses to maintain records and make them available for inspection by administrators. The Court indicated that no Fifth Amendment protection attached to production of the "required records," which the "`defendant was required to keep, not for his private uses, but for the benefit of the public, and for public inspection.'" Id., at 17-18 (quoting Wilson v. United States, 221 U.S. 361, 381 (1911)). The Court's discussion of the constitutional implications of the scheme focused upon the relation between the Government's regulatory objectives and the Government's interest in gaining access to the records in Shapiro's possession: </s> "It may be assumed at the outset that there are limits which the Government cannot constitutionally exceed in requiring the keeping of records which may be inspected by an administrative agency and may be used in prosecuting statutory violations committed by the record-keeper himself. But no serious misgiving that those bounds have been overstepped would appear to be evoked when there is a sufficient relation between the activity sought to be regulated and the public concern so that the Government can constitutionally regulate or forbid the basic activity concerned, and can constitutionally require the keeping of particular records, subject to inspection by the Administrator." 335 U.S., at 32 . </s> See also In re Harris, 221 U.S. 274, 279 (1911) (Holmes, J.) (regarding a court order that a bankrupt produce account [493 U.S. 549, 557] books, "[t]he question is not of testimony but of surrender - not of compelling the bankrupt to be a witness against himself in a criminal case, past or future, but of compelling him to yield possession of property that he no longer is entitled to keep"). The Court has since refined those limits to the government's authority to gain access to items or information vested with this public character. The Court has noted that "the requirements at issue in Shapiro were imposed in `an essentially non-criminal and regulatory area of inquiry,'" and that Shapiro's reach is limited where requirements "are directed to a `selective group inherently suspect of criminal activities.'" Marchetti v. United States, 390 U.S. 39, 57 (1968) (quoting Albertson v. Subversive Activities Control Board, 382 U.S. 70, 79 (1965)); see Grosso v. United States, 390 U.S. 62, 68 (1968) (Shapiro inapplicable because "[h]ere, as in Marchetti, the statutory obligations are directed almost exclusively to individuals inherently suspect of criminal activities"); Haynes v. United States, 390 U.S. 85, 98 -99 (1968). </s> California v. Byers, 402 U.S. 424 (1971), confirms that the ability to invoke the privilege may be greatly diminished when invocation would interfere with the effective operation of a generally applicable, civil regulatory requirement. In Byers, the Court upheld enforcement of California's statutory requirement that drivers of cars involved in accidents stop and provide their names and addresses. A plurality found the risk of incrimination too insubstantial to implicate the Fifth Amendment, id., at 427-428, and noted that the statute "was not intended to facilitate criminal convictions but to promote the satisfaction of civil liabilities," id., at 430, was "`directed at the public at large,'" ibid. (quoting Albertson v. Subversive Activities Control Board, supra, at 79), and required disclosure of no inherently illegal activity. See also United States v. Sullivan, 274 U.S. 259 (1927) (rejecting Fifth Amendment objection to requirement to file income tax return). Justice Harlan, the author of Marchetti, Grosso, and Haynes, concurred in the judgment. He distinguished [493 U.S. 549, 558] those three cases as considering statutory schemes that "focused almost exclusively on conduct which was criminal," 402 U.S., at 454 . While acknowledging that in particular cases the California statute would compel incriminating testimony, he concluded that the noncriminal purpose and the general applicability of the reporting requirement demanded compliance even in such cases. Id., at 458. </s> When a person assumes control over items that are the legitimate object of the government's noncriminal regulatory powers, the ability to invoke the privilege is reduced. In Wilson v. United States, supra, the Court surveyed a range of cases involving the custody of public documents and records required by law to be kept because they related to "the appropriate subjects of governmental regulation and the enforcement of restrictions validly established." Id., at 380. The principle the Court drew from these cases is: </s> "[W]here, by virtue of their character and the rules of law applicable to them, the books and papers are held subject to examination by the demanding authority, the custodian has no privilege to refuse production although their contents tend to criminate him. In assuming their custody he has accepted the incident obligation to permit inspection." Id., at 382. </s> See also Braswell v. United States, 487 U.S. 99, 109 -113 (1988); Curcio v. United States, 354 U.S. 118, 123 -124 (1957) ("A custodian, by assuming the duties of his office, undertakes the obligation to produce the books of which he is custodian in response to a rightful exercise of the State's visitorial powers"). In Shapiro, the Court interpreted this principle as extending well beyond the corporate context, 335 U.S., at 16 -20, and emphasized that Shapiro had assumed and retained control over documents in which the Government had a direct and particular regulatory interest. Id., at 7-8, 14-15. Indeed, it was in part Shapiro's custody over items having this public nature that allowed the Court in Marchetti, supra, at 57, Grosso, supra, at 69, and Haynes, supra, at 99, to distinguish [493 U.S. 549, 559] the measures considered in those cases from the regulatory requirement at issue in Shapiro. </s> These principles readily apply to this case. Once Maurice was adjudicated a child in need of assistance, his care and safety became the particular object of the State's regulatory interests. See 314 Md., at 404, 550 A. 2d, at 1141; Md. Cts. & Jud. Proc. Code Ann. 3-801(e), 3-804(a) (Supp. 1989); see also App. 105 ("This court has jurisdiction to require at all times to know the whereabouts of the minor child. We asserted jurisdiction over that child in the spring of 1987 . . ."). Maryland first placed Maurice in shelter care, authorized placement in foster care, and then entrusted responsibility for Maurice's care to Bouknight. By accepting care of Maurice subject to the custodial order's conditions (including requirements that she cooperate with BCDSS, follow a prescribed training regime, and be subject to further court orders), Bouknight submitted to the routine operation of the regulatory system and agreed to hold Maurice in a manner consonant with the State's regulatory interests and subject to inspection by BCDSS. Cf. Shapiro v. United States, supra. In assuming the obligations attending custody, Bouknight "has accepted the incident obligation to permit inspection." Wilson, 221 U.S., at 382 . The State imposes and enforces that obligation as part of a broadly directed, noncriminal regulatory regime governing children cared for pursuant to custodial orders. See Md. Cts. & Jud. Proc. Code Ann. 3-802(a) (1984) (setting forth child protective purposes of subtitle, including "provid[ing] for the care, protection, and wholesome mental and physical development of children coming within the provisions of this subtitle"); see also Md. Cts. & Jud. Proc. Code Ann. 3-820(b), (c) (Supp. 1989); In re Jessica M., 312 Md. 93, 538 A. 2d 305 (1988). </s> Persons who care for children pursuant to a custody order, and who may be subject to a request for access to the child, are hardly a "`selective group inherently suspect of criminal activities.'" Marchetti, supra, at 57 (quoting Albertson v. [493 U.S. 549, 560] Subversive Activities Control Board, 382 U.S., at 79 ). The juvenile court may place a child within its jurisdiction with social service officials or "under supervision in his own home or in the custody or under the guardianship of a relative or other fit person, upon terms the court deems appropriate." Md. Cts. & Jud. Proc. Code Ann. 3-820(c)(1)(i) (Supp. 1989). Children may be placed, for example, in foster care, in homes of relatives, or in the care of state officials. See, e. g., In re Jessica M., supra; In re Arlene G., 301 Md. 355, 483 A. 2d 39 (1984); Maryland Dept. of Health and Mental Hygiene v. Prince George's County Dept. of Social Services, 47 Md. App. 436, 423 A. 2d 589 (1980). Even when the court allows a parent to retain control of a child within the court's jurisdiction, that parent is not one singled out for criminal conduct, but rather has been deemed to be, without the State's assistance, simply "unable or unwilling to give proper care and attention to the child and his problems." Md. Cts. & Jud. Proc. Code Ann. 3-801(e) (Supp. 1989); see In re Jertrude O., 56 Md. App. 83, 466 A. 2d 885 (1983), cert. denied, 298 Md. 309, 469 A. 2d 863 (1984). The provision that authorized the juvenile court's efforts to gain production of Maurice reflects this broad applicability. See Md. Cts. & Jud. Proc. Code Ann. 3-814(c) (1984) ("If a parent, guardian, or custodian fails to bring the child before the court when requested, the court may issue a writ of attachment directing that the child be taken into custody and brought before the court. The court may proceed against the parent, guardian, or custodian for contempt"). This provision "fairly may be said to be directed at . . . parents, guardians, and custodians who accept placement of juveniles in custody." 314 Md., at 418, 550 A. 2d, at 1148 (McAuliffe, J., dissenting). </s> Similarly, BCDSS' efforts to gain access to children, as well as judicial efforts to the same effect, do not "focu[s] almost exclusively on conduct which was criminal." Byers, 402 U.S., at 454 (Harlan, J., concurring in judgment). Many orders will arise in circumstances entirely devoid of [493 U.S. 549, 561] criminal conduct. Even when criminal conduct may exist, the court may properly request production and return of the child, and enforce that request through exercise of the contempt power, for reasons related entirely to the child's wellbeing and through measures unrelated to criminal law enforcement or investigation. See Maryland Cts. & Jud. Proc. Code Ann. 3-814(c) (1984). This case provides an illustration: concern for the child's safety underlay the efforts to gain access to and then compel production of Maurice. See App. 33-39, 53-55, 150, 155-158; see also 314 Md., at 419, 550 A. 2d, at 1149 (McAuliffe, J., dissenting). Finally, production in the vast majority of cases will embody no incriminating testimony, even if in particular cases the act of production may incriminate the custodian through an assertion of possession or the existence, or the identity, of the child. Cf. Byers, 402 U.S., at 430 -431; id., at 458 (Harlan, J., concurring in judgment). These orders to produce children cannot be characterized as efforts to gain some testimonial component of the act of production. The government demands production of the very public charge entrusted to a custodian, and makes the demand for compelling reasons unrelated to criminal law enforcement and as part of a broadly applied regulatory regime. In these circumstances, Bouknight cannot invoke the privilege to resist the order to produce Maurice. </s> We are not called upon to define the precise limitations that may exist upon the State's ability to use the testimonial aspects of Bouknight's act of production in subsequent criminal proceedings. But we note that imposition of such limitations is not foreclosed. The same custodial role that limited the ability to resist the production order may give rise to corresponding limitations upon the direct and indirect use of that testimony. See Braswell, 487 U.S., at 118 , and n. 11. The State's regulatory requirement in the usual case may neither compel incriminating testimony nor aid a criminal prosecution, but the Fifth Amendment protections are not thereby necessarily unavailable to the person who complies [493 U.S. 549, 562] with the regulatory requirement after invoking the privilege and subsequently faces prosecution. See Marchetti, 390 U.S., at 58 -59 (the "attractive and apparently practical" course of subsequent use restriction is not appropriate where a significant element of the regulatory requirement is to aid law enforcement); see also Leary v. United States, 395 U.S. 6, 26 -27 (1969); Haynes, 390 U.S., at 100 ; Grosso, 390 U.S., at 69 ; cf. Doe I, 465 U.S., at 617 , n. 17 (scope of restriction). In a broad range of contexts, the Fifth Amendment limits prosecutors' ability to use testimony that has been compelled. See Simmons v. United States, 390 U.S. 377, 391 -394 (1968) (no subsequent admission of testimony provided in suppression hearing); Murphy v. Waterfront Comm'n of New York Harbor, 378 U.S. 52, 75 -76, 79 (1964) (Fifth Amendment bars use, in criminal processes, in other jurisdictions of testimony compelled pursuant to a grant of use immunity in one jurisdiction); Maness v. Meyers, 419 U.S. 449, 474 -475 (1975) (WHITE, J., concurring in result); Adams v. Maryland, 347 U.S. 179, 181 (1954) ("[A] witness does not need any statute to protect him from the use of self-incriminating testimony he is compelled to give over his objection. The Fifth Amendment takes care of that without a statute"); see also New Jersey v. Portash, 440 U.S. 450 (1979); Garrity v. New Jersey, 385 U.S. 493, 500 (1967). But cf. Doe I, supra, at 616-617 (construing federal use immunity statute, 18 U.S.C. 6001-6005); Pillsbury Co. v. Conboy, 459 U.S. 248, 261 -262 (1983) (declining to supplement previous grant of federal use immunity). </s> III </s> The judgment of the Court of Appeals of Maryland is reversed, and the cases are remanded to that court for further proceedings not inconsistent with this opinion. </s> So ordered. [493 U.S. 549, 563] </s> JUSTICE MARSHALL, with whom JUSTICE BRENNAN joins, dissenting. </s> Although the Court assumes that respondent's act of producing her child would be testimonial and could be incriminating, ante, at 555, it nonetheless concludes that she cannot invoke her privilege against self-incrimination and refuse to reveal her son's current location. Neither of the reasons the Court articulates to support its refusal to permit respondent to invoke her constitutional privilege justifies its decision. I therefore dissent. </s> I </s> The Court correctly assumes, ante, at 555, that Bouknight's production of her son to the Maryland court would be testimonial because it would amount to an admission of Bouknight's physical control over her son. See Fisher v. United States, 425 U.S. 391, 410 (1976) (acts of production are testimonial if they contain implicit statement of fact). Accord, United States v. Doe, 465 U.S. 605, 612 -613 (1984). The Court also assumes, ante, at 555, that Bouknight's act of production would be self-incriminating. I would not hesitate to hold explicitly that Bouknight's admission of possession or control presents a "'real and appreciable'" threat of self-incrimination. Marchetti v. United States, 390 U.S. 39, 48 (1968). Bouknight's ability to produce the child would conclusively establish her actual and present physical control over him, and thus might "prove a significant `link in a chain' of evidence tending to establish [her] guilt." Ibid. (footnote omitted). </s> Indeed, the stakes for Bouknight are much greater than the Court suggests. Not only could she face criminal abuse and neglect charges for her alleged mistreatment of Maurice, but she could also be charged with causing his death. The State acknowledges that it suspects that Maurice is dead, and the police are investigating his case as a possible homicide. [493 U.S. 549, 564] In these circumstances, the potentially incriminating aspects to Bouknight's act of production are undoubtedly significant. </s> II </s> Notwithstanding the real threat of self-incrimination, the Court holds that "Bouknight may not invoke the privilege to resist the production order because she has assumed custodial duties related to production and because production is required as part of a noncriminal regulatory regime." Ante, at 555-556. In characterizing Bouknight as Maurice's "custodian," and in describing the relevant Maryland juvenile statutes as part of a noncriminal regulatory regime, the Court relies on two distinct lines of Fifth Amendment precedent, neither of which applies to this litigation. </s> A </s> The Court's first line of reasoning turns on its view that Bouknight has agreed to exercise on behalf of the State certain custodial obligations with respect to her son, obligations that the Court analogizes to those of a custodian of the records of a collective entity. See ante, at 558-559. This characterization is baffling, both because it is contrary to the facts of this case and because this Court has never relied on such a characterization to override the privilege against self-incrimination except in the context of a claim of privilege by an agent of a collective entity. 1 </s> [493 U.S. 549, 565] </s> Jacqueline Bouknight is Maurice's mother; she is not, and in fact could not be, his "custodian" whose rights and duties are determined solely by the Maryland juvenile protection law. See Md. Cts. & Jud. Proc. Code Ann. 3-801(j) (Supp. 1989) (defining "custodian" as "person or agency to whom legal custody of a child has been given by order of the court, other than the child's parent or legal guardian"). Although Bouknight surrendered physical custody of her child during the pendency of the proceedings to determine whether Maurice was a "child in need of assistance" (CINA) within the meaning of the Maryland Code, 3-801(e), Maurice's placement in shelter care was only temporary and did not extinguish her legal right to custody of her son. See 3-801(r). When the CINA proceedings were settled, Bouknight regained physical custody of Maurice and entered into an agreement with the Baltimore City Department of Social Services (BCDSS). In that agreement, which was approved by the juvenile court, Bouknight promised, among other things, to "cooperate with BCDSS," App. 28, but she retained legal custody of Maurice. </s> A finding that a child is in need of assistance does not by itself divest a parent of legal or physical custody, nor does it transform such custody to something conferred by the State. See, e. g., In re Jertrude O., 56 Md. App. 83, 97-98, 466 A. 2d 885, 893 (1983) (proving a child is a CINA differs significantly from proving that the parent's rights to legal and physical custody should be terminated). Thus, the parent of a CINA continues to exercise custody because she is [493 U.S. 549, 566] the child's parent, not because the State has delegated that responsibility to her. Although the State has obligations "[t]o provide for the care, protection, and wholesome mental and physical development of children" who are in need of assistance, Md. Cts. & Jud. Proc. Code Ann. 3-802(a)(1) (1984), these duties do not eliminate or override a parent's continuing legal obligations similarly to provide for her child. </s> In light of the statutory structure governing a parent's relationship to a CINA, Bouknight is not acting as a custodian in the traditional sense of that word because she is not acting on behalf of the State. In reality, she continues to exercise her parental duties, constrained by an agreement between her and the State. That agreement, which includes a stipulation that Maurice was a CINA, allows the State, in certain circumstances, to intercede in Bouknight's relationship with her child. It does not, however, confer custodial rights and obligations on Bouknight in the same way corporate law creates the custodial status of a corporate agent. </s> Moreover, the rationale for denying a corporate custodian Fifth Amendment protection for acts done in her representative capacity does not apply to this case. The rule for a custodian of corporate records rests on the well-established principle that a collective entity, unlike a natural person, has no Fifth Amendment privilege against self-incrimination. See Hale v. Henkel, 201 U.S. 43, 69 -70 (1906) (corporation has no privilege); United States v. White, 322 U.S. 694, 701 (1944) (labor union has no privilege). Because an artificial entity can act only through its agents, a custodian of such an entity's documents may not invoke her personal privilege to resist producing documents that may incriminate the entity, even if the documents may also incriminate the custodian. Wilson v. United States, 221 U.S. 361, 384 -385 (1911). As we explained in White: </s> "[I]ndividuals, when acting as representatives of a collective group, cannot be said to be exercising their personal rights and duties nor to be entitled to their purely personal [493 U.S. 549, 567] privileges. Rather they assume the rights, duties and privileges of the artificial entity or association of which they are agents or officers and they are bound by its obligations. . . . And the official records and documents of the organization that are held by them in a representative rather than in a personal capacity cannot be the subject of the personal privilege against self-incrimination, even though production of the papers might tend to incriminate them personally." 322 U.S., at 699 (citations omitted; emphasis added). </s> Jacqueline Bouknight is not the agent for an artificial entity that possesses no Fifth Amendment privilege. Her role as Maurice's parent is very different from the role of a corporate custodian who is merely the instrumentality through whom the corporation acts. I am unwilling to extend the collective entity doctrine into a context where it denies individuals, acting in their personal rather than representative capacities, their constitutional privilege against self-incrimination. </s> B </s> The Court's decision rests as well on cases holding that "the ability to invoke the privilege may be greatly diminished when invocation would interfere with the effective operation of a generally applicable, civil regulatory requirement." Ante, at 557. The cases the Court cites have two common features: they concern civil regulatory systems not primarily intended to facilitate criminal investigations, and they target the general public. See California v. Byers, 402 U.S. 424, 430 -431 (1971) (determining that a "hit and run" statute that required a driver involved in an accident to stop and give certain information was primarily civil). In contrast, regulatory regimes that are directed at a "`selective group inherently suspect of criminal activities,'" Marchetti, 390 U.S., at 57 (quoting Albertson v. Subversive Activities Control Board, 382 U.S. 70, 79 (1965)), do not result in a similar diminution of the Fifth Amendment privilege. [493 U.S. 549, 568] </s> 1 </s> Applying the first feature to this case, the Court describes Maryland's juvenile protection scheme as "a broadly directed, noncriminal regulatory regime governing children cared for pursuant to custodial orders." Ante, at 559. The Court concludes that Bouknight cannot resist an order necessary for the functioning of that system. The Court's characterization of Maryland's system is dubious and highlights the flaws inherent in the Court's formulation of the appropriate Fifth Amendment inquiry. Virtually any civil regulatory scheme could be characterized as essentially noncriminal by looking narrowly or, as in this case, solely to the avowed noncriminal purpose of the regulations. If one focuses instead on the practical effects, the same scheme could be seen as facilitating criminal investigations. The fact that the Court holds Maryland's juvenile statute to be essentially noncriminal, notwithstanding the overlapping purposes underlying that statute and Maryland's criminal child abuse statutes, proves that the Court's test will never be used to find a relationship between the civil scheme and law enforcement goals significant enough to implicate the Fifth Amendment. </s> The regulations embodied in the juvenile welfare statute are intimately related to the enforcement of state criminal statutes prohibiting child abuse, Md. Ann. Code, Art. 27, 35A (1987). State criminal decisions suggest that information supporting criminal convictions is often obtained through civil proceedings and the subsequent protective oversight by BCDSS. See, e. g., Lee v. State, 62 Md. App. 341, 489 A. 2d 87 (1985). See also 3 Code of Md. Regs. 07.02.07.08(A)(1) and 07.02.07.08(C)(1)(b) (1988) (requiring Social Services Administration to maintain a Child Abuse Central Registry and allowing law enforcement officials access to the Registry). In this respect, Maryland's juvenile protection system resembles the revenue system at issue in Marchetti, which required persons engaged in the business of accepting wagers to provide certain information about their activities to the [493 U.S. 549, 569] Federal Government. Focusing on the effects of the regulatory scheme, the Court held that this revenue system was not the sort of neutral civil regulatory scheme that could trump the Fifth Amendment privilege. Even though the Government's "principal interest [was] evidently the collection of revenue," 390 U.S., at 57 , the information sought would increase the "likelihood that any past or present gambling offenses [would] be discovered and successfully prosecuted," id., at 52. </s> In contrast to Marchetti, the Court here disregards the practical implications of the civil scheme and holds that the juvenile protection system does not "'focu[s] almost exclusively on conduct which was criminal.'" Ante, at 560 (quoting Byers, supra, at 454 (Harlan, J., concurring in judgment). See also Byers, supra, at 430 (plurality opinion) (determining statute at issue to be "essentially regulatory, not criminal"). I cannot agree with this approach. The State's goal of protecting children from abusive environments through its juvenile welfare system cannot be separated from criminal provisions that serve the same goal. When the conduct at which a civil statute aims - here, child abuse and neglect - is frequently the same conduct subject to criminal sanction, it strikes me as deeply problematic to dismiss the Fifth Amendment concerns by characterizing the civil scheme as "unrelated to criminal law enforcement or investigation," ante, at 561. A civil scheme that inevitably intersects with criminal sanctions may not be used to coerce, on pain of contempt, a potential criminal defendant to furnish evidence crucial to the success of her own prosecution. </s> I would apply a different analysis, one that is more faithful to the concerns underlying the Fifth Amendment. This approach would target respondent's particular claim of privilege, the precise nature of the testimony sought, and the likelihood of self-incrimination caused by this respondent's compliance. "To sustain the privilege, it need only be evident from the implications of the question, in the setting in [493 U.S. 549, 570] which it is asked, that a responsive answer to the question or an explanation of why it cannot be answered might be dangerous because injurious disclosure could result." Hoffman v. United States, 341 U.S. 479, 486 -487 (1951). Accord, Marchetti, supra, at 48; Malloy v. Hogan, 378 U.S. 1, 11 -12 (1964). This analysis unambiguously indicates that Bouknight's Fifth Amendment privilege must be respected to protect her from the serious risk of self-incrimination. See supra, at 563-564. </s> An individualized inquiry is preferable to the Court's analysis because it allows the privilege to turn on the concrete facts of a particular case, rather than on abstract characterizations concerning the nature of a regulatory scheme. Moreover, this particularized analysis would not undermine any appropriate goals of civil regulatory schemes that may intersect with criminal prohibitions. Instead, the ability of a State to provide immunity from criminal prosecution permits it to gather information necessary for civil regulation, while also preserving the integrity of the privilege against self-incrimination. The fact that the State throws a wide net in seeking information does not mean that it can demand from the few persons whose Fifth Amendment rights are implicated that they participate in their own criminal prosecutions. Rather, when the State demands testimony from its citizens, it should do so with an explicit grant of immunity. </s> 2 </s> The Court's approach includes a second element; it holds that a civil regulatory scheme cannot override Fifth Amendment protection unless it is targeted at the general public. Such an analysis would not be necessary under the particularized approach I advocate. Even under the Court's test, however, Bouknight's right against self-incrimination should not be diminished because Maryland's juvenile welfare scheme clearly is not generally applicable. A child is considered in need of assistance because "[h]e is mentally handicapped [493 U.S. 549, 571] or is not receiving ordinary and proper care and attention, and . . . [h]is parents . . . are unable or unwilling to give proper care and attention to the child and his problems." Md. Cts. & Jud. Proc. Code Ann. 3-801(e) (Supp. 1989). The juvenile court has jurisdiction only over children who are alleged to be in need of assistance, not over all children in the State. See 3-804(a). It thus has power to compel testimony only from those parents whose children are alleged to be CINA's. In other words, the regulatory scheme that the Court describes as "broadly directed," ante, at 559, is actually narrowly targeted at parents who through abuse or neglect deny their children the minimal reasonable level of care and attention. Not all such abuse or neglect rises to the level of criminal child abuse, but parents of children who have been so seriously neglected or abused as to warrant allegations that the children are in need of state assistance are clearly "a selective group inherently suspect of criminal activities." See supra, at 567. </s> III </s> In the end, neither line of precedents relied on by the Court justifies riding roughshod over Bouknight's constitutional privilege against self-incrimination. The Court cannot accurately characterize her as a "custodian" in the same sense as the Court has used that word in the past. Nor is she the State's "agent," whom the State may require to act on its behalf. Moreover, the regulatory scheme at issue here is closely intertwined with the criminal regime prohibiting child abuse and applies only to parents whose abuse or neglect is serious enough to warrant state intervention. </s> Although I am disturbed by the Court's willingness to apply inapposite precedent to deny Bouknight her constitutional right against self-incrimination, especially in light of the serious allegations of homicide that accompany this civil proceeding, I take some comfort in the Court's recognition that the State may be prohibited from using any testimony given by Bouknight in subsequent criminal proceedings. [493 U.S. 549, 572] Ante, at 561 (leaving open the question of the "State's ability to use the testimonial aspects of Bouknight's act of production" in such criminal proceedings). 2 Because I am not content to deny Bouknight the constitutional protection required by the Fifth Amendment now in the hope that she will not be convicted later on the basis of her own testimony, I dissent. </s> Footnotes [Footnote 1 The Court claims that the principle espoused in the collective entity cases was "extend[ed] well beyond the corporate context" in Shapiro v. United States, 335 U.S. 1 (1948). Ante, at 558. Shapiro, however, did not rest on the existence of an agency relationship between a collective entity and the custodian of its records. Instead, the petitioner was denied the Fifth Amendment privilege because the records sought were kept as part of a generalized regulatory system that required all businesses, unincorporated as well as incorporated, to retain records of certain transactions. See 335 U.S., at 22 -23, 27, 33. Shapiro turned on the Court's view "that the privilege which exists as to private papers cannot be maintained in relation to `records required by law to be kept in order that there may be suitable information of transactions which are the appropriate subjects [493 U.S. 549, 565] of governmental regulation and the enforcement of restrictions validly established.'" Id., at 33 (quoting Davis v. United States, 328 U.S. 582, 589 -590 (1946)). See also Marchetti v. United States, 390 U.S. 39, 57 (1968) (describing rationale in Shapiro); ante, at 558 (emphasizing that Shapiro had custody of "documents in which the Government had a direct and particular regulatory interest" (emphasis added)). Thus, Shapiro is properly analyzed with the cases concerning testimony required as a part of a noncriminal regulatory regime, rather than with the cases concerning testimony compelled from custodians of collective entities' records. </s> [Footnote 2 I note, with both exasperation and skepticism about the bona fide nature of the State's intentions, that the State may be able to grant Bouknight use immunity under a recently enacted immunity statute, even though it has thus far failed to do so. See 1989 Md. Laws, ch. 288 (amending 9-123). Although the statute applies only to testimony "in a criminal prosecution or a proceeding before a grand jury of the State," Md. Cts. & Jud. Proc. Code Ann. 9-123(b)(1) (Supp. 1989), the State represented to this Court that "[a]s a matter of law, [granting limited use immunity for the testimonial aspects of Bouknight's compliance with the production order] would now be possible," Tr. of Oral Arg. 10. If such a grant of immunity has been possible since July 1989 and the State has refused to invoke it so that it can litigate Bouknight's claim of privilege, I have difficulty believing that the State is sincere in its protestations of concern for Maurice's well-being. </s> [493 U.S. 549, 1]

United States Supreme Court HOLBROOK v. FLYNN(1986) No. 84-1606 Argued: January 14, 1986Decided: March 26, 1986 </s> After respondent and others were indicted for armed robbery in Rhode Island Superior Court, they were held without bail. When the trial was about to begin, four uniformed state troopers were sitting in the front row of the spectators' section of the courtroom to supplement the customary security force, which was overextended at the time. Respondent's counsel objected to the troopers' presence, but this objection was overruled by the trial justice, primarily on the basis of voir dire responses during the selection of the jury indicating that the troopers' presence would not affect the defendants' ability to receive a fair trial. Respondent was convicted, and the Rhode Island Supreme Court affirmed. Respondent then brought a habeas corpus proceeding in Federal District Court, which also rejected his objections to the troopers' presence. The Court of Appeals reversed, holding that the trial justice had failed to consider whether the particular circumstances of respondent's trial had called for the troopers' presence and that the justice had improperly relied on the jurors' voir dire responses to rebut any suggestion of prejudice to respondent. </s> Held: </s> The troopers' presence at respondent's trial was not so inherently prejudicial that he was thereby denied his constitutional right to a fair trial. Pp. 567-572. </s> (a) While an accused is entitled to have his guilt or innocence determined solely on the basis of evidence introduced at trial, this does not mean that every practice tending to single out an accused from everyone else in the courtroom must be struck down. Pp. 567-568. </s> (b) The conspicuous, or at least noticeable, presence of guards in a courtroom during trial is not the sort of inherently prejudicial practice that should be permitted only where justified by an essential state interest. Such presence need not be interpreted as a sign that the defendant is particularly dangerous or culpable. Jurors may just as easily believe that the guards are there to prevent outside disruptions or eruptions of violence in the courtroom. Reason, principle, and human experience counsel against a presumption that any use of identifiable guards in a courtroom is inherently prejudicial. In view of the variety of ways [475 U.S. 560, 561] in which such guards can be deployed, a case-by-case approach is more appropriate. Pp. 568-569. </s> (c) Whenever a courtroom arrangement is challenged as inherently prejudicial, the question is not whether the jurors articulated a consciousness of some prejudicial effect, but rather whether there was an unacceptable risk of prejudice. In this case, there is no justification for finding such an unacceptable risk based on the troopers' presence. Even if the jurors had been aware that the deployment of troopers was not common practice, there is no reason to believe that the troopers' presence tended to brand respondent with guilt. Their presence was unlikely to have been taken as a sign of anything other than a normal official concern for safety and order. Moreover, even if a slight degree of prejudice could be attributed to the troopers' presence, sufficient cause for their presence could be found in the State's need to maintain custody over defendants who had been denied bail. The troopers' presence was intimately related to the State's legitimate interest in maintaining such custody and thus did not offend the Equal Protection Clause by arbitrarily discriminating against those unable to post bail or to whom bail has been denied. Pp. 570-572. </s> (d) Since this case involves a federal court's review of a constitutional challenge to a state-court proceeding, the federal court's task is not to determine whether it might have been feasible for the State to have employed less conspicuous security measures in the courtroom, but only whether what the jurors saw was so inherently prejudicial as to pose an unacceptable threat to the defendants' right to a fair trial. Respondent has failed to show the existence of such inherent prejudice and has not shown actual prejudice. P. 572. </s> 749 F.2d 961, reversed. </s> MARSHALL, J., delivered the opinion for a unanimous Court. BURGER, C. J., filed a concurring opinion, post, p. 572. </s> Thomas More Dickinson, Special Assistant Attorney General of Rhode Island, argued the cause for petitioners. With him on the brief were Arlene Violet, Attorney General, and John Austin Murphy. </s> George Kannar argued the cause for respondent. With him on the brief were Charles S. Sims and Burt Neuborne. * </s> [Footnote * John K. Van de Kamp, Attorney General, Karl S. Mayer, Assistant Attorney General, and Robert E. Niver, Deputy Attorney General, filed a brief for the State of California as amicus curiae urging reversal. [475 U.S. 560, 562] </s> JUSTICE MARSHALL delivered the opinion of the Court. </s> The question presented in this case is whether a criminal defendant was denied his constitutional right to a fair trial when, at his trial with five codefendants, the customary courtroom security force was supplemented by four uniformed state troopers sitting in the first row of the spectators' section. </s> I </s> On August 14, 1975, nine masked men entered the Bonded Vault Co. in Providence, Rhode Island, robbed several employees at gunpoint, broke into most of the safe-deposit boxes in the vault, and escaped with approximately $4 million in cash and valuables. In January 1976, respondent and eight others were indicted in Providence County Superior Court for that crime. After a hearing in Superior Court, respondent and five of his alleged accomplices were ordered held without bail in the custody of the Warden of the State's Adult Correctional Institution. 1 </s> In April 1976, respondent and his five codefendants were brought to trial in Superior Court before Associate Justice Anthony A. Giannini. Upon entering the courtroom, respondent's counsel noted the presence of four uniformed state troopers, sitting in the first row of the spectators' section; the officers were not far behind, but were separated by the "bar" from, the seats assigned to the defendants for the duration of the trial. 2 Counsel immediately complained to the [475 U.S. 560, 563] judge that "the defendants would object to uniformed police, uniformed state police, sitting in the court as a display of `strength' in the presence of the jury." Tr. 48-49. While counsel observed that he would have no objection to the use of any number of plainclothed security personnel, he argued that the presence of uniformed officers would suggest to the jury that defendants were of "bad character." Id., at 48. Justice Giannini replied that the troopers were present because the Committing Squad, which usually supplied courtroom security personnel in such cases, was overextended at that time. Noting that he had not personally requested the assistance of the troopers, the judge agreed to see whether they might be made to wear civilian clothes for their future appearances in the courtroom. </s> The following week, Justice Giannini announced that he had "received a report that it is not practical, both from an organization point of view and also from a contractual point of view with the union representing the state troopers," for the four troopers to dress in civilian clothes. Id., at 71. In the face of these constraints and in view of the need for adequate security, the justice ruled that the troopers could remain in the courtroom, in full uniform. He noted that because the troopers would be seated behind the bar, defendants would in no way be prejudiced. The next day, denying defendants' motion for reconsideration, Justice Giannini asserted that though he himself had not made the decision to deploy the troopers, he thought defendants "overly sensitive" to the danger of prejudice. Id., at 84. At any rate, the justice went on, an examination of prospective jurors would reveal whether they were likely to draw adverse inference from the troopers' presence, and would thereby guarantee the rights of the defendants. Jury selection began. </s> In the meantime, respondent sought interlocutory review in the Rhode Island Supreme Court of Justice Giannini's ruling. After initially declining review, the Supreme Court read a transcript of the ruling and granted respondent's petition. [475 U.S. 560, 564] Noting that "[t]he presence of armed, uniformed police officers acting as a security force in criminal courtrooms in this jurisdiction is a departure from the practice usually found in the trial courts of this state," the court concluded: "The trial justice may not delegate responsibility that is his to the so-called security committee or its advisors. The presence of the State Police is a decision that must be resolved solely by the trial justice after consideration of all relevant factors." State v. Byrnes, 116 R. I. 925, 927, 357 A. 2d 448, 449 (1976). </s> Upon the State's request, Justice Giannini conducted a hearing at which the first witness was Captain Robert Melucci, the principal officer of the Committing Squad, the group charged with maintaining courtroom security during the trials of defendants in pretrial detention. 3 He testified that, because of other commitments in the courthouse, the force of 12 officers available for deployment in the building was insufficient to maintain the preferred ratio of 2 officers to every defendant in this six-defendant trial. Since any ratio approaching one-to-one posed a "security risk," Tr. 120, and he could spare only six officers for respondent's trial, Captain Melucci had contacted the Superior Court's presiding justice and informed him of the need for additional security personnel. As a result, Captain Melucci testified, additional help had been sought from the State Police. </s> The next witness, Major Lionel Benjamin, Executive Officer of the Rhode Island State Police, explained that any time his force was charged with transporting prisoners from the Adult Correctional Institution to the courthouse and maintaining custody during trial, he was contractually obligated to use officers from the uniformed division. That same contract with the Fraternal Order of Police, according to Major Benjamin, precluded him from asking members of the uniformed [475 U.S. 560, 565] division to perform their duties in civilian clothing. The Major went on to note that even were there no contractual bar, the force's plainclothes detective division lacked the personnel to provide security for the duration of respondent's trial. He concluded by saying that if the court required his troopers to wear civilian clothes, he would withdraw them. Id., at 161. </s> After completing jury selection, Justice Giannini gave his final ruling on respondent's motion. He noted that "if these defendants were admitted to bail, there would be no state policemen and there would be no committing squad officers in this courtroom." Id., at 229. But bail having been denied, it became the responsibility of the Warden and the Committing Squad to maintain custody of the detainees. The justice found that because the Committing Squad lacked the resources, the necessary level of security could be ensured only with the help of the uniformed troopers. Having held the presence of the troopers "justified by the evidence," Justice Giannini considered whether the presence of the troopers had prejudiced the defendants. He observed that of the 54 prospective jurors who had not been struck before they were asked about the troopers, 51 had responded that the troopers' presence "created no inference of guilt with regard to the defendants in their mind"; the remaining 3 had not precisely addressed the question. Id., at 230-231. When asked to speculate why the troopers were present, many had given a vague response as to the need for security. In view of the voir dire responses, the justice concluded that the presence of the troopers would not affect defendants' ability to receive a fair trial. </s> The trial lasted more than two months and ended with verdicts acquitting three defendants and convicting respondent and two others. On appeal, the Rhode Island Supreme Court affirmed the convictions. State v. Byrnes, 433 A. 2d 658 (1981). With respect to respondent's objection to the troopers, the court concluded: [475 U.S. 560, 566] </s> "[T]he trial justice gave a reasoned and careful consideration of the issues raised by the presence of the uniformed troopers and, after consideration of all relevant factors, found that the presence of the troopers in no way prejudiced defendants. We have read the record, and we find no reason whatsoever to fault his conclusion." Id., at 663. </s> Respondent then brought this habeas proceeding in Federal District Court. After certain procedural complications not relevant here, the District Court for the District of Rhode Island entertained the petition and rejected all the claims therein. With respect to respondent's objection to the presence of the troopers throughout the trial, the court held: "Less totalitarian alternatives appear to have been explored and rejected on rational grounds. The security measures approved here, extreme though they might have been, did not, under the totality of the circumstances, deny due process or equal protection to the petitioner." 581 F. Supp. 990, 998 (1984). </s> The Court of Appeals, however, reversed this dismissal. 749 F.2d 961 (CA1 1984). Seizing upon the Rhode Island Supreme Court's observation that the presence of uniformed and armed troopers had been an "extraordinary" event, the Court of Appeals concluded that Justice Giannini had failed to consider whether the particular circumstances of respondent's trial had called for such measures. </s> "Rather, with no threats shown to safety, he balanced nothing, but simply indicated a fear that since the defendants had not been bailed, they might flee from the courtroom. There was no evidence even suggesting any unusual likelihood of this; nor had anything whatever made `manifest' the `necessity for heightened security.' As for the exploration of less `totalitarian alternatives,' the exploration was limited, notwithstanding defendants' suggestions, to inquiring whether regular commitment officers were available without inconveniencing the Presiding [475 U.S. 560, 567] Justice, and whether the union contract permitted the state police to appear out of uniform and unarmed." Id., at 964. </s> Dismissing the trial judge's reliance on jurors' voir dire responses to rebut any suggestion of prejudice to respondent, the Court of Appeals asserted: "Even if all jurors had indicated an unreserved opinion that the troopers' presence would not affect them, such expression, on a case as extreme as this, where there was no need to rely on it, is totally unacceptable." Id., at 965. The court ordered that the writ of habeas corpus be granted. </s> We granted certiorari, 472 U.S. 1026 (1985), and now reverse. </s> II </s> A </s> Central to the right to a fair trial, guaranteed by the Sixth and Fourteenth Amendments, is the principle that "one accused of a crime is entitled to have his guilt or innocence determined solely on the basis of the evidence introduced at trial, and not on grounds of official suspicion, indictment, continued custody, or other circumstances not adduced as proof at trial." Taylor v. Kentucky, 436 U.S. 478, 485 (1978). This does not mean, however, that every practice tending to single out the accused from everyone else in the courtroom must be struck down. Recognizing that jurors are quite aware that the defendant appearing before them did not arrive there by choice or happenstance, we have never tried, and could never hope, to eliminate from trial procedures every reminder that the State has chosen to marshal its resources against a defendant to punish him for allegedly criminal conduct. To guarantee a defendant's due process rights under ordinary circumstances, our legal system has instead placed primary reliance on the adversary system and the presumption of innocence. When defense counsel vigorously represents his client's interests and the trial judge [475 U.S. 560, 568] assiduously works to impress jurors with the need to presume the defendant's innocence, we have trusted that a fair result can be obtained. </s> Our faith in the adversary system and in jurors' capacity to adhere to the trial judge's instructions has never been absolute, however. We have recognized that certain practices pose such a threat to the "fairness of the factfinding process" that they must be subjected to "close judicial scrutiny." Estelle v. Williams, 425 U.S. 501, 503 -504 (1976). Thus, in Estelle v. Williams, we noted that where a defendant is forced to wear prison clothes when appearing before the jury, "the constant reminder of the accused's condition implicit in such distinctive, identifiable attire may affect a juror's judgment." Id., at 504-505. Since no "essential state policy" is served by compelling a defendant to dress in this manner, id., at 505, this Court went no further and concluded that the practice is unconstitutional. This close scrutiny of inherently prejudicial practices has not always been fatal, however. In Illinois v. Allen, 397 U.S. 337 (1970), the Court emphasized that a defendant may be prejudiced if he appears before the jury bound and gagged. "Not only is it possible that the sight of shackles and gags might have a significant effect on the jury's feelings about the defendant, but the use of this technique is itself something of an affront to the very dignity and decorum of judicial proceedings that the judge is seeking to uphold." Id., at 344. Yet the Court nonetheless observed that in certain extreme situations, "binding and gagging might possibly be the fairest and most reasonable way to handle" a particularly obstreperous and disruptive defendant. Ibid. </s> B </s> The first issue to be considered here is thus whether the conspicuous, or at least noticeable, deployment of security personnel in a courtroom during trial is the sort of inherently prejudicial practice that, like shackling, should be permitted [475 U.S. 560, 569] only where justified by an essential state interest specific to each trial. We do not believe that it is. </s> The chief feature that distinguishes the use of identifiable security officers from courtroom practices we might find inherently prejudicial is the wider range of inferences that a juror might reasonably draw from the officers' presence. While shackling and prison clothes are unmistakable indications of the need to separate a defendant from the community at large, the presence of guards at a defendant's trial need not be interpreted as a sign that he is particularly dangerous or culpable. Jurors may just as easily believe that the officers are there to guard against disruptions emanating from outside the courtroom or to ensure that tense courtroom exchanges do not erupt into violence. Indeed, it is entirely possible that jurors will not infer anything at all from the presence of the guards. If they are placed at some distance from the accused, security officers may well be perceived more as elements of an impressive drama than as reminders of the defendant's special status. Our society has become inured to the presence of armed guards in most public places; they are doubtless taken for granted so long as their numbers or weaponry do not suggest particular official concern or alarm. See Hardee v. Kuhlman, 581 F.2d 330, 332 (CA2 1978). </s> To be sure, it is possible that the sight of a security force within the courtroom might under certain conditions "create the impression in the minds of the jury that the defendant is dangerous or untrustworthy." Kennedy v. Cardwell, 487 F.2d 101, 108 (CA6 1973), cert. denied, 416 U.S. 959 (1974). However, "reason, principle, and common human experience," Williams, supra, at 504, counsel against a presumption that any use of identifiable security guards in the courtroom is inherently prejudicial. In view of the variety of ways in which such guards can be deployed, we believe that a case-by-case approach is more appropriate. [475 U.S. 560, 570] </s> III </s> A </s> The courtroom security force in this case consisted of four uniformed state troopers, two Deputy Sheriffs, and six Committing Squad officers. Though respondent does not concede that the deployment of the uniformed Committing Squad officers was proper, his focus at every stage of his habeas proceedings has been exclusively on the prejudice he attributes to the four state troopers. The only question we need answer is thus whether the presence of these four uniformed and armed officers was so inherently prejudicial that respondent was thereby denied his constitutional right to a fair trial. </s> The Court of Appeals was correct to find that Justice Giannini's assessment of jurors' states of mind cannot be dispositive here. If "a procedure employed by the State involves such a probability that prejudice will result that it is deemed inherently lacking in due process," Estes v. Texas, 381 U.S. 532, 542 -543 (1965), little stock need be placed in jurors' claims to the contrary. See Sheppard v. Maxwell, 384 U.S. 333, 351 -352 (1966); Irvin v. Dowd, 366 U.S. 717, 728 (1961). Even though a practice may be inherently prejudicial, jurors will not necessarily be fully conscious of the effect it will have on their attitude toward the accused. This will be especially true when jurors are questioned at the very beginning of proceedings; at that point, they can only speculate on how they will feel after being exposed to a practice daily over the course of a long trial. Whenever a courtroom arrangement is challenged as inherently prejudicial, therefore, the question must be not whether jurors actually articulated a consciousness of some prejudicial effect, but rather whether "an unacceptable risk is presented of impermissible factors coming into play," Williams, 425 U.S., at 505 . </s> We do not minimize the threat that a roomful of uniformed and armed policemen might pose to a defendant's chances of [475 U.S. 560, 571] receiving a fair trial. See ABA Standards for Criminal Justice 15-3.1(c) (2d ed. 1980). But we simply cannot find an unacceptable risk of prejudice in the spectacle of four such officers quietly sitting in the first row of a courtroom's spectator section. 4 Even had the jurors been aware that the deployment of troopers was not common practice in Rhode Island, we cannot believe that the use of the the four troopers tended to brand respondent in their eyes "with an unmistakable mark of guilt." Williams, supra, at 518 (BRENNAN, J., dissenting). Cf. Dorman v. United States, 140 U.S. App. D.C. 313, 327, 435 F.2d 385, 397 (1970) (greater danger of prejudice if jury aware that arrangements are extraordinary). Four troopers are unlikely to have been taken as a sign of anything other than a normal official concern for the safety and order of the proceedings. Indeed, any juror who for some other reason believed defendants particularly dangerous might well have wondered why there were only four armed troopers for the six defendants. </s> We note, moreover, that even were we able to discern a slight degree of prejudice attributable to the troopers' presence at respondent's trial, sufficient cause for this level of security could be found in the State's need to maintain custody over defendants who had been denied bail after an individualized determination that their presence at trial could not otherwise be ensured. Unlike a policy requiring detained defendants to wear prison garb, the deployment of troopers [475 U.S. 560, 572] was intimately related to the State's legitimate interest in maintaining custody during the proceedings and thus did not offend the Equal Protection Clause by arbitrarily discriminating against those unable to post bail or to whom bail had been denied. See Williams, supra, at 505-506. </s> B </s> The Court of Appeals rejected as wholly inadequate the reasons advanced by state authorities and accepted by Justice Giannini to explain why the four uniformed troopers had to be present at respondent's trial. However, our task here is not to determine whether it might have been feasible for the State to have employed less conspicuous security measures in the courtroom. While, in our supervisory capacity, we might express a preference that officers providing courtroom security in federal courts not be easily identifiable by jurors as guards, 5 we are much more constrained when reviewing a constitutional challenge to a state-court proceeding. All a federal court may do in such a situation is look at the scene presented to jurors and determine whether what they saw was so inherently prejudicial as to pose an unacceptable threat to defendant's right to a fair trial; if the challenged practice is not found inherently prejudicial and if the defendant fails to show actual prejudice, the inquiry is over. Respondent has failed to carry his burden here. </s> The judgment of the Court of Appeals is </s> Reversed. </s> Footnotes [Footnote 1 Of the remaining three defendants, two were fugitives at the time of respondent's trial, and the third appeared at that proceeding as a witness for the State. </s> [Footnote 2 Although the record could have been clearer on this point, all the colloquies in the record corroborate the statement, made by respondent's counsel later in pretrial proceedings, that "sitting behind the defendants, taking the first row, vacating the first row where the spectators sit, are four uniformed state police guards, armed. . . ." Tr. 80; see id., at 71-72. The troopers appear to have maintained this position throughout the course of the trial, although at times there might have been only three of them in the courtroom. See, e. g., id., at 109, 146. </s> [Footnote 3 The name of the Committing Squad has been changed to "Rhode Island state marshals." 1976 R. I. Pub. Laws, ch. 259, 1 (codified at R. I. Gen. Laws 42-56-3) (1984 reenactment). </s> [Footnote 4 The only social science study to which respondent has pointed us addresses the effects of prison clothes and courtroom guards upon jury verdicts. Its tentative conclusion is that defendants clad in prison garb or accompanied by guards are more likely to be found guilty than unsupervised defendants wearing their own clothes. However, the study also found that favored treatment was accorded defendants who had both supervision and prison clothing. Fontaine & Kiger, The Effects of Defendant Dress and Supervision on Judgments of Simulated Jurors: An Exploratory Study, 2 Law and Human Behavior 63, 69-70 (1978). In view of these curious and concededly tentative results, we will, at least for now, rely on our own experience and common sense. </s> [Footnote 5 See, e. g., United States v. Jackson, 549 F.2d 517, 526-527 (CA8), cert. denied sub nom. Muhammed v. United States, 430 U.S. 985 (1977); United States v. Clardy, 540 F.2d 439, 442-443 (CA9), cert. denied, 429 U.S. 963 (1976); Kennedy v. Cardwell, 487 F.2d 101, 109 (CA6 1973), cert. denied, 416 U.S. 959 (1974). See also N. Dorsen & L. Friedman, Disorder in the Court 249 (1973). </s> CHIEF JUSTICE BURGER, concurring. </s> I write only to explain my reading of the Court's statement that "in our supervisory capacity, we might express a preference [475 U.S. 560, 573] that officers providing courtroom security in federal courts not be easily identifiable by jurors as guards . . . ." Ante, at 572 (emphasis added). In joining the opinion, I interpret the Court's carefully qualified statement in this case - a state case - as containing no suggestion that federal officers providing security must doff their uniforms before entering federal courtrooms, and certainly none of the three cases the Court cites, ante, at 572, n. 5, would require any such arbitrary action. Moreover, the issue of what kind of security arrangements some might "prefer" is, of course, quite distinct from issues such as whether a federal defendant would become entitled to a new trial because of an alleged prejudicial effect of the security measures used at his trial. On this understanding, I join the Court's opinion. </s> [475 U.S. 560, 574]

United States Supreme Court KAISER v. NEW YORK(1969) No. 62 Argued: January 16, 1969Decided: March 24, 1969 </s> Evidence obtained by wiretapping conducted in 1964 pursuant to a warrant issued under N. Y. Code Crim. Proc. 813-a (held violative of the Fourth and Fourteenth Amendments for over-breadth in Berger v. New York, 388 U.S. 41 , only to the limited extent that it permitted a "trespassory intrusion into a constitutionally protected area") held admissible in state criminal trial, since the wiretapping occurred before (1) Katz v. United States, 389 U.S. 347 , overruled prior decisions that the Fourth Amendment encompassed seizures of speech only if there was a trespass or a physical invasion of the speaker's constitutionally protected area, and (2) Lee v. Florida, 392 U.S. 378 , extended the rule excluding evidence violative of 605 of the Federal Communications Act to state trials; and both Katz v. United States and Lee v. Florida have been held to apply prospectively only (Desist v. United States, ante, p. 244, and Fuller v. Alaska, 393 U.S. 80 , respectively). Pp. 281-283. </s> 21 N. Y. 2d 86, 233 N. E. 2d 818, affirmed. </s> Henry J. Boitel, pro hac vice, and Peter L. F. Sabbatino argued the cause and filed briefs for petitioner. </s> William Cahn argued the cause for respondent. With him on the briefs was George Danzig Levine. </s> MR. JUSTICE STEWART delivered the opinion of the Court. </s> The petitioner was convicted in a New York trial court in 1966 on three counts of conspiracy to extort, attempted extortion, and coercion. The case for the prosecution rested principally on the content of two telephone conversations between the petitioner and one of his co-conspirators. Tapes and transcripts of those conversations were introduced at the trial over the petitioner's objection that they had been obtained by an unlawful [394 U.S. 280, 281] wiretap. The conviction was affirmed by the Appellate Division of the Supreme Court of New York 1 and by the New York Court of Appeals. 2 We granted certiorari. 3 </s> The telephone calls in question were made in 1964 by the petitioner from outside New York City to a co-conspirator at a bar in Manhattan. The conversations were recorded by means of a device attached to wires of the central terminal box in the basement of the building in which the bar was located. This wiretapping was conducted pursuant to a warrant issued under N. Y. Code Crim. Proc. 813-a, the statute with which this Court subsequently dealt in Berger v. New York, 388 U.S. 41 , in reversing a conviction under the Fourth and Fourteenth Amendments. </s> The petitioner contends that the Fourth and Fourteenth Amendments as construed in Berger, as well as 605 of the Federal Communications Act, 4 prohibited the introduction of the intercepted conversations and therefore require reversal of his conviction. For the reasons stated below, we reject these contentions and affirm the judgment of the New York Court of Appeals. 5 </s> [394 U.S. 280, 282] </s> Not until last Term in Katz v. United States, 389 U.S. 347 , did this Court overrule its prior decisions that the Fourth Amendment encompassed seizures of speech only if the law enforcement officers committed a trespass or at least physically invaded a constitutionally protected area of the speaker. 6 Olmstead v. United States, 277 U.S. 438 , explicitly held that wiretapping conducted without such an intrusion was not an unlawful search or seizure. That rule was not modified by Berger v. New York. The Court's discussion of Olmstead in Berger, while recognizing that other cases had negated the statements in Olmstead that conversations are never protected by the Fourth Amendment, cast no doubt upon "[t]he basis of the [Olmstead] decision" - "that the Constitution did not forbid the obtaining of evidence by wiretapping unless it involved actual unlawful entry into the house." 7 Furthermore, the Court in Berger found the overbreadth of N. Y. Code Crim. Proc. 813-a repugnant to the Fourth Amendment only to the limited extent that it permitted a "trespassory intrusion into a constitutionally protected area." 8 </s> Olmstead, then, stated the controlling interpretation of the Fourth Amendment with respect to wiretapping until it was overruled by Katz. And in Desist v. United States, ante, p. 244, we have held today that Katz is to be applied wholly prospectively. Since the wiretapping in this case occurred before Katz was decided and was accomplished without any intrusion into a constitutionally protected area of the petitioner, its fruits were not inadmissible under the exclusionary rule of the Fourth [394 U.S. 280, 283] and Fourteenth Amendments. Mapp v. Ohio, 367 U.S. 643 . </s> Nor did 605 of the Federal Communications Act require exclusion of the intercepted conversations. Until our decision last Term in Lee v. Florida, 392 U.S. 378 , state trial courts were free to accept evidence violative of 605. 9 Lee extended the Nardone 10 exclusionary rule of 605 to the States, but that decision has also been held to apply only prospectively. Fuller v. Alaska, 393 U.S. 80 . The wiretapping evidence was introduced at the petitioner's trial in 1966, long before the date of our decision in Lee. </s> Affirmed. </s> MR. JUSTICE BLACK concurs in the result for the reasons stated in his dissenting opinions in Berger v. New York, 388 U.S. 41, 70 , and Katz v. United States, 389 U.S. 347, 364 . </s> MR. JUSTICE DOUGLAS dissents. </s> [For dissenting opinion of MR. JUSTICE FORTAS, see ante, p. 269.] </s> Footnotes [Footnote 1 28 App. Div. 2d 647, 282 N. Y. S. 2d 207. </s> [Footnote 2 21 N. Y. 2d 86, 233 N. E. 2d 818. </s> [Footnote 3 390 U.S. 1023 . </s> [Footnote 4 Section 605, 48 Stat. 1103, 47 U.S.C. 605, reads in pertinent part as follows: </s> "[N]o person not being authorized by the sender shall intercept any communication and divulge . . . the existence, contents, substance, purport, effect, or meaning of such intercepted communication to any person . . . ." </s> [Footnote 5 The petitioner also contends that the prosecutor's references to the recorded conversations as "confessions" were so inaccurate and misleading as to deny him due process. We do not believe that that characterization of the evidence raises any substantial federal question. The jury was aware that the prosecutor was adverting to the overheard conversations and knew the circumstances under which the incriminating statements had been made. In contrast to the [394 U.S. 280, 282] situation in Miller v. Pate, 386 U.S. 1 , there was here no misrepresentation about evidence which the jurors were not themselves in a position to evaluate. </s> [Footnote 6 See Desist v. United States, ante, at 247-248. </s> [Footnote 7 388 U.S., at 51 . </s> [Footnote 8 Id., at 44. See also id., at 43, 57, 60, 64, 69. </s> [Footnote 9 Schwartz v. Texas, 344 U.S. 199 . </s> [Footnote 10 Nardone v. United States, 302 U.S. 379 , holding that evidence seized in violation of 605 by federal officers was not admissible in federal criminal trials. See also Benanti v. United States, 355 U.S. 96 , holding that such evidence seized by state officers must also be excluded from federal trials. </s> MR. JUSTICE HARLAN, dissenting. </s> It is conceded that petitioner's conviction rested largely upon evidence acquired by nontrespassory wiretapping conducted pursuant to a warrant issued under N. Y. Code Crim. Proc. 813-a. The Court affirms the conviction on the ground that today's decision in Desist v. United States, ante, p. 244, necessarily dictates that evidence [394 U.S. 280, 284] obtained by an illegal, nontrespassory wiretap will be inadmissible only if the tapping occurred after the date of the decision in Katz v. United States, 389 U.S. 347 (1967). The wiretapping in this case took place prior to Katz. However, the case is here on direct review, and for the reasons stated in Part I of my dissenting opinion in Desist, supra, at 258-259, I would hold that petitioner is entitled to benefit from the Katz rule. </s> It is therefore necessary for me to consider whether petitioner's federal constitutional rights were violated by the wiretapping. Were I free to do so, I would decide this issue by inquiring whether, on the facts of this particular case and in light of New York decisions construing 813-a, the wiretapping was valid under the Warrants Clause of the Fourth Amendment. See Ker v. California, 374 U.S. 23, 30 -34 (1963); see also Mapp v. Ohio, 367 U.S. 643 (1961). However, I believe that this approach is foreclosed by this Court's decision in Berger v. New York, 388 U.S. 41 (1967). In Berger, the Court held that a "bugging" pursuant to a 813-a warrant violated the petitioner's Fourth Amendment rights because on its face the statute did not contain constitutionally required safeguards. It is true that the "bugging" in Berger involved a trespass and that the Court did not reach the question whether Olmstead should be overruled. But the holding that 813-a was to be considered on its face rather than as applied depended in no way upon the fact of physical intrusion. The warrant procedure prescribed in 813-a applies equally to "bugging" and to wiretapping. Hence, the Court's "on its face" approach would seem necessarily to embrace 813-a wiretapping. </s> I dissented from the "on its face" approach adopted in Berger. See 388 U.S., at 89 et seq. I continue to disagree with that approach. Yet I think that Berger must be taken as having decided that a warrant issued [394 U.S. 280, 285] pursuant to the version of 813-a then in effect could not possibly satisfy the requirements of the Fourth Amendment. * Since I regard myself as bound by Berger, I am reluctantly compelled to conclude that the wiretap evidence introduced against petitioner was seized in violation of the Constitution, and that his conviction consequently cannot stand. </s> [Footnote * There were no amendments to 813-a between June 1962, the date of the "bugging" in Berger, and July 1964, the date of the wiretapping in this case. Nor in my view is it necessary to decide whether Berger should be "retroactive." The present case was on direct appeal in the New York courts at the time Berger was decided, and petitioner is therefore entitled to invoke Berger under the rule advanced in Part I of my dissenting opinion in Desist. </s> [394 U.S. 280, 286]

United States Supreme Court WOLF V. PEOPLE OF THE STATE OF COLO.(1949) No. 17 Argued: October 19, 1948Decided: June 27, 1949 </s> Mr. Philip Hornbein, Denver, Colo., for petitioner. Mr. James S. Henderson, Denver, Colo., for respondent. </s> Mr. Justice FRANKFURTER delivered the opinion of the Court. The precise question for consideration is this: Does a conviction by a State court for a State offense deny the 'due process of law' required by the Fourteenth Amendment, solely because evidence that was admitted [ Wolf v. People of the State of Colo. 338 U.S. 25 (1949) ] </s> [338 U.S. 25 , 26] </s> at the trial was obtained under circumstances which would have rendered it admissible in a prosecution for violation of a federal law in a court of the United States because there deemed to be an infraction of the Fourth Amendment as applied in Weeks v. United States, 232 U.S. 383 , L.R.A.1915B, 834, Ann.Cas.1915C, 1177? The Supreme Court of Colorado has sustained convictions in which such evidence was admitted, 117 Colo. 279, 187 P.2d 926; 117 Colo. 321, 187 P.2d 928, and we brought the cases here. 333 U.S. 879 . Unlike the specific requirements and restrictions placed by the Bill of Rights, Amendments I to VIII, upon the administration of criminal justice by federal authority, the Fourteenth Amendment did not subject criminal justice in the States to specific limitations. The notion that the 'due process of law' guaranteed by the Fourteenth Amendment is shorthand for the first eight amendments of the Constitution and thereby incorporates them has been rejected by this Court again and again, after mpressive consideration. See, e.g., Hurtado v. California, 110 U.S. 516, 292 ; Twining v. New Jersey, 211 U.S. 78 ; Brown v. Mississippi, 297 U.S. 287 ; Palko v. Connecticut, 302 U.S. 319 . Only the other day the Court reaffirmed this rejection after thorough reexamination of the scope and function of the Due Process Clause of the Fourteenth Amendment. Adamson v. California, 332 U.S. 46 , 171 A.L.R. 1223. The issue is closed. For purposes of ascertaining the restrictions which the Due Process Clause imposed upon the States in the enforcement of their criminal law, we adhere to the views expressed in Palko v. Connecticut, supra, 302 U.S. 319 . That decision speaks to us L.Ed. 288. That decision speaks to us particularly in matters of civil liberty, of a court that included Mr. Chief Justice Hughes, Mr. Justice Brandeis, Mr. Justice Stone and Mr. Justice Cardozo, to speak only of the dead. In rejecting the suggestion that the Due Process Clause incorporated the original Bill of Rights, Mr. Justice Cardozo reaffimred on behalf of that </s> [338 U.S. 25 , 27] </s> Court at affirmed but deeper and more pervasive conception of the Due Process Clause. This Clause exacts from the States for the lowliest and the most outcast all that is 'implicit in the concept of ordered liberty.' 302 U.S. at page 325, 58 S.Ct. at page 152. Due process of law thus conveys neither formal nor fixed nor narrow requirements. It is the compendious expression for all those rights which the courts must enforce because they are basic to our free society. as of any one time, even though, as a as of any one time, even though, as a matter of human experience, some may not too rhetorically be called eternal verities. It is of the very nature of a free society to advance in its standards of what is deemed reasonable and right. Representing as it does a living principle, due process is not confined within a permanent catalogue of what may at a given time be deemed the limits or the essentials of fundamental rights. To rely on a tidy formula for the easy determination of what is a fundamental right for purposes of legal enforcement may satisfy a longing for certainty but ignores the movements of a free society. It belittles the scale of the conception of due process. The real clue to the problem confronting the judiciary in the application of the Due Process Clause is not to ask where the line is once and for all to be drawn but to recognize that it is for the Court to draw it by the gradual and empiric process of 'inclusion and exclusion.' Davidson v. New Orleans, 96 U.S. 97, 104 . This was the Court's insight when first called upon to consider the problem; to this insight the Court has on the whole been faithful as case after case has come before it since Davidson v. New Orleans was decided. The security of one's privacy against arbitrary intrusion by the police-which is at the core of the Fourth Amendment-is basic to a free society. It is therefore implicit in 'the concept of ordered liberty' and as such enforceable againt the States through the Due Process </s> [338 U.S. 25 , 28] </s> Clause. The knock at the door, whether by day or by night, as a prelude to a search, without authority of law but solely on the authority of the police, did not need the commentary of recent history to be condemned as inconsistent with the conception of human rights enshrined in the history and the basic constitutional documents of English-speaking peoples. Accordingly, we have no hesitation in saying that were a State affirmatively to sanction such police incursion into privacy it would run counter to the guaranty of the Fourteenth Amendment. But the ways of enforcing such a basic right raise questions of a different order. How such arbitrary conduct should be checked, what remedies against it should be afforded, the means by which the right should be made effective, are all questions that are not to be so dogmatically answered as to preclude the varying solutions which spring from an allowable range of judgment on issues not susceptible of quantitative solution. In Weeks v. United States, supra, this Court held that in a federal prosecution the Fourth Amendment barred the use of evidence secured through an illegal search and seizure. This ruling was made for the first time in 1914. It was not derived from the explicit requirements of the Fourth Amendment; it was not based on legislation expressing Congressional policy in the enforcement of the Constitution. The decision was a matter of judicial implication. Since then it has been frequently applied and we stoutly adhere to it. But the immediate question is whether the basic right to protection against arbitrary intrusion by the police demands the exclusion of logically relevant evidence obtained by an unreasonable search and seizure because, in a federal prosecution for a federal crime, it would be excluded. As a matter of inherent reason, one would suppose this to be an issue to which men with complete devotion to the protection of the right </s> [338 U.S. 25 , 29] </s> of privacy might give different answers. When we find that in fact most of the English-speaking world does not regard as vital to such protection the exclusion of evidence thus obtained, we must hesitate to treat this remedy as an essential ingredient of the right. The contrariety of views of the States is particularly impressive in view of the careful reconsideration which they have given the problem in the light of the Weeks decision. I. Before the Weeks decision 27 States had passed on the admissibility of evidence obtained by unlawful search and seizure. (a) Of these, 26 States opposed the Weeks doctrine. (See Appendix, Table A.) (b) Of these, 1 State anticipated the Weeks doctrine. (Table B.) II. Since the Weeks decision 47 States all told have passed on the Weeks doctrine. (Table C.) (a) Of these, 20 passed on it for the first time. (1) Of the foregoing States, 6 followed the Weeks doctrine. (Table D.) (2) Of the foregoing States, 14 rejected the Weeks doctrine. (Table E.) (b) Of these, 26 States reviewed prior decisions contrary to the Weeks doctrine. (1) Of these, 10 States have followed Weeks, overruling or distinguishing their prior decisions. (Table F.) (2) Of these, 16 States adhered to their prior decisions against Weeks. (Table G) (c) Of these, 1 State adhered to its prior formulation of the Weeks doctrine. (Table H.) III. As of today 30 States reject the Weeks doctrine, 17 States are in agreement with it. (Table I.) </s> [338 U.S. 25 , 30] </s> IV. Of 10 jurisdictions within the United Kingdom and the British Commonwealth of Nations which have passed on the question, none has held evidence obtained by illegal search and seizure inadmissible. (Table J.) The jurisdictions which have rejected the Weeks doctrine have not left the right to privacy without other means of protection. 1 Indeed, the exclusion of evidence </s> [338 U.S. 25 , 31] </s> is a remedy which directly serves only to protect those upon whose person or premises something incriminating has been found. We cannot, therefore, regard it as a departure from basic standards to remand such persons, together with those who emerge scatheless from a search, to the remedies of private action and such protection as the internal discipline of the police, under the eyes of an alert public opinion, may afford. Granting that in practice the exclusion of evidence may be an effective way of deterring unreasonable searches, it is not for this Court to condemn as falling below the minimal standards assured by the Due Process Clause a State's reliance upon other methods which, if consistently enforced, would be equally effective. Weighty testimony against such an insistence on our own view is the opinion of Mr. Justice (then Judge) Cardozo in People v. Defore, 242 N.Y. 13, 150 N.E. 585.2 We cannot brush aside the experience of State which deem the incidence of such </s> [338 U.S. 25 , 32] </s> condust by the police too slight to call for a deterrent remedy not by way of disciplinary measures but by overriding the relevant rules of evidence. There are, moreover, reasons for excluding evidence unreasonable obtained by the federal police which are less compelling in the case of police under State or local authority. The public opinion of a community can far more effectively be exerted against oppresive conduct on the part of police directly responsible to the community itself than can local opinion, sporadically aroused, be brought to bear upon </s> [338 U.S. 25 , 33] </s> remote authority pervasively exerted throughout the country. We hold, therefore, that in a prosecution in a State court for a State crime the Fourteenth Amendment does not forbid the admission of evidence obtained by an unreasonable search and seizure. And though we have interpreted the Fourth Amendment to forbid the admission of such evidence, a different question would be presented if Congress under its legislative powers were to pass a statute purporting to negate the Weeks doctrine. We would then be faced with the problem of the respect to be accorded the legislative judgment on an issues as to which, in default of that judgment, we have been forced to depend upon our own. Problems of a converse character, also not before us, would be presented should Congress under 5 of the Fourteenth Amendment uindertake to enforce the rights there guaranteed by attempting to make the Weeks doctrine binding upon the States. Affirmed. APPENDIX.* TABLE A. STATES WHICH OPPOSED THE WEEKS DOCTRINE BEFORE THE WEEKS CASE HAD BEEN DECIDED. ALA. Shields v. State, 104 Ala. 35, 16 So. 85, 53 Am.St.Rep. 17. ARK. Starchman v. State, 62 Ark. 538, 36 S.W. 940. CONN. State v. Grisworld, 67 Conn. 290, 34 A. 1046, 33 L.R.A. 227. GA. Williams v. State, 100 Ga. 511, 28 S.E. 624, 39 L.R.A. 269. IDAHO State v. Bond, 12 Idaho 424, 439, 86 P. 43, 47. ILL. Siebert v. People, 143 Ill. 571, 583, 32 N.E. 431. KANS. State v. Miller, 63 Kan. 62, 64 P. 1033. ME. See State v. Gorham, 65 Me. 270, 272. MD. Lawrence v. State, 103 Md. 17, 35, 63 A. 96, 103. </s> [338 U.S. 25 , 34] </s> MASS. Commonwealth v. Dana, 2 Metc. 329. MICH. People v. Aldorfer, 164 Mich. 676, 130 N.W. 351. MINN. State v. Strait, 94 Minn. 384, 102 N.W. 913. MO. State v. Pomeroy, 130 Mo. 489, 32 S.W. 1002. MONT. See State v. Fuller, 34 Mont. 12, 19, 85 P. 369, 373, 8 L.R.A., N.S., 762, 9 Ann.Cas. 648. NEB. Geiger v. State, 6 Neb. 545. N.H. State v. Flynn, 36 N.H. 64. N.Y. People v. Adams, 176 N.Y. 351, 68 N.E. 636, 63 L.R.A. 406, 98 Am. St.Rep. 675. N.C. State v. Wallace, 162 N.C. 622, 78 S.E. 1, Ann.Cas.1915B, 423. OKLA. Silva v. State, 6 Okl.Cr. 97, 116 P. 199. ORE. State v. McDaniel, 39 Or. 161, 169-170, 65 P. 520, 523. S.C. State v. Atkinson, 40 S.C. 363, 371, 18 S.E. 1021, 1024, 42 Am. St.Rep. 877. S.D. State v. Madison, 23 S.D. 584, 591, 122 N.W. 647, 650. TENN. Cohn v. State, 120 Tenn. 61, 109 S.W. 1149, 17 L.R.A.,N.S., 451, 15 Ann.Cas. 1201. Vt. State v. Mathers, 64 Vt. 101, 23 A. 590, 15 L.R.A. 268, 33 Am.St. Rep. 921. WASH. State v. Royce, 38 Wash. 111, 80 P. 268, 3 Ann.Cas. 351. W. Va. See State v. Edwards, 51 W.Va. 220, 229, 41 S.E. 429, 432-433, 59 L.R.A. 465. TABLE B. STATE WHICH HAD FORMULATED THE WEEKS DOCTRINE BEFORE THE WEEKS DECISION. IOWA State v. Sheridan, 121 Iowa 164, 96 N.W. 730. TABLE C. STATES WHICH HAVE PASSED ON THE WEEKS DOCTRINE SINCE THE WEEKS CASE WAS DECIDED. Every State except Rhode Island. But see State v. Lorenzo, 72 R.I. 175, 48 A.2d 407, 49 A.2d 316 (holding that defendant had consented to the search, but that even if he had not and even if the federal rule applied, the evidence was admissible because no timely motion to suppress had been made). </s> [338 U.S. 25 , 35] </s> TABLE D. STATES WHICH PASSED ON THE WEEKS DOCTRINE FOR THE FIRST TIME AFTER THE WEEKS DECISION AND IN SO DOING FOLLOWED IT. FLA. Atz v. Andrews, 84 Fla. 43, 94 So. 329. IND. Flum v. State, 193 Ind. 585, 141 N.E. 353. KY. Youman v. Commonwealth, 189 Ky. 152, 224 S.W. 860, 13 A.L.R. 1303. MISS. Tucker v. State, 128 Miss. 211, 90 So. 845, 24 A.L.R. 1377. WIS. Hoyer v. State, 180 Wis. 407, 193 N.W. 89, 27 A.L.R. 673. WYO. State v. George, 32 Wyo. 223, 231 P. 683. TABLE E. STATES WHICH PASSED ON THE WEEKS DOCTRINE FOR THE FIRST TIME AFTER THE WEEKS DECISION AND IN SO DOING REJECTED IT. ARIZ. Argetakis v. State, 24 Ariz. 599, 212 P. 372. CALIF. People v. Mayen, 188 Cal. 237, 205 P. 435, 24 A.L.R. 1383 ( adopting the general rule but distinguishing the cases then decided by this Court on the ground that they apply only when a timely motion for return of the property seized has been made). COLO. Massantonio v. People, 77 Colo. 392, 236 P. 1019. DEL. State v. Chuchola, 32 W.W.Harr. 133, 120 A. 212 (distinguishing this Court's decisions). LA. State v. Fleckinger, 152 La. 337, 93 So. 115. The constitutional convention of 1921 refused to adopt an amendment incorporating the federal rule. See State v. Eddins, 161 La. 240, 108 So. 468. NEV. State v. Chin Gim, 47 Nev. 431, 224 P. 798. N.J. Statev. Black, 135 A. 685, 5 N.J.Misc 48. N.M. State v. Dillon, 34 N.M. 366, 281 P. 474, 88 A.L.R. 340. N.D. State v. Fahn, 53 N.D. 203, 205 N.W. 67. OHIO State v. Lindway, 131 Ohio St. 166, 2 N.E.2d 490. PA. Commonwealth v. Dabbierio, 290 Pa. 174, 138 A. 679. TEX. Welchek v. State, 93 Tex.Cr.R. 271, 247 S.W. 524. In 1925, a statute changed the rule by providing that 'no evidence obtained by an officer or other person in violation of any provisions of the Constitution or laws of the State </s> [338 U.S. 25 , 36] </s> of Texas, or of the Constitution of the United States of America, shall be admitted in evidence against the accused on the trial of any criminal case.' Texas Laws 1925, c. 49, as amended, Texas Code Crim.Proc . 727a (Vernon, 1948). UTAH State v. Aime, 62 Utah 476, 220 P. 704, 32 A.L.R. 375. VA. Hall v. Commonwealth, 138 Va. 727, 121 S.W. 154. TABLE F. STATES WHICH, AFTER THE WEEKS DECISION, OVERRULED OR DISTINGUISHED PRIOR CONTRARY DECISIONS. IDAHO Idaho expressly refused to follow the Weeks decision in State v. Myers, 36 Idaho 396, 211 P. 440, but repudiated the Myers case and adopted the federal rule in State v. Arregui, 44 Idaho 43, 254 P. 788, 52 A.L.R. 463. ILL. After two cases following the former state rule, Illinois adopted the federal rule in People v. Castree, 311 Ill. 392, 143 N.E. 112, 32 A.L.R. 357. MICH. People v. Marxhaus n, 204 Mich. 559, 171 N.W. 557, 3 A.L.R. 1505 (distinguishing earlier cases on the ground that in them no preliminary motion to suppress had been made). MO. State v. Graham, 295 Mo. 695, 247 S.W. 194, supported the old rule in a dictum, but the federal rule was adopted in State v. Owens, 302 Mo. 348, 259 S.W. 100, 32 A.L.R. 383 (distinguishing earlier cases on the ground that in them no preliminary motion to dismiss had been made). MONT. State ex rel. King v. District Court, 70 Mont. 191, 224 P. 862. OKLA. Gore v. State, 24 Okl.Cr. 394, 218 P. 545. S.D. State v. Gooder, 57 S.D. 619, 234 N.W. 610. But cf. S.D. Laws 1935, c. 96, now S.D. Code 34.1102 (1939), amending Rev.Code 1919, 4606 (all evidence admis- </s> [338 U.S. 25 , 37] </s> sible under a valid search warrant is admissible notwithstanding defects in the issuance of the warrant). TENN. Hughes v. State, 145 Tenn. 544, 238 S.W. 588, 20 A.L.R. 639 ( distinguishing Cohn v. State, supra, Table A). WASH. State v. Gibbons, 118 Wash. 171, 203 P. 390. W. VA. State v. Andrews, 91 W.Va. 720, 114 S.E. 257 (distinguishing earlier cases). TABLE G. STATES WHICH, AFTER THE WEEKS DECISION, REVIEWED PRIOR CONTRARY DECISIONS AND IN SO DOING ADHERED TO THOSE DECISIONS. ALA. Banks v. State, 207 Ala. 179, 93 So. 293, 24 A.L.R. 1359. ARK. Benson v. State, 149 Ark. 633, 233 S.W. 758. CONN. State v. Reynolds, 101 Conn. 224, 125 A. 636. GA. Jackson v. State, 156 Ga. 647, 119 S.E. 525. KANS. State v. Johnson, 116 Kan. 58, 226 P. 245. ME. State v. Schoppe, 113 Me. 10, 16, 92 A. 867 (alternative holding, not noticing Weeks). MD. Meisinger v. State, 155 Md. 195, 141 A. 536, 142 A. 190. But cf. Md. Laws, 1929, c. 194, as amended, Md. Code Ann., Art. 35, 5 (1947 Supp .) (in trial of misdemeanors, evidence obtained by illegal search and seizure is inadmissible). MASS. Commonwealth v. Wilkins, 243 Mass. 356, 138 N.E. 11. MINN. State v. Pluth, 157 Minn. 145, 195 N.W. 789. NEB. Billings v. State, 109 Neb. 596, 191 N.W.2d 721. N.H. State v. Agalos, 79 N.H. 241, 242, 107 A. 314 (not noticing Weeks). N.Y. People v. Defore, 242 N.Y. 13, 150 N.E. 585; People v. Richter's Jewelers, 291 N.Y. 161, 169, 51 N.E.2d 690, 693, 50 A.L.R. 560 (holding that adoption og Amendment to State Con </s> [338 U.S. 25 , 38] </s> stitution in same language as Civil Rights Law, McK. Consol. Laws, c. 6, construed in the Defore case is not occasion for changing interpretation, especially since proceedings of the conviction which framed the amendment show that no change was intended). N.C. State v. Simmons, 183 N.C. 684, 110 S.E. 591 (distinguishing between evidentiary articles and corpus delicti). ORE. See State v. Folkes, 174 Or. 568, 588-589, 150 P.2d 17, 25. But see State v. Laundy, 103 Or. 443, 493-495, 204 P. 958, 974-975, 206 P. 290. S.C. After granting a motion to return illegally seized property in Blacksburg v. Beam, 104 S.C. 146, 88 S.E. 441, L.R.A.1916E, 714; South Carolina reaffirmed its agreement with the general rule in State v. Green, 121 S.C. 230, 114 S.E. 317. VT. State v. Stacy, 104 Vt. 379, 401, 160 A. 257, 266, 747. TABLE H. STATE WHICH HAS ADHERED TO ITS PRIOR FORMULATION OF THE WEEKS DOCTRINE. IOWA State v. Rowley, 197 Iowa 977, 195 N.W. 881 (recognizing the Weeks case but following earlier Iowa cases). TABLE I. SUMMARY OF PRESENT POSITION OF STATES WHICH HAVE PASSED ON THE WEEKS DOCTRINE. (a) States that reject Weeks: Ala., Ariz., Ark., Calif., Colo., Conn., Del., Ga., Kans., La., Me., Md., Mass., Minn., Neb., Nev., N.H., N.J., N.M., N.Y., N.C., N.D., Ohio, Ore., Pa., S.C., Texas, Utah, Vt., Va. (b) States that are in agreement with Weeks: Fla., Idaho, Ill., Ind., Iowa, Ky., Mich., Miss., Mo., Mont., Okla., S.D., Tenn., Wash., W. Va., Wis., Wyo. </s> [338 U.S. 25 , 39] </s> TABLE J. JURISDICTIONS OF THE UNITED KINGDOM AND THE BRITISH COMMONWEALTH OF NATIONS WHICH HAVE HELD ADMISSIBLE EVIDENCE OBTAINED BY ILLEGAL SEARCH AND SEIZURE. AUSTRALIA Miller v. Noblet, (1927) S.A.S.R. 385. CANADA ALTA. Rex v. Nelson, (1922) 2 W.W.R. 381, 69 D.L.R. 180. MAN. ex v. Durousel, 41 Man. 15, (1933) 2 D.L.R. 446. ONT. Regina v. Doyle, 12 Ont. 347. SASK. Rex v. Kostachuk, 24 Sask. 485, 54 Can.C.C. 189. ENGLAND See Elias v. Pasmore, (1934) 2 K.B. 164. INDIA ALL. Ali Ahmad Khan v. Emperor, 81 I.C. 615(1). CAL. Baldeo Bin v. Emperor, 142 I.C. 639. RANG. Chwa Hum Htive v. Emperor, 143 I.C. 824. SCOTLAND See Hodgson v. McPherson, (1913) S.C.(J.) 68, 73. </s> Mr. Justice BLACK, concurring. In this case petitioner was convicted of a crime in a state court on evidence obtained by a search and seizure conducted in a manner that this Court has held 'unreasonable' and therefore in violation of the Fourth Amendment. And under a rule of evidence adopted by this Court evidence so obtained by federal officers cannot be used against defendants in federal courts. For reasons stated in my dissenting opinion in Adamson v. California, 332 U.S. 46, 68 , 1683, 171 A.L.R. 1223. I agree with the conclusion of the Court that the Fourth Amendment's prohibition of 'unreasoanble searches and seizures' is enforceable against the states. Consequently, I should be for reversal of this case if I thought the Fourth Amendment not only prohibited 'unreasonable searches and seizures,' but also, of itself, barred the use of evidence so unlawful obtained. But I agree with what appears to be a plain implication of the Court's opinion that the federal exclusionary rule is </s> [338 U.S. 25 , 40] </s> not a command of the Fourth Amendment but is a judicially created rule of evidence which Congress might negate. See McNabb v. United States, 318 U.S. 332 . This leads me to concur in the Court's judgment of affirmance. It is not amiss to repeat my belief that the Fourteenth Amendment was intended to make the Fourth Amendment in its entirety applicable to the states. The Fourth Amendment was designed to protect people against unrestrained searches and seizures by sheriffs, policemen and other law enforcement officers. Such protection is an essential in a free society. And I am unable to agree that the protection of people from over-Zealous or ruthless state officers is any less essential in a country of 'ordered liberty' than is the protection of people from over-zealous or ruthless federal officers. Certainly there are far more state than federal enforcement officers and their activities, up to now, have more frequently and closely touched the intimate daily lives of people than have the activities of federal officers. A state officer's 'knock at the door * * * as a prelude to a search, without authority of law,' may be, as our experience shows, just as ominous to 'ordered liberty' as though the knock were made by a federal officer. </s> Mr. Justice DOUGLAS, dissenting. I believe for the reasons stated by Mr. Justice BLACK in his dissent in Adamson v. California, 332 U.S. 46, 68 , 1684, 171 A.L.R. 1223, that the Fourth Amendment is applicable to the States. I agree with Mr. Justice MURPHY that the evidence obtained in violation of it must be excluded in state prosecutions as well as in federal prosecutions, since in absence of that rule of evidence the Amendment would have no effective sanction. I also agree with him that under that </s> [338 U.S. 25 , 41] </s> test this evidence was improperly admitted and that the judgments of conviction must be reversed. </s> Mr. Justice MURPHY, with whom Mr. Justice RUTLEDGE joins, dissenting. It is disheartening to find so much that is right in an opinion which seems to me so fundamentally wrong. Of course I agree with the Court that the Fourteenth Amendment prohibits activities which are proscribed by the search and seizure clause of the Fourth Amendment. See my dissenting views, and those of Mr. Justice Black, in Adamson v. California, 332 U.S. 46 , 68, 123, 1684, 1711, 171 A.L.R. 1223. Quite apart from the blanket application of the Bill of Rights to the States, a devotee of democracy would ill suit his name were he to suggest that his home's protection against unlicensed governmental invasion was not 'of the very essence of a scheme of ordered liberty.' Palko v. Connecticut, 302 U.S. 319, 325 , 152. It is difficult for me to understand how the Court can go this far and yet be unwilling to make the step which can give some meaning to the pronouncements it utters. Imagination and zeal may invent a dozen methods to give content to the commands of the Fourth Amendment. But this Court is limited to the remedies currently available. It cannot legislate the ideal system. If we would attempt the enforcement of the arch and seizure clause in the ordinary case today, we are limited to three devices: judicial exclusion of the illegally obtained evidence; criminal prosecution of violators; and civil action against violators in the action of trespass. Alternatives are deceptive. Their very statement conveys the impression that one possibility is as effective as the next. In this case their statement is blinding. For there is but one alternative to the rule of exclusion. That is no sanction at all. </s> [338 U.S. 25 , 42] </s> This has been perfectly clear since 1914, when a unanimous Court decided Weeks v. United States, 232 U.S. 383, 393 , 344, L.R.A.1915B, 834, Ann.Cas. 1915C, 1177. 'If letters and private documents can thus be seized and held and used in evidence against a citizen accused of an offense,' we said, 'the protection of the 4th Amendment, declaring his right to be secure against such searches and seizures, is of no value, and, so far as those thus placed are concerned, might as well be stricken from the Constitution.' 'It would reduce the Fourth Amendment to a form of words.' Holmes, J., for the Court, in Silverthorne Lumber Co. v. United States, 251 U.S. 385, 392 , 183, 24 A.L.R. 1426. Today the Court wipes those statements from the books with tis bland citation of 'other remedies.' Little need be said concerning the possibilities of criminal prosecution. Self-scrutiny is a lofty ideal, but its exaltation reaches new heights if we expect a District Attorney to prosecute himself or his associates for well-meaning violations of the search and seizure clause during a raid the District Attorney or his associates have ordered. 1 But there is an appealing ring in another alternative. A trespass action for damages is a venerable means of securing reparation for unauthorized invasion of the home. Why not put the old writ to a new use? When the Court cites cases permitting the action, the remedy seems complete. But what an illusory remedy this is, if by 'remedy' we mean a positive deterrent to police and prosecutors </s> [338 U.S. 25 , 43] </s> tempted to violate the Fourth Amendment. The appealing ring softens when we recall that in a trespass action the measure of damages is simply the extent of the injury to physical property. If the officer searches with care, he can avoid all but nominal damages-a penny, or a dollar. Are punitive damages possible? Perhaps. But a few states permit none, whatever the circumstances. 2 In those that do, the plaintiff must show the real ill will or malice of the defendant,3 and surely it is not unreasonable to assume that one in honest pursuit of crime bears no malice toward the search victim. If that burden is carried, recovery may yet be defeated by the rule that there must be physical damages before punitive damages may be awarded. 4 In addition, some states limit punitive damages to the actual expenses of litigation. See 61 Harv.L.Rev. 113, 119-120. Others demand some arbitrary ratio between actual and punitive damages before a verdict may stand. See Morris, Punitive Damages in Tort Cases, 44 Harv.L.Rev. 1173, 1180-1181. Even assuming the ill will of the officer, his reasonable grounds for belief that the home he searched harbored evidence of crime is admissible in mitigation of punitive damages. Gamble v. Keyes, 35 S.D. 644, 153 N.W. 888; Simpson v. McCaffrey, 13 Ohio 508. The bad reputation of the plaintiff is likewise admissible. Banfill v. Byrd, 122 Miss. 288, 84 So. 227. If the evidence seized was actually used at a trial, that fact has been </s> [338 U.S. 25 , 44] </s> held a complete justification of the search, and a defense against the trespass action. Elias v. Pasmore (1934) 2 K.B. 164. And even if the plaintiff hurdles all these obstacles, and gains a substantial verdict, the individual officer's finances may well make the judgment useless-for the municipality, of course, is not liable without its consent. Is it surprising that there is so little in the books concerning trespass actions for violation of the search and seizure clause? The conclusion is inescapable that but one remedy exists to deter violations of the search and seizure clause. That is the rule which excludes illegally obtained evidence. Only by exclusion can we impress upon the zealous prosecutor that violation of the Constitution will do him no good. And only when that point is driven home can the prosecutor be expected to emphasize the importance of observing constitutional demands in his instructions to the police. If proof of the efficacy of the federal rule were needed, there is testimony in abundance in the recruit training programs and in-service courses provided the police in states which follow the federal rule. 5 St. Louis, for example, demands extensive training in the rules of search and seizure, with emphasis upon the ease with which a case may collapse if it depends upon evidence obtained </s> [338 U.S. 25 , 45] </s> unlawfully. Current court decisions are digested and read at roll calls. The same general pattern prevails in Washington, D.C. 6 In Dallas, officers are thoroughly briefed and instructed that 'the courts will follow the rules very closely and will detect any frauds.'7 In Milwaukee, a stout volume on the law of arrest and search and seizure is made the basis of extended instruction. 8 Officer preparation in the applicable rules in Jackson, Mississippi, has included the lectures of an Associate Justice of the Mississippi Supreme Court. The instructions on evidence and search and seizure given to trainees in San Antonio carefully note the rule of exclusion in Texas, and close with this statement: 'Every police officer should know the laws and rules of evidence. Upon knowledge of these facts determines whether the * * * defendant will be convicted or acquitted . * * * When you investigate a case * * * remember throughout your investigation that only admissible evidence can be used.' But in New York City, we are informed simply that 'copies of the State Penal Law and Code of Criminal Procedure' are given to officers, and that they are 'kept advised' that illegally obtained evidence may be admitted in New York courts. In Baltimore, a 'Digest of Laws' is distributed, and it is made clear that the </s> [338 U.S. 25 , 46] </s> statutory section excluding evidence 'is limited in its application to the trial of misdemeanors. * * * It would appear * * * that * * * evidence illegally obtained may still be admissible in the trial of felonies.' In Cleveland, recruits and other officers are told of the rules of search and seizure, but 'instructed that it is admissible in the courts of Ohio. The Ohio Supreme Court has indicated very definitely and clearly that Ohio belongs to the 'admissionist' group of states when evidence obtained by an illegal search is presented to the court.' A similar pattern emerges in Birmingham, Alabama. The contrast between states with the federal rule and those without it is thus a positive demonstration of its efficacy. There are apparent exceptions to the contrast-Denver, for example, appears to provide as comprehensive a series of instructions as that in Chicago, although Colorado permits introduction of the evidence and Illinois does not. And, so far as we can determine from letters, a fairly uniform standard of officer instruction appears in other cities, irrespective of the local rule of evidence. But the examples cited above serve to grand an assumption that has motivated this Court since the Weeks case: that this is an area in which judicial action has positive effect upon the breach of law; and that without judicial action, there are simply no effective sanctions presently available. I cannot believe that we should decide due process questions by simply taking a poll of the rules in various jurisdictions, even if we follow the Palko 'test.' Today's decision will do inestimable harm to the cause of fair police methods in our cities and states. Even more important, perhaps, it must have tragic effect upon public respect for our judiciary. For the Court now allows that is indeed shabby business: lawlessness by officers of the law. </s> [338 U.S. 25 , 47] </s> Since the evidence admitted was secured in violation of the Fourth Amendment, the judgment should be reversed. </s> Mr. Justice RUTLEDGE, dissenting. 'Wisdom too often never comes, and so one ought not to reject it merely because it comes late.' Similarly, one should not reject a piecemeal wisdom, merely because it hobbles toward the truth with backward glances. Accordingly, although I think that all 'the specific guarantees of the Bill of Rights should be carried over intact into the first section of the Fourteenth Amendment,' Adamson v. California, 332 U.S. 46 , dissenting opinion at page 124, at page 1683, 171 A.L.R. 1223, I welcome the fact that the Court, in its slower progress toward this goal, today finds the substance of the Fourth Amendment 'to be implicit in the concept of ordered liberty, and thus, through the Fourteenth Amendment, * * * valid as againt the states.' Palko v. Connecticut, 302 U.S. 319, 325 , 152. </s> But I reject the Court's simultaneous conclusion that the mandate embodied in the Fourth Amendment, although binding on the states, does not carry with it the one sanction-exclusion of evidence taken in violation of the Amendment's terms-failure to observe which means that 'the protection of the 4th Amendment * * * might as well be stricken from the Constitution.' Weeks v. United States, 232 U.S. 383, 393 , 344, L.R.A.1915B, 834, Ann.Cas.1915C, 1177. For I agree with my brother MURPHY'S demonstration that the Amendment without the sanction is a dead letter. Twenty-nine years ago this Court, speaking through Justice Holmes, refused to permit the Government to subpoena documentary evidence which it had stolen, copied and then returned, for the reason that such a procedure 'reduces the Fourth Amendment to a form of words.' Silverthorne Lumber Co. v. United States, 251 U.S. 385, 392 , 183, 24 A. L.R. 1426. But the version of the Fourth Amendment today held </s> [338 U.S. 25 , 48] </s> applicable to the states hardly rises to the dignity of a form of words; at best it is a pale and frayed carbon copy of the original, bearing little resemblance to the Amendment the fulfillment of whose command I had heretofore thought to be 'an indispensable need for a democratic society.' Harris v. United States, 331 U.S. 145 , dissenting opinion at page 161, at page 1106. I also reject any intimation that Congress could validly enact legislation permitting the introduction in federal courts of evidence seized in violation of the Fourth Amendment. I had thought that issue settled by this Court's invalidation on dual grounds, in Boyd v. United States, 116 U.S. 616 , of a federal statute which in effect required the production of evidence thought probative by Government counsel-the Court there holding the statute to be 'obnoxious to the prohibition of the fourth amendment of the constitution, as well as of the fifth.' Id., at page 632, 6 S.Ct. at page 533. See Adams v. New York, 192 U.S. 585, 597 , 598, 375. The view that the Fourth Amendment itself forbids the introduction of evidence illegally obtained in federal prosecutions is one of long standing and firmly established. See Olmstead v. United States, 277 U.S. 438, 462 , 567, 66 A.L.R. 376. It is too late in my judgment to question it now. We apply it today in Lustig v. United States, 338 U.S. 74 . As Congress and this Court are, in my judgment, powerless to permit the admission in federal courts of evidence seized in defiance of the Fourth Amendment, so I think state legislators and judges-if subject to the Amendment, as I believe them to be-may not lend their offices to the admission in state courts of evidence thus seized. Compliance with the Bill of Rights betokens more than lip service. The Court makes the illegality of this search and seizure its inarticulate premise of decison. I acquiesce in that premise and think the conviction should be reversed. Mr. Justice MURPHY joins in this opinion. Footnotes </s> [Footnote 1 The common law provides actions for damages against the searching officer, e.g., Entick v. Carrington, 2 Wils. 275, 19 How.St.Tr. 1030; Grumon v. Raymond, 1 Conn. 40, 6 Am.Dec. 200; Sandford v. Nichols, 13 Mass. 286, 7 Am.Dec. 151; Halsted v. Brice, 13 Mo. 171; Hussey v. Davis, 58 N.H. 317; Reed v. Lucas, 42 Tex. 529; against one who procures the issuance of a warrant maliciously and without probable cause, e.g., Gulsby v. Louisville & N.R. Co., 167 Ala. 122, 52 So. 392; Whitson v. May, 71 Ind. 269; Krehbiel v. Henkle, 152 Iowa 604, 129 N.W. 945, 133 N.W. 115, Ann.Cas. 1913B, 1156; Olson v. Tvete, 46 Minn. 225, 48 N.W. 914; Boeger v. Langenberg, 97 Mo. 390, 11 S.W. 223, 10 Am.St.Rep. 322; Doane v. Anderson, 60 Hun 586, 15 N.Y.S. 459; Shall v. Minneapolis, St. P. & S.S.M.R. Co., 156 Wis. 195, 145 N.W. 649, 50 L.R.A.,N.S., 1151, against a magistrate who has acted without jurisdiction in issuing a warrant, e.g., Williams v. Kozak, 4 Cir., 280 F. 373; Grumon v. Raymond, 1 Conn. 40, 6 Am.Dec. 200; Kennedy v. Terrill, Hardin, Ky., 490; Shaw v. Moon, 117 Or. 558, 245 P. 318, 45 A.L.R. 600, against persons assisting in the execution of an illegal search, e.g., Hebrew v. Pulis, 73 N.J.L. 621, 625, 64 A. 121, 122, 7 L.R.A., N.S., 580, 118 Am.St.Rep. 716; Cartwright v. Canode, Tex.Civ.App. 138 S.W. 792, affirmed 106 Tex. 502, 171 S.W. 696. One may also without liability use force to resist an unlawful search. E.g., Commonwealth v. Martin, 105 Mass. 178; State v. Mann, 27 N.C. 45. Statutory sanctions in the main provide for the punishment of one maliciously procuring a search warrant or willfully exceeding his authority in exercising it. E.g., 18 U.S.C. 53a, 630, 631 (now 2234Ä 2236); Ala.Code Ann.1940, tit. 15, 99; Ariz.Code Ann. 44-3513 (1939); Fla.Stat.Ann. 933.16, 933.17; Iowa Code 751.38, 751.39 (1946), I.C.A .; Mont.Rev.Code Ann. 10948, 10952 (1935); Nev.Comp.Laws 10425, 10426 (1929); N.Y.Crim.Code 811, 812; N.Y.Penal Law, McK.Consol.Laws, C. 40, 1786, 1847; N.D.Rev.Code 12-1707, 12-1708 (1943); Okl.Stat.Ann. tit. 21, 536, 585, tit. 22, 1239, 1240; Or.Comp.Laws Ann. 26Ä1717 ( 1940); S.D.Code. 13.1213, 13.1234, 34.9904, 34.9905 (1939); Tenn.Code Ann. 11905 (1934). Some statutes more broadly penalize unlawful searches. E.g., 18 U.S.C. 53a (now 2236); Idaho Code Ann. 17-1004, 17-1024 ( 1932); Minn.Stat.Ann. 613.54, 621.17; Va.Code Ann. 4822d (Michie, 1942); Wash.Rev.Stat.Ann. 2240Ä1, 2240Ä2. Virginia also makes punishable one who issues a general search warrant or a warrant unsupported by affidavit. Va.Code Ann. 4822e (Michie, 1942). A few States have provided statutory civil remedies. See, e.g., Ga.Code Ann. 27-301 (1935); Ill.Rev.Stat. c. 38, 698 (Smith-Hurd); Miss.Code Ann. 1592 (1942). And in one State, misuse of a search warrant may be an abuse of process punishable as contempt of court. See Mich.Stat.Ann. 27.511 ( 1938), Comp.Laws 1948, 605.1. </s> [Footnote 2 'We hold, then, with the defendant that the evidence against him was the outcome of a trespass. The officer might have been resisted, or sued for damages, or even prosecuted for oppression. Penal Law, 1846, 1847. He was subject to removal or other discipline at the hands of his superiors. These consequences are undisputed. The defendant would add another. We must determine whether evidence of crim nality, procured by an act of trespass, is to be rejected an incompetent for the misconduct of the trespasser. * * * 'Those judgments (Weeks v. United States and cases which followed it) do not bind us, for they construe provisions of the Federal Constitution, the Fourth and Fifth Amendments, not applicable to the States. Even though not binding, they merit our attentive scrutiny. * * * </s> 'In so holding (i.e., that evidence procured by unlawful search is not incompetent), we are not unmindful of the argument that, unless the evidence is excluded, the statute becomes a form and its protection an illusion. This has a strange sound when the immunity is viewed in the light of its origin and history. The rule now embodied in the statute was received into English law as the outcome of the prosecution of Wilkes and Entick. * * * Wilkes sued the messengers who had ransacked his papers, and recovered a verdict of 4,000 against one and 1,000 against the other. Entick, too, had a substantial verdict. * * * We do not know whether the public, represented by its juries, is today more indifferent to its liberties than it was when the immunity was born. If so, the change of sentiment without more does not work a change of remedy. Other sanctions, penal and disciplinary, supplementing the right to damages, have already been enumerated. No doubt the protection of the statute would be greater from the point of view of the individual whose privacy had been invaded if the government were required to ignore what it had learned through the invasion. The question is whether protection for the individual would not be gained at a disproportionate loss of protection for society. On the one side is the social need that crime shall be repressed. On the other, the social need that law shall not be flouted by the insolence of office. There are dangers in any choice. The rule of the Adams case (People v. Adams, 176 N.y. 351, 68 N.E. 636, 63 L.R.A. 406, 98 Am.St.Rep. 675) strikes a balance between opposing interests.' 242 N.Y. at pages 19, 20, 24Ä25, 150 N.E. at pages 586Ä587, 588Ä589. </s> [Footnote * In the case of jurisdictions which have decided more than one case is point, the following Tables cite only the leading case. </s> [Footnote 1 See Pound, Criminal Justice in America (New York, 1930): 'Under our legal system the way of the prosecutor is hard, and the need of 'getting results' puts pressure upon prosecutors to * * * indulge in that lawless enforcement of law which produces a vicious circle of disrespect for law.' And note the statement of the Wickersham Commission, with reference to arrests: '* * * in case of persons of no influence or little or no means the legal restrictions are not likely to give an officer serious trouble.' National Commission on Law Observance and Enforcement, Report on Criminal Procedure (1931), p. 19. </s> [Footnote 2 See McCormick, Damages, 78. See Willis, Measure of Damages When Property is Wrongfully Taken by a Private Individual, 22 Harv.L.Rev. 419. [Footnote 3 Id., 79. See Fennemore v. Armstrong, 6 Boyce 35, 29 Del. 35, 96 A. 204. [Footnote 4 'It is a well settled and almost universally accepted rule in the law of damages that a finding of exemplary damages must be predicated upon a finding of actual damages.' 17 Iowa L.Rev. 413, 414. This appears to be an overstatement. See McCormick, supra, 83; Restatement of Torts, 908, comment c. </s> [Footnote 5 The material which follows is gleaned from letters and other material from Commissioners of Police and Chiefs of Police in twenty-six cities. Thirty-eight large cities in the United States were selected at random, and inquiries directed concerning the instruction provided police on the rules of search and seizure. Twenty-six replies have been received to date. Those of any significance are mentioned in the text of this opinion. The sample is believed to be representative, but it cannot, of course, substitute for a thoroughgoing comparison of present-day police procedures by a completely objective observer. A study of this kind would be of inestimable value. </s> [Footnote 6 E.g., Assistant Superintendent Truscott's letter to the Washington Police Force of January 3, 1949, concerning McDonald v. United States, 335 U.S. 451 . [Footnote 7 Recently lectures have included two pages of discussion of the opinions in Harris v. United States, 331 U.S. 145 . [Footnote 8 Chief of Police John W. Polcyn notes, in a Foreword to the book, that officers were often not properly informed with respect to searches and seizures before thoroughgoing instruction was undertaken. One of their fears was that of 'losing their cases in court, only because they neglected to do what they might have done with full legal sanction at the time of the arrets, or did what they had no legal right to do at such time.'

United States Supreme Court SANTA FE INDUSTRIES, INC. v. GREEN(1977) No. 75-1753 Argued: Decided: March 23, 1977 </s> Delaware's "short-form merger" statute enables a parent company owning at least 90% of the stock of a subsidiary to merge with the subsidiary upon approval of the parent company's board of directors, and to make cash payments for the minority shareholders' shares. Though advance notice to or consent of the minority shareholders is not required, they must be notified within 10 days of the merger's effective date, and any dissatisfied minority shareholder may petition the Delaware Court of Chancery for the payment of the fair value of his shares as determined by a court-appointed appraiser subject to court review. Pursuant to that statutory procedure petitioner Santa Fe Industries, which had acquired 95% control of another company (Kirby), after obtaining independent appraisals of Kirby's assets and submitting them with financial data to a banking firm to appraise the Kirby stock's fair market value, decided to offer the minority stockholders $150 per share, which was more than the banking firm's appraisal. The minority stockholders were notified the day after the merger became effective and advised of their right to obtain an appraisal if dissatisfied with the $150 price, and were given an information statement containing relevant financial data about Kirby, the appraisals of its assets, and the banking firm's stock appraisal. Respondents, minority stockholders who objected to the merger, instead of pursuing their Delaware appraisal remedy, brought this action in District Court seeking to set aside the merger and to recover the fair value for their stock, which they claimed was at least $772 per share. Respondents alleged that the Kirby stock had been fraudulently appraised in an effort to freeze out the minority stockholders at an inadequate price, in violation of 10 (b) of the Securities Exchange Act of 1934, which makes it "unlawful for any person . . . [t]o use or employ . . . any manipulative or deceptive device or contrivance in contravention of [Securities and Exchange Commission rules]," and Rule 10b-5 issued thereunder, which, in addition to nondisclosure and misrepresentation, prohibits any "artifice to defraud" or any act "which operates or would operate as a fraud or deceit." The District Court dismissed the complaint for failure, with [430 U.S. 462, 463] respect to the two aspects on which respondents' case was deemed to rest, to state a claim upon which relief could be granted: (1) With regard to the claim that actionable fraud inhered in the allegedly gross undervaluation of the minority shares, the court concluded that if "full and fair disclosure is made, transactions eliminating minority interests are beyond the purview of Rule 10b-5," and that respondents did not allege any nondisclosure or misrepresentation in this case. (2) With regard to the claim that the merger was undertaken without prior notice to minority shareholders, and was solely to eliminate the minority from the company and therefore lacked any justifiable business purpose, the court concluded that Rule 10b-5 did not override the Delaware corporation law provisions, which do not require a business purpose or prior notice for a short-form merger. The Court of Appeals reversed. While not disagreeing with the lower court's conclusions with respect to (1), supra, the Court of Appeals concluded that Rule 10b-5 reached "breaches of fiduciary duty by a majority against minority shareholders without any charge of misrepresentation or lack of disclosure," and that therefore the complaint, taken as a whole, stated a cause of action under the Rule. Held: </s> 1. Only conduct involving manipulation or deception is reached by 10 (b) or Rule 10b-5. "When a statute speaks to specifically in terms of manipulation and deception, . . . and when its history reflects no more expansive intent, [the Court is] quite unwilling to extend the scope of the statute . . .," Ernst & Ernst v. Hochfelder, 425 U.S. 185, 214 . Pp. 471-474. </s> 2. The Kirby merger, if carried out as alleged in respondents' complaint, was neither deceptive nor manipulative and therefore did not violate 10 (b) or Rule 10b-5. The minority shareholders were furnished with all relevant information with which to decide whether to accept the price offered for their stock or reject it and seek an appraisal in the Delaware court, and the cases relied on by respondents and the Court of Appeals in which breaches of fiduciary duty were held violative of Rule 10b-5, all of which included some element of deception, are inappropriate here where there was none. Manipulation is "virtually a term of art when used in connection with securities markets," Ernst & Ernst, supra, at 199, referring to practices that are intended to mislead investors by artificially affecting market activities, none of which was involved here. Pp. 474-477. </s> 3. A holding that the complaint in this case alleged fraud under Rule 10b-5 would bring within the Rule a wide variety of corporate conduct traditionally left to state regulation. Absent a clear indication [430 U.S. 462, 464] of congressional intent, the Court should be reluctant to federalize the substantial portion of the law of corporations that deals with transactions in securities, particularly where established state policies of corporate regulation would be overridden. Cf. Cort v. Ash, 422 U.S. 78, 84 ; Piper v. Chris-Craft Industries, Inc., ante, at 41. Pp. 477-480. </s> 533 F.2d 1283, reversed and remanded. </s> WHITE, J., delivered the opinion of the Court, in which BURGER, C. J., and STEWART, MARSHALL, POWELL, and REHNQUIST, JJ., joined, and in all but Part IV of which BLACKMUN and STEVENS, JJ., joined. BLACKMUN, J., post, p. 480, and STEVENS, J., post, p. 480, filed opinions concurring in part. BRENNAN, J., filed a dissenting statement, post, p. 480. </s> William R. Glendon argued the cause for petitioners. With him on the briefs were Robert D. Larsen and Guy C. Quinlan. </s> Sidney Bender argued the cause for respondents. With him on the brief was Aaron Lewittes. </s> MR. JUSTICE WHITE delivered the opinion of the Court. </s> The issue in this case involves the reach and coverage of 10 (b) of the Securities Exchange Act of 1934 and Rule 10b-5 1 thereunder in the context of a Delaware short-form [430 U.S. 462, 465] merger transaction used by the majority stockholder of a corporation to eliminate the minority interest. </s> I </s> In 1936, petitioner Santa Fe Industries, Inc. (Santa Fe), acquired control of 60% of the stock of Kirby Lumber Corp. (Kirby), a Delaware corporation. Through a series of purchases over the succeeding years, Santa Fe increased its control of Kirby's stock to 95%; the purchase prices during the period 1968-1973 ranged from $65 to $92.50 per share. 2 In 1974, wishing to acquire 100% ownership of Kirby, Santa Fe availed itself of 253 of the Delaware Corporation Law, known as the "short-form merger" statute. Section 253 permits a parent corporation owning at least 90% of the stock of a subsidiary to merge with that subsidiary, upon approval by the parent's board of directors, and to make payment in cash for the shares of the minority stockholders. The statute does not require the consent of, or advance notice to, the minority stockholders. However, notice of the merger must be given within 10 days after its effective date, and any stockholder who is dissatisfied with the terms of the merger may petition the Delaware Court of Chancery for a decree ordering the surviving corporation to pay him the fair value [430 U.S. 462, 466] of his shares, as determined by a court-appointed appraiser subject to review by the court. Del. Code Ann., Tit. 8, 253, 262 (1975 ed. and Supp. 1976). </s> Santa Fe obtained independent appraisals of the physical assets of Kirby - land, timber, buildings, and machinery - and of Kirby's oil, gas, and mineral interests. These appraisals, together with other financial information, were submitted to Morgan Stanley & Co. (Morgan Stanley), an investment banking firm retained to appraise the fair market value of Kirby stock. Kirby's physical assets were appraised at $320 million (amounting to $640 for each of the 500,000 shares); Kirby's stock was valued by Morgan Stanley at $125 per share. Under the terms of the merger, minority stockholders were offered $150 per share. </s> The provisions of the short-form merger statute were fully complied with. 3 The minority stockholders of Kirby were notified the day after the merger became effective and were advised of their right to obtain an appraisal in Delaware court if dissatisfied with the offer of $150 per share. They also received an information statement containing, in addition to the relevant financial data about Kirby, the appraisals of the value of Kirby's assets and the Morgan Stanley appraisal concluding that the fair market value of the stock was $125 per share. </s> Respondents, minority stockholders of Kirby, objected to the terms of the merger, but did not pursue their appraisal [430 U.S. 462, 467] remedy in the Delaware Court of Chancery. 4 Instead, they brought this action in federal court on behalf of the corporation and other minority stockholders, seeking to set aside the merger or to recover what they claimed to be the fair value of their shares. The amended complaint asserted that, based on the fair market value of Kirby's physical assets as revealed by the appraisal included in the information statement sent to minority shareholders, Kirby's stock was worth at least $772 per share. 5 The complaint alleged further that the merger took place without prior notice to minority stockholders; that the purpose of the merger was to appropriate the difference between the "conceded pro rata value of the physical assets," App. 103a, and the offer of $150 per share - to "freez[e] out the minority stockholders at a wholly inadequate price," id., at 100a; and that Santa Fe, knowing the appraised value of the physical assets, obtained a "fraudulent appraisal" of the stock from Morgan Stanley and offered $25 above that appraisal "in order to lull the minority stockholders into erroneously believing that [Santa Fe was] generous." Id., at 103a. This course of conduct was alleged to be "a violation of Rule 10b-5 because defendants employed a `device, scheme, or artifice to defraud' and engaged in an `act, practice or course of business which operates or would operate as a fraud or deceit upon any person, in connection with the purchase or sale [430 U.S. 462, 468] of any security.'" Ibid. 6 Morgan Stanley assertedly participated in the fraud as an accessory by submitting its appraisal of $125 per share although knowing the appraised value of the physical assets. </s> The District Court dismissed the complaint for failure to state a claim upon which relief could be granted. 391 F. Supp. 849 (SDNY 1975). As the District Court understood the complaint, respondents' case rested on two distinct grounds. First, federal law was assertedly violated because the merger was for the sole purpose of eliminating the minority from the company, therefore lacking any justifiable business purpose, and because the merger was undertaken without prior notice to the minority shareholders. Second, the low valuation placed on the shares in the cash-exchange offer was itself said to be a fraud actionable under Rule 10b-5. In rejecting the first ground for recovery, the District Court reasoned that Delaware law required neither a business purpose for a short-form merger nor prior notice to the minority shareholders who the statute contemplated would be removed from the company, and that Rule 10b-5 did not override these provisions of state corporate law by independently placing a duty on the majority not to merge without prior notice and without a justifiable business purpose. </s> As for the claim that actionable fraud inhered in the allegedly gross undervaluation of the minority shares, the District Court observed that respondents valued their shares at a minimum of $772 per share, "basing this figure on the pro rata value of Kirby's physical assets." Id., at 853. Accepting this [430 U.S. 462, 469] valuation for purposes of the motion to dismiss, the District Court further noted that, as revealed by the complaint, the physical asset appraisal, along with other information relevant to Morgan Stanley's valuation of the shares, had been included with the information statement sent to respondents within the time required by state law. It thought that if "full and fair disclosure is made, transactions eliminating minority interests are beyond the purview of Rule 10b-5," and concluded that the "complaint fail[ed] to allege an omission, misstatement or fraudulent course of conduct that would have impeded a shareholder's judgment of the value of the offer." Id., at 854. The complaint therefore failed to state a claim and was dismissed. 7 </s> A divided Court of Appeals for the Second Circuit reversed. 533 F.2d 1283 (1976). It first agreed that there was a double aspect to the case: first, the claim that gross undervaluation of the minority stock itself violated Rule 10b-5; and second, that "without any misrepresentation or failure to disclose relevant facts, the merger itself constitutes a violation of Rule 10b-5" because it was accomplished without any corporate purpose and without prior notice to the minority stockholders. Id., at 1285. As to the first aspect of the case, the Court of Appeals did not disturb the District Court's conclusion that the complaint did not allege a material misrepresentation or nondisclosure with respect to the value of the stock; and the court declined to rule that a claim of gross [430 U.S. 462, 470] undervaluation itself would suffice to make out a Rule 10b-5 case. With respect to the second aspect of the case, however, the court fundamentally disagreed with the District Court as to the reach and coverage of Rule 10b-5. The Court of Appeals' view was that, although the Rule plainly reached material misrepresentations and nondisclosures in connection with the purchase or sale of securities, neither misrepresentation nor nondisclosure was a necessary element of a Rule 10b-5 action; the Rule reached "breaches of fiduciary duty by a majority against minority shareholders without any charge of misrepresentation or lack of disclosure." Id., at 1287. 8 The court went on to hold that the complaint, taken as a whole, stated a cause of action under the Rule: </s> "We hold that a complaint alleges a claim under Rule 10b-5 when it charges, in connection with a Delaware short-form merger, that the majority has committed a breach of its fiduciary duty to deal fairly with minority shareholders by effecting the merger without any justifiable business purpose. The minority shareholders are given no prior notice of the merger, thus having no opportunity to apply for injunctive relief, and the proposed price to be paid is substantially lower than the appraised value reflected in the Information Statement." Id., at 1291. </s> See also id., at 1289. 9 </s> [430 U.S. 462, 471] </s> We granted the petition for certiorari challenging this holding because of the importance of the issue involved to the administration of the federal securities laws. 429 U.S. 814 (1976). We reverse. </s> II </s> Section 10 (b) of the 1934 Act makes it "unlawful for any person . . . to use or employ . . . any manipulative or deceptive device or contrivance in contravention of [Securities and Exchange Commission rules]"; Rule 10b-5, promulgated by the SEC under 10 (b), prohibits, in addition to nondisclosure and misrepresentation, any "artifice to defraud" or any act "which operates or would operate as a fraud or deceit." 10 The court below construed the term "fraud" in Rule 10b-5 by adverting to the use of the term in several of this Court's decisions in contexts other than the 1934 Act and the related Securities Act of 1933, 15 U.S.C. 77a et seq. 11 The Court [430 U.S. 462, 472] of Appeals' approach to the interpretation of Rule 10b-5 is inconsistent with that taken by the Court last Term in Ernst & Ernst v. Hochfelder, 425 U.S. 185 (1976). </s> Ernst & Ernst makes clear that in deciding whether a complaint states a cause of action for "fraud" under Rule 10b-5, "we turn first to the language of 10 (b), for `[t]he starting point in every case involving construction of a statute is the language itself.'" Id., at 197, quoting Blue Chip Stamps v. Manor Drug Stores, 421 U.S. 723, 756 (1975) (POWELL, J., concurring). In holding that a cause of action under Rule 10b-5 does not lie for mere negligence, the Court began with the principle that "[a]scertainment of congressional intent with respect to the standard of liability created by a particular section of the [1933 and 1934] Acts must . . . rest primarily on the language of that section," 425 U.S., at 200 , and then focused on the statutory language of 10 (b) - "[t]he words `manipulative or deceptive' used in conjunction with `device or contrivance.'" Id., at 197. The same language and the same principle apply to this case. </s> To the extent that the Court of Appeals would rely on the use of the term "fraud" in Rule 10b-5 to bring within the ambit of the Rule all breaches of fiduciary duty in connection with a securities transaction, its interpretation would, like the interpretation rejected by the Court in Ernst & Ernst, "add a gloss to the operative language of the statute quite different from its commonly accepted meaning." Id., at 199. But, as the Court there held, the language of the statute must control the interpretation of the Rule: </s> "Rule 10b-5 was adopted pursuant to authority granted the [Securities and Exchange] Commission under 10 (b). The rulemaking power granted to an administrative agency charged with the administration of a federal statute is not the power to make law. Rather, it is `"the power to adopt regulations to carry into effect the will of Congress as expressed by the statute."'. . . [The [430 U.S. 462, 473] scope of the Rule] cannot exceed the power granted the Commission by Congress under 10 (b)." Id., at 212-214. 12 </s> The language of 10 (b) gives no indication that Congress meant to prohibit any conduct not involving manipulation or deception. Nor have we been cited to any evidence in the legislative history that would support a departure from the language of the statute. 13 "When a statute speaks so specifically in terms of manipulation and deception, . . . and when its history reflects no more expansive intent, we are quite unwilling to extend the scope of the statute . . . ." Id., at 214. Thus the claim of fraud and fiduciary breach in this complaint states a cause of action under any part of Rule 10b-5 only if [430 U.S. 462, 474] the conduct alleged can be fairly viewed as "manipulative or deceptive" within the meaning of the statute. </s> III </s> It is our judgment that the transaction, if carried out as alleged in the complaint, was neither deceptive nor manipulative and therefore did not violate either 10 (b) of the Act or Rule 10b-5. </s> As we have indicated, the case comes to us on the premise that the complaint failed to allege a material misrepresentation or material failure to disclose. The finding of the District Court, undisturbed by the Court of Appeals, was that there was no "omission" or "misstatement" in the information statement accompanying the notice of merger. On the basis of the information provided, minority shareholders could either accept the price offered or reject it and seek an appraisal in the Delaware Court of Chancery. Their choice was fairly presented, and they were furnished with all relevant information on which to base their decision. 14 </s> We therefore find inapposite the cases relied upon by respondents and the court below, in which the breaches of [430 U.S. 462, 475] fiduciary duty held violative of Rule 10b-5 included some element of deception. 15 Those cases forcefully reflect the principle that "[] 10 (b) must be read flexibly, not technically [430 U.S. 462, 476] and restrictively" and that the statute provides a cause of action for any plaintiff who "suffer[s] an injury as a result of deceptive practices touching its sale [or purchase] of securities . . . ." Superintendent of Insurance v. Bankers Life & Cas. Co., 404 U.S. 6, 12 -13 (1971). But the cases do not support the proposition, adopted by the Court of Appeals below and urged by respondents here, that a breach of fiduciary duty by majority stockholders, without any deception, misrepresentation, or nondisclosure, violates the statute and the Rule. </s> It is also readily apparent that the conduct alleged in the complaint was not "manipulative" within the meaning of the statute. "Manipulation" is "virtually a term of art when used in connection with securities markets." Ernst & Ernst, 425 U.S., at 199 . The term refers generally to practices, such as wash sales, matched orders, or rigged prices, that are intended to mislead investors by artificially affecting market activity. See, e. g., 9 of the 1934 Act, 15 U.S.C. 78i (prohibiting specific manipulative practices); Ernst & Ernst, supra, at 195, 199 n. 21, 205; Piper v. Chris-Craft Industries, Inc., ante, at 43 (Rule 10b-6, also promulgated under 10 (b), is "an antimanipulative provision designed to protect the orderliness of the securities market during distributions of stock" and "to prevent stimulative trading by an issuer in its own securities in order to create an unnatural and unwarranted appearance of market activity"); 2 A. Bromberg, Securities Law: Fraud 7.3 (1975); 3 L. Loss, Securities Regulation 1541-1570 (2d ed. 1961); 6 id., at 3755-3763 (Supp. 1969). Section 10 (b)'s general prohibition of practices deemed by [430 U.S. 462, 477] the SEC to be "manipulative" - in this technical sense of artificially affecting market activity in order to mislead investors - is fully consistent with the fundamental purpose of the 1934 Act "`to substitute a philosophy of full disclosure for the philosophy of caveat emptor . . . .'" Affiliated Ute Citizens v. United States, 406 U.S. 128, 151 (1972), quoting SEC v. Capital Gains Research Bureau, 375 U.S. 180, 186 (1963). Indeed, nondisclosure is usually essential to the success of a manipulative scheme. 3 Loss, supra, at 1565. No doubt Congress meant to prohibit the full range of ingenious devices that might be used to manipulate securities prices. But we do not think it would have chosen this "term of art" if it had meant to bring within the scope of 10 (b) instances of corporate mismanagement such as this, in which the essence of the complaint is that shareholders were treated unfairly by a fiduciary. </s> IV </s> The language of the statute is, we think, "sufficiently clear in its context" to be dispositive here, Ernst & Ernst, supra, at 201; but even if it were not, there are additional considerations that weigh heavily against permitting a cause of action under Rule 10b-5 for the breach of corporate fiduciary duty alleged in this complaint. Congress did not expressly provide a private cause of action for violations of 10 (b). Although we have recognized an implied cause of action under that section in some circumstances, Superintendent of Insurance v. Bankers Life & Cas. Co., supra, at 13 n. 9, we have also recognized that a private cause of action under the antifraud provisions of the Securities Exchange Act should not be implied where it is "unnecessary to ensure the fulfillment of Congress' purposes" in adopting the Act. Piper v. Chris-Craft Industries, ante, at 41. Cf. J. I. Case Co. v. Borak, 377 U.S. 426, 431 -433 (1964). As we noted earlier, supra, this page, the Court repeatedly has described the [430 U.S. 462, 478] "fundamental purpose" of the Act as implementing a "philosophy of full disclosure"; once full and fair disclosure has occurred, the fairness of the terms of the transaction is at most a tangential concern of the statute. Cf. Mills v. Electric Auto-Lite Co., 396 U.S. 375, 381 -385 (1970). As in Cort v. Ash, 422 U.S. 66, 80 (1975), we are reluctant to recognize a cause of action here to serve what is "at best a subsidiary purpose" of the federal legislation. </s> A second factor in determining whether Congress intended to create a federal cause of action in these circumstances is "whether `the cause of action [is] one traditionally relegated to state law . . . .'" Piper v. Chris-Craft Industries, Inc., ante, at 40, quoting Cort v. Ash, supra, at 78. The Delaware Legislature has supplied minority shareholders with a cause of action in the Delaware Court of Chancery to recover the fair value of shares allegedly undervalued in a short-form merger. See supra, at 465-466. Of course, the existence of a particular state-law remedy is not dispositive of the question whether Congress meant to provide a similar federal remedy, but as in Cort and Piper, we conclude that "it is entirely appropriate in this instance to relegate respondent and others in his situation to whatever remedy is created by state law." 422 U.S., at 84 ; ante, at 41. </s> The reasoning behind a holding that the complaint in this case alleged fraud under Rule 10b-5 could not be easily contained. It is difficult to imagine how a court could distinguish, for purposes of Rule 10b-5 fraud, between a majority stockholder's use of a short-form merger to eliminate the minority at an unfair price and the use of some other device, such as a long-form merger, tender offer, or liquidation, to achieve the same result; or indeed how a court could distinguish the alleged abuses in these going private transactions from other types of fiduciary self-dealing involving transactions in securities. The result would be to bring within the Rule a wide variety of corporate conduct traditionally left to state regulation. In addition to posing a [430 U.S. 462, 479] "danger of vexatious litigation which could result from a widely expanded class of plaintiffs under Rule 10b-5," Blue Chip Stamps v. Manor Drug Stores, 421 U.S., at 740 , this extension of the federal securities laws would overlap and quite possibly interfere with state corporate law. Federal courts applying a "federal fiduciary principle" under Rule 10b-5 could be expected to depart from state fiduciary standards at least to the extent necessary to ensure uniformity within the federal system. 16 Absent a clear indication of congressional intent, we are reluctant to federalize the substantial portion of the law of corporations that deals with transactions in securities, particularly where established state policies of corporate regulation would be overridden. As the Court stated in Cort v. Ash, supra: "Corporations are creatures of state law, and investors commit their funds to corporate directors on the understanding that, except where federal law expressly requires certain responsibilities of directors with respect to stockholders, state law will govern the internal affairs of the corporation." 422 U.S., at 84 (emphasis added). </s> We thus adhere to the position that "Congress by 10 (b) did not seek to regulate transactions which constitute no more than internal corporate mismanagement." Superintendent of Insurance v. Bankers Life & Cas. Co., 404 U.S., at 12 . There [430 U.S. 462, 480] may well be a need for uniform federal fiduciary standards to govern mergers such as that challenged in this complaint. But those standards should not be supplied by judicial extension of 10 (b) and Rule 10b-5 to "cover the corporate universe." 17 </s> The judgment of the Court of Appeals is reversed, and the case is remanded for further proceedings consistent with this opinion. </s> So ordered. </s> MR. JUSTICE BRENNAN dissents and would affirm for substantially the reasons stated in the majority and concurring opinions in the Court of Appeals, 533 F.2d 1283 (CA2 1976). </s> Footnotes [Footnote 1 Section 10 of the Securities Exchange Act of 1934, 15 U.S.C. 78j, provides in relevant part: "It shall be unlawful for any person, directly or indirectly, by the use of any means or instrumentality of interstate commerce or of the mails, or of any facility of any national securities exchange - . . . . . "(b) To use or employ, in connection with the purchase or sale of any security registered on a national securities exchange or any security not so registered, any manipulative or deceptive device or contrivance in contravention of such rules and regulations as the Commission may prescribe as necessary or appropriate in the public interest or for the protection of investors." Rule 10b-5, 17 CFR 240.10b-5 (1976), provides: "Employment of manipulative and deceptive devices. "It shall be unlawful for any person, directly or indirectly, by the use of [430 U.S. 462, 465] any means or instrumentality of interstate commerce, or of the mails or of any facility of any national securities exchange, "(a) To employ any device, scheme, or artifice to defraud, "(b) To make any untrue statement of a material fact or to omit to state a material fact necessary in order to make the statements made, in the light of the circumstances under which they were made, not misleading, or "(c) To engage in any act, practice, or course of business which operates or would operate as a fraud or deceit upon any person, "in connection with the purchase or sale of any security." </s> [Footnote 2 App. 33a (merger information statement, considered by parties and court below as part of the amended complaint). Sante Fe controlled Kirby through its wholly owned subsidiary, Santa Fe Natural Resources, Inc., which owned the Kirby stock. </s> [Footnote 3 The merger became effective on July 31, 1974, and was accomplished in the following way. A new corporation, Forest Products, Inc., was organized as a Delaware corporation. The Kirby stock, together with cash, was transferred from Santa Fe's wholly owned subsidiary (see n. 2, supra) to Forest Products in exchange for all of the Forest Products stock. The new corporation was then merged into Kirby, with Kirby as the surviving corporation. The cash transferred to Forest Products was used to make the purchase offer for the Kirby shares not owned by the Santa Fe subsidiary. </s> [Footnote 4 On August 21, 1974, respondents petitioned for an appraisal of their Kirby stock, but they withdrew that petition on September 9 and the next day commenced this lawsuit. </s> [Footnote 5 The figure of $772 per share was calculated as follows: "The difference of $311,000,000 ($622 per share) between the fair market value of Kirby's land and timber, alone, as per the defendants' own appraisal thereof at $320,000,000 and the $9,000,000 book value of said land and timber, added to the $150 per share, yields a pro rata share of the value of the physical assets of Kirby of at least $772 per share. The value of the stock was at least the pro rata value of the physical assets." App. 102a. </s> [Footnote 6 The complaint also alleged a breach of fiduciary duty under state law and asserted that the federal court had both diversity and pendent jurisdiction over this claim. The District Court found an absence of complete diversity of citizenship between the plaintiffs and defendants because of the defendant Morgan Stanley and refused to exercise pendent jurisdiction because it held that the complaint failed to state a claim under the federal securities laws. 391 F. Supp. 849, 855 (SDNY 1975). </s> [Footnote 7 The District Court also based its holding on the alternative ground that the injuries alleged in the complaint were not causally related to any deception by the majority shareholder: "Assuming arguendo that the merger information statement did not constitute adequate disclosure, the amended complaint does not demonstrate a causal connection between the alleged deception and plaintiffs' damages. Plaintiffs did not tender their shares for cancellation and payment pursuant to this merger plan. . . . From the outset, plaintiffs recognized the alleged deception and did not rely upon it." 391 F. Supp., at 855. </s> [Footnote 8 The court concluded its discussion thus: "Whether full disclosure has been made is not the crucial inquiry since it is the merger and the undervaluation which constituted the fraud, and not whether or not the majority determines to lay bare their real motives. If there is no valid corporate purpose for the merger, then even the most brazen disclosure of that fact to the minority shareholders in no way mitigates the fraudulent conduct." 533 F.2d, at 1292. </s> [Footnote 9 The Court of Appeals affirmed, however, the dismissal of the complaint against Morgan Stanley. As the Court of Appeals understood it, Morgan Stanley had not been charged with participating in the majority shareholder's breach of fiduciary duty; it had been involved only in evaluation [430 U.S. 462, 471] of the stock and the compilation of its report with respect thereto. The complaint contained "no allegation that Morgan Stanley & Co. engaged in any misrepresentation or nondisclosure such as would support its liability under Rule 10b-5 (2)." Ibid. </s> [Footnote 10 See n. 1, supra. </s> [Footnote 11 The Court of Appeals quoted passages from Pepper v. Litton, 308 U.S. 295, 306 , 311 (1939) (where this Court upheld the disallowance of a bankruptcy claim of a controlling stockholder who violated his fiduciary obligation to the other stockholders), and from 1 J. Story, Equity Jurisprudence 187 (1853); the court also cited cases that quoted the passage from Mr. Justice Story's treatise - Moore v. Crawford, 130 U.S. 122, 128 (1889) (a diversity suit to compel execution of a deed held in constructive trust), and SEC v. Capital Gains Research Bureau, 375 U.S. 180, 194 (1963) (Investment Advisers Act of 1940 prohibits, as a "fraud or deceit upon any client," a registered investment adviser's failure to disclose to his clients his own financial interest in his recommendations). Although Capital Gains involved a federal securities statute, the Court's references to fraud in the "equitable" sense of the term were premised on its recognition that Congress intended the Investment Advisers Act to establish federal fiduciary standards for investment advisers. See id., at 191-192, 194. Moreover, the fraud that the SEC sought to enjoin in Capital Gains was, in fact, a nondisclosure. </s> [Footnote 12 The case for adhering to the language of the statute is even stronger here than in Ernst & Ernst, where the interpretation of Rule 10b-5 rejected by the Court was strongly urged by the Commission. See also Piper v. Chris-Craft Industries, Inc., ante, p. 1, and Blue Chip Stamps v. Manor Drug Stores, 421 U.S. 723 (1975) (rejecting interpretations of Rule 10b-5 urged by the SEC as amicus curiae). By contrast, the Commission apparently has not concluded that Rule 10b-5 should be used to reach "going private" transactions where the majority stockholder eliminates the minority at an allegedly unfair price. See SEC Securities Act Release No. 5567 (Feb. 6, 1975), CCH Fed. Sec. L. Rep. § 80,104 (proposing Rules 13e-3A and 13e-3B dealing with "going private" transactions, pursuant to six sections of the 1934 Act including 10 (b), but stating that the Commission "has reached no conclusions with respect to the proposed rules"). Because we are concerned here only with 10 (b), we intimate no view as to the Commission's authority to promulgate such rules under other sections of the Act. </s> [Footnote 13 As the Court noted in Ernst & Ernst: "Neither the intended scope of 10 (b) nor the reasons for the changes in its operative language are revealed explicitly in the legislative history of the 1934 Act, which deals primarily with other aspects of the legislation." 425 U.S., at 202 . The only specific reference to 10 in the Senate Report on the 1934 Act merely states that the section was "aimed at those manipulative and deceptive practices which have been demonstrated to fulfill no useful function." S. Rep. No. 792, 73d Cong., 2d Sess., 6 (1934). </s> [Footnote 14 In addition to their principal argument that the complaint alleges a fraud under clauses (a) and (c) of Rule 10b-5, respondents also argue that the complaint alleges nondisclosure and misrepresentation in violation of clause (b) of the Rule. Their major contention in this respect is that the majority stockholder's failure to give the minority advance notice of the merger was a material nondisclosure, even though the Delaware short-form merger statute does not require such notice. Brief for Respondents 27. But respondents do not indicate how they might have acted differently had they had prior notice of the merger. Indeed, they accept the conclusion of both courts below that under Delaware law they could not have enjoined the merger because an appraisal proceeding is their sole remedy in the Delaware courts for any alleged unfairness in the terms of the merger. Thus, the failure to give advance notice was not a material nondisclosure within the meaning of the statute or the Rule. Cf. TSC Industries, Inc. v. Northway, Inc., 426 U.S. 438 (1976). </s> [Footnote 15 The decisions of this Court relied upon by respondents all involved deceptive conduct as part of the Rule 10b-5 violation alleged. Affiliated Ute Citizens v. United States, 406 U.S. 128 (1972) (misstatements of material fact used by bank employees in position of market maker to acquire stock at less than fair value); Superintendent of Insurance v. Bankers Life & Cas. Co., 404 U.S. 6, 9 (1971) ("seller [of bonds] was duped into believing that it, the seller, would receive the proceeds"). Cf. SEC v. Capital Gains Research Bureau, 375 U.S. 180 (1963) (injunction under Investment Advisers Act of 1940 to compel registered investment adviser to disclose to his clients his own financial interest in his recommendations). We have been cited to a large number of cases in the Courts of Appeals, all of which involved an element of deception as part of the fiduciary misconduct held to violate Rule 10b-5. E. g., Schoenbaum v. Firstbrook, 405 F.2d 215, 220 (CA2 1968) (en banc), cert. denied, 395 U.S. 906 (1969) (majority stockholder and board of directors "were guilty of deceiving" the minority stockholders); Drachman v. Harvey, 453 F.2d 722, 733, 736, 737 (CA2 1972) (en banc) (Rule 10b-5 violation alleged on facts found "indistinguishable" from Superintendent of Insurance v. Bankers Life & Cas. Co.); Schlick v. Penn-Dixie Cement Corp., 507 F.2d 374 (CA2 1974), cert. denied, 421 U.S. 976 (1975) (scheme of market manipulation and merger on unfair terms, one aspect of which was misrepresentation); Pappas v. Moss, 393 F.2d 865, 869 (CA3 1968) ("if a `deception' is required in the present context [of 10 (b) and Rule 10b-5], it is fairly found by viewing this fraud as though the `independent' stockholders were standing in the place of the defrauded corporate entity," where the board of directors passed a resolution containing at least two material misrepresentations and authorizing the sale of corporate stock to the directors at a price below fair market value); Shell v. Hensley, 430 F.2d 819, 825 (CA5 1970) (derivative suit alleging that corporate officers used misleading proxy materials and other reports to deceive shareholders regarding a bogus employment contract intended to conceal improper payments to the corporation president and regarding purchases by the corporation of certain securities at excessive prices); Rekant v. Desser, 425 F.2d 872, 882 (CA5 1970) (as part of scheme to cause corporation to issue Treasury shares and a promissory note for grossly inadequate consideration, corporate officers deceived shareholders by making [430 U.S. 462, 476] affirmative misrepresentations in the corporation's annual report and by failing to file any such report the next year). See Recent Cases, 89 Harv. L. Rev. 1917, 1926 (1976) (stating that no appellate decision before that of the Court of Appeals in this case and in Marshel v. AFW Fabric Corp., 533 F.2d 1277 (CA2), vacated and remanded for a determination of mootness, 429 U.S. 881 (1976), "had permitted a 10b-5 claim without some element of misrepresentation or nondisclosure") (footnote omitted). </s> [Footnote 16 For example, some States apparently require a "valid corporate purpose" for the elimination of the minority interest through a short-form merger, whereas other States do not. Compare Bryan v. Brock & Blevins Co., 490 F.2d 563 (CA5), cert. denied, 419 U.S. 844 (1974) (merger arranged by controlling stockholder for no business purpose except to eliminate 15% minority stockholder violated Georgia short-form merger statute) with Stauffer v. Standard Brands, Inc., 41 Del. Ch. 7, 187 A. 2d 78 (1962) (Delaware short-form merger statute allows majority stockholder to eliminate the minority interest without any corporate purpose and subject only to an appraisal remedy). Thus to the extent that Rule 10b-5 is interpreted to require a valid corporate purpose for elimination of minority shareholders as well as a fair price for their shares, it would impose a stricter standard of fiduciary duty than that required by the law of some States. </s> [Footnote 17 Cary, Federalism and Corporate Law: Reflections Upon Delaware, 83 Yale L. J. 663, 700 (1974) (footnote omitted). Professor Cary argues vigorously for comprehensive federal fiduciary standards, but urges a "frontal" attack by a new federal statute rather than an extension of Rule 10b-5. He writes: "It seems anomalous to jig-saw every kind of corporate dispute into the federal courts through the securities acts as they are presently written." Ibid. See also Note, Going Private, 84 Yale L. J. 903 (1975) (proposing the application of traditional doctrines of substantive corporate law to problems of fairness raised by "going private" transactions such as short-form mergers). </s> MR. JUSTICE BLACKMUN, concurring in part. </s> Like MR. JUSTICE STEVENS, I refrain from joining Part IV of the Court's opinion. I, too, regard that part as unnecessary for the decision in the instant case and, indeed, as exacerbating the concerns I expressed in my dissents in Blue Chip Stamps v. Manor Drug Stores, 421 U.S. 723, 761 (1975), and in Ernst & Ernst v. Hochfelder, 425 U.S. 185, 215 (1976). I, however, join the remainder of the Court's opinion and its judgment. </s> MR. JUSTICE STEVENS, concurring in part. </s> For the reasons stated by MR. JUSTICE BLACKMUN in his dissenting opinion in Blue Chip Stamps v. Manor Drug Stores, [430 U.S. 462, 481] 421 U.S. 723, 761 , 1 and those stated in my dissent in Piper v. Chris-Craft Industries, ante, p. 53, I believe both of those cases were incorrectly decided. I foresee some danger that Part IV of the Court's opinion in this case may incorrectly be read as extending the holdings of those cases. Moreover, the entire discussion in Part IV is unnecessary to the decision of this case. Accordingly, I join only Parts I, II, and III of the Court's opinion. I would also add further emphasis to the fact that the controlling stockholders in this case did not breach any duty owed to the minority shareholders because (a) there was complete disclosure of the relevant facts, and (b) the minority are entitled to receive the fair value of their shares. 2 The facts alleged in the complaint do not constitute "fraud" within the meaning of Rule 10b-5. </s> [Footnote 1 See also Eason v. General Motors Acceptance Corp., 490 F.2d 654 (CA7 1973), cert. denied, 416 U.S. 960 . </s> [Footnote 2 The motivation for the merger is a matter of indifference to the minority stockholders because they retain no interest in the corporation after the merger is consummated. </s> [430 U.S. 462, 482]

United States Supreme Court UNITED STATES v. LOUISIANA(1957) No. 11 Argued: April 8, 1957Decided: June 24, 1957 </s> Leave to intervene in this suit is granted to the States of Alabama, Florida, Mississippi and Texas, without prejudice to the present motions of the United States and Louisiana, which are continued. </s> Solicitor General Rankin argued the cause for the United States, Plaintiff. With him on the brief were Attorney General Brownell, Oscar H. Davis, John F. Davis, George S. Swarth and Fred W. Smith. </s> Jack P. F. Gremillion, Attorney General, W. Scott Wilkinson, Special Assistant Attorney General, and Victor A. Sachse argued the cause for the State of Louisiana, defendant. With them on the brief were Edward M. Carmouche and John L. Madden, Special Assistant Attorneys General, Bailey Walsh, Hugh M. Wilkinson and Marc Dupuy, Jr. </s> By leave of the Court, 353 U.S. 980 , Price Daniel, Governor, Will Wilson, Attorney General, James H. Rogers, Assistant Attorney General, and J. Chrys Dougherty filed a brief for the State of Texas, as amicus curiae, urging that the Court's decision in this case should be limited to the State of Louisiana. </s> PER CURIAM. </s> The Court has before it the motions of the United States for judgment and of Louisiana for leave to take depositions. As a result of its consideration of these matters, including the representations made by the State of Texas in its amicus curiae brief, the Court is of the opinion that the issues in this litigation are so related to [354 U.S. 515, 516] the possible interests of Texas, and other States situated on the Gulf of Mexico, in the subject matter of this suit, that the just, orderly, and effective determination of such issues requires that they be adjudicated in a proceeding in which all the interested parties are before the Court. </s> Accordingly, to that end, the Court, acting pursuant to Rules 9 (2) and (6) of its Revised Rules, Rule 21 of the Federal Rules of Civil Procedure, and the general equity powers of the Court, grants leave to each of the States of Alabama, Florida, Mississippi, and Texas to intervene in this suit within 60 days from the date of this opinion, with leave to the United States, within 60 days thereafter, to file an amended or supplemental complaint adding as parties to this suit any of such States as shall not have so intervened. The bringing in of such additional parties shall be without prejudice to the present motions of the United States and Louisiana, subject only to such terms as justice may require vis-a-vis the additional parties. Meanwhile such motions are continued. </s> THE CHIEF JUSTICE and MR. JUSTICE CLARK took no part in the consideration or decision of this case. </s> [354 U.S. 515, 517]

United States Supreme Court TAHOE-SIERRA PRESERVATION COUNCIL, INC., et al. v. TAHOE REGIONAL PLANNING AGENCY et al.(2002) No. 00-1167 Argued: January 7, 2002Decided: April 23, 2002 </s> Respondent Tahoe Regional Planning Agency (TRPA) imposed two moratoria, totaling 32 months, on development in the Lake Tahoe Basin while formulating a comprehensive land-use plan for the area. Petitioners, real estate owners affected by the moratoria and an association representing such owners, filed parallel suits, later consolidated, claiming that TRPA's actions constituted a taking of their property without just compensation. The District Court found that TRPA had not effected a "partial taking" under the analysis set out in Penn Central Transp. Co. v. New York City, 438 U.S. 104; however, it concluded that the moratoria did constitute a taking under the categorical rule announced in Lucas v. South Carolina Coastal Council, 505 U.S. 1003, because TRPA temporarily deprived petitioners of all economically viable use of their land. On appeal, TRPA successfully challenged the District Court's takings determination. Finding that the only question in this facial challenge was whether Lucas' rule applied, the Ninth Circuit held that because the regulations had only a temporary impact on petitioners' fee interest, no categorical taking had occurred; that Lucas applied to the relatively rare case in which a regulation permanently denies all productive use of an entire parcel, whereas the moratoria involved only a temporal slice of the fee interest; and that First English Evangelical Lutheran Church of Glendale v. County of Los Angeles, 482 U.S. 304, concerned the question whether compensation is an appropriate remedy for a temporary taking, not whether or when such a taking has occurred. The court also concluded that Penn Central's adhoc balancing approach was the proper framework for analyzing whether a taking had occurred, but that petitioners had not challenged the District Court's conclusion that they could not make out a claim under Penn Central's factors. </s> Held: The moratoria ordered by TRPA are not per se takings of property requiring compensation under the Takings Clause. Pp.16-39. </s> (a)Although this Court's physical takings jurisprudence, for the most part, involves the straightforward application of per se rules, its regulatory takings jurisprudence is characterized by "essentially adhoc, factual inquiries," Penn Central, 533 U.S. 606, 636 (O'Connor, J., concurring). The longstanding distinction between physical and regulatory takings makes it inappropriate to treat precedent from one as controlling on the other. Petitioners rely on First English and Lucas--both regulatory takings cases--to argue for a categorical rule that whenever the government imposes a deprivation of all economically viable use of property, no matter how brief, it effects a taking. In First English, 480 U.S. 470, 497. To sever a 32-month segment from the remainder of each fee simple estate and then ask whether that segment has been taken in its entirety would ignore Penn Central's admonition to focus on "the parcel as a whole," 364 U.S. 40, 49, justifies creating a new categorical rule. Pp.17-29. </s> (b)"Fairness and justice" will not be better served by a categorical rule that any deprivation of all economic use, no matter how brief, constitutes a compensable taking. That rule would apply to numerous normal delays in obtaining, e.g., building permits, and would require changes in practices that have long been considered permissible exercises of the police power. Such an important change in the law should be the product of legislative rulemaking not adjudication. More importantly, for the reasons set out in Justice O'Connor's concurring opinion in Palazzolo, 533 U.S., at 636, the better approach to a temporary regulatory taking claim requires careful examination and weighing of all the relevant circumstances--only one of which is the length of the delay. A narrower rule excluding normal delays in processing permits, or covering only delays of more than a year, would have a less severe impact on prevailing practices, but would still impose serious constraints on the planning process. Moratoria are an essential tool of successful development. The interest in informed decisionmaking counsels against adopting a per se rule that would treat such interim measures as takings regardless of the planners' good faith, the landowners' reasonable expectations, or the moratorium's actual impact on property values. The financial constraints of compensating property owners during a moratorium may force officials to rush through the planning process or abandon the practice altogether. And the interest in protecting the decisional process is even stronger when an agency is developing a regional plan than when it is considering a permit for a single parcel. Here, TRPA obtained the benefit of comments and criticisms from interested parties during its deliberations, but a categorical rule tied to the deliberations' length would likely create added pressure on decisionmakers to quickly resolve land-use questions, disadvantaging landowners and interest groups less organized or familiar with the planning process. Moreover, with a temporary development ban, there is less risk that individual landowners will be singled out to bear a special burden that should be shared by the public as a whole. It may be true that a moratorium lasting more than one year should be viewed with special skepticism, but the District Court found that the instant delay was not unreasonable. The restriction's duration is one factor for a court to consider in appraising regulatory takings claims, but with respect to that factor, the temptation to adopt per se rules in either direction must be resisted. Pp. 28-39. </s> 216 F.3d 764, affirmed. </s> Stevens, J., delivered the opinion of the Court, in which O'Connor, Kennedy, Souter, Ginsburg, and Breyer, JJ., joined. Rehnquist, C.J., filed a dissenting opinion, in which Scalia, J., and Thomas, J., joined. Thomas, J., filed a dissenting opinion, in which Scalia, J., joined. </s> TAHOE-SIERRA PRESERVATION COUNCIL, INC., etal., PETITIONERS v. TAHOE REGIONAL PLANNING AGENCY etal. </s> on writ of certiorari to the united states court of appeals for the ninth circuit </s> [April 23, 2002] </s> Justice Stevens delivered the opinion of the Court. </s> The question presented is whether a moratorium on development imposed during the process of devising a comprehensive land-use plan constitutes a per se taking of property requiring compensation under the Takings Clause of the United States Constitution.1 This case actually involves two moratoria ordered by respondent Tahoe Regional Planning Agency (TRPA) to maintain the status quo while studying the impact of development on Lake Tahoe and designing a strategy for environmentally sound growth. The first, Ordinance 81-5, was effective from August 24, 1981, until August 26, 1983, whereas the second more restrictive Resolution 83-21 was in effect from August 27, 1983, until April 25, 1984. As a result of these two directives, virtually all development on a substantial portion of the property subject to TRPA's jurisdiction was prohibited for a period of 32 months. Although the question we decide relates only to that 32-month period, a brief description of the events leading up to the moratoria and a comment on the two permanent plans that TRPA adopted thereafter will clarify the narrow scope of our holding. </s> I </s> The relevant facts are undisputed. The Court of Appeals, while reversing the District Court on a question of law, accepted all of its findings of fact, and no party challenges those findings. All agree that Lake Tahoe is "uniquely beautiful," 34 F.Supp. 2d 1226, 1230 (Nev. 1999), that President Clinton was right to call it a "`national treasure that must be protected and preserved,'" ibid., and that Mark Twain aptly described the clarity of its waters as "`not merely transparent, but dazzlingly, brilliantly so,'" ibid. (emphasis added) (quoting M. Twain, Roughing It 174-175 (1872)). </s> Lake Tahoe's exceptional clarity is attributed to the absence of algae that obscures the waters of most other lakes. Historically, the lack of nitrogen and phosphorous, which nourish the growth of algae, has ensured the transparency of its waters.2 Unfortunately, the lake's pristine state has deteriorated rapidly over the past 40 years; increased land development in the Lake Tahoe Basin (Basin) has threatened the "`noble sheet of blue water'" beloved by Twain and countless others. 34 F.Supp., at 1230. As the District Court found, "[d]ramatic decreases in clarity first began to be noted in the 1950's/early 1960's, shortly after development at the lake began in earnest." Id., at 1231. The lake's unsurpassed beauty, it seems, is the wellspring of its undoing. </s> The upsurge of development in the area has caused "increased nutrient loading of the lake largely because of the increase in impervious coverage of land in the Basin resulting from that development." Ibid. </s> "Impervious coverage--such as asphalt, concrete, buildings, and even packed dirt--prevents precipitation from being absorbed by the soil. Instead, the water is gathered and concentrated by such coverage. Larger amounts of water flowing off a driveway or a roof have more erosive force than scattered raindrops falling over a dispersed area--especially one covered with indigenous vegetation, which softens the impact of the raindrops themselves." Ibid. </s> Given this trend, the District Court predicted that "unless the process is stopped, the lake will lose its clarity and its trademark blue color, becoming green and opaque for eternity."3 </s> Those areas in the Basin that have steeper slopes produce more runoff; therefore, they are usually considered "high hazard" lands. Moreover, certain areas near streams or wetlands known as "Stream Environment Zones" (SEZs) are especially vulnerable to the impact of development because, in their natural state, they act as filters for much of the debris that runoff carries. Because "[t]he most obvious response to this problem ... is to restrict development around the lake--especially in SEZ lands, as well as in areas already naturally prone to runoff," id., at 1232, conservation efforts have focused on controlling growth in these high hazard areas. </s> In the 1960's, when the problems associated with the burgeoning development began to receive significant attention, jurisdiction over the Basin, which occupies 501 square miles, was shared by the States of California and Nevada, five counties, several municipalities, and the Forest Service of the Federal Government. In 1968, the legislatures of the two States adopted the Tahoe Regional Planning Compact, see 1968 Cal. Stats., ch. 998, p. 1900, §1; 1968 Nev. Stats. 4, which Congress approved in 1969, Pub. L. 91-148, 83 Stat. 360. The compact set goals for the protection and preservation of the lake and created TRPA as the agency assigned "to coordinate and regulate development in the Basin and to conserve its natural resources." Lake Country Estates, Inc. v. Tahoe Regional Planning Agency, 440 U.S. 391, 394 (1979). </s> Pursuant to the compact, in 1972 TRPA adopted a Land Use Ordinance that divided the land in the Basin into seven "land capability districts," based largely on steepness but also taking into consideration other factors affecting runoff. Each district was assigned a "land coverage coefficient--a recommended limit on the percentage of such land that could be covered by impervious surface." Those limits ranged from 1% for districts 1 and 2 to 30% for districts 6 and 7. Land in districts 1, 2, and 3 is characterized as "high hazard" or "sensitive," while land in districts 4, 5, 6, and 7 is "low hazard" or "non-sensitive." The SEZ lands, though often treated as a separate category, were actually a subcategory of district 1. 34 F. Supp. 2d, at 1232. </s> Unfortunately, the 1972 ordinance allowed numerous exceptions and did not significantly limit the construction of new residential housing. California became so dissatisfied with TRPA that it withdrew its financial support and unilaterally imposed stricter regulations on the part of the Basin located in California. Eventually the two States, with the approval of Congress and the President, adopted an extensive amendment to the compact that became effective on December 19, 1980. Pub. L. 96-551, 94 Stat. 3233; Cal. Govt Code Ann. §66801 (West Supp. 2002); Nev. Rev. Stat. §277.200 (1980). </s> The 1980 Tahoe Regional Planning Compact (Compact) redefined the structure, functions, and voting procedures of TRPA, App. 37, 94 Stat. 3235-3238; 34 F.Supp. 2d, at 1233, and directed it to develop regional "environmental threshold carrying capacities"--a term that embraced "standards for air quality, water quality, soil conservation, vegetation preservation and noise." 94 Stat. 3235, 3239. The Compact provided that TRPA "shall adopt" those standards within 18 months, and that "[w]ithin 1 year after" their adoption (i.e., by June 19, 1983), it "shall" adopt an amended regional plan that achieves and maintains those carrying capacities. Id., at 3240. The Compact also contained a finding by the Legislatures of California and Nevada "that in order to make effective the regional plan as revised by [TRPA], it is necessary to halt temporarily works of development in the region which might otherwise absorb the entire capability of the region for further development or direct it out of harmony with the ultimate plan." Id., at 3243. Accordingly, for the period prior to the adoption of the final plan ("or until May 1, 1983, whichever is earlier"), the Compact itself prohibited the development of new subdivisions, condominiums, and apartment buildings, and also prohibited each city and county in the Basin from granting any more permits in 1981, 1982, or 1983 than had been granted in 1978.4 </s> During this period TRPA was also working on the development of a regional water quality plan to comply with the Clean Water Act, 33 U.S.C. §1288 (1994 ed.). Despite the fact that TRPA performed these obligations in "good faith and to the best of its ability," 34 F.Supp. 2d., at 1233, after a few months it concluded that it could not meet the deadlines in the Compact. On June 25, 1981, it therefore enacted Ordinance 81-5 imposing the first of the two moratoria on development that petitioners challenge in this proceeding. The ordinance provided that it would become effective on August 24, 1981, and remain in effect pending the adoption of the permanent plan required by the Compact. App. 159, 191. </s> The District Court made a detailed analysis of the ordinance, noting that it might even prohibit hiking or picnicking on SEZ lands, but construed it as essentially banning any construction or other activity that involved the removal of vegetation or the creation of land coverage on all SEZ lands, as well as on class 1, 2, and 3 lands in California. 34 F.Supp. 2d, at 1233-1235. Some permits could be obtained for such construction in Nevada if certain findings were made. Id., at 1235. It is undisputed, however, that Ordinance 81-5 prohibited the construction of any new residences on SEZ lands in either State and on class 1, 2, and 3 lands in California. </s> Given the complexity of the task of defining "environmental threshold carrying capacities" and the division of opinion within TRPA's governing board, the District Court found that it was "unsurprising" that TRPA failed to adopt those thresholds until August 26, 1982, roughly two months after the Compact deadline. Ibid. Under a liberal reading of the Compact, TRPA then had until August 26, 1983, to adopt a new regional plan. 94 Stat. 3240. "Unfortunately, but again not surprisingly, no regional plan was in place as of that date." 34 F.Supp. 2d, at 1235. TRPA therefore adopted Resolution 83-21, "which completely suspended all project reviews and approvals, including the acceptance of new proposals," and which remained in effect until a new regional plan was adopted on April 26, 1984. Thus, Resolution 83-21 imposed an 8-month moratorium prohibiting all construction on high hazard lands in either State. In combination, Ordinance 81-5 and Resolution 83-21 effectively prohibited all construction on sensitive lands in California and on all SEZ lands in the entire Basin for 32 months, and on sensitive lands in Nevada (other than SEZ lands) for eight months. It is these two moratoria that are at issue in this case. </s> On the same day that the 1984 plan was adopted, the State of California filed an action seeking to enjoin its implementation on the ground that it failed to establish land-use controls sufficiently stringent to protect the Basin. Id., at 1236. The District Court entered an injunction that was upheld by the Court of Appeals and remained in effect until a completely revised plan was adopted in 1987. Both the 1984 injunction and the 1987 plan contained provisions that prohibited new construction on sensitive lands in the Basin. As the case comes to us, however, we have no occasion to consider the validity of those provisions. </s> II </s> Approximately two months after the adoption of the 1984 Plan, petitioners filed parallel actions against TRPA and other defendants in federal courts in Nevada and California that were ultimately consolidated for trial in the District of Nevada. The petitioners include the Tahoe Sierra Preservation Council, a nonprofit membership corporation representing about 2,000 owners of both improved and unimproved parcels of real estate in the Lake Tahoe Basin, and a class of some 400 individual owners of vacant lots located either on SEZ lands or in other parts of districts 1, 2, or 3. Those individuals purchased their properties prior to the effective date of the 1980 Compact, App. 34, primarily for the purpose of constructing "at a time of their choosing" a single-family home "to serve as a permanent, retirement or vacation residence," id., at 36. When they made those purchases, they did so with the understanding that such construction was authorized provided that "they complied with all reasonable requirements for building." Ibid.5 </s> Petitioners' complaints gave rise to protracted litigation that has produced four opinions by the Court of Appeals for the Ninth Circuit and several published District Court opinions.6 For present purposes, however, we need only describe those courts' disposition of the claim that three actions taken by TRPA--Ordinance 81-5, Resolution 83-21, and the 1984 regional plan--constituted takings of petitioners' property without just compensation.7 Indeed, the challenge to the 1984 plan is not before us because both the District Court and the Court of Appeals held that it was the federal injunction against implementing that plan, rather than the plan itself, that caused the post-1984 injuries that petitioners allegedly suffered, and those rulings are not encompassed within our limited grant of certiorari.8 Thus, we limit our discussion to the lower courts' disposition of the claims based on the 2-year moratorium (Ordinance 81-5) and the ensuing 8-month moratorium (Resolution 83-21). </s> The District Court began its constitutional analysis by identifying the distinction between a direct government appropriation of property without just compensation and a government regulation that imposes such a severe restriction on the owner's use of her property that it produces "nearly the same result as a direct appropriation." 34 F.Supp. 2d, at 1238. The court noted that all of the claims in this case "are of the `regulatory takings' variety." Id., at 1239. Citing our decision in Agins v. City of Tiburon, 447 U.S. 255 (1980), it then stated that a "regulation will constitute a taking when either: (1) it does not substantially advance a legitimate state interest; or (2) it denies the owner economically viable use of her land." 34 F.Supp. 2d, at 1239. The District Court rejected the first alternative based on its finding that "further development on high hazard lands such as [petitioners'] would lead to significant additional damage to the lake." Id., at 1240.9 With respect to the second alternative, the court first considered whether the analysis adopted in Penn Central Transp. Co. v. New York City, 438 U.S. 104 (1978), would lead to the conclusion that TRPA had effected a "partial taking," and then whether those actions had effected a "total taking."10 </s> Emphasizing the temporary nature of the regulations, the testimony that the "average holding time of a lot in the Tahoe area between lot purchase and home construction is twenty-five years," and the failure of petitioners to offer specific evidence of harm, the District Court concluded that "consideration of the Penn Central factors clearly leads to the conclusion that there was no taking." 34 F.Supp. 2d, at 1240. In the absence of evidence regarding any of the individual plaintiffs, the court evaluated the "average" purchasers' intent and found that such purchasers "did not have reasonable, investment-backed expectations that they would be able to build single-family homes on their land within the six-year period involved in this lawsuit."11 </s> The District Court had more difficulty with the "total taking" issue. Although it was satisfied that petitioners' property did retain some value during the moratoria,12 it found that they had been temporarily deprived of "all economically viable use of their land." Id., at 1245. The court concluded that those actions therefore constituted "categorical" takings under our decision in Lucas v. South Carolina Coastal Council, 505 U.S. 1003 (1992). It rejected TRPA's response that Ordinance 81-5 and Resolution 83-21 were "reasonable temporary planning moratoria" that should be excluded from Lucas' categorical approach. The court thought it "fairly clear" that such interim actions would not have been viewed as takings prior to our decisions in Lucas and First English Evangelical Lutheran Church of Glendale v. County of Los Angeles, 482 U.S. 304 (1987), because "[z]oning boards, cities, counties and other agencies used them all the time to `maintain the status quo pending study and governmental decision making.'" 34 F.Supp. 2d., at 1248-1249 (quoting Williams v. Central, 907 P.2d 701, 706 (Colo. App. 1995)). After expressing uncertainty as to whether those cases required a holding that moratoria on development automatically effect takings, the court concluded that TRPA's actions did so, partly because neither the ordinance nor the resolution, even though intended to be temporary from the beginning, contained an express termination date. 34 F.Supp. 2d, at 1250-1251.13 Accordingly, it ordered TRPA to pay damages to most petitioners for the 32-month period from August 24, 1981, to April 25, 1984, and to those owning class 1, 2, or 3 property in Nevada for the 8-month period from August 27, 1983, to April 25, 1984. Id., at 1255. </s> Both parties appealed. TRPA successfully challenged the District Court's takings determination, and petitioners unsuccessfully challenged the dismissal of their claims based on the 1984 and 1987 plans. Petitioners did not, however, challenge the District Court's findings or conclusions concerning its application of Penn Central. With respect to the two moratoria, the Ninth Circuit noted that petitioners had expressly disavowed an argument "that the regulations constitute a taking under the adhoc balancing approach described in Penn Central" and that they did not "dispute that the restrictions imposed on their properties are appropriate means of securing the purpose set forth in the Compact."14 Accordingly, the only question before the court was "whether the rule set forth in Lucas applies--that is, whether a categorical taking occurred because Ordinance 81-5 and Resolution 83-21 denied the plaintiffs' `all economically beneficial or productive use of land.'" 216 F.3d 764, 773 (2000). Moreover, because petitioners brought only a facial challenge, the narrow inquiry before the Court of Appeals was whether the mere enactment of the regulations constituted a taking. </s> Contrary to the District Court, the Court of Appeals held that because the regulations had only a temporary impact on petitioners' fee interest in the properties, no categorical taking had occurred. It reasoned: </s> "Property interests may have many different dimensions. For example, the dimensions of a property interest may include a physical dimension (which describes the size and shape of the property in question), a functional dimension (which describes the extent to which an owner may use or dispose of the property in question), and a temporal dimension (which describes the duration of the property interest). At base, the plaintiffs' argument is that we should conceptually sever each plaintiff's fee interest into discrete segments in at least one of these dimensions--the temporal one--and treat each of those segments as separate and distinct property interests for purposes of takings analysis. Under this theory, they argue that there was a categorical taking of one of those temporal segments." Id., at 774. </s> Putting to one side "cases of physical invasion or occupation," ibid., the court read our cases involving regulatory taking claims to focus on the impact of a regulation on the parcel as a whole. In its view a "planning regulation that prevents the development of a parcel for a temporary period of time is conceptually no different than a land-use restriction that permanently denies all use on a discrete portion of property, or that permanently restricts a type of use across all of the parcel." Id., at 776. In each situation, a regulation that affects only a portion of the parcel--whether limited by time, use, or space--does not deprive the owner of all economically beneficial use.15 </s> The Court of Appeals distinguished Lucas as applying to the "`relatively rare'" case in which a regulation denies all productive use of an entire parcel, whereas the moratoria involve only a "temporal `slice'" of the fee interest and a form of regulation that is widespread and well established. 216 F.3d, at 773-774. It also rejected petitioners' argument that our decision in First English was controlling. According to the Court of Appeals, First English concerned the question whether compensation is an appropriate remedy for a temporary taking and not whether or when such a taking has occurred. 216 F.3d, at 778. Faced squarely with the question whether a taking had occurred, the court held that Penn Central was the appropriate framework for analysis. Petitioners, however, had failed to challenge the District Court's conclusion that they could not make out a taking claim under the Penn Centralfactors. </s> Over the dissent of five judges, the Ninth Circuit denied a petition for rehearing en banc. 228 F.3d 998 (2000). In the dissenters' opinion, the panel's holding was not faithful to this Court's decisions in First English and Lucas, nor to Justice Holmes admonition in Pennsylvania Coal Co. v. Mahon, 260 U.S. 393, 416 (1922), that "`a strong public desire to improve the public condition is not enough to warrant achieving the desire by a shorter cut than the constitutional way of paying for the change.'" 228 F.3d, at 1003. Because of the importance of the case, we granted certiorari limited to the question stated at the beginning of this opinion. 533 U.S. 948 (2001). We now affirm. </s> III </s> Petitioners make only a facial attack on Ordinance 81-5 and Resolution 83-21. They contend that the mere enactment of a temporary regulation that, while in effect, denies a property owner all viable economic use of her property gives rise to an unqualified constitutional obligation to compensate her for the value of its use during that period. Hence, they "face an uphill battle," Keystone Bituminous Coal Assn. v. DeBenedictis, 480 U.S. 470, 495 (1987), that is made especially steep by their desire for a categorical rule requiring compensation whenever the government imposes such a moratorium on development. Under their proposed rule, there is no need to evaluate the landowners' investment-backed expectations, the actual impact of the regulation on any individual, the importance of the public interest served by the regulation, or the reasons for imposing the temporary restriction. For petitioners, it is enough that a regulation imposes a temporary deprivation--no matter how brief--of all economically viable use to trigger a per se rule that a taking has occurred. Petitioners assert that our opinions in First English and Lucas have already endorsed their view, and that it is a logical application of the principle that the Takings Clause was "designed to bar Government from forcing some people alone to bear burdens which, in all fairness and justice, should be borne by the public as a whole." Armstrong v. United States, 364 U.S. 40, 49 (1960). </s> We shall first explain why our cases do not support their proposed categorical rule--indeed, fairly read, they implicitly reject it. Next, we shall explain why the Armstrong principle requires rejection of that rule as well as the less extreme position advanced by petitioners at oral argument. In our view the answer to the abstract question whether a temporary moratorium effects a taking is neither "yes, always" nor "no, never"; the answer depends upon the particular circumstances of the case.16 Resisting "[t]he temptation to adopt what amount to per se rules in either direction," Palazzolo v. Rhode Island, 533 U.S. 606, 636 (2001) (O'Connor, J., concurring), we conclude that the circumstances in this case are best analyzed within the Penn Central framework. </s> IV </s> The text of the Fifth Amendment itself provides a basis for drawing a distinction between physical takings and regulatory takings. Its plain language requires the payment of compensation whenever the government acquires private property for a public purpose, whether the acquisition is the result of a condemnation proceeding or a physical appropriation. But the Constitution contains no comparable reference to regulations that prohibit a property owner from making certain uses of her private property.17 Our jurisprudence involving condemnations and physical takings is as old as the Republic and, for the most part, involves the straightforward application of per se rules. Our regulatory takings jurisprudence, in contrast, is of more recent vintage and is characterized by "essentially adhoc, factual inquiries," Penn Central, 438 U.S., at 124, designed to allow "careful examination and weighing of all the relevant circumstances." Palazzolo, 533 U.S., at 636 (O'Connor, J., concurring). </s> When the government physically takes possession of an interest in property for some public purpose, it has a categorical duty to compensate the former owner, United States v. Pewee Coal Co., 341 U.S. 114, 115 (1951), regardless of whether the interest that is taken constitutes an entire parcel or merely a part thereof. Thus, compensation is mandated when a leasehold is taken and the government occupies the property for its own purposes, even though that use is temporary. United States v. General Motors Corp., 323 U.S. 373 (1945), United States v. Petty Motor Co., 327 U.S. 372 (1946). Similarly, when the government appropriates part of a rooftop in order to provide cable TV access for apartment tenants, Loretto v. Teleprompter Manhattan CATV Corp., 458 U.S. 419 (1982); or when its planes use private airspace to approach a government airport, United States v. Causby, 328 U.S. 256 (1946), it is required to pay for that share no matter how small. But a government regulation that merely prohibits landlords from evicting tenants unwilling to pay a higher rent, Block v. Hirsh, 256 U.S. 135 (1921); that bans certain private uses of a portion of an owner's property, Village of Euclid v. Ambler Realty Co., 272 U.S. 365 (1926); Keystone Bituminous Coal Assn. v. DeBenedictis, 480 U.S. 470 (1987); or that forbids the private use of certain airspace, Penn Central Transp. Co. v. New York City, 438 U.S. 104 (1978), does not constitute a categorical taking. "The first category of cases requires courts to apply a clear rule; the second necessarily entails complex factual assessments of the purposes and economic effects of government actions." Yee v. Escondido, 503 U.S. 519, 523 (1992). See also Loretto, 458 U.S., at 440; Keystone, 480 U.S., at 489, n.18. </s> This longstanding distinction between acquisitions of property for public use, on the one hand, and regulations prohibiting private uses, on the other, makes it inappropriate to treat cases involving physical takings as controlling precedents for the evaluation of a claim that there has been a "regulatory taking,"18 and vice versa. For the same reason that we do not ask whether a physical appropriation advances a substantial government interest or whether it deprives the owner of all economically valuable use, we do not apply our precedent from the physical takings context to regulatory takings claims. Land-use regulations are ubiquitous and most of them impact property values in some tangential way--often in completely unanticipated ways. Treating them all as per se takings would transform government regulation into a luxury few governments could afford. By contrast, physical appropriations are relatively rare, easily identified, and usually represent a greater affront to individual property rights.19 "This case does not present the `classi[c] taking' in which the government directly appropriates private property for its own use," Eastern Enterprises v. Apfel, 524 U.S. 498, 522 (1998); instead the interference with property rights "arises from some public program adjusting the benefits and burdens of economic life to promote the common good," Penn Central, 438 U.S., at 124. </s> Perhaps recognizing this fundamental distinction, petitioners wisely do not place all their emphasis on analogies to physical takings cases. Instead, they rely principally on our decision in Lucas v. South Carolina Coastal Council, 505 U.S. 1003 (1992)--a regulatory takings case that, nevertheless, applied a categorical rule--to argue that the Penn Central framework is inapplicable here. A brief review of some of the cases that led to our decision in Lucas, however, will help to explain why the holding in that case does not answer the question presented here. </s> As we noted in Lucas, it was Justice Holmes' opinion in Pennsylvania Coal Co. v. Mahon, 260 U.S. 393 (1922),20 that gave birth to our regulatory takings jurisprudence.21 In subsequent opinions we have repeatedly and consistently endorsed Holmes' observation that "if regulation goes too far it will be recognized as a taking." Id., at 415. Justice Holmes did not provide a standard for determining when a regulation goes "too far," but he did reject the view expressed in Justice Brandeis' dissent that there could not be a taking because the property remained in the possession of the owner and had not been appropriated or used by the public.22 After Mahon, neither a physical appropriation nor a public use has ever been a necessary component of a "regulatory taking." </s> In the decades following that decision, we have "generally eschewed" any set formula for determining how far is too far, choosing instead to engage in "`essentially ad hoc, factual inquiries.'" Lucas, 505 U.S., at 1015 (quoting Penn Central, 438 U.S., at 124). Indeed, we still resist the temptation to adopt per se rules in our cases involving partial regulatory takings, preferring to examine "a number of factors" rather than a simple "mathematically precise" formula.23 Justice Brennan's opinion for the Court in Penn Central did, however, make it clear that even though multiple factors are relevant in the analysis of regulatory takings claims, in such cases we must focus on "the parcel as a whole": </s> "` Taking' jurisprudence does not divide a single parcel into discrete segments and attempt to determine whether rights in a particular segment have been entirely abrogated. In deciding whether a particular governmental action has effected a taking, this Court focuses rather both on the character of the action and on the nature and extent of the interference with rights in the parcel as a whole--here, the city tax block designated as the `landmark site.'" Id., at 130-131. </s> This requirement that "the aggregate must be viewed in its entirety" explains why, for example, a regulation that prohibited commercial transactions in eagle feathers, but did not bar other uses or impose any physical invasion or restraint upon them, was not a taking. Andrus v. Allard, 444 U.S. 51, 66 (1979). It also clarifies why restrictions on the use of only limited portions of the parcel, such as set-back ordinances, Gorieb v. Fox, 274 U.S. 603 (1927), or a requirement that coal pillars be left in place to prevent mine subsidence, Keystone Bituminous Coal Assn. v. DeBenedictis, 480 U.S., at 498, were not considered regulatory takings. In each of these cases, we affirmed that "where an owner possesses a full `bundle' of property rights, the destruction of one `strand' of the bundle is not a taking." Andrus, 444 U.S., at 65-66. </s> While the foregoing cases considered whether particular regulations had "gone too far" and were therefore invalid, none of them addressed the separate remedial question of how compensation is measured once a regulatory taking is established. In his dissenting opinion in San Diego Gas & Elec. Co. v. San Diego, 450 U.S. 621, 636 (1981), Justice Brennan identified that question and explained how he would answer it: </s> "The constitutional rule I propose requires that, once a court finds that a police power regulation has effected a `taking,' the government entity must pay just compensation for the period commencing on the date the regulation first effected the `taking,' and ending on the date the government entity chooses to rescind or otherwise amend the regulation." Id., at 658. </s> Justice Brennan's proposed rule was subsequently endorsed by the Court in First English, 482 U.S., at 315, 318, 321. First English was certainly a significant decision, and nothing that we say today qualifies its holding. Nonetheless, it is important to recognize that we did not address in that case the quite different and logically prior question whether the temporary regulation at issue had in fact constituted a taking. </s> In First English, the Court unambiguously and repeatedly characterized the issue to be decided as a "compensation question" or a "remedial question." Id., at 311 ("The disposition of the case on these grounds isolates the remedial question for our consideration"); see also id., at 313, 318. And the Court's statement of its holding was equally unambiguous: "We merely hold that where the government's activities have already worked a taking of all use of property, no subsequent action by the government can relieve it of the duty to provide compensation for the period during which the taking was effective." Id., at 321 (emphasis added). In fact, First English expressly disavowed any ruling on the merits of the takings issue because the California courts had decided the remedial question on the assumption that a taking had been alleged. Id., at 312-313 ("We reject appellee's suggestion that ... we must independently evaluate the adequacy of the complaint and resolve the takings claim on the merits before we can reach the remedial question"). After our remand, the California courts concluded that there had not been a taking, First English Evangelical Church of Glendale v. County of Los Angeles, 210 Cal. App. 3d 1353, 258 Cal. Rptr. 893 (1989), and we declined review of that decision, 493 U.S. 1056 (1990). </s> To the extent that the Court in First English referenced the antecedent takings question, we identified two reasons why a regulation temporarily denying an owner all use of her property might not constitute a taking. First, we recognized that "the county might avoid the conclusion that a compensable taking had occurred by establishing that the denial of all use was insulated as a part of the State's authority to enact safety regulations." 482 U.S., at 313. Second, we limited our holding "to the facts presented" and recognized "the quite different questions that would arise in the case of normal delays in obtaining building permits, changes in zoning ordinances, variances, and the like which [were] not before us." Id., at 321. Thus, our decision in First English surely did not approve, and implicitly rejected, the categorical submission that petitioners are now advocating. </s> Similarly, our decision in Lucas is not dispositive of the question presented. Although Lucas endorsed and applied a categorical rule, it was not the one that petitioners propose. Lucas purchased two residential lots in 1988 for $975,000. These lots were rendered "valueless" by a statute enacted two years later. The trial court found that a taking had occurred and ordered compensation of $1,232,387.50, representing the value of the fee simple estate, plus interest. As the statute read at the time of the trial, it effected a taking that "was unconditional and permanent." 505 U.S., at 1012. While the State's appeal was pending, the statute was amended to authorize exceptions that might have allowed Lucas to obtain a building permit. Despite the fact that the amendment gave the State Supreme Court the opportunity to dispose of the appeal on ripeness grounds, it resolved the merits of the permanent takings claim and reversed. Since "Lucas had no reason to proceed on a `temporary taking' theory at trial," we decided the case on the permanent taking theory that both the trial court and the State Supreme Court had addressed. Ibid. </s> The categorical rule that we applied in Lucas states that compensation is required when a regulation deprives an owner of "all economically beneficial uses" of his land. Id., at 1019. Under that rule, a statute that "wholly eliminated the value" of Lucas' fee simple title clearly qualified as a taking. But our holding was limited to "the extraordinary circumstance when no productive or economically beneficial use of land is permitted." Id., at 1017. The emphasis on the word "no" in the text of the opinion was, in effect, reiterated in a footnote explaining that the categorical rule would not apply if the diminution in value were 95% instead of 100%. Id., at 1019, n. 8.24 Anything less than a "complete elimination of value," or a "total loss," the Court acknowledged, would require the kind of analysis applied in Penn Central. Lucas, 505 U.S., at 1019-1020, n. 8.25 </s> Certainly, our holding that the permanent "obliteration of the value" of a fee simple estate constitutes a categorical taking does not answer the question whether a regulation prohibiting any economic use of land for a 32-month period has the same legal effect. Petitioners seek to bring this case under the rule announced in Lucas by arguing that we can effectively sever a 32-month segment from the remainder of each landowner's fee simple estate, and then ask whether that segment has been taken in its entirety by the moratoria. Of course, defining the property interest taken in terms of the very regulation being challenged is circular. With property so divided, every delay would become a total ban; the moratorium and the normal permit process alike would constitute categorical takings. Petitioners' "conceptual severance" argument is unavailing because it ignores Penn Central's admonition that in regulatory takings cases we must focus on "the parcel as a whole." 508 U.S. 602, 644 (1993) ("To the extent that any portion of property is taken, that portion is always taken in its entirety; the relevant question, however, is whether the property taken is all, or only a portion of, the parcel in question"). Thus, the District Court erred when it disaggregated petitioners' property into temporal segments corresponding to the regulations at issue and then analyzed whether petitioners were deprived of all economically viable use during each period. 34 F.Supp. 2d, at 1242-1245. The starting point for the court's analysis should have been to ask whether there was a total taking of the entire parcel; if not, then Penn Central was the proper framework.26 </s> An interest in real property is defined by the metes and bounds that describe its geographic dimensions and the term of years that describes the temporal aspect of the owner's interest. See Restatement of Property §§7-9 (1936). Both dimensions must be considered if the interest is to be viewed in its entirety. Hence, a permanent deprivation of the owner's use of the entire area is a taking of "the parcel as a whole," whereas a temporary restriction that merely causes a diminution in value is not. Logically, a fee simple estate cannot be rendered valueless by a temporary prohibition on economic use, because the property will recover value as soon as the prohibition is lifted. Cf. Agins v. City of Tiburon, 308 U.S. 271, 285 (1939))). </s> Neither Lucas, nor First English, nor any of our other regulatory takings cases compels us to accept petitioners' categorical submission. In fact, these cases make clear that the categorical rule in Lucas was carved out for the "extraordinary case" in which a regulation permanently deprives property of all value; the default rule remains that, in the regulatory taking context, we require a more fact specific inquiry. Nevertheless, we will consider whether the interest in protecting individual property owners from bearing public burdens "which, in all fairness and justice, should be borne by the public as a whole," Armstrong v. United States, 364 U.S., at 49, justifies creating a new rule for these circumstances.27 </s> V </s> Considerations of "fairness and justice" arguably could support the conclusion that TRPA's moratoria were takings of petitioners' property based on any of seven different theories. First, even though we have not previously done so, we might now announce a categorical rule that, in the interest of fairness and justice, compensation is required whenever government temporarily deprives an owner of all economically viable use of her property. Second, we could craft a narrower rule that would cover all temporary land-use restrictions except those "normal delays in obtaining building permits, changes in zoning ordinances, variances, and the like" which were put to one side in our opinion in First English, 526 U.S. 687, 698 (1999). Sixth, apart from the District Court's finding that TRPA's actions represented a proportional response to a serious risk of harm to the lake, petitioners might have argued that the moratoria did not substantially advance a legitimate state interest, see Agins and Monterey. Finally, if petitioners had challenged the application of the moratoria to their individual parcels, instead of making a facial challenge, some of them might have prevailed under a Penn Central analysis. </s> As the case comes to us, however, none of the last four theories is available. The "rolling moratoria" theory was presented in the petition for certiorari, but our order granting review did not encompass that issue, 533 U.S. 948 (2001); the case was tried in the District Court and reviewed in the Court of Appeals on the theory that each of the two moratoria was a separate taking, one for a 2-year period and the other for an 8-month period. 216 F.3d, at 769. And, as we have already noted, recovery on either a bad faith theory or a theory that the state interests were insubstantial is foreclosed by the District Court's unchallenged findings of fact. Recovery under a Penn Central analysis is also foreclosed both because petitioners expressly disavowed that theory, and because they did not appeal from the District Court's conclusion that the evidence would not support it. Nonetheless, each of the three per se theories is fairly encompassed within the question that we decided to answer. </s> With respect to these theories, the ultimate constitutional question is whether the concepts of "fairness and justice" that underlie the Takings Clause will be better served by one of these categorical rules or by a Penn Central inquiry into all of the relevant circumstances in particular cases. From that perspective, the extreme categorical rule that any deprivation of all economic use, no matter how brief, constitutes a compensable taking surely cannot be sustained. Petitioners' broad submission would apply to numerous "normal delays in obtaining building permits, changes in zoning ordinances, variances, and the like," 482 U.S., at 321, as well as to orders temporarily prohibiting access to crime scenes, businesses that violate health codes, fire-damaged buildings, or other areas that we cannot now foresee. Such a rule would undoubtedly require changes in numerous practices that have long been considered permissible exercises of the police power. As Justice Holmes warned in Mahon, "[g]overnment hardly could go on if to some extent values incident to property could not be diminished without paying for every such change in the general law." 260 U.S., at 413. A rule that required compensation for every delay in the use of property would render routine government processes prohibitively expensive or encourage hasty decision-making. Such an important change in the law shouldbe the product of legislative rulemaking rather thanadjudication.30 </s> More importantly, for reasons set out at some length by Justice O'Connor in her concurring opinion in Palazzolo v. Rhode Island, 533 U.S., at 636 (2001), we are persuaded that the better approach to claims that a regulation has effected a temporary taking "requires careful examination and weighing of all the relevant circumstances." In that opinion, Justice O'Connor specifically considered the role that the "temporal relationship between regulatory enactment and title acquisition" should play in the analysis of a takings claim. Id., at 632. We have no occasion to address that particular issue in this case, because it involves a different temporal relationship--the distinction between a temporary restriction and one that is permanent. Her comments on the "fairness and justice" inquiry are, nevertheless, instructive: </s> "Today's holding does not mean that the timing of the regulation's enactment relative to the acquisition of title is immaterial to the Penn Central analysis. Indeed, it would be just as much error to expunge this consideration from the takings inquiry as it would be to accord it exclusive significance. Our polestar instead remains the principles set forth in Penn Central itself and our other cases that govern partial regulatory takings. Under these cases, interference with investment-backed expectations is one of a number of factors that a court must examine. ... </s> "The Fifth Amendment forbids the taking of private property for public use without just compensation. We have recognized that this constitutional guarantee is `"designed to bar Government from forcing some people alone to bear public burdens which, in all fairness and justice, should be borne by the public as a whole."' Penn Central, [438 U.S.], at 123-124 (quoting Armstrong v. United States, 364 U.S. 40, 49 (1960)). The concepts of `fairness and justice' that underlie the Takings Clause, of course, are less than fully determinate. Accordingly, we have eschewed `any "set formula" for determining when "justice and fairness" require that economic injuries caused by public action be compensated by the government, rather than remain disproportionately concentrated on a few persons." Penn Central, supra, at 124 (quoting Goldblatt v. Hempstead, 369 U. S. 590, 594 (1962)). The outcome instead `depends largely "upon the particular circumstances [in that] case."' Penn Central, supra, at 124 (quoting United States v. Central Eureka Mining Co., 357 U.S. 155, 168 (1958))." Id., at 633. </s> In rejecting petitioners' per se rule, we do not hold that the temporary nature of a land-use restriction precludes finding that it effects a taking; we simply recognize that it should not be given exclusive significance one way or the other. </s> A narrower rule that excluded the normal delays associated with processing permits, or that covered only delays of more than a year, would certainly have a less severe impact on prevailing practices, but it would still impose serious financial constraints on the planning process.31 Unlike the "extraordinary circumstance" in which the government deprives a property owner of all economic use, Lucas, 505 U.S., at 1017, moratoria like Ordinance 81-5 and Resolution 83-21 are used widely among land-use planners to preserve the status quo while formulating a more permanent development strategy.32 In fact, the consensus in the planning community appears to be that moratoria, or "interim development controls" as they are often called, are an essential tool of successful development.33 Yet even the weak version of petitioners' categorical rule would treat these interim measures as takings regardless of the good faith of the planners, the reasonable expectations of the landowners, or the actual impact of the moratorium on property values.34 </s> The interest in facilitating informed decisionmaking by regulatory agencies counsels against adopting a per se rule that would impose such severe costs on their deliberations. Otherwise, the financial constraints of compensating property owners during a moratorium may force officials to rush through the planning process or to abandon the practice altogether. To the extent that communities are forced to abandon using moratoria, landowners will have incentives to develop their property quickly before a comprehensive plan can be enacted, thereby fostering inefficient and ill-conceived growth. A finding in the 1980 Compact itself, which presumably was endorsed by all three legislative bodies that participated in its enactment, attests to the importance of that concern. 94 Stat. 3243 ("The legislatures of the States of California and Nevada find that in order to make effective the regional plan as revised by the agency, it is necessary to halt temporarily works of development in the region which might otherwise absorb the entire capability of the region for further development or direct it out of harmony with the ultimate plan"). </s> As Justice Kennedy explained in his opinion for the Court in Palazzolo, it is the interest in informed decisionmaking that underlies our decisions imposing a strict ripeness requirement on landowners asserting regulatory takings claims: </s> "These cases stand for the important principle that a landowner may not establish a taking before a land-use authority has the opportunity, using its own reasonable procedures, to decide and explain the reach of a challenged regulation. Under our ripeness rules a takings claim based on a law or regulation which is alleged to go too far in burdening property depends upon the landowner's first having followed reasonable and necessary steps to allow regulatory agencies to exercise their full discretion in considering development plans for the property, including the opportunity to grant any variances or waivers allowed by law. As a general rule, until these ordinary processes have been followed the extent of the restriction on property is not known and a regulatory taking has not yet been established. See Suitum [v. Tahoe Regional Planning Agency, 520 U.S. 725, 736, and n.10 (1997)] (noting difficulty of demonstrating that `mere enactment' of regulations restricting land use effects a taking)." 533 U.S., at 620-621. </s> We would create a perverse system of incentives were we to hold that landowners must wait for a taking claim to ripen so that planners can make well-reasoned decisions while, at the same time, holding that those planners must compensate landowners for the delay. </s> Indeed, the interest in protecting the decisional process is even stronger when an agency is developing a regional plan than when it is considering a permit for a single parcel. In the proceedings involving the Lake Tahoe Basin, for example, the moratoria enabled TRPA to obtain the benefit of comments and criticisms from interested parties, such as the petitioners, during its deliberations.35 Since a categorical rule tied to the length of deliberations would likely create added pressure on decisionmakers to reach a quick resolution of land-use questions, it would only serve to disadvantage those landowners and interest groups who are not as organized or familiar with the planning process. Moreover, with a temporary ban on development there is a lesser risk that individual landowners will be "singled out" to bear a special burden that should be shared by the public as a whole. Nollan v. California Coastal Comm'n, 483 U.S. 825, 835 (1987). At least with a moratorium there is a clear "reciprocity of advantage," Mahon, 260 U.S., at 415, because it protects the interests of all affected landowners against immediate construction that might be inconsistent with the provisions of the plan that is ultimately adopted. "While each of us is burdened somewhat by such restrictions, we, in turn, benefit greatly from the restrictions that are placed on others." Keystone, 480 U.S., at 491. In fact, there is reason to believe property values often will continue to increase despite a moratorium. See, e.g., Growth Properties, Inc. v. Klingbeil Holding Co., 419 F.Supp. 212, 218 (Md. 1976) (noting that land values could be expected to increase 20% during a 5-year moratorium on development). Cf. Forest Properties, Inc. v. United States, 177 F.3d 1360, 1367 (CA Fed. 1999) (record showed that market value of the entire parcel increased despite denial of permit to fill and develop lake-bottom property). Such an increase makes sense in this context because property values throughout the Basin can be expected to reflect the added assurance that Lake Tahoe will remain in its pristine state. Since in some cases a 1-year moratorium may not impose a burden at all, we should not adopt a rule that assumes moratoria always force individuals to bear a special burden that should be shared by the public as a whole. </s> It may well be true that any moratorium that lasts for more than one year should be viewed with special skepticism. But given the fact that the District Court found that the 32 months required by TRPA to formulate the 1984 Regional Plan was not unreasonable, we could not possibly conclude that every delay of over one year is constitutionally unacceptable.36 Formulating a general rule of this kind is a suitable task for state legislatures.37 In our view, the duration of the restriction is one of the important factors that a court must consider in the appraisal of a regulatory takings claim, but with respect to that factor as with respect to other factors, the "temptation to adopt what amount to per se rules in either direction must be resisted." Palazzolo, 533 U.S., at 636 (O'Connor, J., concurring). There may be moratoria that last longer than one year which interfere with reasonable investment-backed expectations, but as the District Court's opinion illustrates, petitioners' proposed rule is simply "too blunt an instrument," for identifying those cases. Id., at 628. We conclude, therefore, that the interest in "fairness and justice" will be best served by relying on the familiar Penn Central approach when deciding cases like this, rather than by attempting to craft a new categorical rule. </s> Accordingly, the judgment of the Court of Appeals is affirmed. </s> It is so ordered. </s> TAHOE-SIERRA PRESERVATION COUNCIL, INC., etal., PETITIONERS v. TAHOE REGIONAL PLANNING AGENCY etal. </s> on writ of certiorari to the united states court of appeals for the ninth circuit </s> [April 23, 2002] </s> Chief Justice Rehnquist, with whom Justice Scalia and Justice Thomas join, dissenting. </s> For over half a decade petitioners were prohibited from building homes, or any other structures, on their land. Because the Takings Clause requires the government to pay compensation when it deprives owners of all economically viable use of their land, see Lucas v. South Carolina Coastal Council, 505 U.S. 1003 (1992), and because a ban on all development lasting almost six years does not resemble any traditional land-use planning device, I dissent. </s> I </s> "A court cannot determine whether a regulation has gone 'too far' unless it knows how far the regulation goes." MacDonald, Sommer & Frates v. Yolo County, 477 U.S. 340, 348 (1986) (citing Pennsylvania Coal Co. v. Mahon, 260 U.S. 393, 415 (1922)).1 In failing to undertake this inquiry, the Court ignores much of the impact of respondent's conduct on petitioners. Instead, it relies on the flawed determination of the Court of Appeals that the relevant time period lasted only from August 1981 until April 1984. Ante, at 7, 9. During that period, Ordinance 81-5 and Regulation 83-21 prohibited development pending the adoption of a new regional land-use plan. The adoption of the 1984 Regional Plan (hereinafter Plan or 1984 Plan) did not, however, change anything from the petitioners' standpoint. After the adoption of the 1984 Plan, petitioners still could make no use of their land. </s> The Court of Appeals disregarded this post-April 1984 deprivation on the ground that respondent did not "cause" it. In a §1983 action, "the plaintiff must demonstrate that the defendant's conduct was the actionable cause of the claimed injury." 216 F.3d 764, 783 (CA9 2000). Applying this principle, the Court of Appeals held that the 1984 Regional Plan did not amount to a taking because the Plan actually allowed permits to issue for the construction of single-family residences. Those permits were never issued because the District Court immediately issued a temporary restraining order, and later a permanent injunction that lasted until 1987, prohibiting the approval of any building projects under the 1984 Plan. Thus, the Court of Appeals concluded that the "1984 Plan itself could not have constituted a taking," because it was the injunction, not the Plan, that prohibited development during this period. 216 F.3d, at 784. The Court of Appeals is correct that the 1984 Plan did not cause petitioners' injury. But that is the right answer to the wrong question. The causation question is not limited to whether the 1984 Plan caused petitioners' injury; the question is whether respondent caused petitioners' injury. </s> We have never addressed the §1983 causation requirement in the context of a regulatory takings claim, though language in Penn Central Transp. Co. v. New York City, 438 U.S. 104 (1978), suggests that ordinary principles of proximate cause govern the causation inquiry for takings claims. Id., at 124. The causation standard does not require much elaboration in this case, because respondent was undoubtedly the "moving force" behind petitioners' inability to build on their land from August 1984 through 1987. Monell v. New York City Dept. of Social Servs., 436 U.S. 658, 694 (1978) (§1983 causation established when government action is the "moving force" behind the alleged constitutional violation). The injunction in this case issued because the 1984 Plan did not comply with the1980 Tahoe Regional Planning Compact (Compact) and regulations issued pursuant to the Compact. And, ofcourse, respondent is responsible for the Compact and its regulations. </s> On August 26, 1982, respondent adopted Resolution 82-11. That resolution established "environmental thresholds for water quality, soil conservation, air quality, vegetation preservation, wildlife, fisheries, noise, recreation, and scenic resources." California v. Tahoe Regional Planning Agency, 766 F.2d 1308, 1311 (CA9 1985). The District Court enjoined the 1984 Plan in part because the Plan would have allowed 42,000 metric tons of soil per year to erode from some of the single-family residences, in excess of the Resolution 82-11 threshold for soil conservation. Id., at 1315; see also id., at 1312. Another reason the District Court enjoined the 1984 Plan was that it did not comply with article V(g) of the Compact, which requires a finding "with respect to each project, that the project will not cause the established [environmental] thresholds to be exceeded." Id., at 1312. Thus, the District Court enjoined the 1984 Plan because the Plan did not comply with the environmental requirements of respondent's regulations and of the Compact itself. </s> Respondent is surely responsible for its own regulations, and it is also responsible for the Compact as it is the governmental agency charged with administering the Compact. Compact, Art. I(c), 94 Stat 3234. It follows that respondent was the "moving force" behind petitioners' inability to develop its land from April 1984 through the enactment of the 1987 plan. Without the environmental thresholds established by the Compact and Resolution 82-11, the 1984 Plan would have gone into effect and petitioners would have been able to build single-family residences. And it was certainly foreseeable that development projects exceeding the environmental thresholds would be prohibited; indeed, that was the very purpose of enacting the thresholds. </s> Because respondent caused petitioners' inability to use their land from 1981 through 1987, that is the appropriate period of time from which to consider their takings claim. </s> II </s> I now turn to determining whether a ban on all economic development lasting almost six years is a taking. Lucas reaffirmed our "frequently expressed" view that "when the owner of real property has been called upon to sacrifice all economically beneficial uses in the name of the common good, that is, to leave his property economically idle, he has suffered a taking." 447 U.S. 255, 258-259 (1980). The District Court in this case held that the ordinances and resolutions in effect between August 24, 1981, and April 25, 1984, "did in fact deny the plaintiffs all economically viable use of their land." 34 F.Supp. 2d 1226, 1245 (Nev. 1999). The Court of Appeals did not overturn this finding. And the 1984 injunction, issued because the environmental thresholds issued by respondent did not permit the development of single-family residences, forced petitioners to leave their land economically idle for at least another three years. The Court does not dispute that petitioners were forced to leave their land economically idle during this period. See ante, at 7. But the Court refuses to apply Lucas on the ground that the deprivation was "temporary." </s> Neither the Takings Clause nor our case law supports such a distinction. For one thing, a distinction between "temporary" and "permanent" prohibitions is tenuous. The "temporary" prohibition in this case that the Court finds is not a taking lasted almost six years.2 The "permanent" prohibition that the Court held to be a taking in Lucas lasted less than two years. See 357 U.S. 17, 26 (1958). Under the Court's decision today, the takings question turns entirely on the initial label given a regulation, a label that is often without much meaning. There is every incentive for government to simply label any prohibition on development "temporary," or to fix a set number of years. As in this case, this initial designation does not preclude the government from repeatedly extending the "temporary" prohibition into a long-term ban on all development. The Court now holds that such a designation by the government is conclusive even though in fact the moratorium greatly exceeds the time initially specified. Apparently, the Court would not view even a 10-year moratorium as a taking under Lucas because the moratorium is not "permanent." </s> Our opinion in First English Evangelical Lutheran Church of Glendale v. County of Los Angeles, 482 U.S. 304 (1987), rejects any distinction between temporary and permanent takings when a landowner is deprived of all economically beneficial use of his land. First English stated that "`temporary takings which, as here, deny a landowner all use of his property, are not different in kind from permanent takings, for which the Constitution clearly requires compensation." Id., at 318. Because of First English's rule that "temporary deprivations of use are compensable under the Takings Clause," the Court in Lucas found nothing problematic about the later developments that potentially made the ban on development temporary. 505 U.S., at 1011-1012 (citing First English, supra); see also 505 U.S., at 1033 (Kennedy, J., concurring) ("It is well established that temporary takings are as protected by the Constitution as are permanent ones." (citing First English, supra, at 318)). </s> More fundamentally, even if a practical distinction between temporary and permanent deprivations were plausible, to treat the two differently in terms of takings law would be at odds with the justification for the Lucas rule. The Lucas rule is derived from the fact that a "total deprivation of use is, from the landowner's point of view, the equivalent of a physical appropriation." 505 U.S., at 1017. The regulation in Lucas was the "practical equivalence" of a long-term physical appropriation, i.e., a condemnation, so the Fifth Amendment required compensation. The "practical equivalence," from the landowner's point of view, of a "temporary" ban on all economic use is a forced leasehold. For example, assume the following situation: Respondent is contemplating the creation of a National Park around Lake Tahoe to preserve its scenic beauty. Respondent decides to take a 6-year leasehold over petitioners' property, during which any human activity on the land would be prohibited, in order to prevent any further destruction to the area while it was deciding whether to request that the area be designated a National Park. </s> Surely that leasehold would require compensation. In a series of World War II-era cases in which the Government had condemned leasehold interests in order to support the war effort, the Government conceded that it was required to pay compensation for the leasehold interest.3 See United States v. Petty Motor Co., 327 U.S. 372 (1946); United States v. General Motors Corp., 323 U.S. 373, 376 (1945). From petitioners' standpoint, what happened in this case is no different than if the government had taken a 6-year lease of their property. The Court ignores this "practical equivalence" between respondent's deprivation and the deprivation resulting from a leasehold. In so doing, the Court allows the government to "do by regulation what it cannot do through eminent domain--i.e., take private property without paying for it." 228 F.3d 998, 999 (CA9 2000) (Kozinski, J., dissenting from denial of rehearing en banc). </s> Instead of acknowledging the "practical equivalence" of this case and a condemned leasehold, the Court analogizes to other areas of takings law in which we have distinguished between regulations and physical appropriations, see ante, at 17-19. But whatever basis there is for such distinctions in those contexts does not apply when a regulation deprives a landowner of all economically beneficial use of his land. In addition to the "practical equivalence" from the landowner's perspective of such a regulation and a physical appropriation, we have held that a regulation denying all productive use of land does not implicate the traditional justification for differentiating between regulations and physical appropriations. In "the extraordinary circumstance when no productive or economically beneficial use of land is permitted," it is less likely that "the legislature is simply `adjusting the benefits and burdens of economic life' in a manner that secures an `average reciprocity of advantage' to everyone concerned," Lucas, supra, at 1017-1018 (quoting Penn Central Transp. Co. v. New York City, 438 U.S. 104, 124 (1978), and Pennsylvania Coal Co. v. Mahon, 260 U.S., at 415), and more likely that the property "is being pressed into some form of public service under the guise of mitigating serious public harm," Lucas supra, at 1018. </s> The Court also reads Lucas as being fundamentally concerned with value, ante, at 25-27, rather than with the denial of "all economically beneficial or productive use of land," 505 U.S., at 1015. But Lucas repeatedly discusses its holding as applying where "no productive or economically beneficial use of land is permitted." Id., at 1017; see also ibid. ("[T]otal deprivation of beneficial use is, from the landowner's point of view, the equivalent of a physical appropriation"); id., at 1016 ("[T]he Fifth Amendment is violated when land-use regulation ... denies an owner economically viable use of his land"); id., at 1018 ("[T]he functional basis for permitting the government, by regulation, to affect property values without compensation . .. does not apply to the relatively rare situations where the government has deprived a landowner of all economically beneficial uses"); ibid. ("[T]he fact that regulations that leave the owner of land without economically beneficial or productive options for its use ... carry with them a heightened risk that private property is being pressed into some form of public service"); id., at 1019 ("[W]hen the owner of real property has been called upon to sacrifice all economically beneficial uses in the name of the common good, that is, to leave his property economically idle, he has suffered a taking"). Moreover, the Court's position that value is the sine qua non of the Lucas rule proves too much. Surely, the land at issue in Lucas retained some market value based on the contingency, which soon came to fruition (see supra, at 5), that the development ban would be amended. </s> Lucas is implicated when the government deprives a landowner of "all economically beneficial or productive use of land." Id., at 1015. The District Court found, and the Court agrees, that the moratorium "temporarily" deprived petitioners of "`all economically viable use of their land.'" Ante, at 11. Because the rationale for the Lucas rule applies just as strongly in this case, the "temporary" denial of all viable use of land for six years is a taking. </s> III </s> The Court worries that applying Lucas here compels finding that an array of traditional, short-term, land-use planning devices are takings. Ante, at 31, 33-34. But since the beginning of our regulatory takings jurisprudence, we have recognized that property rights "are enjoyed under an implied limitation." Mahon, supra, at 413. Thus, in Lucas, after holding that the regulation prohibiting all economically beneficial use of the coastal land came within our categorical takings rule, we nonetheless inquired into whether such a result "inhere[d] in the title itself, in the restrictions that background principles of the State's law of property and nuisance already place upon land ownership." 505 U.S., at 1029. Because the regulation at issue in Lucas purported to be permanent, or at least long term, we concluded that the only implied limitation of state property law that could achieve a similar long-term deprivation of all economic use would be something "achieved in the courts--by adjacent landowners (or other uniquely affected persons) under the State's law of private nuisance, or by the State under its complementary power to abate nuisances that affect the public generally, or otherwise." Ibid. </s> When a regulation merely delays a final land use decision, we have recognized that there are other background principles of state property law that prevent the delay from being deemed a taking. We thus noted in First English that our discussion of temporary takings did not apply "in the case of normal delays in obtaining building permits, changes in zoning ordinances, variances, and the like." 533 U.S. 606, 627, (2001). Zoning regulations existed as far back as colonial Boston, see Treanor, The Original Understanding of the Takings Clause and the Political Process, 95 Colum. L.Rev. 782, 789 (1995), and New York City enacted the first comprehensive zoning ordinance in 1916, see 1 Anderson's American Law of Zoning §3.07, p. 92 (K. Young rev. 4th ed. 1995). Thus, the short-term delays attendant to zoning and permit regimes are a longstanding feature of state property law and part of a landowner's reasonable investment-backed expectations. See Lucas, supra, at 1034 (Kennedy, J., concurring in judgment). </s> But a moratorium prohibiting all economic use for a period of six years is not one of the longstanding, implied limitations of state property law.4 Moratoria are "interim controls on the use of land that seek to maintain the status quo with respect to land development in an area by either `freezing' existing land uses or by allowing the issuance of building permits for only certain land uses that would not be inconsistent with a contemplated zoning plan or zoning change." 1 E. Ziegler, Rathkopf's The Law of Zoning and Planning §13:3, p. 13-6 (4th ed. 2001). Typical moratoria thus prohibit only certain categories of development, such as fast-food restaurants, see Schafer v. New Orleans, 743 F.2d 1086 (CA5 1984), or adult businesses, see Renton v. Playtime Theatres, Inc., 475 U.S. 41 (1986), or all commercial development, see Arnold Bernhard & Co. v. Planning & Zoning Comm'n, 194 Conn. 152, 479 A.2d 801 (1984). Such moratoria do not implicate Lucas because they do not deprive landowners of all economically beneficial use of their land. As for moratoria that prohibit all development, these do not have the lineage of permit and zoning requirements and thus it is less certain that property is acquired under the "implied limitation" of a moratorium prohibiting all development. Moreover, unlike a permit system in which it is expected that a project will be approved so long as certain conditions are satisfied, a moratorium that prohibits all uses is by definition contemplating a new land-use plan that would prohibit all uses. </s> But this case does not require us to decide as a categorical matter whether moratoria prohibiting all economic use are an implied limitation of state property law, because the duration of this "moratorium" far exceeds that of ordinary moratoria. As the Court recognizes, ante, at 38, n. 37, state statutes authorizing the issuance of moratoria often limit the moratoria's duration. California, where much of the land at issue in this case is located, provides that a moratorium "shall be of no further force and effect 45 days from its date of adoption," and caps extension of the moratorium so that the total duration cannot exceed two years. Cal. Govt. Code Ann. §65858(a) (West Supp. 2002); see also Minn. Stat. §462.355, subd. 4 (2000) (limiting moratoria to 18 months, with one permissible extension, for a total of two years). Another State limits moratoria to 120 days, with the possibility of a single 6-month extension. Ore. Rev. Stat. Ann. §197.520(4) (1997). Others limit moratoria to six months without any possibility of an extension. See Colo. Rev. Stat. §30-28-121 (2001); N.J. Stat. Ann. §40:55D-90(b) (1991).5 Indeed, it has long been understood that moratoria on development exceeding these short time periods are not a legitimate planning device. See, e.g., Holdsworth v. Hague, 9 N.J. Misc. 715, 155 A. 892 (1931). </s> Resolution 83-21 reflected this understanding of the limited duration of moratoria in initially limiting the moratorium in this case to 90 days. But what resulted--a "moratorium" lasting nearly six years--bears no resemblance to the short-term nature of traditional moratoria as understood from these background examples of state property law. </s> Because the prohibition on development of nearly six years in this case cannot be said to resemble any "implied limitation" of state property law, it is a taking that requires compensation. </s> * * * </s> Lake Tahoe is a national treasure and I do not doubt that respondent's efforts at preventing further degradation of the lake were made in good faith in furtherance of the public interest. But, as is the case with most governmental action that furthers the public interest, the Constitution requires that the costs and burdens be borne by the public at large, not by a few targeted citizens. Justice Holmes' admonition of 80 years ago again rings true: "We are in danger of forgetting that a strong public desire to improve the public condition is not enough to warrant achieving the desire by a shorter cut than the constitutional way of paying for the change." Mahon, 260 U.S., at 416. </s> TAHOE-SIERRA PRESERVATION COUNCIL, INC., etal., PETITIONERS v. TAHOE REGIONAL PLANNING AGENCY etal. </s> on writ of certiorari to the united states court of appeals for the ninth circuit </s> [April 23, 2002] </s> Justice Thomas, with whom Justice Scalia joins, dissenting. </s> I join the Chief Justice's dissent. I write separately to address the majority's conclusion that the temporary moratorium at issue here was not a taking because it was not a "taking of `the parcel as a whole.'" Ante, at 27. While this questionable rule** has been applied to various alleged regulatory takings, it was, in my view, rejected in the context of temporal deprivations of property by First English Evangelical Lutheran Church of Glendale v. County of Los Angeles, 482 U.S. 304, 318 (1987), which held that temporary and permanent takings "are not different in kind" when a landowner is deprived of all beneficial use of his land. I had thought that First English put to rest the notion that the "relevant denominator" is land's infinite life. Consequently, a regulation effecting a total deprivation of the use of a so-called "temporal slice" of property is compensable under the Takings Clause unless background principles of state property law prevent it from being deemed a taking; "total deprivation of use is, from the landowner's point of view, the equivalent of a physical appropriation." Lucas v. South Carolina Coastal Council, 505 U.S. 1003, 1017 (1992). </s> A taking is exactly what occurred in this case. No one seriously doubts that the land use regulations at issue rendered petitioners' land unsusceptible of any economically beneficial use. This was true at the inception of the moratorium, and it remains true today. These individuals and families were deprived of the opportunity to build single-family homes as permanent, retirement, or vacation residences on land upon which such construction was authorized when purchased. The Court assures them that "a temporary prohibition on economic use" cannot be a taking because "logically . . . the property will recover value as soon as the prohibition is lifted." Ante, at 27-28. But the "logical" assurance that a "temporary restriction . . . merely causes a diminution in value," ante, at 27, is cold comfort to the property owners in this case or any other. After all, "[i]n the long run we are all dead." John Maynard Keynes, Monetary Reform 88 (1924). </s> I would hold that regulations prohibiting all productive uses of property are subject to Lucas' per se rule, regardless of whether the property so burdened retains theoretical useful life and value if, and when, the "temporary" moratorium is lifted. To my mind, such potential future value bears on the amount of compensation due and has nothing to do with the question whether there was a taking in the first place. It is regrettable that the Court has charted a markedly different path today. </s> FOOTNOTES Footnote 1 </s> Often referred to as the "Just Compensation Clause," the final Clause of the Fifth Amendment provides: "... nor shall private property be taken for public use without just compensation." It applies to the States as well as the Federal Government. Chicago, B. & Q. R. Co. v. Chicago, 166 U.S. 226, 239, 241 (1897); Webb's Fabulous Pharmacies, Inc. v. Beckwith, 449 U.S. 155, 160 (1980). </s> Footnote 2 </s> According to a Senate Report: "Only two other sizable lakes in the world are of comparable quality--Crater Lake in Oregon, which is protected as part of the Crater Lake National Park, and Lake Baikal in the [former] Soviet Union. Only Lake Tahoe, however, is so readily accessible from large metropolitan centers and is so adaptable to urban development." S.Rep. No. 91-510, pp.3-4 (1969). </s> Footnote 3 </s> The District Court added: "Or at least, for a very, very long time. Estimates are that, should the lake turn green, it could take over 700 years for it to return to its natural state, if that were ever possible at all." 34 F.Supp. 2d, at 1231. </s> Footnote 4 </s> App. 104-107. This moratorium did not apply to rights that had vested before the effective date of the 1980 Compact. Id., at 107-108. Two months after the 1980 Compact became effective, TRPA adopted its Ordinance 81-1 broadly defining the term "project" to include the construction of any new residence and requiring owners of land in districts 1, 2, or 3, to get a permit from TRPA before beginning construction of homes on their property. 34 F.Supp. 2d 1226, 1233 (Nev. 1999). </s> Footnote 5 </s> As explained above, supra, at 4, the petitioners who purchased land after the 1972 compact did so amidst a heavily regulated zoning scheme. Their property was already classified as part of land capability districts 1, 2, and 3, or SEZ land. And each land classification was subject to regulations as to the degree of artificial disturbance the land could safely sustain. </s> Footnote 6 </s> 911 F.2d 1331 (CA9 1990); 938 F.2d 153 (CA9 1991); 34 F.3d 753 (CA9 1994); 216 F.3d 764 (CA9 2000); 611 F.Supp. 110 (Nev. 1985); 808 F.Supp. 1474 (Nev. 1992); 808 F.Supp. 1484 (Nev. 1992). </s> Footnote 7 </s> In 1991, petitioners amended their complaint to allege that the adoption of the 1987 plan also constituted an unconstitutional taking. Ultimately both the District Court and the Court of Appeals held that this claim was barred by California's 1-year statute of limitations and Nevada's 2-year statute of limitations. See 216 F.3d, at 785-789. Although the validity of the 1987 plan is not before us, we note that other litigants have challenged certain applications of that plan. See Suitum v. Tahoe Regional Planning Agency, 520 U.S. 725 (1997). </s> Footnote 8 </s> In his dissent, The Chief Justice contends that the 1984 plan is before us because the 1980 Compact is a proximate cause of petitioners' injuries, post, at 1-3. Petitioners, however, do not challenge the Court of Appeals' holding on causation in their briefs on the merits, presumably because they understood when we granted certiorari on the question "[w]hether the Court of Appeals properly determined that a temporary moratorium on land development does not constitute a taking of property requiring compensation under the Takings Clause of the United States Constitution," 533 U.S. 948 (2001), we were only interested in the narrow question decided today. Throughout the District Court and Court of Appeals decisions the phrase "temporary moratorium" refers to two things and two things only: Ordinance 81-5 and Resolution 83-21. The dissent's novel theory of causation was not briefed, nor was it discussed during oral argument. </s> Footnote 9 </s> As the District Court explained: "There is a direct connection between the potential development of plaintiffs' lands and the harm the lake would suffer as a result thereof. Further, there has been no suggestion by the plaintiffs that any less severe response would have adequately addressed the problems the lake was facing. Thus it is difficult to see how a more proportional response could have been adopted. Given that TRPA's actions had wide-spread application, and were not aimed at an individual landowner, the plaintiffs would appear to bear the burden of proof on this point. They have not met this burden--nor have they really attempted to do so. Although unwilling to stipulate to the fact that TRPA's actions substantially advanced a legitimate state interest, the plaintiffs did not seriously contest the matter at trial." 34 F.Supp., at 1240 (citation omitted). </s> Footnote 10 </s> The Penn Central analysis involves "a complex of factors including the regulation's economic effect on the landowner, the extent to which the regulation interferes with reasonable investment-backed expectations, and the character of the government action." Palazzolo v. Rhode Island, 533 U.S. 606, 617 (2001). </s> Footnote 11 </s> 34 F.Supp. 2d, at 1241. The court stated that petitioners "had plenty of time to build before the restrictions went into effect--and almost everyone in the Tahoe Basin knew in the late 1970s that a crackdown on development was in the works." In addition, the court found "the fact that no evidence was introduced regarding the specific diminution in value of any of the plaintiffs' individual properties clearly weighs against a finding that there was a partial taking of the plaintiffs' property." Ibid. </s> Footnote 12 </s> The pretrial order describes purchases by the United States Forest Service of private lots in environmentally sensitive areas during the periods when the two moratoria were in effect. During the 2-year period ending on August 26, 1983, it purchased 215 parcels in California at an average price of over $19,000 and 45 parcels in Nevada at an average price of over $39,000; during the ensuing 8-month period, it purchased 167 California parcels at an average price of over $29,000 and 27 Nevada parcels at an average price of over $41,000. App. 76-77. Moreover, during those periods some owners sold sewer and building allocations to owners of higher capability lots "for between $15,000 and $30,000." Id., at 77. </s> Footnote 13 </s> Ordinance 81-5 specified that it would terminate when the regional plan became finalized. And Resolution 83-21 was limited to 90 days, but was renewed for an additional term. Nevertheless, the District Court distinguished these measures from true "temporary" moratoria because there was no fixed date for when they would terminate. 34 F.Supp. 2d, at 1250-1251. </s> Footnote 14 </s> 216 F.3d, at 773. "Below, the district court ruled that the regulations did not constitute a taking under Penn Central's adhoc approach, but that they did constitute a categorical taking under Lucas [v. South Carolina Coastal Council, 505 U.S. 1003 (1992)]. See Tahoe-Sierra Preservation Council, 34 F. Supp. 2d at 1238-45. The defendants appealed the district court's latter holding, but the plaintiffs did not appeal the former. And even if arguments regarding the Penn Central test were fairly encompassed by the defendants' appeal, the plaintiffs have stated explicitly on this appeal that they do not argue that the regulations constitute a taking under the adhoc balancing approach described in Penn Central." Ibid. </s> Footnote 15 </s> The Court of Appeals added: </s> "Each of these three types of regulation will have an impact on the parcel's value, because each will affect an aspect of the owner's `use' of the property--by restricting when the `use' may occur, where the `use' may occur, or how the `use' may occur. Prior to Agins [v. City of Tiburon, 447 U.S. 255 1980)], the Court had already rejected takings challenges to regulations eliminating all `use' on a portion of the property, and to regulations restricting the type of `use' across the breadth of the property. See Penn Central, 272 U.S. 365, 384, 397 ... (1926) (75% diminution in value caused by zoning law); see also William C. Haas & Co. v. City & County of San Francisco, 605 F.2d 1117, 1120 (9th Cir. 1979) (value reduced from $2,000,000 to $100,000). In those cases, the Court `uniformly reject[ed] the proposition that diminution in property value, standing alone, can establish a "taking."' Penn Central, 508 U.S. 602, 645 ... (1993). There is no plausible basis on which to distinguish a similar diminution in value that results from a temporary suspension of development." Id., at 776-777. </s> Footnote 16 </s> Despite our clear refusal to hold that a moratorium never effects a taking, The Chief Justice accuses us of "allow[ing] the government to ... take private property without paying for it," post, at 8. It may be true that under a Penn Central analysis petitioners' land was taken and compensation would be due. But petitioners failed to challenge the District Court's conclusion that there was no taking under Penn Central. Supra, at 12. </s> Footnote 17 </s> In determining whether government action affecting property is an unconstitutional deprivation of ownership rights under the Just Compensation Clause, a court must interpret the word "taken." When the government condemns or physically appropriates the property, the fact of a taking is typically obvious and undisputed. When, however, the owner contends a taking has occurred because a law or regulation imposes restrictions so severe that they are tantamount to a condemnation or appropriation, the predicate of a taking is not self-evident, and the analysis is more complex. </s> Footnote 18 </s> To illustrate the importance of the distinction, the Court in Loretto, 341 U.S. 114, 116 (1951), in which there had been an "actual taking of possession and control" of a coal mine, and United States v. Central Eureka Mining Co., 357 U.S. 155 (1958), in which "by contrast, the Court found no taking where the Government had issued a wartime order requiring nonessential gold mines to cease operations ... ." 458 U.S., at 431. Loretto then relied on this distinction in dismissing the argument that our discussion of the physical taking at issue in the case would affect landlord-tenant laws. "So long as these regulations do not require the landlord to suffer the physical occupation of a portion of his building by a third party, they will be analyzed under the multifactor inquiry generally applicable to nonpossessory governmental activity." Id., at 440 (citing Penn Central). </s> Footnote 19 </s> According to The Chief Justice's dissent, even a temporary, use-prohibiting regulation should be governed by our physical takings cases because, under Lucas v. South Carolina Coastal Council, 505 U.S. 1003, 1017 (1992), "from the landowner's point of view," the moratorium is the functional equivalent of a forced leasehold, post, at 6-7. Of course, from both the landowner's and the government's standpoint there are critical differences between a leasehold and a moratorium. Condemnation of a leasehold gives the government possession of the property, the right to admit and exclude others, and the right to use it for a public purpose. A regulatory taking, by contrast, does not give the government any right to use the property, nor does it dispossess the owner or affect her right to exclude others. </s> The Chief Justice stretches Lucas' "equivalence" language too far. For even a regulation that constitutes only a minor infringement on property may, from the landowner's perspective, be the functional equivalent of an appropriation. Lucas carved out a narrow exception to the rules governing regulatory takings for the "extraordinary circumstance" of a permanent deprivation of all beneficial use. The exception was only partially justified based on the "equivalence" theory cited by his dissent. It was also justified on the theory that, in the "relatively rare situations where the government has deprived a landowner of all economically beneficial uses," it is less realistic to assume that the regulation will secure an "average reciprocity of advantage," or that government could not go on if required to pay for every such restriction. 505 U.S., at 1017-1018. But as we explain, infra, at 35-38, these assumptions hold true in the context of a moratorium. </s> Footnote 20 </s> The case involved "a bill in equity brought by the defendants in error to prevent the Pennsylvania Coal Company from mining under their property in such way as to remove the supports and cause a subsidence of the surface and of their house." Mahon, 260 U.S., at 412. Mahon sought to prevent Pennsylvania Coal from mining under his property by relying on a state statute, which prohibited any min-ing that could undermine the foundation of a home. The companychallenged the statute as a taking of its interest in the coal withoutcompensation. </s> Footnote 21 </s> In Lucas, we explained: "Prior to Justice Holmes's exposition in Pennsylvania Coal Co. v. Mahon, 260 U. S. 393 (1922), it was generally thought that the Takings Clause reached only a `direct appropriation' of property, Legal Tender Cases, 12 Wall. 457, 551, (1871), or the functional equivalent of a `practical ouster of [the owner's] possession,' Transportation Co. v. Chicago, 99 U.S. 635, 642 (1879) . ... Justice Holmes recognized in Mahon, however, that if the protection against physical appropriations of private property was to be meaningfully enforced, the government's power to redefine the range of interests included in the ownership of property was necessarily constrained by constitutional limits. 260 U. S., at 414-415. If, instead, the uses of private property were subject to unbridled, uncompensated qualification under the police power, `the natural tendency of human nature [would be] to extend the qualification more and more until at last private property disappear[ed].' Id., at 415. These considerations gave birth in that case to the oft-cited maxim that, `while property may be regulated to a certain extent, if regulation goes too far it will be recognized as a taking.' Ibid." 505 U.S., at 1014 (citation omitted). </s> Footnote 22 </s> Justice Brandeis argued: "Every restriction upon the use of property imposed in the exercise of the police power deprives the owner of some right theretofore enjoyed, and is, in that sense, an abridgment by the State of rights in property without making compensation. But a restriction imposed to protect the public health, safety or morals from dangers threatened is not a taking. The restriction here in question is merely the prohibition of a noxious use. The property so restricted remains in the possession of its owner. The State does not appropriate it or make any use of it. The State merely prevents the owner from making a use which interferes with paramount rights of the public." Mahon, 260 U.S., at 417 (Brandeis, J., dissenting). </s> Footnote 23 </s> In her concurring opinion in Palazzolo, 533 U.S., at 633, Justice O'Connor reaffirmed this approach: "Our polestar instead remains the principles set forth in Penn Central itself and our other cases that govern partial regulatory takings. Under these cases, interference with investment-backed expectations is one of a number of factors that a court must examine." Ibid. "Penn Central does not supply mathematically precise variables, but instead provides important guideposts that lead to the ultimate determination whether just compensation is required." Id., at 634. "The temptation to adopt what amount to per se rules in either direction must be resisted. The Takings Clause requires careful examination and weighing of all the relevant circumstances in this context." Id., at 636. </s> Footnote 24 </s> Justice Kennedy concurred in the judgment on the basis of the regulation's impact on "reasonable, investment-backed expectations." 505 U.S., at 1034. </s> Footnote 25 </s> It is worth noting that Lucas underscores the difference between physical and regulatory takings. See supra, at 17-19. For under our physical takings cases it would be irrelevant whether a property owner maintained 5% of the value of her property so long as there was a physical appropriation of any of the parcel. </s> Footnote 26 </s> The Chief Justice's dissent makes the same mistake by carving out a 6-year interest in the property, rather than considering the parcel as a whole, and treating the regulations covering that segment as analogous to a total taking under Lucas, post, at 9. </s> Footnote 27 </s> Armstrong, like Lucas, was a case that involved the "total destruction by the Government of all value" in a specific property interest. 364 U.S., at 48-49. It is nevertheless perfectly clear that Justice Black's oft-quoted comment about the underlying purpose of the guarantee that private property shall not be taken for a public use without just compensation applies to partial takings as well as total takings. </s> Footnote 28 </s> Brief for the Institute for Justice as Amicus Curiae 30. Although amicus describes the 1-year cut off proposal as the "better approach by far," ibid., its primary argument is that Penn Central should be overruled, id., at 20 ("All partial takings by way of land use restriction should be subject to the same prima facie rules for compensation as a physical occupation for a limited period of time"). </s> Footnote 29 </s> Brief for Petitioners 44. See also Pet. for Cert. i. </s> Footnote 30 </s> In addition, we recognize the anomaly that would be created if we were to apply Penn Central when a landowner is permanently deprived of 95% of the use of her property, Lucas, 256 U.S. 135, 157 (1921). </s> Footnote 31 </s> Petitioners fail to offer a persuasive explanation for why moratoria should be treated differently from ordinary permit delays. They contend that a permit applicant need only comply with certain specific requirements in order to receive one and can expect to develop at the end of the process, whereas there is nothing the landowner subject to a moratorium can do but wait, with no guarantee that a permit will be granted at the end of the process. Brief for Petitioners 28. Setting aside the obvious problem with basing the distinction on a course of events we can only know after the fact--in the context of a facial challenge--petitioners' argument breaks down under closer examination because there is no guarantee that a permit will be granted, or that a decision will be made within a year. See, e.g., Dufau v. United States, 22 Cl. Ct. 156 (1990) (holding that 16-month delay in granting a permit did not constitute a temporary taking). Moreover, under petitioners' modified categorical rule, there would be no per se taking if TRPA simply delayed action on all permits pending a regional plan. Fairness and justice do not require that TRPA be penalized for achieving the same result, but with full disclosure. </s> Footnote 32 </s> See, e.g., SantaFe Village Venture v. Albuquerque, 914 F.Supp. 478, 483 (N.M. 1995) (30-month moratorium on development of lands within the Petroglyph National Monument was not a taking); Williams v. Central, 907 P.2d 701, 703-706 (Colo. App. 1995) (10-month moratorium on development in gaming district while studying city's ability to absorb growth was not a compensable taking); Woodbury Place Partners v. Woodbury, 492 N.W. 2d 258 (Minn. App. 1993) (moratorium pending review of plan for land adjacent to interstate highway was not a taking even though it deprived property owner of all economically viable use of its property for two years); Zilber v. Moranga, 692 F.Supp. 1195 (ND Cal. 1988) (18-month development moratorium during completion of a comprehensive scheme for open space did not require compensation). See also Wayman, Leaders Consider Options for Town Growth, Charlotte Observer, Feb. 3, 2002, p. 15M (describing 10-month building moratorium imposed "to give town leaders time to plan for development"); Wallman, City May Put Reins on Beach Projects, Sun-Sentinel, May 16, 2000, p.1B (2-year building moratorium on beachfront property in Fort Lauderdale pending new height, width, and dispersal regulations); Foderaro, In Suburbs, They're Cracking Down on the Joneses, N.Y. Times, Mar. 19, 2001, p.A1 (describing moratorium imposed in Eastchester, New York during a review of the town's zoning code to address the problem of oversized homes); Dawson, Commissioners recommend Aboite construction ban be lifted, Fort Wayne News Sentinel, May 4, 2001, p.1A (3-year moratorium to allow improvements in the water and sewage treatment systems). </s> Footnote 33 </s> See J. Juergensmeyer & T. Roberts, Land Use Planning and Control Law §§5.28(G) and 9.6 (1998); Garvin & Leitner, Drafting Interim Development Ordinances: Creating Time to Plan, 48 Land Use Law & Zoning Digest 3 (June 1996) ("With the planning so protected, there is no need for hasty adoption of permanent controls in order to avoid the establishment of nonconforming uses, or to respond in an adhoc fashion to specific problems. Instead, the planning and implementation process may be permitted to run its full and natural course with widespread citizen input and involvement, public debate, and full consideration of all issues and points of view"); Freilich, Interim Development Controls: Essential Tools for Implementing Flexible Planning and Zoning, 49 J. Urb. L. 65 (1971). </s> Footnote 34 </s> The Chief Justice offers another alternative, suggesting that delays of six years or more should be treated as per se takings. However his dissent offers no explanation for why 6 years should be the cut-off point rather than 10 days, 10 months, or 10 years. It is worth emphasizing that we do not reject a categorical rule in this case because a 32-month moratorium is just not that harsh. Instead, we reject a categorical rule because we conclude that the Penn Central framework adequately directs the inquiry to the proper considerations--only one of which is the length of the delay. </s> Footnote 35 </s> Petitioner Preservation Council "through its authorized representatives, actively participated in the entire TRPA regional planning process leading to the adoption of the 1984 Regional Plan at issue in this action, and attended and expressed its views and concerns, orally and in writing, at each public hearing held by the Defendant TRPA in connection with the consideration of the 1984 Regional Plan at issue herein, as well as in connection with the adoption of Ordinance 81-5 and the Revised 1987 Regional Plan addressed herein." App. 24. </s> Footnote 36 </s> We note that the temporary restriction that was ultimately upheld in the First English case lasted for more than six years before it was replaced by a permanent regulation. First English Evangelical Lutheran Church of Glendale v. County of Los Angeles, 210 Cal. App. 3d, 1353, 258 Cal. Rptr. 893 (1989). </s> Footnote 37 </s> Several States already have statutes authorizing interim zoning ordinances with specific time limits. See Cal. Govt. Code Ann. §65858 (West Supp. 2002) (authorizing interim ordinance of up to two years); Colo. Rev. Stat. §30-28-121 (2001) (six months); Ky. Rev. Stat. Ann. §100.201 (2001) (one year); Mich. Comp. Laws Ann. §125.215 (2001) (three years); Minn. Stat. §394.34 (2000) (two years); N.H. Rev. Stat. §674:23 (2001) (one year); Ore. Rev. Stat. Ann. §197.520 (1997) (10 months); S.D. Codified Laws §11-2-10 (2001) (two years); Utah Code Ann. §17-27-404 (1995) (18 months); Wash. Rev. Code §35.63.200 (2001) Wis. Stat. §62.23(7)(d) (2001) (two years). Other States, although without specific statutory authority, have recognized that reasonable interim zoning ordinances may be enacted. See, e.g., S. E. W. Freil v. Triangle Oil Co., 76 Md. App. 96, 543 A.2d 863 (1988); New Jersey Shore Builders Assn. v. Dover Twp. Comm., 191 N.J. Super. 627, 468 A.2d 742 (1983); SCA Chemical Waste Servs., Inc. v. Konigsberg, 636 S.W. 2d 430 (Tenn. 1982); Sturgess v. Chilmark, 380 Mass. 246, 402 N.E. 2d 1346 (1980); Lebanon v. Woods, 153 Conn. 182, 215 A.2d 112 (1965). </s> FOOTNOTES Footnote 1 </s> We are not bound by the Court of Appeals' determination that petitioners' claim under 42 U.S.C §1983 (1994 ed., Supp. V) permitted only challenges to Ordinance 81-5 and Regulation 83-21. Petitioners sought certiorari on the Court of Appeals' ruling that respondent Tahoe Regional Planning Agency (hereinafter respondent) did not cause petitioners' injury from 1984 to 1987. Pet. for Cert. 27-30. We did not grant certiorari on any of the petition's specific questions presented, but formulated the following question: "Whether the Court of Appeals properly determined that a temporary moratorium on land development does not constitute a taking of property requiring compensation under the Takings Clause of the United States Constitution?" 533 U.S. 948-949 (2001). This Court's Rule 14(1)(a) provides that a "question presented is deemed to comprise every subsidiary question fairly included therein." The question of how long the moratorium on land development lasted is necessarily subsumed within the question whether the moratorium constituted a taking. Petitioners did not assume otherwise. Their brief on the merits argues that respondent "effectively blocked all construction for the past two decades." Brief for Petitioners 7. </s> Footnote 2 </s> Even under the Court's mistaken view that the ban on development lasted only 32 months, the ban in this case exceeded the ban in Lucas. </s> Footnote 3 </s> There was no dispute that just compensation was required in those cases. The disagreement involved how to calculate that compensation. In United States v. General Motors Corp., 323 U.S. 373 (1945), for example, the issues before the Court were how to value the leasehold interest (i.e., whether the "long-term rental value [should be] the sole measure of the value of such short-term occupancy," id., at 380), whether the Government had to pay for the respondent's removal of personal property from the condemned warehouse, and whether the Government had to pay for the reduction in value of the respondent's equipment and fixtures left in the warehouse. Id., at 380-381. </s> Footnote 4 </s> Six years is not a "cut-off point," ante, at 35, n.34; it is the length involved in this case. And the "explanation" for the conclusion that there is a taking in this case is the fact that a 6-year moratorium far exceeds any moratorium authorized under background principles of state property law. See infra, at 12-13. This case does not require us to undertake a more exacting study of state property law and discern exactly how long a moratorium must last before it no longer can be considered an implied limitation of property ownership (assuming, that is, that a moratorium on all development is a background principle of state property law, see infra, at 12). </s> Footnote 5 </s> These are just some examples of the state laws limiting the duration of moratoria. There are others. See, e.g., Utah Code Ann. §§17-27-404(3)(b)(i)-(ii) (1995) (temporary prohibitions on development "may not exceed six months in duration," with the possibility of extensions for no more than "two additional six-month periods"). See also ante, at 36, n.31. </s> FOOTNOTES Footnote * </s> *The majority's decision to embrace the "parcel as a whole" doctrine as settled is puzzling. See, e.g., Palazzolo v. Rhode Island, 533 U.S. 606, 631 (2001) (noting that the Court has "at times expressed discomfort with the logic of [the parcel as a whole] rule"); Lucas v. South Carolina Coastal Council, 505 U.S. 1003, 1016, n.7 (1992) (recognizing that "uncertainty regarding the composition of the denominator in [the Court's] `deprivation' fraction has produced inconsistent pronouncements by the Court," and that the relevant calculus is a "difficult question").

United States Supreme Court DAVIS v. NORTH CAROLINA(1966) No. 815 Argued: April 28, 1966Decided: June 20, 1966 </s> Petitioner, an impoverished Negro of low mentality with a third or fourth grade education, was arrested after his escape from a state prison camp. Charlotte city police took him into custody in connection with a murder investigation and kept him in a detention cell for 16 days, where he spoke to no one but the police, who interrogated him intermittently each day. He finally confessed to the crime. There is no indication in the record that police advised him of any of his rights until after his confessions. At his trial for rape-murder, a written confession and testimony of an oral confession were introduced in evidence, despite counsel's objection that the confessions were involuntary. Petitioner was found guilty and sentenced to death. The conviction was affirmed by the North Carolina Supreme Court. The Federal District Court denied a writ of habeas corpus but the Court of Appeals reversed and remanded to the District Court for an evidentiary hearing on the voluntariness of the confessions. The District Court, following a hearing, held the confessions voluntary and the Court of Appeals affirmed. Held: Petitioner's confessions were the involuntary end product of coercive influences and thus constitutionally inadmissible in evidence. Pp. 739-753. </s> (a) Had this trial occurred after Miranda v. Arizona, ante, p. 436, the decision below would be reversed summarily. P. 739. </s> (b) As Johnson v. New Jersey, ante, p. 719, points out, the nonretroactivity of Miranda does not affect a court's duty to consider the voluntariness of statements under the standards of voluntariness which had begun to evolve long prior to Miranda and Escobedo v. Illinois, 378 U.S. 478 . P. 740. </s> (c) The fact that a defendant was not advised of his right to remain silent or of his right to counsel at the outset of interrogation, as is now required by Miranda, is significant in considering the voluntariness of later statements. Pp. 740-741. </s> (d) It is this Court's duty to examine the entire record and make an independent determination of the ultimate issue of voluntariness. Pp. 741-742. [384 U.S. 737, 738] </s> (e) The uncontested fact that no one other than the police spoke to petitioner during his 16 days' detention and interrogation is significant in determining voluntariness. Pp. 745-746. </s> (f) Evidence of extended interrogation in a coercive atmosphere, as here, has often resulted in a finding of involuntariness by this Court, e. g., Fikes v. Alabama, 352 U.S. 191 . This Court has never sustained the use of a confession obtained after such a lengthy period of detention and interrogation as occurred here. P. 752. </s> 339 F.2d 770, reversed and remanded. </s> Charles V. Bell argued the cause for petitioner. With him on the brief were Walter B. Nivens and Calvin Brown. </s> James F. Bullock, Assistant Attorney General of North Carolina, argued the cause for respondent. With him on the brief was T. W. Bruton, Attorney General. </s> Opinion of the Court by MR. CHIEF JUSTICE WARREN, announced by MR. JUSTICE BRENNAN. </s> Petitioner, Elmer Davis, Jr., was tried before a jury in the Superior Court of Mecklenburg County, North Carolina, on a charge of rape-murder. At trial, a written confession and testimony as to an oral confession were offered in evidence. Defense counsel objected on the ground that the confessions were involuntarily given. The trial judge heard testimony on this issue, ruled that the confessions were made voluntarily, and permitted them to be introduced in evidence. The jury returned a verdict of guilty without a recommendation for life imprisonment, and Davis was sentenced to death. </s> The conviction was affirmed on appeal by the Supreme Court of North Carolina, 253 N.C. 86, 116 S. E. 2d 365, and this Court denied certiorari. 365 U.S. 855 . Davis then sought a writ of habeas corpus in the United States District Court for the Eastern District of North Carolina. The writ was denied without an evidentiary hearing on the basis of the state court record. 196 F. Supp. 488. [384 U.S. 737, 739] On appeal, the Court of Appeals for the Fourth Circuit reversed and remanded the case to the District Court for an evidentiary hearing on the issue of the voluntariness of Davis' confessions. 310 F.2d 904. A hearing was held in the District Court, following which the District Judge again held that the confessions were voluntary. 221 F. Supp. 494. The Court of Appeals for the Fourth Circuit, after argument and then resubmission en banc, affirmed with two judges dissenting. 339 F.2d 770. We granted certiorari. 382 U.S. 953 . </s> We are not called upon in this proceeding to pass on the guilt or innocence of the petitioner of the atrocious crime that was committed. Nor are we called upon to determine whether the confessions obtained are true or false. Rogers v. Richmond, 365 U.S. 534 (1961). The sole issue presented for review is whether the confessions were voluntarily given or were the result of overbearing by police authorities. Upon thorough review of the record, we have concluded that the confessions were not made freely and voluntarily but rather that Davis' will was overborne by the sustained pressures upon him. Therefore, the confessions are constitutionally inadmissible and the judgment of the court below must be reversed. </s> Had the trial in this case before us come after our decision in Miranda v. Arizona, ante, p. 436, we would reverse summarily. Davis was taken into custody by Charlotte police and interrogated repeatedly over a period of 16 days. There is no indication in the record that police advised him of any of his rights until after he had confessed orally on the 16th day. 1 This would [384 U.S. 737, 740] be clearly improper under Miranda. Id., at 478-479, 492. Similarly, no waiver of rights could be inferred from this record since it shows only that Davis was repeatedly interrogated and that he denied the alleged offense prior to the time he finally confessed. Id., at 476, 499. </s> We have also held today, in Johnson v. New Jersey, ante, p. 719, that our decision in Miranda, delineating procedures to safeguard the Fifth Amendment privilege against self-incrimination during in-custody interrogation is to be applied prospectively only. Thus the present case may not be reversed solely on the ground that warnings were not given and waiver not shown. As we pointed out in Johnson, however, the nonretroactivity of the decision in Miranda does not affect the duty of courts to consider claims that a statement was taken under circumstances which violate the standards of voluntariness which had begun to evolve long prior to our decisions in Miranda and Escobedo v. Illinois, 378 U.S. 478 (1964). This Court has undertaken to review the voluntariness of statements obtained by police in state cases since Brown v. Mississippi, 297 U.S. 278 (1936). The standard of voluntariness which has evolved in state cases under the Due Process Clause of the Fourteenth Amendment is the same general standard which applied in federal prosecutions - a standard grounded in the policies of the privilege against self-incrimination. Malloy v. Hogan, 378 U.S. 1, 6 -8 (1964). </s> The review of voluntariness in cases in which the trial was held prior to our decisions in Escobedo and Miranda is not limited in any manner by these decisions. On the contrary, that a defendant was not advised of his right to remain silent or of his right respecting counsel at the outset of interrogation, as is now required by Miranda, is a significant factor in considering the voluntariness of statements later made. This factor has been recognized in several of our prior decisions [384 U.S. 737, 741] dealing with standards of voluntariness. Haynes v. Washington, 373 U.S. 503, 510 -511 (1963); Culombe v. Connecticut, 367 U.S. 568, 610 (1961); Turner v. Pennsylvania, 338 U.S. 62, 64 (1949). See also Gallegos v. Colorado, 370 U.S. 49, 54 , 55 (1962). Thus, the fact that Davis was never effectively advised of his rights gives added weight to the other circumstances described below which made his confessions involuntary. </s> As is almost invariably so in cases involving confessions obtained through unobserved police interrogation, there is a conflict in the testimony as to the events surrounding the interrogations. Davis alleged that he was beaten, threatened, and cursed by police and that he was told he would get a hot bath and something to eat as soon as he signed a statement. This was flatly denied by each officer who testified. 2 Davis further stated that he had repeatedly asked for a lawyer and that police refused to allow him to obtain one. This was also denied. Davis' sister testified at the habeas corpus hearing that she twice came to the police station and asked to see him, but that each time police officers told her Davis was not having visitors. Police officers testified that, on the contrary, upon learning of Davis' desire to see his sister, they went to her home to tell her Davis wanted to see her, but she informed them she was busy with her children. These factual allegations were resolved against Davis by the District Court and we need not review these specific findings here. </s> It is our duty in this case, however, as in all of our prior cases dealing with the question whether a confession was involuntarily given, to examine the entire record [384 U.S. 737, 742] and make an independent determination of the ultimate issue of voluntariness. E. g., Haynes v. Washington, 373 U.S. 503, 515 -516 (1963); Blackburn v. Alabama, 361 U.S. 199, 205 (1960); Ashcraft v. Tennessee, 322 U.S. 143, 147 -148 (1944). Wholly apart from the disputed facts, a statement of the case from facts established in the record, in our view, leads plainly to the conclusion that the confessions were the product of a will overborne. </s> Elmer Davis is an impoverished Negro with a third or fourth grade education. His level of intelligence is such that it prompted the comment by the court below, even while deciding against him on his claim of involuntariness, that there is a moral question whether a person of Davis' mentality should be executed. Police first came in contact with Davis while he was a child when his mother murdered his father, and thereafter knew him through his long criminal record, beginning with a prison term he served at the age of 15 or 16. </s> In September 1959, Davis escaped from a state prison camp near Asheville, North Carolina, where he was serving sentences of 17 to 25 years. On September 20, 1959, Mrs. Foy Belle Cooper was raped and murdered in the Elmwood Cemetery in the City of Charlotte, North Carolina. On September 21, police in a neighboring county arrested Davis in Belmont, 12 miles from Charlotte. He was wearing civilian clothes and had in his possession women's undergarments and a billfold with identification papers of one Bishel Buren Hayes. Hayes testified at trial that his billfold and shoes had been taken from him while he lay in a drunken sleep near the Elmwood Cemetery on September 20. </s> Charlotte police learned of Davis' arrest and contacted the warden of the state prison to get permission to take Davis into their custody in connection with the Cooper murder and other felonies. Having obtained permission, [384 U.S. 737, 743] they took Davis from Belmont authorities and brought him to the detective headquarters in Charlotte. From the testimony of the officers, it is beyond dispute that the reason for securing Davis was their suspicion that he had committed the murder. 3 </s> The second and third floors of the detective headquarters building contain lockup cells used for detention overnight and occasionally for slightly longer periods. It has no kitchen facilities for preparing meals. The cell in which Davis was placed measures 6 by 10 feet and contains a solid steel bunk with mattress, a drinking fountain, and a commode. It is located on the inside of the building with no view of daylight. It is ventilated by two exhaust fans located in the ceiling of the top floor of the building. Despite the fact that a county jail equipped and used for lengthy detention is located directly across the street from detective headquarters, Davis was incarcerated in this cell on an upper floor of the building for the entire period until he confessed. 4 Police Chief Jesse James testified: "I don't know anybody who has stayed in the city jail as long as this boy." </s> When Davis arrived at the detective headquarters, an arrest sheet was prepared giving various statistics concerning [384 U.S. 737, 744] him. On this arrest sheet was typed the following illuminating directive: "HOLD FOR HUCKS & FESPERMAN RE - MRS. COOPER. ESCAPEE FROM HAYWOOD COUNTY STILL HAS 15 YEARS TO PULL. DO NOT ALLOW ANYONE TO SEE DAVIS. OR ALLOW HIM TO USE TELEPHONE." Both at trial and at the habeas corpus hearing the testimony of police officers on this notation was nearly uniform. Each officer testified that he did not put that directive on the arrest sheet, that he did not know who did, and that he never knew of it. The police captain first testified at trial that there had never been an order issued in the police department that Davis was not to see or talk to anybody. He cited as an example the fact that Davis' sister came to see him (after Davis had confessed). He testified later in the trial, however: </s> "I don't know, it is possible I could have ordered this boy to be held without privilege of communicating with his friends, relatives and held without the privilege of using the telephone or without the privilege of talking to anybody. . . . No, I did not want him to talk to anybody. For the simple reason he was an escaped convict and it is the rules and regulations of the penal system that if he is a C grade prisoner he is not permitted to see anyone alone or write anyone letters and I was trying to conform to the state regulations." 5 </s> [384 U.S. 737, 745] </s> The District Court found as a fact that from September 21 until after he confessed on October 6, neither friend nor relative saw Davis. It concluded, however, that Davis was not held incommunicado because he would have been permitted visitors had anyone requested to see him. In so finding, the District Court noted specifically the testimony that police officers contacted Davis' sister for him. But the court made no mention whatever of the notation on the arrest sheet or the testimony of the police captain. </s> The stark wording of the arrest sheet directive remains, as does Captain McCall's testimony. The denials and evasive testimony of the other officers cannot wipe this evidence from the record. Even accepting that police would have allowed a person to see Davis had anyone actually come, the directive stands unassailably as an indicium of the purpose of the police in holding Davis. As the dissenting judges below stated: "The instruction not to permit anyone access to Davis and not to allow him to communicate with the outside world can mean only that it was the determination of his custodians to keep him under absolute control where they could subject him to questioning at will in the manner and to the extent they saw fit, until he would confess." 339 F.2d, at 780. Moreover, the uncontested fact that no one other than the police spoke to Davis during the 16 days of detention and interrogation that preceded his [384 U.S. 737, 746] confessions is significant in the determination of voluntariness. </s> During the time Davis was held by Charlotte police, he was fed two sandwiches, described by one officer as "thin" and "dry," twice a day. This fare was occasionally supplemented with peanuts and other "stuff" such as cigarettes brought to him by a police officer. 6 The District Court found that the food was the same served prisoners held overnight in the detention jail and that there was no attempt by police to weaken Davis by inadequate feeding. The State contends that "two sandwiches twice a day supplemented by peanuts `and other stuff' was not such a poor diet, for an idle person doing no work, as to constitute a violation of due process of law." Brief for Respondent, p. 7. </s> We may readily agree that the record does not show any deliberate attempt to starve Davis, compare Payne v. Arkansas, 356 U.S. 560 (1958), and that his diet was not below a minimum necessary to sustain him. Nonetheless, the diet was extremely limited and may well have had a significant effect on Davis' physical strength and therefore his ability to resist. There is evidence in the record, not rebutted by the State, that Davis lost 15 pounds during the period of detention. </s> From the time Davis was first brought to the overnight lockup in Charlotte on September 21, 1959, until he confessed on the 16th day of detention, police officers conducted daily interrogation sessions with him in a special interrogation room in the building. 7 These sessions each [384 U.S. 737, 747] lasted "forty-five minutes or an hour or maybe a little more," according to one of the interrogating officers. Captain McCall testified that he had assigned his entire force of 26 to 29 men to investigate the case. From this group, Detectives Hucks and Fesperman had primary responsibility for interrogating Davis. These officers testified to interrogating him once or twice each day throughout the 16 days. Three other officers testified that they conducted several interrogation sessions at the request of Hucks and Fesperman. Although the officers denied that Davis was interrogated at night, one testified that the interrogation periods he directed were held some time prior to 11 p. m. 8 Captain McCall also interrogated Davis once. </s> According to each of the officers, no mention of the Cooper murder was made in any of the interrogations between September 21 and October 3. Between these dates they interrogated Davis extensively with respect to the stolen goods in his possession. It is clear from the record, however, that these interrogations were directly related to the murder and were not simply questioning as to unrelated felonies. The express purpose of this line of questioning was to break down Davis' alibis as to where he had obtained the articles. By destroying Davis' contention that he had taken the items from homes some [384 U.S. 737, 748] distance from Charlotte, Davis could be placed at the scene of the crime. 9 </s> In order to put pressure on Davis with respect to these alibis, police took him from the lockup on October 1 to [384 U.S. 737, 749] have him point out where he had stolen the goods. Davis had told the officers that he took the items from houses along the railroad line between Canton and Asheville. To disprove this story, Davis was aroused at 5 a. m. and driven to Canton. There his leg shackles were removed and he walked on the railroad tracks, handcuffed to an officer, 14 miles to Asheville. When Davis was unable to recognize any landmark along the way or any house that he had burglarized, an officer confronted him with the accusation that his story was a lie. The State points out that Davis was well fed on this day, that he agreed to make the hike, and contends that it was not so physically exhausting as to be coercive. The coercive influence was not, however, simply the physical exertion of the march, but also the avowed purpose of that trek - to break down his alibis to the crime of murder. </s> On the afternoon of October 3, two officers planned and carried out a ruse to attempt to get Davis to incriminate himself in some manner. They engaged Davis in idle conversation for 10 to 20 minutes and then inquired whether he would like to go out for "some fresh air." They then took Davis from the jail and drove him into [384 U.S. 737, 750] the cemetery to the scene of the crime in order to observe his reaction. </s> The purpose of these excursions and of all of the interrogation sessions was known to Davis. On the day of the drive to the cemetery, the interrogators shifted tactics and began questioning Davis specifically about the murder. 10 They asked him if he knew why he was being held. He stated that he believed it was with respect to the Cooper murder. Police then pressed him, asking, "Well, did you do it?" He denied it. The interrogation sessions continued through the next two days. Davis consistently denied any knowledge of the crime. 11 </s> On October 6, Detectives Hucks and Fesperman interrogated Davis for the final time. Lieutenant Sykes, who had known Davis' family, but who had not taken part in any of the prior interrogation sessions because he had been away on vacation, asked to sit in. During this interrogation, after repeated earlier denials of guilt, Davis refused to answer questions concerning the crime. At about 12:45 p. m., Lieutenant Sykes inquired of Davis if he would like to talk to any of the officers alone about Mrs. Cooper. Davis said he would like to talk to Sykes. The others left the room. Lieutenant Sykes then asked Davis if he had been reading a testament which he was holding. Davis replied that he had. Sykes asked Davis if he had been praying. Davis replied that he did not know how to pray and agreed he would like Sykes to pray for him. The lieutenant offered a short [384 U.S. 737, 751] prayer. At that point, as the dissent below aptly put it, the prayers of the police officer were answered - Davis confessed. He was driven to the cemetery and asked to re-enact the crime. Police then brought him back to the station where he repeated the confession to several of the officers. In the presence of six officers, a two-page statement of the confession Davis had made was transcribed. Although based on the information Davis had given earlier, Captain McCall dictated this statement employing his own choice of format, wording, and content. He paused periodically to ask Davis if he agreed with the statement so far. Each time Davis acquiesced. Davis signed the statement. 12 Captain McCall then contacted the press and stated, "He finally broke down today." 13 </s> The concluding paragraphs of this confession, dictated by the police, contain, along with the standard disclaimer that the confession was free and voluntary, a statement that unwittingly summarizes the coercive effect on Davis of the prolonged period of detention and interrogation. They read: </s> "In closing, I want to say this. I have known in my own mind that [sic] you people were holding me for, and all the time I have been lying in jail, it has been worrying me, and I knew that sooner or later, I would have to tell you about it. </s> "I have made this statement freely and voluntarily. Captain McCall has dictated this statement [384 U.S. 737, 752] in the presence of Detectives W. F. Hucks, E. F. Fesperman, H. C. Gardner, C. E. Davis, and Detective Lieutenant C. L. Sykes. I am glad it is over, because I have been going thru a big strain." </s> The facts established on the record demonstrate that Davis went through a prolonged period in which substantial coercive influences were brought to bear upon him to extort the confessions that marked the culmination of police efforts. Evidence of extended interrogation in such a coercive atmosphere has often resulted in a finding of involuntariness by this Court. E. g., Culombe v. Connecticut, 367 U.S. 568 (1961); Fikes v. Alabama, 352 U.S. 191 (1957); Turner v. Pennsylvania, 338 U.S. 62 (1949). We have never sustained the use of a confession obtained after such a lengthy period of detention and interrogation as was involved in this case. </s> The fact that each individual interrogation session was of relatively short duration does not mitigate the substantial coercive effect created by repeated interrogation in these surroundings over 16 days. So far as Davis could have known, the interrogation in the overnight lockup might still be going on today had he not confessed. Moreover, as we have noted above, the fact that police did not directly accuse him of the crime until after a substantial period of eroding his will to resist by a tangential line of interrogation did not reduce the coercive influence brought to bear upon him. Similarly, it is irrelevant to the consideration of voluntariness that Davis was an escape from a prison camp. Of course Davis was not entitled to be released. But this does not alleviate the coercive effect of his extended detention and repeated interrogation while isolated from everyone but the police in the police jail. </s> In light of all of the factors discussed above, the conclusion is inevitable - Davis' confessions were the involuntary end product of coercive influences and are thus constitutionally inadmissible in evidence. Accordingly, [384 U.S. 737, 753] the judgment of the Court of Appeals for the Fourth Circuit must be reversed and the case remanded to the District Court. On remand, the District Court should enter such orders as are appropriate and consistent with this opinion, allowing the State a reasonable time in which to retry petitioner. </s> Reversed and remanded. </s> MR. JUSTICE BLACK concurs in the result. </s> Footnotes [Footnote 1 The written confession which Davis subsequently signed contained a notation that he was advised he did not have to make a statement and that any statement made could be used for or against him in court. A police officer testified at trial that he told Davis if the statement was not the truth he did not have to sign it. </s> [Footnote 2 The State adds in its brief: "Surely, Davis was not such a sensitive person, after all his years in prison, that `cussing' and being called `Nigger' constituted any degree of fear or coercion." Brief for Respondent, p. 8. </s> [Footnote 3 Some of the officers testified that they had no idea why Davis was being brought to Charlotte except as an escapee or in relation to the stolen goods in his possession. Captain McCall, who was in charge of the entire detective division of the Charlotte Police, stated at trial, however: "He was brought over here for the purpose of being an escaped convict and as a likely suspect in the murder case . . . . We were not holding him for the State when he was in Gaston County jail, but were making an investigation in reference to our murder case." At the habeas corpus hearing, he testified: "[H]e was in our custody primarily because he was a suspect in Mrs. Cooper's case . . . ." Davis' prior offenses included an assault in the vicinity of the cemetery, and his home had been nearby. See also note 9, infra. </s> [Footnote 4 The only exception to this incarceration was a day spent near Asheville, described infra, and a night in the Asheville jail. </s> [Footnote 5 Transcript of Evidence on Appeal. His testimony at the habeas corpus hearing was very similar. He first stated somewhat confusingly: </s> "Inasmuch as he was an escaped convict, I would have asked them what was the purpose of placing this do not allow anyone to see Davis or allow him to use the telephone. To be perfectly honest with you, why put it in writing when you can do the same thing verbally. I mean there is no question about it. The question is that [384 U.S. 737, 745] each individual is allowed due process of law. And if they had been asked in any way or if I had been asked for anyone to see Elmer, they would have been given permission. Nobody asked to my knowledge." </s> He later testified: </s> "I didn't want anybody to talk to him without me knowing it as he was a prisoner of the State of North Carolina, and he was a C grade prisoner and not entitled to visitors without the permission of the warden." </s> [Footnote 6 During the 16-day period, this diet varied only for two meals on the day he was taken to Asheville and on one other occasion when an officer brought him two hamburgers. </s> [Footnote 7 As the Police Chief explained: "An interrogation room should be void of all materials so that you can talk to a man in complete quiet and keep his attention." </s> [Footnote 8 After the officer admitted that the sessions might have been up to 11 p. m., the following question was posed and answered: </s> "Q. Well, he could have been interrogated by you at night, couldn't he? </s> "A. I'll say no and I'll say yes." </s> Another officer testified as follows: </s> "Q. At the time you interrogated him up in the Police Department, was it daylight or dark? </s> "A. Well, it could have been both, if I remember correctly. I'll just leave it that way: it could have been both, because that's the way it is." </s> [Footnote 9 Further graphic evidence of the obvious purpose of the police in detaining and repeatedly interrogating Davis is found in statements made to the press during this period: </s> "Detective Capt. W. A. McCall said Davis had not implicated himself in the Sunday slaying. </s> "`We're still talking to him,' he said." Charlotte Observer, Sept. 23, 1959, B-1. </s> "A Negro man was seen crouching in the bushes at Elmwood Cemetery shortly before the rape-slaying of an elderly widow there Sunday afternoon, Charlotte detectives said Wednesday. </s> . . . . . </s> "Charlotte detectives . . . continued interrogating E. J. Davis, the escapee who was arrested in Belmont Monday night. </s> . . . . . </s> "`We questioned him twice today,' Capt. McCall said Wednesday night. `He has given us some conflicting information, and we're checking all his alibis.' </s> "`We'll give him a lie detector test if necessary. But so far we have had no positive results from our interrogation.'" Charlotte Observer, Sept. 24, 1959, B-1. </s> "`Everybody . . . everybody is a suspect in this case until we sign a murder warrant.' </s> "Detective Capt. W. A. McCall spoke these words Thursday as police continued their search for the man who killed and raped a 78-year-old widow in a local graveyard Sunday afternoon. </s> . . . . . </s> "But the main emphasis Thursday continued to be on E. J. Davis, a 32-year-old Negro prison escapee who was convicted of raping an elderly woman here in 1949. </s> "Davis was questioned at length Thursday for the third straight day. </s> "`We know he's telling us some lies,' Capt. McCall said. `We're checking every alibi and every story he gives us, and some of them just aren't true. </s> "`We don't have enough facts yet to give him a lie detector test, though.'" Charlotte Observer, Sept. 25, 1959, B-1. </s> "Being questioned presently in connection with the slaying of 78-year-old Mrs. Foy Belle Cooper is E. J. Davis, a 32-year-old [384 U.S. 737, 749] Negro escapee who was arrested Monday in Belmont. Davis has a prior record for rape in 1949." Charlotte Observer, Sept. 26, 1959, B-1. </s> "Charlotte detectives concentrated Monday on a 32-year-old escaped convict in an effort to find who raped and murdered a 78-year-old widow here a week ago. </s> . . . . . </s> "Davis has been questioned closely several times in connection with the rape-slaying of Mrs. Foy Belle Cooper, 78." Charlotte Observer, Sept. 29, 1959, 14-A. </s> "City detectives were still probing a man's alibis for loopholes Friday in an investigation into the rape-slaying of a 78-year-old white woman in Charlotte Sept. 20. </s> "The suspect is an escaped convict, E. J. Davis. . . ." Charlotte Observer, Oct. 3, 1959, B-1. </s> [Footnote 10 Although the District Court found that police did not interrogate Davis directly about the Cooper case until October 3, the testimony was not uniform on this point. There is testimony in the record by police officers that the first interrogation about the murder was on the Friday before he confessed - October 2, 1959. See 253 N.C. 86, 90, 116 S. E. 2d 365, 367. See also Charlotte Observer, Oct. 7, 1959, A-1, Oct. 8, 1959, B-1. </s> [Footnote 11 Although the record does not show the tenor of the interrogation on October 4, it is established that Davis was interrogated every day and that he denied any connection with the crime until October 6. </s> [Footnote 12 After Davis signed the written confession, Police Chief Jesse James appeared to question Davis about his treatment. In response to this questioning, Davis stated that he had been treated all right. The following morning, a minister who knew Davis' family and had read of his arrest 16 days earlier in the newspaper, appeared to talk to Davis. He testified that Davis told him his treatment had been very fine and that everyone had been courteous and kind to him. The minister indicated further that he often cooperated with police in such matters. </s> [Footnote 13 Charlotte Observer, Oct. 7, 1959, A-1-2. </s> MR. JUSTICE CLARK, with whom MR. JUSTICE HARLAN joins, dissenting. </s> The rationale of the Court's opinion is that Davis, "an impoverished Negro with a third or fourth grade education," was overborne when he gave his confession to the rape-murder. </s> Davis, a 39-year-old man, admits that he has "been in a lot of jails." The record indicates that his intelligence was far above that of a fourth grader. His own testimony at his trial reveals a highly retentive memory. He described in detail his numerous arrests, convictions, prison sentences, and escapes over a 15-year span. Furthermore, during the federal habeas corpus hearing Davis showed his awareness of legal technicalities. At one point the prosecutor sought to cross-examine Davis as to whether he had "been tried and convicted of various offenses." Despite the fact that there was no objection to the question by his lawyer, Davis turned to the judge and said: "Your Honor, do I have to answer that question? This is in the past." After some argument about the admissibility of the evidence, the judge recessed the hearing for 10 minutes to give counsel an opportunity to present legal authority. Davis' objection was thereafter sustained. </s> This case goes against the grain of our prior decisions. The Court first confesses that the rule adopted under the Fifth Amendment in Miranda v. Arizona, ante, p. 436, i. e., that an accused must be effectively advised of [384 U.S. 737, 754] his right to counsel before custodial interrogation, is not retroactive and therefore does not apply to this case. See Johnson v. New Jersey, ante, p. 719. However, it obtains the same result by reading the Due Process Clause as requiring that heavy weight must be given the failure of the State to afford counsel during interrogation as "a significant factor in considering the voluntariness of statements." Through this change of pace Davis' guilty handwriting is stamped a forgery and his conviction is reversed. </s> I have found no case dealing with lengthy detention by state officers which supports reversal here. The Court cites three: Culombe v. Connecticut, 367 U.S. 568 (1961); Fikes v. Alabama, 352 U.S. 191 (1957); and Turner v. Pennsylvania, 338 U.S. 62 (1949), all of which were treated in terms of due process. But these cases are clearly distinguishable on their facts with respect to the character of the accused and the circumstances under which interrogation took place. Culombe was a "mental defective of the moron class" who had twice been in state mental institutions. He had no previous criminal record. Fikes was "a schizophrenic and highly suggestible." He had only one prior conviction - for burglary. The interrogation of both these men was more concentrated than that of Davis. Turner was subjected to continual interrogation by a relay of officers, falsely told that others had implicated him, and not permitted to see his family or friends. The prosecutor admitted that his arraignment was delayed, in violation of a state statute, until the police could secure a confession. Turner had no prior criminal record. </s> On the other hand, Davis had a long criminal record. At the time of his arrest he was an escapee from state prison, and so could be properly held in custody. It is therefore wrong to compare police conduct here to the detention of an ordinary suspect until he confesses. Moreover, the sporadic interrogation of Davis can hardly [384 U.S. 737, 755] be denominated as sustained or overbearing pressure. From the record it appears that he was simply questioned for about an hour each day by a couple of detectives. There was no protracted grilling. Nor did the police officers operate in relays. </s> The Court makes much of an "arrest sheet" which informed the jailer that Davis was being held in connection with the murder of Mrs. Cooper and that he was an escaped convict. This sheet further directed: "Do not allow anyone to see Davis. Or allow him to use telephone." No witness was able to identify the author of this notation. It is true Captain McCall said that he "might" have done it. But he said that, even so, it was merely a notice to the jailer that Davis was an escapee and, therefore, not permitted to see or talk to anyone. On the contrary, however, the record shows that Davis was not held incommunicado. Upon his request, the police located his sister the second day after his arrest, informed her that Davis was in custody, and on two separate occasions invited her to visit him. The officers first called on his sister for the sole purpose of telling her that Davis wished to see her. A few days later they also asked whether she was missing any of the clothes which were found on Davis. He made no request to see anyone else. Moreover, it is undenied that visitors from churches and schools entered the jail with scripture pamphlets. And Davis had one of these booklets in his hands the day of his confession. </s> Witness testified that Davis had told them that his treatment was "very fine and that everybody was courteous and kind to him." As for the hike of some 14 miles along the railroad tracks, Davis described the purpose of it clearly: </s> "Well, we had some clothes and things, what I took up there, and we wanted to go up there and get it straightened out; but the place where I took the stuff I couldn't locate the place because it was at [384 U.S. 737, 756] night, you understand, when I took the clothes and things off the line." </s> As to the "prayer" of Lieutenant Sykes, there is no testimony whatever that it was in any way "coercive." Indeed, one witness, Davis' preacher, quoted him as saying "that he had nothing but praise for Lieutenant Sykes, especially in the way in which he dealt with him." At another point the parson testified: "Elmer told me that he appreciated the prayer of Lieutenant Sykes." The Court disregards the fact that Davis had a copy of the scriptures in his hands when Sykes came into the room and continued to hold them as they talked. After Sykes - a lay preacher - noticed the testament, it was only natural that the conversation would turn to the scriptures and prayer. Sykes asked if Davis wished him to give a prayer. Davis said that he did, and Sykes prayed with him. The prayer was entirely unsuggestive. </s> It is said also that the food was not sufficient. But the uncontradicted evidence is that Davis never complained about the meals he received while in custody. * Davis testified that he lost 15 pounds in jail. But this does not warrant a finding that he was improperly fed. No one could contradict or substantiate this contention because the record does not show that his weight was taken upon arrest. And Davis was found to be untruthful in most of his testimony. Indeed, Davis did not paint his treatment with a black brush until his habeas corpus hearing, although he testified at length at his trial in the state court. </s> Under these circumstances, it appears to me that the trial judge's findings cannot be found to be clearly erroneous. To the contrary, they are fully supported by the entire record. I would affirm. </s> [Footnote * On the morning that Davis left the jail to walk along the railroad tracks, a police officer asked him "if he was hungry," and his natural reply at that time of day was "yes." The officer then gave Davis breakfast. </s> [384 U.S. 737, 757]

United States Supreme Court BRYAN v. ITASCA COUNTY(1976) No. 75-5027 Argued: April 20, 1976Decided: June 14, 1976 </s> Petitioner, an enrolled Chippewa Indian, brought this suit in state court seeking a declaratory judgment that the State of Minnesota and respondent county lacked authority to impose a personal property tax on his mobile home located on land held in trust for members of his tribe and that imposition of such a tax contravened federal law. The trial court rejected the contention. The Minnesota Supreme Court affirmed, holding that the grant of civil jurisdiction to the State in 4 (a) of Pub. L. 280 includes taxing authority and since 4 (b) does not exempt nontrust property from such authority, the county had power to assess the tax. Section 4 (a) gave various States, including Minnesota, with respect to all Indian country within the State except as specifically exempted "jurisdiction over civil causes of action between Indians or to which Indians are parties which arise in the areas of Indian country listed . . . to the same extent that such State . . . has jurisdiction over other civil causes of action, and those civil laws of such State . . . that are of general application to private persons or private property shall have the same force and effect within such Indian country as they have elsewhere within the State . . . ." Though tax laws are not specifically mentioned, the State Supreme Court concluded that they were included since the exempting provision, 4 (b), does not exempt nontrust property, but states that "[n]othing in this section shall authorize the . . . taxation of any real or personal property . . . belonging to any Indian or any Indian tribe . . . that is held in trust by the United States . . . ." Held: Public Law 280 did not grant States the authority to impose taxes on reservation Indians. Pp. 379-393. </s> (a) The central focus of Pub. L. 280, embodied in 2 of the Act, was to confer on the States criminal jurisdiction with respect to crimes involving Indians, and no mention was made of a congressional intent to authorize the States to tax Indians or Indian property on Indian reservations, a significant omission in light of applying the canons of construction to statutes affecting Indian immunities, where some mention would normally be expected had Congress contemplated a sweeping change in the status of reservation Indians. Pp. 379-383. [426 U.S. 373, 374] </s> (b) Section 4 (a) seems to have been intended primarily to provide a state forum for resolving private legal disputes involving Indians. Pp. 383-386. </s> (c) When Title IV of the Civil Rights Act of 1968 amended Pub. L. 280 to require tribal consent to any new state jurisdiction Congress in effect characterized the relevant part of Pub. L. 280 as conferring the power to resolve private civil controversies, and the legislative history of Title IV would make it difficult to construe 4 jurisdiction acquired pursuant to that Title as extending general state regulatory power, including taxing power, to govern Indian reservations. Pp. 386-387. </s> (d) Public L. 280 was plainly not meant to effect total assimilation, and nothing in its legislative history suggests otherwise. The same Congress that enacted Pub. L. 280 also enacted several termination Acts, indicating that Congress well knew how directly to express its intent to confer upon the States general civil regulatory powers, including taxation. Pp. 387-390. </s> (e) Section 4 (b), which is "entirely consistent with, and in effect . . . a reaffirmation of, the law as it stood prior to its enactment," Kirkwood v. Arenas, 243 F.2d 863, 866 (CA9), should, as an admittedly ambiguous statute, be construed in favor of the Indians and against abolishing their tax immunities by implication. Pp. 390-393. </s> 303 Minn. 395, 228 N. W. 2d 249, reversed. </s> BRENNAN, J., delivered the opinion for a unanimous Court. </s> Bernard P. Becker argued the cause for petitioner. With him on the brief were Gerald L. Seck, Michael Hagedorn, and Daniel H. Israel. </s> C. H. Luther, Deputy Attorney General of Minnesota, argued the cause for respondent. With him on the brief were Warren Spannaus, Attorney General, and Paul R. Kempainen and Steven G. Thorne, Special Assistant Attorneys General. * </s> [Footnote * Solicitor General Bork, Assistant Attorney General Taft, Harry R. Sachse, Edmund B. Clark, and Jacques B. Gelin filed a brief for the United States as amicus curiae urging reversal. [426 U.S. 373, 375] </s> MR. JUSTICE BRENNAN delivered the opinion of the Court. </s> This case presents the question reserved in McClanahan v. Arizona State Tax Comm'n, 411 U.S. 164, 178 n. 18 (1973): whether the grant of civil jurisdiction to the States conferred by 4 of Pub. L. 280, 67 Stat. 589, 28 U.S.C. 1360, is a congressional grant of power to the States to tax reservation Indians except insofar as taxation is expressly excluded by the terms of the statute. </s> Petitioner Russell Bryan, an enrolled member of the Minnesota Chippewa Tribe, 1 resides in a mobile home on land held in trust by the United States for the Chippewa Tribe on the Leech Lake Reservation in Minnesota. In June 1972, petitioner received notices from the auditor of respondent Itasca County, Minn., that he had been assessed personal property tax liability on the mobile home totaling $147.95. Thereafter, in September 1972, petitioner brought this suit in the Minnesota District Court seeking a declaratory judgment that the State and county were without authority to levy such a tax on personal property of a reservation Indian on the reservation and that imposition of such a tax was contrary to federal law. The Minnesota District Court rejected the contention and entered judgment for respondent county. The Minnesota Supreme Court affirmed, 303 Minn. 395, 228 N. W. 2d 249 (1975). We granted certiorari, 423 U.S. 923 (1975), and now reverse. </s> I </s> Principles defining the power of States to tax reservation [426 U.S. 373, 376] Indians and their property and activities on federally established reservations were clarified in McClanahan v. Arizona State Tax Comm'n, supra. As summarized in its companion case, Mescalero Apache Tribe v. Jones, 411 U.S. 145 (1973), McClanahan concluded: </s> "[I]n the special area of state taxation, absent cession of jurisdiction or other federal statutes permitting it, there has been no satisfactory authority for taxing Indian reservation lands or Indian income from activities carried on within the boundaries of the reservation, and McClanahan . . . lays to rest any doubt in this respect by holding that such taxation is not permissible absent Congressional consent." Mescalero Apache Tribe v. Jones, supra, at 148. 2 </s> [426 U.S. 373, 377] </s> McClanahan held that Arizona was disabled in the absence of congressional consent from imposing a state income tax on the income of a reservation Indian earned solely on the reservation. On the authority of McClanahan, Moe v. Salish & Kootenai Tribes, 425 U.S. 463 (1976), held this Term that in the absence of congressional consent the State was disabled from imposing a personal property tax on motor vehicles owned by tribal members living on the reservation, or a vendor license fee applied to a reservation Indian conducting a business for the tribe on reservation land, or a sales tax as applied to on-reservation sales by Indians to Indians. </s> Thus McClanahan and Moe preclude any authority in respondent county to levy a personal property tax upon petitioner's mobile home in the absence of congressional consent. Our task therefore is to determine whether 4 of Pub. L. 280, 28 U.S.C. 1360, constitutes such consent. </s> Section 4 (a), 28 U.S.C. 1360 (a), provides: </s> "Each of the States . . . listed in the following table shall have jurisdiction over civil causes of action between Indians or to which Indians are parties which arise in the areas of Indian country listed . . . to the same extent that such State . . . has jurisdiction over other civil causes of action, and those civil laws of such State . . . that are of general application to private persons or private property shall have the same force and effect within such Indian country as they have elsewhere within the State . . .: </s> . . . . . [426 U.S. 373, 378] </s> "Minnesota . . . All Indian country within the State, except the Red Lake Reservation." </s> The statute does not in terms provide that the tax laws of a State are among "civil laws . . . of general application to private persons or private property." The Minnesota Supreme Court concluded, however, that they were, finding in 4 (b) of the statute a negative implication of inclusion in 4 (a) of a general power of tax. Section 4 (b), 28 U.S.C. 1360 (b), provides: </s> "Nothing in this section shall authorize the alienation, encumbrance, or taxation of any real or personal property, including water rights, belonging to any Indian or any Indian tribe, band, or community that is held in trust by the United States or is subject to a restriction against alienation imposed by the United States; or shall authorize regulation of the use of such property in a manner inconsistent with any Federal treaty, agreement, or statute or with any regulation made pursuant thereto; or shall confer jurisdiction upon the State to adjudicate, in probate proceedings or otherwise, the ownership or right to possession of such property or any interest therein." </s> The Minnesota Supreme Court reasoned that "unless paragraph (a) is interpreted as a general grant of the power to tax, then the exceptions contained in paragraph (b) are limitations on a nonexistent power." 303 Minn., at 402, 228 N. W. 2d at 253. 3 Therefore, the state court held: "Public Law 280 is a clear grant of the power [426 U.S. 373, 379] to tax." Id., at 406, 228 N. W. 2d, at 256. 4 We disagree. That conclusion is foreclosed by the legislative history of Pub. L. 280 and the application of canons of construction applicable to congressional statutes claimed to terminate Indian immunities. </s> II </s> The primary concern of Congress in enacting Pub. L. 280 that emerges from its sparse legislative history was with the problem of lawlessness on certain Indian reservations, and the absence of adequate tribal institutions for law enforcement. See Goldberg, Public Law 280: The Limits of State Jurisdiction over Reservation Indians, 22 U. C. L. A. L. Rev. 535, 541-542 (1975). The House Report states: </s> "These States lack jurisdiction to prosecute Indians for most offenses committed on Indian reservations or other Indian country, with limited exceptions. The applicability of Federal criminal laws in States having Indian reservations is also limited. The United States district courts have a measure of jurisdiction over offenses committed on Indian reservations or other Indian country by or against Indians, but in cases of offenses committed by Indians against Indians that jurisdiction is limited to the so-called 10 major crimes: murder, manslaughter, rape, incest, assault with intent to kill, assault with a dangerous weapon, arson, burglary, robbery, and larceny. </s> "As a practical matter, the enforcement of law [426 U.S. 373, 380] and order among the Indians in the Indian country has been left largely to the Indian groups themselves. In many States, tribes are not adequately organized to perform that function; consequently, there has been created a hiatus in law-enforcement authority that could best be remedied by conferring criminal jurisdiction on States indicating an ability and willingness to accept such responsibility." H. R. Rep. No. 848, 83d Cong., 1st Sess., 5-6 (1953). 5 </s> Thus, provision for state criminal jurisdiction over offenses committed by or against Indians on the reservations was the central focus of Pub. L. 280 and is embodied in 2 of the Act, 18 U.S.C. 1162. 6 </s> [426 U.S. 373, 381] </s> In marked contrast in the legislative history is the virtual absence of expression of congressional policy or intent respecting 4's grant of civil jurisdiction to the States. Of special significance for our purposes, however, is the total absence of mention or discussion regarding a congressional intent to confer upon the States an authority to tax Indians or Indian property on reservations. Neither the Committee Reports nor the floor discussion in either House mentions such authority. 7 This omission has significance in the application of the canons of construction applicable to statutes affecting Indian immunities, as some mention would normally be expected if such a sweeping change in the status of tribal government and reservation Indians had been contemplated by Congress. 8 The only mention of taxation authority is in a colloquy between Mr. Sellery, Chief Counsel of the Bureau of Indian Affairs, and Congressman Young during House committee hearings on Pub. L. 280. That colloquy strongly suggests that Congress did not mean to grant tax authority to the States: </s> "Mr. Young. Does your bill limit the provision [426 U.S. 373, 382] for Federal assistance to States in defraying the increased expenses of the courts in connection with the widening of the jurisdiction that the bill encompasses? </s> "Mr. Sellery. No; it does not. </s> "Mr. Young. Do you think it would be necessary to provide for some payment, inasmuch as the great portion of Indian lands are not subject to taxation? </s> "Mr. Sellery. . . . Generally, the Department's views are that if we started on the processes of Federal financial assistance or subsidization of law enforcement activities among the Indians, it might turn out to be a rather costly program, and it is a problem which the States should deal with and accept without Federal financial assistance; otherwise there will be some tendency, the Department believes, for the Indian to be thought of and perhaps to think of himself because of the financial assistance which comes from the Federal Government as still somewhat a member of a race or group which is set apart from other citizens of the State. And it is desired to give him and the other citizens of the State the feeling of a conviction that he is in the same status and has access to the same services, including the courts, as other citizens of the State who are not Indians. </s> "Mr. Young. That would not quite be true, though; would it? Because for the most part he does not pay any taxes. </s> "Mr. Sellery. No. There is that difference. </s> "Mr. Young. A rather sizable difference in not paying for the courts or paying for the increased expenses for judicial proceedings. </s> "Mr. Sellery. The Indians, of course, do pay other forms of taxes. I do not know how the courts [426 U.S. 373, 383] of Nevada are supported financially, but the Indians do pay the sales tax and other taxes. </s> "Mr. Young. But no income tax or corporation tax or profits tax. You understand a large portion of the land is held in trust and therefore is not subject to tax. </s> "Mr. Sellery. That is correct. </s> "Mr. Young. So far as my State is concerned, it would be a large burden on existing costs of judicial procedure. I think it is only right that the Federal Government should make some contribution for that. You seem to differentiate. I think there is a differentiation, too, in that they are not paying taxes. </s> "Mr. Sellery. I will concede your point that they are not paying taxes. The Department has recommended, nevertheless, that no financial assistance be afforded to the States." App. 55-56. 9 </s> Piecing together as best we can the sparse legislative history of 4, subsection (a) seems to have been primarily intended to redress the lack of adequate Indian forums for resolving private legal disputes between reservation Indians, and between Indians and other private citizens, by permitting the courts of the States to decide such disputes; this is definitely the import of the statutory wording conferring upon a State "jurisdiction over civil causes of action between Indians or to which Indians are parties which arise in . . . Indian country . . . to the same extent that such State . . . has jurisdiction over other civil causes of action." With this as the primary [426 U.S. 373, 384] focus of 4 (a), the wording that follows in 4 (a) - "and those civil laws of such State . . . that are of general application to private persons or private property shall have the same force and effect within such Indian country as they have elsewhere within the State" - authorizes application by the state courts of their rules of decision to decide such disputes. 10 Cf. 28 U.S.C. 1652. This construction finds support in the consistent and uncontradicted references in the legislative history to "permitting" "State courts to adjudicate civil controversies" arising on Indian reservations, H. R. Rep. No. 848, pp. 5, 6 (emphasis added), and the absence of anything remotely resembling an intention to confer general state civil regulatory control over Indian reservations. 11 In [426 U.S. 373, 385] short, the consistent and exclusive use of the terms "civil causes of action," "aris[ing] on," "civil laws . . . of general application to private persons or private property," and "adjudicat[ion]," in both the Act and its legislative history virtually compels our conclusion that the primary intent of 4 was to grant jurisdiction over private civil litigation involving reservation Indians in state court. </s> Furthermore, certain tribal reservations were completely exempted from the provisions of Pub. L. 280 precisely because each had a "tribal law-and-order organization that functions in a reasonably satisfactory manner." H. R. Rep. No. 848, p. 7. 12 Congress plainly [426 U.S. 373, 386] meant only to allow state courts to decide criminal and civil matters arising on reservations not so organized. Accordingly, rather than the expansive reading given 4 (a) by the Minnesota Supreme Court, we feel that the construction we give the section is much more consonant with the revealed congressional intent. Moreover, our construction is consistent with our prior references to 4 as "the extension of state jurisdiction over civil causes of action by or against Indians arising in Indian country." Kennerly v. District Court of Montana, 400 U.S. 423, 427 (1971). See also id., at 424 n. 1; id., at 430-431 (STEWART, J., dissenting); Warren Trading Post v. Arizona Tax Comm'n, 380 U.S. 685, 687 n. 3 (1965); Menominee Tribe v. United States, 391 U.S. 404, 416 n. 8 (1968) (STEWART, J., dissenting). </s> Our construction is also more consistent with Title IV of the Civil Rights Act of 1968, 82 Stat. 78, 25 U.S.C. 1321-1326. Title IV repeals 7 of Pub. L. 280 and requires tribal consent as a condition to further state assumptions of the jurisdiction provided in 18 U.S.C. 1162 and 28 U.S.C. 1360. Section 402 of Title IV, 25 U.S.C. 1322, tracks the language of 4 of Pub. L. 280. Section 406 of Title IV, 25 U.S.C. 1326, which provides for Indian consent, refers to "State jurisdiction acquired pursuant to this subchapter with respect to criminal offenses or civil causes of action . . . ." It is true, of course, that the primary interpretation of 4 must have reference to the legislative history of the Congress that enacted it rather than to the history of Acts of a later Congress. Nevertheless, Title IV of the 1968 Act is intimately related to 4, as it provides the method for further state assumptions of the jurisdiction conferred by 4, and we previously have construed the effect of legislation affecting reservation Indians in light of "intervening" legislative enactments. Moe v. Salish & Kootenai Tribes, 425 U.S., at 472 -475. It would be [426 U.S. 373, 387] difficult to suppose that Congress in 1968 intended the meaning of 4 to vary depending upon the time and method by which particular States acquired jurisdiction. And certainly the legislative history of Title IV makes it difficult to construe 4 jurisdiction acquired pursuant to Title IV as extending general state civil regulatory authority, including taxing power, to govern Indian reservations. Senator Ervin, who offered and principally sponsored Title IV, see Kennerly v. District Court of Montana, supra, at 429 n. 5, referred to 1360 civil jurisdiction as follows: </s> "Certain representatives of municipalities have charged that the repeal of [ 7 of] Public Law 280 would hamper air and water pollution controls and provide a haven for undesirable, unrestricted business establishments within tribal land borders. Not only does this assertion show the lack of faith that certain cities have in the ability and desire of Indian tribes to better themselves and their environment, but, most importantly, it is irrelevant, since Public Law 280 relates primarily to the application of state civil and criminal law in court proceedings, and has no bearing on programs set up by the States to assist economic and environmental development in Indian territory." (Emphasis added.) Hearing before the Subcommittee on Indian Affairs of the House Committee on Interior and Insular Affairs, No. 90-23, 90th Cong., 2d Sess., 136 (1968). </s> III </s> Other considerations also support our construction. Today's congressional policy toward reservation Indians may less clearly than in 1953 favor their assimilation, but Pub. L. 280 was plainly not meant to effect total assimilation. Public L. 280 was only one of many types of assimilationist legislation under active consideration [426 U.S. 373, 388] in 1953. H. R. Rep. No. 848, pp. 3-5; Santa Rosa Band of Indians v. Kings County, 532 F.2d 655, 662 (CA9 1975). 13 And nothing in its legislative history remotely suggests that Congress meant the Act's extension of civil jurisdiction to the States should result in the undermining or destruction of such tribal governments as did exist and a conversion of the affected tribes into little more than "`private, voluntary organizations,'" United States v. Mazurie, 419 U.S. 544, 557 (1975) - a possible result if tribal governments and reservation Indians were subordinated to the full panoply of civil regulatory powers, including taxation, of state and local governments. 14 The Act itself refutes such an [426 U.S. 373, 389] inference: there is notably absent any conferral of state jurisdiction over the tribes themselves, and 4 (c), 28 U.S.C. 1360 (c), providing for the "full force and effect" of any tribal ordinances or customs "heretofore or hereafter adopted by an Indian tribe . . . if not inconsistent with any applicable civil law of the State," contemplates the continuing vitality of tribal government. </s> Moreover, the same Congress that enacted Pub. L. 280 also enacted several termination Acts 15 - legislation which is cogent proof that Congress knew well how to express its intent directly when that intent was to subject reservation Indians to the full sweep of state laws and state taxation. Cf. Board of Comm'rs v. Seber, 318 U.S. 705, 713 (1943); Goudy v. Meath, 203 U.S. 146, 149 (1906). These termination enactments provide expressly for subjecting distributed property "and any income derived therefrom by the individual, corporation, or other legal entity . . . to the same taxes, State and Federal, as in the case of non-Indians," 25 U.S.C. 564j, [426 U.S. 373, 390] 749, 898, and provide that "all statutes of the United States which affect Indians because of their status as Indians shall no longer be applicable to the members of the tribe, and the laws of the several States shall apply to the tribe and its members in the same manner as they apply to other citizens or persons within their jurisdiction." 25 U.S.C. 564q, 757, 899; cf. 25 U.S.C. 726. These contemporaneous termination Acts are in pari materia with Pub. L. 280. Menominee Tribe v. United States, 391 U.S., at 411 . Reading this express language respecting state taxation and application of the full range of state laws to tribal members of these contemporaneous termination Acts, the negative inference is that Congress did not mean in 4 (a) to subject reservation Indians to state taxation. Thus, rather than inferring a negative implication of a grant of general taxing power in 4 (a) from the exclusion of certain taxation in 4 (b), we conclude that construing Pub. L. 280 in pari materia with these Acts shows that if Congress in enacting Pub. L. 280 had intended to confer upon the States general civil regulatory powers, including taxation, over reservation Indians, it would have expressly said so. </s> IV </s> Additionally, we note that 4 (b), excluding "taxation of any real or personal property . . . belonging to any Indian or any Indian tribe . . . that is held in trust by the United States or is subject to a restriction against alienation imposed by the United States," is not obviously the narrow exclusion of state taxation that the Minnesota Supreme Court read it to be. On its face the statute is not clear whether the exclusion is applicable only to taxes levied directly on the trust property specifically, or whether it also excludes taxation on activities [426 U.S. 373, 391] taking place in conjunction with such property and income deriving from its use. And even if read narrowly to apply only to taxation levied against trust property directly, 4 (b) certainly does not expressly authorize all other state taxation of reservation Indians. </s> Moreover, the express prohibition of any "alienation, encumbrance, or taxation" of any trust property can be read as prohibiting state courts, acquiring jurisdiction over civil controversies involving reservation Indians pursuant to 4, from applying state laws or enforcing judgments in ways that would effectively result in the "alienation, encumbrance, or taxation" of trust property. Indeed, any other reading of this provision of 4 (b) is difficult to square with the identical prohibition contained in 2 (b) of the Act, which applies the same restrictions upon States exercising criminal jurisdiction over reservation Indians. It would simply make no sense to infer from the identical language of 2 (b) a general power in 2 (a) to tax Indians in all other respects since 2 (a) deals only with criminal jurisdiction. </s> Indeed, 4 (b) in its entirety may be read as simply a reaffirmation of the existing reservation Indian-Federal Government relationship in all respects save the conferral of state-court jurisdiction to adjudicate private civil causes of action involving Indians. We agree with the Court of Appeals for the Ninth Circuit that 4 (b) "is entirely consistent with, and in effect is a reaffirmation of, the law as it stood prior to its enactment." Kirkwood v. Arenas, 243 F.2d 863, 865-866 (1957). The absence of more precise language respecting state taxation of reservation Indians is entirely consistent with a general uncertainty in 1953 of the precise limits of state power to tax reservation Indians respecting other than their trust property, and a congressional [426 U.S. 373, 392] intent merely to reaffirm the existing law whatever subsequent litigation might determine it to be. 16 </s> Finally, in construing this "admittedly ambiguous" statute, Board of Comm'rs v. Seber, 318 U.S., at 713 , we must be guided by that "eminently sound and vital canon," Northern Cheyenne Tribe v. Hollowbreast, 425 U.S. 649, 655 n. 7 (1976), that "statutes passed for the benefit of dependent Indian tribes . . . are to be liberally construed, doubtful expressions being resolved in favor of the Indians." Alaska Pacific Fisheries v. United States, 248 U.S. 78, 89 (1918). See Choate v. Trapp, 224 U.S. 665, 675 (1912); Antoine v. Washington, 420 U.S. 194, 199 -200 (1975). This principle of statutory construction has particular force in the face of claims that ambiguous statutes abolish by implication Indian tax immunities. McClanahan v. Arizona State Tax Comm'n, 411 U.S., at 174 ; Squire v. Capoeman, 351 U.S. 1, 6 -7 (1956); Carpenter v. Shaw, 280 U.S. 363, 366 -367 (1930). "This is so because . . . Indians stand in a special relation to the federal government from which the states are excluded unless the Congress has manifested a clear purpose to terminate [a tax] immunity and allow states to treat Indians as part of the general community." Oklahoma Tax Comm'n v. United States, 319 U.S. 598, 613 -614 (1943) (Murphy, J., dissenting). What we recently said of a claim that [426 U.S. 373, 393] Congress had terminated an Indian reservation by means of an ambiguous statute is equally applicable here to the respondent's claim that 4 (a) of Pub. L. 280 is a clear grant of power to tax, and hence a termination of traditional Indian immunity from state taxation: </s> "Congress was fully aware of the means by which termination could be effected. But clear termination language was not employed in the . . . Act. This being so, we are not inclined to infer an intent to terminate . . . . A congressional determination to terminate must be expressed on the face of the Act or be clear from the surrounding circumstances and legislative history." Mattz v. Arnett, 412 U.S. 481, 504 -505 (1973). </s> The judgment of the Minnesota Supreme Court is </s> Reversed. </s> Footnotes [Footnote 1 The Minnesota Chippewa Tribe is a federally recognized tribe with a constitution approved by the Secretary of the Interior. Memorandum for United States as Amicus Curiae 2 n. 2. Its reservation was established by the Treaty of Feb. 22, 1855, 10 Stat. 1165. </s> [Footnote 2 The McClanahan principle derives from a general pre-emption analysis, 411 U.S., at 172 , that gives effect to the plenary and exclusive power of the Federal Government to deal with Indian tribes, United States v. Mazurie, 419 U.S. 544, 554 n. 11 (1975); Morton v. Mancari, 417 U.S. 535, 551 -552 (1974); Board of Comm'rs v. Seber, 318 U.S. 705, 715 -716 (1943), and "to regulate and protect the Indians and their property against interference even by a state," id., at 715. This pre-emption analysis draws support from "the `backdrop' of the Indian sovereignty doctrine," Moe v. Salish & Kootenai Tribes, 425 U.S. 463, 475 (1976); "`[t]he policy of leaving Indians free from state jurisdiction and control [which] is deeply rooted in the Nation's history,'" McClanahan, 411 U.S., at 168 ; and the extensive federal legislative and administrative regulation of Indian tribes and reservations, id., at 173-179. "Congress has . . . acted consistently upon the assumption that the States have no power to regulate the affairs of Indians on a reservation," Williams v. Lee, 358 U.S. 217, 220 (1959), and therefore "`State laws generally are not applicable to tribal Indians on an Indian reservation except where Congress has expressly provided that State laws shall apply.'" McClanahan, supra, at 170-171 (quoting United States Department of the Interior, Federal Indian Law 845 (1958)). </s> Of course, this pre-emption model usually yields different conclusions as to the application of state laws to tribal Indians who [426 U.S. 373, 377] have left or never inhabited federally established reservations, or Indians "who do not possess the usual accoutrements of tribal self-government," McClanahan, supra, at 167-168; see Mescalero Apache Tribe, 411 U.S., at 148 -149. </s> [Footnote 3 The State Supreme Court relied upon Omaha Tribe of Indians v. Peters, 382 F. Supp. 421 (1974), aff'd, 516 F.2d 133 (CA8 1975), where the District Court for the District of Nebraska gave the same construction to Pub. L. 280 in upholding a state income tax levied against reservation Indian income. </s> [Footnote 4 Petitioner had not properly raised a claim that his mobile home was in fact annexed to tribal trust land and therefore a part of the real property expressly excluded from taxation by 4 (b). The Minnesota Supreme Court found, therefore, that the mobile home was personal property taxable as such under Minnesota law. </s> [Footnote 5 This House Report and the Senate Report, S. Rep. No. 699, 83d Cong., 1st Sess. (1953), are in all material respects identical. All citations herein are to the House Report. </s> [Footnote 6 Section 2 of Pub. L. 280, 18 U.S.C. 1162, provides: </s> "State jurisdiction over offenses committed by or against Indians in the Indian country. </s> "(a) Each of the States or Territories listed in the following table shall have jurisdiction over offenses committed by or against Indians in the areas of Indian country listed opposite the name of the State or Territory to the same extent that such State or Territory has jurisdiction over offenses committed elsewhere within the State or Territory, and the criminal laws of such State or Territory shall have the same force and effect within such Indian country as they have elsewhere within the State or Territory: </s> "State or Territory of Indian country affected </s> . . . . . </s> "Minnesota . . . . . All Indian country within the State, except the Red Lake Reservation. </s> . . . . . </s> "(b) Nothing in this section shall authorize the alienation, encumbrance, or taxation of any real or personal property, including water rights, belonging to any Indian or any Indian tribe, band, or community [426 U.S. 373, 381] that is held in trust by the United States or is subject to a restriction against alienation imposed by the United States; or shall authorize regulation of the use of such property in a manner inconsistent with any Federal treaty, agreement, or statute or with any regulation made pursuant thereto; or shall deprive any Indian or any Indian tribe, band, or community of any right, privilege, or immunity afforded under Federal treaty, agreement, or statute with respect to hunting, trapping, or fishing or the control, licensing, or regulation thereof. </s> "(c) The provisions of sections 1152 and 1153 of this chapter shall not be applicable within the areas of Indian country listed in subsection (a) of this section as areas over which the several States have exclusive jurisdiction." </s> [Footnote 7 99 Cong. Rec. 9962, 10782-10784, 10928 (1953). </s> [Footnote 8 See Israel & Smithson, Indian Taxation, Tribal Sovereignty and Economic Development, 49 N. D. L. Rev. 267, 292 (1973). </s> [Footnote 9 Unpublished Transcript of Hearings on H. R. 1063 before the Subcommittee on Indian Affairs of the House Committee on Interior and Insular Affairs, 83d Cong., 1st Sess. (1953). The transcript was produced by the United States during the briefing of Tonasket v. Washington, 411 U.S. 451 (1973). The portion quoted in the text is reproduced in the Appendix in the instant case. </s> [Footnote 10 Cf. Israel & Smithson, supra, n. 8, at 296: </s> "A fair reading of these two clauses suggests that Congress never intended `civil laws' to mean the entire array of state noncriminal laws, but rather that Congress intended `civil laws' to mean those laws which have to do with private rights and status. Therefore, `civil laws . . . of general application to private persons or private property' would include the laws of contract, tort, marriage, divorce, insanity, descent, etc., but would not include laws declaring or implementing the states' sovereign powers, such as the power to tax, grant franchises, etc. These are not within the fair meaning of `private' laws." </s> [Footnote 11 Moreover, this interpretation is consistent with the title of Pub. L. 280, H. R. Rep. No. 848, p. 3: "A bill to confer jurisdiction on the States . . ., with respect to criminal offenses and civil causes of action committed or arising on Indian reservations within such States, and for other purposes" (the other purposes being 8's withdrawal from the affected areas of the operation of the Federal Indian Liquor Laws, and 6-7's provision of a method whereby additional States could assume civil and criminal jurisdiction over Indian reservations). Additionally, this interpretation is buttressed by 4 (c), which provides that "any tribal ordinance or custom . . . adopted by an Indian tribe . . . in the exercise of any authority which it may possess shall, if not inconsistent with any applicable civil law of the State, be given full force and effect in the determination of civil causes of action pursuant to this section" (emphasis added). Finally, [426 U.S. 373, 385] reading 4 (a) as an integrated whole, with the reference to state civil law as intended to provide the rules of decision for the private civil causes of action over which state courts were granted jurisdiction is consistent with 3 of Pub. L. 280, which codifies 4 in Title 28 of the United States Code. That Title collects Acts of Congress governing jurisdiction and the judiciary. Section 4 would be expected to be codified in Title 25, governing Indian affairs if general state regulatory power over Indian reservations were being granted. Indeed, 4 is entitled, as provided in Pub. L. 280 and codified at 28 U.S.C. 1360, "State civil jurisdiction in actions to which Indians are parties." </s> [Footnote 12 Tribal groups in the affected States which were exempted from the coverage of Pub. L. 280 because they had "reasonably satisfactory law-and-order" organizations, had objected to the extension of state criminal and civil jurisdiction on various grounds. Three of the tribes exempted objected due to their fear of inequitable treatment of reservation Indians in the state courts. H. R. Rep. No. 848, pp. 7-8. Two of the objecting tribes expressed the fear that "the extension of State law to their reservations would result in the loss of various rights." Id., at 8. One tribe objected on the ground that its members were "not yet ready to be subjected to State laws." Ibid. Certainly if abolition of traditional Indian immunity from state taxation, except insofar as expressly excluded, was an anticipated result of Pub. L. 280's extension of civil jurisdiction, vehement Indian objections on this specific ground would also have been voiced. </s> [Footnote 13 The legislative history of Pub. L. 280 does contain a congressional expression that "the Indians of several States have reached a stage of acculturation and development that makes desirable extension of State civil jurisdiction to the Indian country." H. R. Rep. No. 848, p. 6. But not too much can be made of this unelaborated statement; its thrust is too difficult to reconcile with the focus of Pub. L. 280 - extending state jurisdiction to those reservations with the least developed and most inadequate tribal legal institutions; presumably those tribes evincing the least "acculturation and development" in terms of the mainstream of American society. See Goldberg, Public Law 280: The Limits of State Jurisdiction over Reservation Indians, 22 U. C. L. A. L. Rev. 535, 543 (1975). </s> [Footnote 14 Much has been written on the subject of a devastating impact on tribal governments that might result from an interpretation of 4 as conferring upon state and local governments general civil regulatory control over reservation Indians. Santa Rosa Band of Indians v. Kings County, 532 F.2d 655, 662-663, 666-668 (CA9 1975); Goldberg, supra; Note, The Extension of County Jurisdiction Over Indian Reservations in California: Public Law 280 and the Ninth Circuit, 25 Hastings L. J. 1451 (1974); Comment, Indian Taxation: Underlying Policies and Present Problems, 59 Calif. L. Rev. 1261 (1971). The suggestion is that since tribal governments are disabled under many state laws from incorporating as local units of government, Goldberg, supra, at 581, general regulatory control might relegate tribal governments to a level below [426 U.S. 373, 389] that of counties and municipalities, thus essentially destroying them, particularly if they might raise revenue only after the tax base had been filtered through many governmental layers of taxation. Present federal policy appears to be returning to a focus upon strengthening tribal self-government, see, e. g., Indian Financing Act of 1974, 88 Stat. 77, 25 U.S.C. 1451 et seq. (1970 ed., Supp. V); Indian Self-Determination and Education Assistance Act of 1975, 88 Stat. 2203, 25 U.S.C. 450 et seq. (1970 ed., Supp. V), and the Court of Appeals for the Ninth Circuit has expressed the view that courts "are not obliged in ambiguous instances to strain to implement [an assimilationist] policy Congress has now rejected, particularly where to do so will interfere with the present congressional approach to what is, after all, an ongoing relationship." Santa Rosa Band of Indians v. Kings County, supra, at 663. </s> [Footnote 15 68 Stat. 718, 25 U.S.C. 564 (Klamath Tribe); 68 Stat. 768, 25 U.S.C. 721-728 (Alabama and Coushatta Tribes of Texas); 68 Stat. 1099, 25 U.S.C. 741-760 (Paiute Indians of Utah); 68 Stat. 250, 25 U.S.C. 891-901 (Menominee Tribe of Wisconsin). </s> [Footnote 16 Congress would have been fully justified in 1953 in being uncertain as to state power to levy a personal property tax on reservation Indians. No decision of this Court directly resolved the issue until Moe v. Salish & Kootenai Tribes, 425 U.S. 463 (1976), decided earlier this Term. It appears that the only decision of this Court prior to 1953 dealing with state power to levy a personal property tax on reservation Indians was United States v. Rickert, 188 U.S. 432, 443 -444 (1903), which held exempt from state taxation personal Indian property purchased with federal funds. See United States Department of the Interior, Federal Indian Law 865 (1958). </s> [426 U.S. 373, 394]

United States Supreme Court WILLIS SHAW EXP. v. UNITED STATES(1964) No. 201 Argued: Decided: May 4, 1964 </s> The District Court affirmed an order of the Interstate Commerce Commission (ICC) granting appellant's common carrier application under the grandfather clause of the Transportation Act of 1958 to transport certain frozen seasonal agricultural products but substantially curtailing its prior operations. Held: The ICC should reconsider in light of the carrier's status and ability to perform, and the transportation characteristics and marketing pattern of the products. United States v. Carolina Freight Carriers Corp., 315 U.S. 475, 482 -489. </s> Reversed and remanded. </s> A. Alvis Layne argued the cause for appellant. With him on the brief was John H. Joyce. </s> Stephen J. Pollak argued the cause for the United States et al. With him on the brief were Solicitor General Cox, Assistant Attorney General Orrick, Lionel Kestenbaum, Robert W. Ginnane and Fritz R. Kahn. </s> PER CURIAM. </s> Appellant applied to the Interstate Commerce Commission under the grandfather clause of the Transportation Act of 1958, 7 (c), 72 Stat. 573, 49 U.S.C. 303 (b) (6), to transport as a common carrier over irregular routes frozen fruits, berries, and vegetables, and frozen seafoods and poultry when transported with such frozen fruits, berries, and vegetables. The Commission granted a certificate which substantially curtailed appellant's prior operations. 89 M. C. C. 377. The District Court affirmed without opinion. </s> We think United States v. Carolina Freight Carriers Corp., 315 U.S. 475 , requires reversal of the judgment and [377 U.S. 159, 160] a remand to the Commission for reconsideration in light of appellant's status and performance as a common carrier, the transportation characteristics and marketing pattern of these seasonal agricultural products, and the demonstrated ability of appellant to perform the services. Id., at 482-489. </s> Reversed and remanded. </s> MR. JUSTICE HARLAN, MR. JUSTICE STEWART and MR. JUSTICE WHITE dissent, agreeing with the three-judge District Court that the Commission correctly employed the statutory standards prescribed by Congress. "The precise delineation of the area or the specification of localities which may be serviced has been entrusted by the Congress to the Commission." United States v. Carolina Freight Carriers Corp., 315 U.S. 475, 480 . See also Alton R. Co. v. United States, 315 U.S. 15, 22 -23. </s> [377 U.S. 159, 161]

United States Supreme Court UNITED STATES v. ATLANTIC RESEARCH CORP.(2007) No. 06-562 Argued: April 23, 2007Decided: June 11, 2007 </s> Sections 107(a) and 113(f) of the Comprehensive Environmental Response, Compensation, and Liability Act of 1980 allow private parties to recover expenses associated with cleaning up contaminated sites. Section 107(a) defines four categories of potentially responsible parties (PRPs) and makes them liable for, among other things, "(A) all costs of removal or remedial action incurred by the United States Government or a State or an Indian tribe not inconsistent with the national contingency plan" and "(B) any other necessary costs of response incurred by any other person consistent with [such] plan," §§107(a)(4)(A)-(B). Originally, some courts interpreted §107(a)(4)(B) as providing a cause of action for a private party to recover voluntarily incurred response costs and to seek contribution after having been sued. However, after the enactment of §113(f), which authorizes one PRP to sue another for contribution, many courts held it to be the exclusive remedy for PRPs. In Cooper Industries, Inc. v. Aviall Services, Inc., 543 U.S. 157, 161, this Court held that a private party could seek contribution under §113(f) only after being sued under §106 or §107(a). </s> After respondent Atlantic Research cleaned up a Government site it leased and contaminated while doing Government work, it sued the Government to recover some of its costs under, as relevant here, §107(a). The District Court dismissed the case, but the Eighth Circuit reversed, holding that §113(f) does not provide the exclusive remedy for recovering cleanup costs and that §107(a)(4)(B) provided a cause of action to any person other than those permitted to sue under §107(a)(4)(A). Held:Because §107(a)(4)(B)'s plain terms allow a PRP to recover costs from other PRPs, the statute provides Atlantic Research with a cause of action. Pp.4-11. (a)Applying the maxim that statutes must "be read as a whole," King v. St. Vincent's Hospital, 502 U.S. 215, 221, subparagraph (B)'s language can be understood only with reference to subparagraph (A). The provisions are adjacent and have similar structures, and the text denotes a relationship between them. Subparagraph (B)'s phrase "other necessary costs" refers to and differentiates the relevant costs from those listed in subparagraph (A). Thus, it is natural to read the phrase "any other person" by referring to the immediately preceding subparagraph (A). Accepting the Government's interpretation--that "any other person" refers only to a person not identified as a PRP in §§107(a)(1)-(4)--would destroy the symmetry of subparagraphs (A) and (B) and render subparagraph (B) internally confusing. Moreover, because the statute defines PRPs so broadly as to sweep in virtually all persons likely to incur cleanup costs, accepting that interpretation would reduce the number of potential plaintiffs to almost zero, rendering subparagraph (B) a dead letter. Pp.4-7. </s> (b)Contrary to the Government's argument, this interpretation will not create friction between §107(a) and §113(f). Their two clearly distinct remedies complement each other: §113(f)(1) authorizes a contribution action to PRPs with common liability stemming from an action instituted under §106 or §107(a), while §107(a) permits cost recovery (as distinct from contribution) by a private party that has itself incurred cleanup costs. Thus, at least in the case of reimbursement, a PRP cannot choose §107(a)'s longer statute of limitations for recovery actions over §113(f)'s shorter one for contribution claims. Similarly, a PRP could not avoid §113(f)'s equitable distribution of reimbursement costs among PRPs by instead choosing to impose joint and several liability under §107(a). That choice of remedies simply does not exist, and in any event, a defendant PRP in a §107(a) suit could blunt any such distribution by filing a §113(f) counterclaim. Finally, permitting PRPs to seek recovery under §107(a) will not eviscerate §113(f)(2), which prohibits §113(f) contribution claims against "[a] person who has resolved its liability to the United States or a State in an administrative or judicially approved settlement ...." Although that settlement bar does not by its terms protect against §107(a) cost-recovery liability, a district court applying traditional equity rules would undoubtedly consider any prior settlement in the liability calculus; the settlement bar continues to provide significant protection from contribution suits by PRPs that have inequitably reimbursed costs incurred by another party; and settlement carries the inherent benefit of finally resolving liability as to the United States or a State. Pp.7-11. 459 F.3d 827, affirmed. Thomas, J., delivered the opinion for a unanimous Court. </s> UNITED STATES, PETITIONER v. ATLANTICRESEARCH CORPORATION on writ of certiorari to the united states court of appeals for the eighth circuit [June 11, 2007] </s> Justice Thomas delivered the opinion of the Court. </s> Two provisions of the Comprehensive Environmental Response, Compensation, and Liability Act of 1980 (CERCLA)--§§107(a) and 113(f)--allow private parties to recover expenses associated with cleaning up contaminated sites. 42 U.S.C. §§9607(a), 9613(f). In this case, we must decide a question left open in Cooper Industries, Inc. v. Aviall Services, Inc., 543 U.S. 157, 161 (2004): whether §107(a) provides so-called potentially responsible parties (PRPs), 42 U.S.C. §§9607(a)(1)-(4), with a cause of action to recover costs from other PRPs. We hold that it does. I A </s> Courts have frequently grappled with whether and how PRPs may recoup CERCLA-related costs from other PRPs. The questions lie at the intersection of two statutory provisions--CERCLA §§107(a) and 113(f). Section 107(a) defines four categories of PRPs, 94 Stat. 2781, 42 U.S.C. §§9607(a)(1)-(4), and makes them liable for, among other things: "(A) all costs of removal or remedial action incurred by the United States Government or a State or an Indian tribe not inconsistent with the national contingency plan; [and] </s> "(B) any other necessary costs of response incurred by any other person consistent with the national contingency plan." §9607(a)(4)(A)-(B). </s> Enacted as part of the Superfund Amendments and Reauthorization Act of 1986 (SARA), 100 Stat. 1613, §113(f) authorizes one PRP to sue another for contribution in certain circumstances. 42 U.S.C. §9613(f).1 </s> Prior to the advent of §113(f)'s express contribution right, some courts held that §107(a)(4)(B) provided a cause of action for a private party to recover voluntarily incurred response costs and to seek contribution after having been sued. See Cooper Industries, supra, at 161-162 (collecting cases); Key Tronic Corp. v. United States, 511 U.S. 809, 816, n.7 (1994) same. After SARA's enactment, however, some Courts of Appeals believed it necessary to "direc[t] traffic between" §107(a) and §113(f). 459 F.3d 827, 832 (CA8 2006) (case below). As a result, many Courts of Appeals held that §113(f) was the exclusive remedy for PRPs. See Cooper Industries, supra, at 169 (collecting cases). But as courts prevented PRPs from suing under §107(a), they expanded §113(f) to allow PRPs to seek "contribution" even in the absence of a suit under §106 or §107(a). Aviall Servs., Inc. v. Cooper Industries, Inc., 312 F.3d 677, 681 (CA5 2002) (en banc). </s> In Cooper Industries, we held that a private party could seek contribution from other liable parties only after having been sued under §106 or §107(a). 543 U.S., at 161. This narrower interpretation of §113(f) caused several Courts of Appeals to reconsider whether PRPs have rights under §107(a)(4)(B), an issue we declined to address in Cooper Industries. Id., at 168. After revisiting the issue, some courts have permitted §107(a) actions by PRPs. See Consolidated Edison Co. of N.Y. v. UGI Utilities, Inc., 423 F.3d 90 (CA2 2005); Metropolitan Water Reclamation Dist. of Greater Chicago v. North American Galvanizing & Coatings, Inc., 473 F.3d 824 (CA7 2007). However, at least one court continues to hold that §113(f) provides the exclusive cause of action available to PRPs. E. I. Dupont de Nemours & Co. v. United States, 460 F.3d 515 (CA3 2006). Today, we resolve this issue. B </s> In this case, respondent Atlantic Research leased property at the Shumaker Naval Ammunition Depot, a facility operated by the Department of Defense. At the site, Atlantic Research retrofitted rocket motors for petitioner United States. Using a high-pressure water spray, Atlantic Research removed pieces of propellant from the motors. It then burned the propellant pieces. Some of the resultant wastewater and burned fuel contaminated soil and groundwater at the site. Atlantic Research cleaned the site at its own expense and then sought to recover some of its costs by suing the United States under both §107(a) and §113(f). After our decision in Cooper Industries foreclosed relief under §113(f), Atlantic Research amended its complaint to seek relief under §107(a) and federal common law. The United States moved to dismiss, arguing that §107(a) does not allow PRPs (such as Atlantic Research) to recover costs. The District Court granted the motion to dismiss, relying on a case decided prior to our decision in Cooper Industries, Dico, Inc. v. Amoco Oil Co., 340 F.3d 525 (CA8 2003). </s> The Court of Appeals for the Eighth Circuit reversed. Recognizing that Cooper Industries undermined the reasoning of its prior precedent, 459 F.3d, at 830, n.4, the Court of Appeals joined the Second and Seventh Circuits in holding that §113(f) does not provide "the exclusive route by which [PRPs] may recover cleanup costs." Id., at 834 (citing Consolidated Edison Co., supra). The court reasoned that §107(a)(4)(B) authorized suit by any person other than the persons permitted to sue under §107(a)(4)(A). 459 F.3d, at 835. Accordingly, it held that §107(a)(4)(B) provides a cause of action to Atlantic Research. To prevent perceived conflict between §107(a)(4)(B) and §113(f)(1), the Court of Appeals reasoned that PRPs that "have been subject to §§106 or 107 enforcement actions are still required to use §113, thereby ensuring its continued vitality." Id., at 836-837. We granted certiorari, 549 U.S. ___ (2007), and now affirm. II A </s> The parties' dispute centers on what "other person[s]" may sue under §107(a)(4)(B). The Government argues that "any other person" refers to any person not identified as a PRP in §§107(a)(1)-(4).2 In other words, subparagraph (B) permits suit only by non-PRPs and thus bars Atlantic Research's claim. Atlantic Research counters that subparagraph (B) takes its cue from subparagraph (A), not the earlier paragraph (1)-(4). In accord with the Court of Appeals, Atlantic Research believes that subparagraph (B) provides a cause of action to anyone except the United States, a State, or an Indian tribe--the persons listed in subparagraph (A). We agree with Atlantic Research. Statutes must "be read as a whole." King v. St. Vincent's Hospital, 502 U.S. 215, 221 (1991). Applying that maxim, the language of suparagraph (B) can be understood only with reference to subparagraph (A). The provisions are adjacent and have remarkably similar structures. Each concerns certain costs that have been incurred by certain entities and that bear a specified relationship to the national contingency plan.3 Bolstering the structural link, the text also denotes a relationship between the two provisions. By using the phrase "other necessary costs," subparagraph (B) refers to and differentiates the relevant costs from those listed in subparagraph (A). </s> In light of the relationship between the subparagraph, it is natural to read the phrase "any other person" by referring to the immediately preceding subparagraph (A), which permits suit only by the United States, a State, or an Indian tribe. The phrase "any other person" therefore means any person other than those three. See 42 U.S.C. §9601(21) (defining "person" to include the United States and the various States). Consequently, the plain language of subparagraph (B) authorizes cost-recovery actions by any private party, including PRPs. See Key Tronic, 511 U.S., at 818 (stating in dictum that §107 "impliedly authorizes private parties to recover cleanup costs from other PRP[s]" (emphasis added)). </s> The Government's interpretation makes little textual sense. In subparagraph (B), the phrase "any other necessary costs" and the phrase "any other person" both refer to antecedents--"costs" and "person[s]"--located in some previous statutory provision. Although "any other necessary costs" clearly references the costs in subparagraph (A), the Government would inexplicably interpret "any other person" to refer not to the persons listed in subparagraph (A) but to the persons listed as PRPs in paragraphs (1)-(4). Nothing in the text of §107(a)(4)(B) suggests an intent to refer to antecedents located in two different statutory provisions. Reading the statute in the manner suggested by the Government would destroy the symmetry of §§107(a)(4)(A) and (B) and render subparagraph (B) internally confusing. </s> Moreover, the statute defines PRPs so broadly as to sweep in virtually all persons likely to incur cleanup costs. Hence, if PRPs do not qualify as "any other person" for purposes of §107(a)(4)(B), it is unclear what private party would. The Government posits that §107(a)(4)(B) authorizes relief for "innocent" private parties--for instance, a landowner whose land has been contaminated by another. But even parties not responsible for contamination may fall within the broad definitions of PRPs in §§107(a)(1)-(4). See 42 U.S.C. §9607(a)(1) (listing "the owner and operator of a ... facility" as a PRP); see also United States v. Alcan Aluminum Corp., 315 F.3d 179, 184 (CA2 2003) ("CERCLA §9607 is a strict liability statute"). The Government's reading of the text logically precludes all PRPs, innocent or not, from recovering cleanup costs. Accordingly, accepting the Government's interpretation would reduce the number of potential plaintiffs to almost zero, rendering §107(a)(4)(B) a dead letter.4 See Louisville & Nashville R. Co. v. Mottley, 219 U.S. 467, 475 (1911) ("We must have regard to all the words used by Congress, and as far as possible give effect to them"). </s> According to the Government, our interpretation suffers from the same infirmity because it causes the phrase "any other person" to duplicate work done by other text. In the Government's view, the phrase "any other necessary costs" "already precludes governmental entities from recovering under" §107(a)(4)(B). Brief for United States 20. Even assuming the Government is correct, it does not alter our conclusion. The phrase "any other person" performs a significant function simply by clarifying that subparagraph (B) excludes the persons enumerated in subparagraph (A). In any event, our hesitancy to construe statutes to render language superfluous does not require us to avoid surplusage at all costs. It is appropriate to tolerate a degree of surplusage rather than adopt a textually dubious construction that threatens to render the entire provision a nullity. B </s> The Government also argues that our interpretation will create friction between §107(a) and §113(f), the very harm courts of appeals have previously tried to avoid. In particular, the Government maintains that our interpretation, by offering PRPs a choice between §107(a) and §113(f), effectively allows PRPs to circumvent §113(f)'s shorter statute of limitations. See 42 U.S.C. §§9613(g)(2)-(3). Furthermore, the Government argues, PRPs will eschew equitable apportionment under §113(f) in favor of joint and several liability under §107(a). Finally, the Government contends that our interpretation eviscerates the settlement bar set forth in §113(f)(2). We have previously recognized that §§107(a) and 113(f) provide two "clearly distinct" remedies. Cooper Industries, 543 U.S., at 163, n.3. "CERCLA provide[s] for a right to cost recovery in certain circumstances, §107(a), and separate rights to contribution in other circumstances, §§113(f)(1), 113(f)(3)(B)." Id., at 163 (emphases added). The Government, however, uses the word "contribution" as if it were synonymous with any apportionment of expenses among PRPs. Brief for United States 33, n.14 ("Contribution is merely a form of cost recovery, not a wholly independent type of relief"); see also, e.g., Pinal Creek Group v. Newmont Mining Corp., 118 F.3d 1298, 1301 (CA9 1997) ("Because all PRPs are liable under the statute, a claim by one PRP against another PRP necessarily is for contribution"). This imprecise usage confuses the complementary yet distinct nature of the rights established in §§107(a) and 113(f). </s> Section 113(f) explicitly grants PRPs a right to contribution. Contribution is defined as the "tortfeasor's right to collect from others responsible for the same tort after the tortfeasor has paid more than his or her proportionate share, the shares being determined as a percentage of fault." Black's Law Dictionary 353 (8th ed. 1999). Nothing in §113(f) suggests that Congress used the term "contribution" in anything other than this traditional sense. The statute authorizes a PRP to seek contribution "during or following" a suit under §106 or §107(a). 42 U.S.C. §9613(f)(1).5 Thus, §113(f)(1) permits suit before or after the establishment of common liability. In either case, a PRP's right to contribution under §113(f)(1) is contingent upon an inequitable distribution of common liability among liable parties. </s> By contrast, §107(a) permits recovery of cleanup costs but does not create a right to contribution. A private party may recover under §107(a) without any establishment of liability to a third party. Moreover, §107(a) permits a PRP to recover only the costs it has "incurred" in cleaning up a site. 42 U.S.C. §9607(a)(4)(B). When a party pays to satisfy a settlement agreement or a court judgment, it does not incur its own costs of response. Rather, it reimburses other parties for costs that those parties incurred. </s> Accordingly, the remedies available in §§107(a) and 113(f) complement each other by providing causes of action "to persons in different procedural circumstances." Consolidated Edison, 423 F.3d, at 99; see also E. I. Dupont de Nemours, 460 F.3d, at 548 (Sloviter, J., dissenting). Section 113(f)(1) authorizes a contribution action to PRPs with common liability stemming from an action instituted under §106 or §107(a). And §107(a) permits cost recovery (as distinct from contribution) by a private party that has itself incurred cleanup costs. Hence, a PRP that pays money to satisfy a settlement agreement or a court judgment may pursue §113(f) contribution. But by reimbursing response costs paid by other parties, the PRP has not incurred its own costs of response and therefore cannot recover under §107(a). As a result, though eligible to seek contribution under §113(f)(1), the PRP cannot simultaneously seek to recover the same expenses under §107(a). Thus, at least in the case of reimbursement, the PRP cannot choose the 6-year statute of limitations for cost-recovery actions over the shorter limitations period for §113(f) contribution claims.6 </s> For similar reasons, a PRP could not avoid §113(f)'s equitable distribution of reimbursement costs among PRPs by instead choosing to impose joint and several liability on another PRP in an action under §107(a).7 The choice of remedies simply does not exist. In any event, a defendant PRP in such a §107(a) suit could blunt any inequitable distribution of costs by filing a §113(f) counterclaim. 459 F.3d, at 835; see also Consolidated Edison, supra, at 100, n.9 (collecting cases). Resolution of a §113(f) counter-claim would necessitate the equitable apportionment of costs among the liable parties, including the PRP that filed the §107(a) action. 42 U.S.C. §9613(f)(a) ("In resolving contribution claims, the court may allocate response costs among liable parties using such equitable factors as the court determines are appropriate"). </s> Finally, permitting PRPs to seek recovery under §107(a) will not eviscerate the settlement bar set forth in §113(f)(2). That provision prohibits §113(f) contribution claims against "[a] person who has resolved its liability to the United States or a State in an administrative or judicially approved settlement ...." 42 U.S.C. §9613(f)(2). The settlement bar does not by its terms protect against cost-recovery liability under §107(a). For several reasons, we doubt this supposed loophole would discourage settlement. First, as stated above, a defendant PRP may trigger equitable apportionment by filing a §113(f) counterclaim. A district court applying traditional rules of equity would undoubtedly consider any prior settlement as part of the liability calculus. Cf. Restatement (Second) of Torts §886A(2), p. 337 (1977) ("No tortfeasor can be required to make contribution beyond his own equitable share of the liability"). Second, the settlement bar continues to provide significant protection from contribution suits by PRPs that have inequitably reimbursed the costs incurred by another party. Third, settlement carries the inherent benefit of finally resolving liability as to the United States or a State.8 III </s> Because the plain terms of §107(a)(4)(B) allow a PRP to recover costs from other PRPs, the statute provides Atlantic Research with a cause of action. We therefore affirm the judgment of the Court of Appeals. It is so ordered. </s> FOOTNOTESFootnote 1Section 113(f)(1) permits private parties to seek contribution during or following a civil action under §106 or §107(a). 42 U.S.C. §9613(f)(1). Section 113(f)(3)(B) permits private parties to seek contribution after they have settled their liability with the Government. §9613(f)(3)(B). Footnote 2CERCLA §107(a) lists four broad categories of persons as PRPs, by definition liable to other persons for various costs: </s> "(1) the owner and operator of a vessel or a facility, </s> "(2) any person who at the time of disposal of any hazardous substance owned or operated any facility at which such hazardous substances were disposed of, </s> "(3) any person who by contract, agreement, or otherwise arranged for disposal or treatment, or arranged with a transporter for transport for disposal or treatment, of hazardous substances owned or possessed by such person, by any other party or entity, at any facility or incineration vessel owned or operated by another party or entity and containing such hazardous substances, and </s> "(4) any person who accepts or accepted any hazardous substances for transport to disposal or treatment facilities, incineration vessels or sites selected by such person, from which there is a release, or a threatened release which causes the incurrence of response costs, of a hazardous substance, shall be liable for [various costs]." 42 U.S.C. §§9607(a)(1)-(4). Footnote 3"The national contingency plan specifies procedures for preparing and responding to contaminations and was promulgated by the Environmental Protection Agency ...." Cooper Industries Inc. v. Aviall Services, Inc., 543 U.S. 157, 161, n.2 (2004) (citing 40 CFR pt. 300 (2004)). Footnote 4Congress amended the statute in 2002 to exempt some bona fide prospective purchasers (BFPPs) from liability under §107(a). See 42 U.S.C. §9607(r)(1) (2000 ed., Supp. IV). The Government claims that these persons are non-PRPs and therefore qualify as "any other person" under its interpretation of §107(a)(4)(B). Prior to 2002, however, the statute made this small set of persons liable as PRPs. Accordingly, even if BFPPs now give some life to the Government's interpretation of §107(a)(4)(B), it would be implausible at best to conclude that §107(a)(4)(B) lay dormant until the enactment of §107(r)(1) in 2002. Footnote 5Similarly, §113(f)(3)(B) permits a PRP to seek contribution after it "has resolved its liability to the United States or a State ... in an administrative or judicially approved settlement ...." 42 U.S.C. §9613(f)(3)(B). Footnote 6We do not suggest that §§107(a)(4)(B) and 113(f) have no overlap at all. Key Tronic Corp. v. United States, 511 U.S. 809, 816 (1994) (stating the statutes provide "similar and somewhat overlapping remed[ies]"). For instance, we recognize that a PRP may sustain expenses pursuant to a consent decree following a suit under §106 or §107(a). See, e.g., United Technologies Corp. v. Browning-Ferris Industries, Inc., 33 F.3d 96, 97 (CA1 1994). In such a case, the PRP does not incur costs voluntarily but does not reimburse the costs of another party. We do not decide whether these compelled costs of response are recoverable under §113(f), §107(a), or both. For our purposes, it suffices to demonstrate that costs incurred voluntarily are recoverable only by way of §107(a)(4)(B), and costs of reimbursement to another person pursuant to a legal judgment or settlement are recoverable only under §113(f). Thus, at a minimum, neither remedy swallows the other, contrary to the Government's argument. Footnote 7We assume without deciding that §107(a) provides for joint and several liability. Footnote 8Because §107(a) expressly permits PRPs to seek cost recovery, we need not address the alternative holding of the Court of Appeals that §107(a) contains an additional implied right to contribution for PRPs who are not eligible for relief under §113(f). Cf. Cooper Industries, 543 U.S., at 171 (citing Texas Industries, Inc. v. Radcliff Materials, Inc., 451 U.S. 630 (1981); Northwest Airlines, Inc. v. Transport Workers, 451 U.S. 77 (1981)).

United States Supreme Court UNITED STATES v. NEIFERT-WHITE CO.(1968) No. 267 Argued: January 18, 1968Decided: March 5, 1968 </s> The False Claims Act, which was enacted "broadly to protect the funds and property of the Government from fraudulent claims, regardless of the particular form, or function, of the governmental instrumentality upon which such claims were made," Rainwater v. United States, 356 U.S. 590, 592 (1958), held to apply to the supplying of false information in support of an application to the Commodity Credit Corporation for a loan. Pp. 229-233. </s> 372 F.2d 372, reversed and remanded. </s> John S. Martin, Jr., argued the cause for the United States. With him on the briefs were Solicitor General Griswold, Assistant Attorney General Weisl, John C. Eldridge and Robert V. Zener. </s> Patrick F. Hooks argued the cause for respondent. With him on the brief was Michael J. Hughes. </s> MR. JUSTICE FORTAS delivered the opinion of the Court. </s> This is an action by the United States to recover statutory forfeitures under the False Claims Act. 1 The [390 U.S. 228, 229] question is whether the Act applies to the supplying of false information in support of an application to a federal agency, the Commodity Credit Corporation (CCC), for a loan. The District Court dismissed the action on the ground that an application for a CCC loan, as distinguished from a claim for payment of an obligation owed by the Government, is not a "claim" within the meaning of the Act. The Court of Appeals for the Ninth Circuit affirmed. We granted certiorari. 389 U.S. 814 (1967). </s> The CCC is authorized to make loans to grain growers to finance the construction or purchase of storage facilities. 4 (h) of the Commodity Credit Corporation Charter Act, as amended, 62 Stat. 1071, 15 U.S.C. 714b (h). Pursuant to its authority under statute, 15 U.S.C. 714b (d), the CCC has adopted regulations providing for the granting of loans in amounts not to exceed 80% of the actual purchase price of storage bins. A grain grower who desires to apply for a loan is required to support his application by an invoice showing the purchase [390 U.S. 228, 230] price and the amount of the down payment made by him. 23 Fed. Reg. 9687. </s> Since the Government's complaint was dismissed for failure to state a cause of action, the allegations of the complaint must be taken as true for present purposes. According to the complaint, respondent is a dealer in grain storage bins. In 1959, in selling bins to 12 grain farmers, one of respondent's officers prepared invoices in which the purchase price was deliberately overstated. The purpose was fraudulently to induce the CCC to extend loans to respondent's customers in amounts exceeding 80% of the actual purchase price. The invoices were submitted to the CCC along with the loan applications, and the agency relied on the overstated purchase price in determining the amount of loans that were subsequently made. The United States claims the statutory forfeiture of $2,000 for each of the 12 alleged violations of the Act. </s> The issue in this case is narrow and precise: Does the False Claims Act reach "claims" for favorable action by the Government upon applications for loans or is it confined to "claims" for payments due and owing from the Government? 2 It is respondent's position that the term "claims" in the Act must be read in its narrow sense to include only a demand based upon the Government's liability to the claimant. Respondent relies upon United States v. Cohn, 270 U.S. 339 (1926), and United States v. McNinch, 356 U.S. 595 (1958), to support this narrow reading. </s> Cohn involved a criminal proceeding under an earlier version of the present False Claims Act. 3 It concerned a [390 U.S. 228, 231] fraudulent application to obtain the release of merchandise which did not belong to the United States and which was being held by the customs authorities as bailee only. The case did not involve an attempt, by fraud, to cause the Government to part with its money or property, either in discharge of an obligation or in response to an application for discretionary action. The language in the Court's opinion upon which respondent relies cannot be taken as a decision upon a point which the facts of the case did not present. 4 </s> In McNinch, the Government brought suit for damages and forfeitures under the False Claims Act, in its present form, against persons who had filed fraudulent applications for home-modernization loans with a private bank which was regularly insured by the Federal Housing Administration against losses on such loans. The bank granted the loans sought by defendants, which were "routinely" insured by the FHA. 356 U.S., at 597 , n. 4. [390 U.S. 228, 232] This Court held that since FHA "disburses no funds nor does it otherwise suffer immediate financial detriment," id., at 599, the transaction was not within the ambit of the False Claims Act. The Court emphasized the distinction between contracts of insurance against loss such as those involved in McNinch, and transactions in which the United States pays or lends money. For purposes of the present case, we need not reconsider the validity of this distinction. It is sufficient to note that the instant case involves a false statement made with the purpose and effect of inducing the Government immediately to part with money. </s> The precise question presented by this case has never been considered by the Court. However, both the history and the language of the False Claims Act, as well as the thrust of our prior decisions, indicate the answer to our present inquiry. The original False Claims Act was passed in 1863 as a result of investigations of the fraudulent use of government funds during the Civil War. Debates at the time suggest that the Act was intended to reach all types of fraud, without qualification, that might result in financial loss to the Government. 5 In its present form the Act is broadly phrased to reach any person who makes or causes to be made "any claim upon or against" the United States, or who makes a false "bill, receipt, . . . claim, . . . affidavit, or deposition" for the purpose of "obtaining or aiding to obtain the payment or approval of" such a false claim. In the various contexts in which questions of the proper construction of the Act have been presented, the Court has consistently refused to accept a rigid, restrictive reading, even at the time when the statute imposed criminal sanctions as well as civil. 6 See, e. g., United States ex rel. Marcus v. Hess, 317 U.S. 537 (1943). [390 U.S. 228, 233] </s> On the very day that this Court decided McNinch, it also decided three cases holding that a fraudulent application for a loan submitted to the CCC was a claim against the Government of the United States, within the meaning of the False Claims Act. 7 The question debated in those cases was not the meaning of the word "claim," but whether the CCC, a wholly owned government corporation, was "the Government of the United States, or any department or officer thereof" within the meaning of the statute. In the course of its opinion on this matter, the Court noted that the objective of Congress in enacting the False Claims Act "was broadly to protect the funds and property of the Government from fraudulent claims, regardless of the particular form, or function, of the government instrumentality upon which such claims were made" and that "[b]y any ordinary standard the language of the Act is certainly comprehensive enough to achieve this purpose." Rainwater v. United States, 356 U.S. 590, 592 (1958). </s> Analogous reasoning leads us to hold today that the False Claims Act should not be given the narrow reading that respondent urges. This remedial statute reaches beyond "claims" which might be legally enforced, to all fraudulent attempts to cause the Government to pay out sums of money. We believe the term "claim," as used in the statute, is broad enough to reach the conduct alleged by the Government in its complaint. Accordingly, we reverse the judgment of the Court of Appeals and remand the case for further proceedings in accordance with this opinion. </s> Reversed and remanded. </s> MR. JUSTICE MARSHALL took no part in the consideration or decision of this case. </s> Footnotes [Footnote 1 In relevant part, the statute provides as follows: R. S. 3490 (1874): "Any person . . . who shall do or commit any of the acts prohibited by any of the provisions of section fifty-four hundred and thirty-eight, Title `CRIMES,' shall forfeit and pay to the United States the sum of two thousand dollars, and, in addition, double the amount of damages which the United States may have sustained by reason of the doing or committing such act . . . ." R. S. 5438 (1874): "Every person who makes or causes to be made, or presents or causes to be presented, for payment or approval, to or by any person or officer in the civil, military, or naval service of the United States, any claim upon or against the Government of the United States, [390 U.S. 228, 229] or any department or officer thereof, knowing such claim to be false, fictitious, or fraudulent, or who, for the purpose of obtaining or aiding to obtain the payment or approval of such claim, makes, uses, or causes to be made or used, any false bill, receipt, voucher, roll, account, claim, certificate, affidavit, or deposition, knowing the same to contain any fraudulent or fictitious statement or entry, or who enters into any agreement, combination, or conspiracy to defraud the Government of the United States, or any department or officer thereof, by obtaining or aiding to obtain the payment or allowance of any false or fraudulent claim, . . . shall be imprisoned at hard labor for not less than one nor more than five years, or fined not less than one thousand nor more than five thousand dollars." The criminal aspect of this statutory scheme has been altered and codified in 18 U.S.C. 287 and 18 U.S.C. 1001; see n. 2, infra. The civil (forfeiture) provisions have been codified, unaltered, in 31 U.S.C. 231, but the above-cited version of these provisions continues to be the official one. The above-quoted provisions survive only insofar as civil liability is concerned. </s> [Footnote 2 No other issue is presented. The statute expressly reaches persons who falsify a "receipt" "for the purpose of . . . aiding to obtain the payment or approval of [a] claim." See n. 1, supra. </s> [Footnote 3 See n. 1, supra. The criminal aspect of the original False Claims Act has been carried forward in two separate criminal statutes [390 U.S. 228, 231] currently in force. Section 287 of Title 18 makes it a crime for a person to present "any claim upon or against the United States, or any department or agency thereof, knowing such claim to be false, fictitious, or fraudulent." Section 1001 of the same title subjects to criminal penalties "[w]hoever . . . knowingly and willfully falsifies, conceals or covers up by any trick, scheme, or device a material fact, or makes any false, fictitious or fraudulent statements or representations, or makes or uses any false writing or document knowing the same to contain any false, fictitious or fraudulent statement or entry." Respondent has been indicted under still another criminal statute, 15 U.S.C. 714m (a), which prohibits the making of false statements for the purpose of influencing the CCC. </s> [Footnote 4 "[I]t is clear, in the light of the entire context, that in the present statute, the provision relating to the payment or approval of a `claim upon or against' the Government relates solely to the payment or approval of a claim for money or property to which a right is asserted against the Government, based upon the Government's own liability to the claimant." 270 U.S., at 345 -346. (Emphasis added.) </s> [Footnote 5 See Cong. Globe, 37th Cong., 3d Sess., 952-958. </s> [Footnote 6 See n. 1, supra. </s> [Footnote 7 The principal case was Rainwater v. United States, 356 U.S. 590 (1958). Reference was made to the other two cases, Cato Bros. v. United States and Toepleman v. United States, in the course of the opinion in McNinch. </s> [390 U.S. 228, 234]

United States Supreme Court LAND v. DOLLAR(1951) No. 697 Argued: Decided: June 4, 1951 </s> In these related proceedings, this Court (1) grants certiorari in Nos. 697 and 702; (2) denies a motion to vacate an order staying the Court of Appeals' contempt order; (3) continues on the docket a motion for reconsideration of the denial of certiorari in No. 353; and (4) rejects the suggestion that the Court defer adjournment and hear argument within a matter of weeks. Pp. 737-740. </s> [Footnote * No. 353, Land et al. v. Dollar et al., on motion for leave to file a motion for reconsideration of denial of certiorari; No. 697, Land et al. v. Dollar et al., and No. 702, In re Killion, on petitions for writs of certiorari to the United States Court of Appeals for the District of Columbia Circuit; No. ___, Sawyer et al. v. Dollar et al., and No. ___, In re Killion, on motion to vacate stay of contempt order. </s> Attorney General McGrath and Solicitor General Perlman for Land et al. </s> Arthur B. Dunne for petitioner in No. 702. </s> Herman Phleger, Gregory A. Harrison, Moses Lasky, Edmund L. Jones and Howard Boyd for Dollar et al. </s> PER CURIAM. </s> (1) Nos. 697 and 702 are before the Court on petitions for certiorari to review, first, an order of the District Court for the District of Columbia requiring that Charles Sawyer endorse certain stock certificates as "United States Maritime Commission, by Charles Sawyer, Secretary of Commerce," and, second, a Restraining Order issued by the Court of Appeals for the District of Columbia Circuit enjoining named petitioners from: </s> "proposing, seeking or advocating any step in any proceeding, whether in said suit entitled United States v. R. Stanley Dollar, et al., or in any other [341 U.S. 737, 738] proceeding, inconsistent with strict compliance with and obedience to the orders heretofore entered by this Court in this cause. </s> "AND IT IS FURTHER ORDERED that said persons are and each of them is enjoined and restrained until further order of this Court from complying with, taking advantage of, or utilizing, or seeking to comply with, utilize or take advantage of said temporary injunction issued by the United States District Court for the Northern District of California, Southern Division, in said cause entitled United States v. R. Stanley Dollar, et al., or any order of similar tenor which may hereafter be entered by said court or any other court." </s> The two orders are before the Court for the first time in Nos. 697 and 702. Certiorari is granted in these cases. </s> (2) Subsequent to the issuance of the above Restraining Order, the Court of Appeals for the District of Columbia Circuit found named petitioners to be in civil contempt of its prior decrees by reason of, inter alia, their activities in connection with obtaining the temporary injunction on behalf of the United States in its suit in the Northern District of California, referred to in the Restraining Order. The order of contempt has been stayed pending disposition of Nos. 697 and 702 as well as the forthcoming petitions for certiorari directed to the contempt order. Motion of respondents to vacate the stay is denied. </s> (3) No action is taken at this time on petitioners' motion for leave to file a motion for reconsideration of our denial of certiorari in No. 353. The motion is continued on the docket so that there may be no question as to this Court's control over No. 353 for whatever action may be deemed appropriate. [341 U.S. 737, 739] </s> (4) It has been suggested that this Court delay the normal ending of the October Term, 1950, and hear argument within a matter of weeks. No motion for advancement has been filed. </s> We agree that expeditious disposition of the important issues in this lengthy proceeding is highly desirable. But our desire for expedition must be weighed against the danger to orderly presentation of important issues inherent in hasty briefing and argument. And this is particularly so when it is suggested that we hear argument not only in Nos. 697 and 702 now before us, but also in the cases to come to us from the order of civil contempt in which petitions for certiorari are to be filed. </s> There is a further consideration militating against premature disposition of the issues presented. There is now pending in the United States District Court for the Northern District of California an action brought by the United States for adjudication of its claim of title in the same shares of stock as those involved in the instant cases. We have heretofore held that judgments entered in the instant cases would not be res judicata against the United States. Land v. Dollar, 330 U.S. 731, 736 , 737, 739 (1947). Appeals have been taken from the temporary injunction issued in that suit on behalf of the United States and with which much of the present phase of this litigation is concerned. We are advised that on May 31, 1951, the Court of Appeals for the Ninth Circuit heard argument on a motion to stay the temporary injunction pending appeal from the order granting the temporary injunction and has taken that motion under advisement. On June 1, 1951, the District Court for the Northern District of California began its hearing on defendants' (respondents in this Court) motion to dismiss the complaint and for summary judgment. [341 U.S. 737, 740] </s> For the foregoing reasons, we do not accept the suggestion that hearing argument in a matter of weeks is compatible with the orderly administration of justice. </s> MR. JUSTICE BLACK and MR. JUSTICE CLARK took no part in the consideration or decision of these applications. </s> MR. JUSTICE FRANKFURTER does not join in this opinion. </s> Separate memorandum of MR. JUSTICE FRANKFURTER. </s> It is not practicable, as a rule, for reasons indicated in my memorandum in Maryland v. Baltimore Radio Show, 338 U.S. 912 , to set forth the considerations that move the Court in granting or denying a petition for certiorari. And since an unexplained announcement of an individual vote on such action is too often apt to be equivocal, it has been my unbroken practice not to note my vote on the disposition of such petitions. However, the petition now before the Court is the latest stage in a long process. In different phases it has been here three times. Because our action may be misleading, unless viewed in its setting, a plain narrative of the course of this litigation in its bearing on this petition is, I believe, desirable. </s> 1. What is ultimately in issue is the ownership of the Dollar Steamship Lines. As a result of transactions between the Lines and the United States Maritime Commission, which we need not here relate, 92% of the stock of the corporation was in 1945 listed in the name of the Maritime Commission and voted by the members of that body. On November 6 of that year, the former Dollar stockholders (hereafter called the Dollars) brought suit against the members of the Commission, alleging that the stock was unlawfully withheld and demanding its return. The action was brought in the District Court for the District of Columbia, and for four and one-half [341 U.S. 737, 741] years wound its way through the Court of Appeals to this Court, back to the District Court, and once again to the Court of Appeals. 81 U.S. App. D.C. 28, 154 F.2d 307; 330 U.S. 731 ; 82 F. Supp. 919; 87 U.S. App. D.C. 214, 184 F.2d 245. At every stage, the Commissioners were represented by attorneys from the Department of Justice, who asserted as ground for dismissal that the action was a suit against the United States to which consent had not been given. Our decision, 330 U.S. 731 , held that, if the allegations of the complaint were true, the action was not against the United States, but rather against the Commissioners in their individual capacities. The District Court decided on the merits that the facts were not as they had been alleged. 82 F. Supp. 919. But on July 17, 1950, the Court of Appeals reversed. It held that the stock of the corporation was unlawfully withheld by the members of the Commission, and that, since title to it had never vested in the United States, the suit was not against the sovereign. 87 U.S. App. D.C. 214, 184 F.2d 245. We refused to review this decision. 340 U.S. 884 . Later, we refused to reconsider our refusal. 340 U.S. 948 . </s> 2. The upshot of the litigation at this point was that the Dollars had obtained a final judgment that the members of the United States Maritime Commission were unlawfully withholding the stock of the corporation, and that, as against the Commissioners, the Dollars were entitled to it. To carry out the judgment, the District Court entered an order on mandate on December 11, 1950. That order stated in part that </s> "title to the shares in question is in the plaintiffs [Dollars], since they were never legally divested of the same, and the asserted title of all others arising out of the same transaction to the contrary [is] null and void . . . ." 97 F. Supp. 59. [341 U.S. 737, 742] </s> 3. The members of the Maritime Commission took an appeal from this order. They urged that it was too broad, in that it purported to bind, not only the individual members of the Commission, but also the United States. The Court of Appeals remanded the cause with instructions to enter a narrower order, the terms of which it prescribed. The substance of those terms is as follows: </s> "[P]laintiffs [Dollars] are entitled to possession of the shares as against defendants, and the defendants are ordered and directed to deliver forthwith to the plaintiffs the said shares. The possession to which plaintiffs are entitled is an effective possession of the shares. In so far as such right requires action on the part of defendants in addition to physical delivery of the certificates, such action is hereby directed to be taken. Plaintiffs are entitled under this judgment to all rights belonging to possessors of the shares." 88 U.S. App. D.C. ___, ___, 188 F.2d 629, 631. </s> In further explanation of its order the Court stated: </s> "The District Court is directed to enforce obedience to its order, as herein modified, whether effective process is against the present named defendants or is against another official, or other officials, against whom the order might be lawfully enforced if he or they were a party or parties to the suit. </s> . . . . . </s> "If the Secretary of Commerce now has custody or possession of the shares, he obviously acquired such custody or possession since the beginning of this action, indeed since the order of June 11, 1947 [prohibiting transfer of the stock pendente lite]. Obedience to the order about to be entered pursuant to this opinion is, therefore, enforceable against him, and he is liable under Rule 71, supra, to the same [341 U.S. 737, 743] process for enforcing obedience to that order as if he were a party." 88 U.S. App. D.C. ___, ___, 188 F.2d 629, 632. </s> 4. We were asked to grant certiorari to review this order for enforcement. On March 12, 1951, we refused. 340 U.S. 948 . It was at this point that we refused to reconsider our refusal to review the decision on the merits. </s> 5. Accordingly, the case went back to the District Court. That court entered two orders on March 16. The first was in the terms prescribed by the Court of Appeals. The second was designed to enforce the judgment against the Secretary of Commerce, who, under a Presidential Reorganization Plan, had succeeded the Maritime Commission as custodian of the stock shortly before the Court of Appeals entered its decision on the merits. This order directed the Secretary to endorse the stock certificates in his possession in blank, by writing on them the words, "United States Maritime Commission, by Charles Sawyer, Secretary of Commerce." It required further that he deliver the stock to a representative of the Dollars, and that he instruct the corporation to make the transfers of record. In the event that the Secretary failed to endorse the stock before delivery or to issue the instructions prior to March 17, the Clerk of the District Court was directed to perform these acts in his place. 97 F. Supp. 60. </s> 6. Meanwhile, a new proceeding got under way. On March 12, the day we denied certiorari to the decision of the Court of Appeals modifying the order on mandate, the Government filed a complaint in the District Court for the Northern District of California, Southern Division. In this action, the United States was named as plaintiff, and sought relief by injunction, declaratory judgment, and damages against the Dollar shareholders, the corporation, and the transfer agents responsible for the stock. The claim urged was substantially the same as that which Government counsel for members of the Maritime Commission [341 U.S. 737, 744] had unsuccessfully advanced in the litigation in the District of Columbia which culminated in the judgment against the individual defendants. </s> 7. On March 19, the Government moved for a preliminary injunction in this California litigation. It requested that the Dollars be restrained from "exercising or attempting to exercise any rights or privileges as the owners" of the stock, from making demands upon the corporation that new certificates be issued in their name, and from transferring the stock certificates in their possession. The Government supported its motion by an affidavit of the present Chairman of the Federal Maritime Board. On the basis of a report of the Maritime Commission to the Congress on April 10, 1939, which referred to the Dollar management as "shockingly incompetent" and charged it with drawing excessive salaries from the corporation and with "[f]ailure to maintain adequate service from the West Coast to the Orient," the Chairman stated that "[s]hould inefficient management replace the existing management" of the corporation, "grave danger exists that this important unit of the American Merchant Marine may deteriorate as it did before when under the control of plaintiffs in the case of R. Stanley Dollar et al. v. Emory S. Land et al." On April 6 the District Judge announced that he would issue a temporary restraining order. See 97 F. Supp. 50. </s> 8. That order, dated April 11, is in pertinent part as follows: </s> "Now, therefore, it is hereby ordered by this Court that, in order to preserve the status quo pending the determination by this Court as to whether plaintiff on the one hand, or the [Dollars] . . . on the other hand, are the lawful owners of said stock, the [Dollars] . . . be and they hereby are, enjoined pending the entry official judgment in this action, from [341 U.S. 737, 745] exercising or attempting to exercise any rights or privileges as owners of stock certificates . . ., and from making any demands upon [the corporation or its agents] . . . that new certificates representing said shares of stock . . . be issued to [the Dollars] . . ., or that said [Dollars] be registered as the owners of the shares of stock represented by said certificates . . ., and from pledging, selling, transferring, or otherwise disposing of said stock certificates and the shares of stock represented thereby, and </s> "It is further ordered by this Court that [the corporation and its agents] . . . be, and they hereby are, restrained, pending the entry of final judgment in this action, from issuing any new certificates of stock of [the corporation] representing said shares to [the Dollars] . . ., from registering or recording [the Dollars] . . . as owners of any of the shares of stock . . ., and from in any way recognizing said [Dollars] . . ., as the lawful owners of said shares of stock or said certificates." </s> 9. While these proceedings were taking place in California, appeals were taken to the Court of Appeals for the District of Columbia Circuit from the two orders entered by the District Court for the District of Columbia on March 16. The Secretary of Commerce and the members of the Maritime Commission urged as grounds for reversal that the lower court had misconstrued the mandate of the Court of Appeals, and had jeopardized the United States' claim of title by giving the Dollars power to transfer the stock to a bona fide purchaser for value. They did not assert as grounds for reversing the orders that the Dollars were likely so to mismanage the corporation that assets to which the United States might ultimately be entitled would be wasted. On April 4 the [341 U.S. 737, 746] Court dismissed the appeals, without opinion. At the same time it took under advisement a motion to impose sanctions on the representatives of the Government. </s> 10. The Court of Appeals acted on the motion to impose sanctions by orders dated April 10, for reasons indicated in a statement read in open court on April 6 and an opinion filed on April 11, 1951. 88 U.S. App. D.C. ___, 190 F.2d 366. </s> (a) It issued an order requiring the Secretary of Commerce, the Solicitor General, and other officials of the Department of Justice and of the corporation to show cause why they should not be held in contempt for disobedience to the orders of the courts of the District of Columbia. It based this order in part on allegations that the respondents "refused to endorse the certificates and refused to instruct the transfer agent to transfer the shares" as directed by the Court. Instead, respondents "executed proxies in their own names after the decree of this court was known to them," and "warned, in writing, the transfer agent of the corporation not to transfer the shares of stock." In part, the order was based on the allegation that respondents "sought and obtained from the District Court in Northern California an injunction against the Dollar interests, restraining them from attempting to secure compliance with the decree of this court." 88 U.S. App. D.C. at ___, 190 F.2d at 374. The proceedings to which this order has led are not before us on this petition. </s> (b) The Court of Appeals issued a restraining order also directed to the Secretary of Commerce, the Solicitor General, and officers of the Department of Justice and the corporation. It recited that these respondents "caused to be instituted" the California suit, and that "in said action said respondents have sought in the name of the United States relief which is contrary to, inconsistent [341 U.S. 737, 747] with, and in nullification of this Court's decisions and orders" in the case. It stated at the hearing on the order that it was not deciding "whether the United States might seek ancillary injunctive relief in any other respect; that is, in any respect save only the defeat and nullification of a judgment already finally entered by a court of competent jurisdiction." It ordered that the respondents, their agents, attorneys, and all persons in active concert with any of them </s> "be and they hereby are enjoined and restrained until further order of this Court from proposing, seeking or advocating any step in any proceeding, whether in said suit entitled United States v. R. Stanley Dollar, et al., or in any other proceeding, inconsistent with strict compliance with and obedience to the orders heretofore entered by this Court in this cause. </s> "AND IT IS FURTHER ORDERED that said persons are and each of them is enjoined and restrained until further order of this Court from complying with, taking advantage of, or utilizing, or seeking to comply with, utilize or take advantage of said temporary injunction issued by the United States District Court for the Northern District of California, Southern Division, in said cause entitled United States v. R. Stanley Dollar, et al., or any order of similar tenor which may hereafter be entered by said court or any other court." </s> We have before us for review on this petition (1) the order of the Court of Appeals for the District of Columbia Circuit dismissing appeals from the orders entered by the District Court on March 16 directing that the stock be delivered to the Dollars; (2) the restraining order issued by the Court of Appeals for the District of Columbia Circuit on April 10. [341 U.S. 737, 748] </s> Three other matters concerning this litigation are also now before the Court. They are referred to in a per curiam opinion. This memorandum does not address itself to them. </s> By MR. JUSTICE JACKSON. </s> Respondents ask the full Court to vacate a stay of proceedings granted by THE CHIEF JUSTICE. I regret that I cannot acquiesce in summary disposition of the motion, for I think the circumstances require the Court to set it down for prompt argument and act only after hearing both sides. </s> This Court examined the decision of the Court of Appeals that the Dollar interests were entitled to the stock in question and decided that it did not merit further review. 87 U.S. App. D.C. 214, 184 F.2d 245. Certiorari denied, 340 U.S. 884 . The courts below properly understood that we then regarded that litigation as ended and the District Court entered its mandate. When complete compliance was withheld, the mandate was modified to order officials to deliver up "effective possession" of the stock. Certiorari was sought from this enforcement order and we were also again asked to review the merits. We denied both. 340 U.S. 948 . To date, "effective possession" has not been delivered. </s> We may have been right or we may have been wrong in these repeated denials of review. But what the Court of Appeals has now done is try to effectuate a judgment that we, by refusal to review, in effect have confirmed. </s> Denial by the full Court of this motion fixes it as the Court's policy to suspend enforcement indefinitely, certainly so long as any phase of this matter is pending here. Successive stays will issue as of course until we decide this and perhaps also the case recently commenced in California. No one knows for how long this will continue. [341 U.S. 737, 749] My prediction would be in terms of years rather than months. </s> Certainly both the appearance and substance of justice require that the parties be heard before the Court denies respondents, for an indefinite period, the benefits of the judgment they have won. We should not overlook the fact that management of this shipping concern is kept out of the hands of those whom years of litigation have adjudged to be its owners, and no protection by bond, condition of the order, or otherwise is provided for them during such time as it is kept in the hands adjudged to have it illegally. </s> This Court, now asked to vacate the stay order, denies the motion without hearing either of the parties. This matter has become one of considerable delicacy and I should not, in effect, approve an indefinite stay of proceedings without hearing all the argument and information that either party can offer. I do not think denial without hearing is prudent judicial action. No legitimate interest could suffer from a hearing and we would surely be better informed as a result of it. </s> Even if the parties themselves are not strictly entitled to or do not want to argue this motion, I should require them to do so, for hearings are more important here for the benefit of the Court, as a protection against unwise decision, than for benefit of the parties. It is the Court that is now on trial. When the shoe of contempt was on the other foot, we strongly supported the Government's demand for complete submission to court decrees, even before they were sustained by this Court and though their validity was reasonably in doubt. On this basis a heavy fine was levied against the United Mine Workers. United States v. United Mine Workers, 330 U.S. 258 . See also McComb v. Jacksonville Paper Co., 336 U.S. 187 . </s> The spectacle of this Court stalling the enforcement efforts of lower courts while there is outstanding a judgment [341 U.S. 737, 750] that some of the Nation's high officials are guilty of contempt of court is not wholesome. The evil influence of such an example will be increased by delay. This Court should exercise utmost care lest it appear to be indifferent to a claim of official disobedience. </s> Moreover, we owe something in this matter to the Court of Appeals. That court held several hearings, considered every phase of this case in careful and exhaustive opinions, and made detailed findings of fact. It embarked on this effort at enforcement only after this Court had refused to review the basic orders. They were clearly justified in believing that we expected the order to be enforced. Surely we do not want to confirm Mr. Dooley's observation to the effect that an appeal is an occasion for one court to show its contempt for another. </s> Being outvoted as to the stay, however, I think it is owing to the Court itself, to the courts below, and to both litigants, to hear and decide the controversial orders without delay. Any denial of this motion or continuance of the stay should be conditioned upon a shortening of the time of all parties and an argument of the cases on the merits within two weeks, deferring the Court's adjournment until the controversy is finally cleared up. If the Court of Appeals is wrong, we should promptly vindicate the officials involved. If that court is right, we should not waver in upholding its hand. </s> I withhold my assent from the per curiam opinion of today. </s> [341 U.S. 737, 1]

United States Supreme Court KERN-LIMERICK, INC. v. SCURLOCK(1954) No. 115 Argued: January 4, 1954Decided: February 8, 1954 </s> The Arkansas Gross Receipts Tax Law of 1941, which levies on sellers an excise tax of 2% on the gross receipts from all sales in the State, held unconstitutional as applied to the transactions here involved, whereby private contractors procured in Arkansas two tractors for use in constructing a naval ammunition depot for the United States under a cost-plus-fixed-fee contract entered into with the Navy Department under 2 (c) (10) and 4 (b) of the Armed Services Procurement Act of 1947 and providing that, in procuring articles required for accomplishment of the work, the contractor should act as purchasing agent for the Government, title to the articles purchased should pass directly from the vendor to the Government and the Government should be directly liable to the vendor for payment of the purchase price. Pp. 111-123. </s> (a) The Procurement Act authorized the purchase of this machinery by the Navy for the construction of an ammunition depot. P. 114. </s> (b) Under the Procurement Act, the Navy Department has power to negotiate contracts which provide for private purchasing agents for supplies and materials. Pp. 114-116. </s> (c) The restrictions in 7 (b) on delegations of authority are not applicable to actions under 2 (c) (10). Pp. 115-116. </s> (d) Under the contract here involved, the United States was the real purchaser; the naming of the Government as purchaser was not merely colorable and did not leave the contractor the real purchaser. Alabama v. King & Boozer, 314 U.S. 1 , distinguished. Pp. 116-122. </s> (e) The drafting of the contract by the Navy Department to conserve Government funds, if that was the purpose, does not change the character of the transaction. Pp. 122-123. </s> 221 Ark. 439, 254 S. W. 2d 454, reversed. </s> The Supreme Court of Arkansas held the Arkansas Gross Receipts Tax Law of 1941, Ark. Stat., 1947, 84-1901 et seq., applicable to the sale of certain machinery [347 U.S. 110, 111] in Arkansas for use in the construction of a naval ammunition depot for the United States. 221 Ark. 439, 254 S. W. 2d 454. On appeal to this Court, reversed, p. 123. </s> Assistant Attorney General Holland argued the cause for appellants. On the brief were Acting Solicitor General Stern, Mr. Holland, Ellis N. Slack and Lee A. Jackson for the United States, and A. F. House and William Nash for Kern-Limerick, Inc., appellants. </s> O. T. Ward argued the cause and filed a brief for appellee. </s> MR. JUSTICE REED delivered the opinion of the Court. </s> This appeal brings here the legality of the application of the Arkansas Gross Receipts Tax Law of 1941, Ark. Stat., 1947, 84-1901 et seq., to a transaction by which certain private contractors engaged in a joint venture, abbreviated WHMS, procured in Arkansas two diesel tractors costing $17,146, for use in the construction there for the United States of a naval ammunition depot estimated to cost over thirty million dollars. The tractors were procured from Kern-Limerick, Inc., a local dealer. The circumstances of the transaction would concededly make Kern-Limerick liable for the tax if the real purchaser were not the United States. </s> The applicable sections of the Gross Receipts Tax Law levy an "excise tax of two [2%] per centum upon the gross proceeds or gross receipts derived from all sales to any person." 84-1903. This is a sales tax, not a use tax. 1 It is to be paid to the Tax Commissioner by the seller, 84-1908. He is the taxpayer, 84-1902 (e), and "shall collect the tax levied hereby from the purchaser." [347 U.S. 110, 112] 84-1908. Gross receipts derived from sales to the United States Government are exempt. 84-1904. </s> The construction contract had, so far as pertinent here, the provisions as to "Materials - Purchases" which are set out in the margin. 2 It was entered into by the Department of the Navy "under authority of Sections 2 (c) (10) and 4 (b)" of the Armed Services Procurement [347 U.S. 110, 113] Act of 1947. 62 Stat. 21, 41 U.S.C. (Supp. V) 157 et seq. These sections authorized this cost-plus-a-fixed-fee contract by negotiation without advertising. 3 </s> Kern-Limerick, Inc., the seller, upon demand by the Commissioner paid under protest the amount of the sales tax and brought this action for a refund in accordance with state law. The United States intervened, as under the contract any state taxes the contractor was required to pay were reimbursable to it by the Government. The Supreme Court of Arkansas held WHMS was the purchaser and the claimed tax payable by Kern-Limerick as the "seller." It denied the contention of the United States that the Government was the purchaser. It held that the Armed Services Procurement Act authorized the Navy Department "to purchase . . . supplies or services for its own use," but did not authorize the Department "to buy nails, lumber, cement, tractors, etc., which were not to be used by the Navy but by WHMS [in this instance] to construct, as independent contractors, the Ammunition Dump." The state court further held that, even if the Department had the authority to buy the tractors, it could not, under the Procurement Act of 1947, delegate this power to WHMS. 221 Ark. 439, 254 S. W. 2d 454. </s> Appellants seek reversal of the decision on the grounds that the Procurement Act authorizes this contract and [347 U.S. 110, 114] that the Arkansas tax cannot by statute or constitutionally be applied to a purchase by the United States. </s> The state court's interpretation of the Procurement Act to deny the Navy authority to buy supplies or equipment for the construction of an ammunition dump is, we think, too restrictive. The Act gives broad powers to the Armed Services for obtaining as cheaply and promptly as possible "purchases and contracts for supplies or services . . . for the use of any such agency or otherwise," 2 (a), and provides: </s> SEC. 9. "(b) The term `supplies' shall mean all property except land, and shall include, by way of description and without limitation, public works, buildings, facilities, ships, floating equipment, and vessels of every character, type and description, aircraft, parts, accessories, equipment, machine tools and alteration or installation thereof." 4 </s> We hold that the Act allows the purchase of this machinery. </s> It seems to us, also, that under the Procurement Act the Armed Services may use agents, other than its own official personnel, to handle for it the detail of purchase. The contention of Arkansas which was accepted by its [347 U.S. 110, 115] Supreme Court is, as we understand it, that the Procurement Act does not permit a delegation to private contractors of any authority to purchase for or pledge the credit of the United States even though these contractors have contracts for construction or supplies on a cost-plus basis. Further, it follows from the Arkansas contention, that without such statutory authority the purchase by the contractor was not for the United States but for itself. This contention is based on the language of the Procurement Act, 7 (a) and (b). 5 Pursuant to 7 (a), the Secretary of the Navy, somewhat obscurely, appears to have delegated his authority to determine the necessity for a negotiated contract to a Navy Contracting Officer asserted in the contract, without exception, to be the Chief of the Bureau of Yards and Docks. See 32 CFR 400.201-5 and 402.101. That official negotiated the contract, as it stated and as is admitted by stipulation, under the authority of 2 (c) (10) of the Procurement Act - "for supplies or services for which it is impracticable to secure competition." </s> Arkansas calls attention to the restrictions on delegation in 7 (b) upon which the state court commented. But the provisions of 7 (b), as the words show, do not [347 U.S. 110, 116] cover actions under 2 (c) (10), and the section's prohibition of delegation in certain instances is inapplicable. We find nothing in the Procurement Act that bars a contract for purchase for the United States of supplies or services by private persons. </s> The Government asserts that 4 (a) and (b) authorize this contract. Under them, negotiated contracts such as this "may be of any type which . . . will promote the best interests of the Government." Under such a provision, it seems that the determination to use purchasing agents is permissible. Where there is no prohibition of a particular type of contract and no direction to use a particular type, the contracting officers are free to follow business practices. 6 We conclude that the Navy Department has power to negotiate contracts which provide for private purchasing agents for supplies and materials. </s> With this determination that the provisions of the contract are within the authority of the Procurement Act, we turn to examine the validity of the argument that the naming of the Government as purchaser was only colorable and left the contractor the real purchaser and the transaction subject to the Arkansas tax. Alabama v. King & Boozer, 314 U.S. 1 , is relied upon primarily. We consider this argument under the assumption, made by the Supreme Court of Arkansas, that the contract was designed to avoid the necessity in this cost-plus contract of the ultimate payment of a state tax by the United States. </s> We are mindful, too, of the careful attention Congress has given in recent years to a proper adjustment of tax liabilities between the federal and the state sovereignties. Congress has been solicitous to see that states and their subdivisions are not unduly burdened by federal acquisition [347 U.S. 110, 117] of property taxable by the states when otherwise held. It understands the burdens on local public agencies from the new federal installations and their accompanying personnel. Provisions deemed suitable have been made. 7 These include recent legislation designed to make independent contractors carrying on activities of the Atomic Energy Commission subject to state sales taxes. 8 But in recommending the legislation the Joint Committee on Atomic Energy, while providing for voluntary contributions, did not propose to subject Government property and purchases to state taxes. The enactment left them free. 9 This recognition of the constitutional immunity of the Federal Government from state exactions rests, of course, upon unquestioned authority. From McCulloch v. Maryland, 4 Wheat. 316, through Gillespie v. Oklahoma, 257 U.S. 501 , and New York ex rel. Rogers v. Graves, 299 U.S. 401 , a host of cases upheld freedom from state taxation not only for Government activities but also for the agencies and [347 U.S. 110, 118] salaries of persons that carried on the work. James v. Dravo Contracting Co., 302 U.S. 134 , reviewed this judicial history, adopted for federal contractors and state taxation the reasoning that subjected a state contractor's earnings to federal income tax and upheld the state's gross receipts tax upon a federal contractor's earnings on the ground that it did not interfere "in any substantial way with the performance of federal functions." Id., at 161. The question of the immunity of Government in relation to its purchases of commodities was left open. Id., at 153. Graves v. New York ex rel. O'Keefe, 306 U.S. 466 , overruled New York ex rel. Rogers v. Graves, supra, and Gillespie, supra, fell in Oklahoma Tax Comm'n v. Texas Co., 336 U.S. 342, 365 . </s> A phase of the question reserved in the Dravo case came up in Alabama v. King & Boozer, 314 U.S. 1 . We declared that federal sovereignty "does not spell immunity from paying the added costs, attributable to the taxation of those who furnish supplies to the Government and who have been granted no tax immunity." Id., at 9. That case involved the usual type sales tax on the seller, collectible by him from the buyer. There was there, too, a cost-plus-a-fixed-fee contract with the United States. We held the state tax collectible from the sellers, notwithstanding the Government bore the economic burden. A few excerpts will make clear the purport of the ruling: </s> "As the sale of the lumber by King and Boozer was not for cash, the precise question is whether the Government became obligated to pay for the lumber and so was the purchaser whom the statute taxes, but for the claimed immunity. . . . The contract provided that the title to all materials and supplies for which the contractors were `entitled to be reimbursed' should vest in the Government `upon delivery at the site of the work or at an approved [347 U.S. 110, 119] storage site and upon inspection and acceptance in writing by the Contracting Officer.'" Id., at 10. </s> ". . . we think all the provisions which we have mentioned, read together, plainly contemplate that the contractors were to purchase in their own names and on their own credit all the materials required, unless the Government should elect to furnish them; that the Government was not to be bound by their purchase contracts, but was obligated only to reimburse the contractors when the materials purchased should be delivered, inspected and accepted at the site." Id., at 11. </s> "But however extensively the Government may have reserved the right to restrict or control the action of the contractors in other respects, neither the reservation nor the exercise of that power gave to the contractors the status of agents of the Government to enter into contracts or to pledge its credit." Id., at 13. </s> The contract here in issue differs in form but not in economic effect on the United States. The Nation bears the burden of the Arkansas tax as it did that of Alabama. The significant difference lies in this. Both the request for bids and the purchase order, in accordance with the contract arrangements making the contractors purchasing agents for the Government, note 2, supra, contain this identical, specific provision: </s> "3. This purchase is made by the Government. The Government shall be obligated to the Vendor for the purchase price, but the Contractor shall handle all payments hereunder on behalf of the Government. The vendor agrees to make demand or claim for payment of the purchase price from the Government by submitting an invoice to the Contractor. [347 U.S. 110, 120] Title to all materials and supplies purchased hereunder shall vest in the Government directly from the Vendor. The Contractor shall not acquire title to any thereof." </s> The purchase order is headed Navy Department Bureau of Yards and Docks, is signed by the contractor as purchasing agent, and requires the seller to make this certification on the claim for payment: </s> "`I certify that the above bill is correct and just; that payment therefor has not been received; that all statutory requirements as to American production and labor standards, and all conditions of purchase applicable to the transactions have been complied with; and that the State or local sales taxes are not included in the amounts billed.' </s> . . . . . </s> "In the event the Contractor is required to pay and does pay State or local sales taxes, the words `and that State or local sales taxes are not included in the amounts billed' should be struck from the certification and the following additional certification added: </s> "`The amount of State or local sales, use, occupational, gross receipts, or other similar taxes or license fees imposed on the Vendor or Vendee by reason of this transaction is $ ________. The Vendor, or Vendee, as the case may be, agrees upon direction of the United States to make appropriate claim for refund and in the event of any refund, to pay the amount thereof to the United States.'" </s> The stipulation of facts shows in detail the course of business under this contract in the purchase of supplies and the form of this purchase. Both conform to the language of the contract in requiring specific Government approval to the purchasing agent for each request for bid and each purchase. Under these circumstances, it is clear [347 U.S. 110, 121] that the Government is the disclosed purchaser and that no liability of the purchasing agent to the seller arises from the transaction. 10 </s> A comment should be made about another excerpt from King & Boozer. It was referred to in the Arkansas opinion as though it were effective for the determination of this case. The quotation is this: </s> "The soundness of this conclusion turns on the terms of the contract and the rights and obligations of the parties under it. The taxing statute, as the Alabama courts have held, makes the `purchaser' liable for the tax to the seller, who is required `to add to the sales price' the amount of the tax and collect it when the sales price is collected, whether the sale is for cash or on credit. Who, in any particular transaction like the present, is a `purchaser' within the meaning of the statute, is a question of state law on which only the Supreme Court of Alabama can speak with final authority." Id., at 9-10. </s> Read literally, one might conclude this Court was saying that a state court might interpret its tax statute so as to throw tax liability where it chose, even though it arbitrarily eliminated an exempt sovereign. Such a conclusion as to the meaning of the quoted words would deny the long course of judicial construction which establishes as a principle that the duty rests on this Court to decide for itself facts or constructions upon which federal constitutional issues rest. 11 The quotation refers, we think, only to the power of the state court to determine who is responsible under its law for payment to the state of the [347 U.S. 110, 122] exaction. The formulation of the "precise question" at the first of the quotation from King & Boozer, p. 118, supra, indicates this. </s> We find that the purchaser under this contract was the United States. Thus, King & Boozer is not controlling for, though the Government also bore the economic burden of the state tax in that case, the legal incidence of that tax was held to fall on the independent contractor and not upon the United States. 12 The doctrine of sovereign immunity is so embedded in constitutional history and practice that this Court cannot subject the Government or its official agencies to state taxation without a clear congressional mandate. No instance of such submission is shown. </s> Nor do we think that the drafting of the contract by the Navy Department to conserve Government funds, if that was the purpose, changes the character of the transaction. As we have indicated, the intergovernmental submission to taxation is primarily a problem of finance and legislation. But since purchases by independent contractors of supplies for Government construction or other activities do not have federal immunity from taxation, the form of contracts, when governmental [347 U.S. 110, 123] immunity is not waived by Congress, may determine the effect of state taxation on federal agencies, 13 for decisions consistently prohibit taxes levied on the property or purchases of the Government itself. 14 </s> Reversed. </s> Footnotes [Footnote 1 Cook v. Southeast Arkansas Transportation Co., 211 Ark. 831, 202 S. W. 2d 772. </s> [Footnote 2 Materials - Purchases. Article 8 - (a) "Except where provision is otherwise made by the Officer-in-Charge, all materials, articles, supplies, and equipment required for the accomplishment of the work under this contract shall be furnished by the Contractor. The Contractor shall act as the purchasing agent of the Government in effecting such procurement and the Government shall be directly liable to the vendors for the purchase price. The exercise of this agency is subject to the obtaining of approval in the instances and in the manner required by subparagraph (c) of this article. The Contractor shall negotiate and administer all such purchases and shall advance all payments therefor unless the Officer-in-Charge shall otherwise direct. "(b) Title to all such materials, articles, supplies and equipment, the cost of which is reimbursable to the Contractor hereunder, shall pass directly from the vendor to the Government without vesting in the Contractor, and such title (except as to property to which the Government has obtained title at an earlier date) shall vest in the Government at the time payment is made therefor by the Government or by the Contractor or upon delivery thereof to the Government or the Contractor, whichever of said events shall first occur. This provision for passage of title shall not relieve the Contractor of any of its duties or obligations under this contract or constitute any waiver of the Government's right to absolute fulfillment of all of the terms hereof. "(c) No purchase in excess of $500 shall be made hereunder without the prior written approval of the Officer-in-Charge, except that the Officer-in-Charge may, in his discretion, either reduce the limitation on the amount of any purchase which may be made without such prior approval or authorize the Contractor to make purchases in amounts not in excess of $2500 for any one purchase without obtaining such prior approval." These provisions were also applicable to subcontractors. </s> [Footnote 3 Section 2 (c) provides: "All purchases and contracts for supplies and services shall be made by advertising, as provided in section 3, except that such purchases and contracts may be negotiated by the agency head without advertising if - . . . . . "(10) for supplies or services for which it is impracticable to secure competition; . . . ." Section 4 (b) prohibits use of cost-plus-a-percentage-of-cost contracts and prescribes other operative limitations not pertinent here. All provisions required by those sections were included in the contract. </s> [Footnote 4 S. Rep. No. 571, 80th Cong., 1st Sess., p. 21, had this to say of this language: "To make it clear that the bill relates to all procurement by the services, except purchases with nonappropriated funds, subsection (b) of this section defines `supplies' to include all property except land, and shall include, but without limitation, public works, buildings, facilities, ships, floating equipment, and vessels of every character, type and description, aircraft, parts, accessories, equipment, machine tools, and alteration or installation thereof. These are really examples and this section is to be construed in the broadest manner possible." The corresponding House Report, No. 109, p. 23, omitted only the last sentence. </s> [Footnote 5 "SEC. 7. (a) . . . Except as provided in subsection (b) of this section, the agency head is authorized to delegate his powers provided by this Act, including the making of such determinations and decisions, in his discretion and subject to his direction, to any other officer or officers or officials of the agency. "(b) The power of the agency head to make the determinations or decisions specified in paragraphs (12), (13), (14), (15), and (16) of section 2 (c) and in section 5 (a) shall not be delegable, and the power to make the determinations or decisions specified in paragraph (11) of section 2 (c) shall be delegable only to a chief officer responsible for procurement and only with respect to contracts which will not require the expenditure of more than $25,000." Appellee also refers to 10. As that provides only for interservice procurement, we do not think it pertinent. </s> [Footnote 6 United States v. Linn, 15 Pet. 290, 316; Muschany v. United States, 324 U.S. 49, 63 . </s> [Footnote 7 E. g., T. V. A., 16 U.S.C. 831l; R. F. C., 15 U.S.C. 607. Cf. Dameron v. Brodhead, 345 U.S. 322 . </s> [Footnote 8 67 Stat. 575. See S. Rep. No. 694, 83d Cong., 1st Sess. </s> [Footnote 9 Section 9 of the Atomic Energy Act of 1946, 60 Stat. 765, 42 U.S.C. 1809 (b), as amended, provides: "In order to render financial assistance to those States and localities in which the activities of the Commission are carried on and in which the Commission has acquired property previously subject to State and local taxation, the Commission is authorized to make payments to State and local governments in lieu of property taxes. Such payments may be in the amounts, at the times, and upon the terms the Commission deems appropriate, but the Commission shall be guided by the policy of not making payments in excess of the taxes which would have been payable for such property in the condition in which it was acquired, except in cases where special burdens have been cast upon the State or local government by activities of the Commission, the Manhattan Engineer District or their agents. In any such case, any benefit accruing to the State or local government by reason of such activities shall be considered in determining the amount of the payment." </s> [Footnote 10 See Hodgson v. Dexter, 1 Cranch 345, 362; Larson v. Domestic & Foreign Corp., 337 U.S. 682, 703 ; Restatement, Agency, 320; Williston, Contracts, 281. Cf. Merchant Fleet Corp. v. Harwood, 281 U.S. 519, 525 . </s> [Footnote 11 New Jersey Ins. Co. v. Division of Tax Appeals, 338 U.S. 665, 674 ; Richfield Oil Corp. v. State Board, 329 U.S. 69, 83 ; United [347 U.S. 110, 122] States v. Allegheny County, 322 U.S. 174, 182 ; Union Pacific R. Co. v. Public Service Comm'n, 248 U.S. 67, 69 . Cf. Dyer v. Sims, 341 U.S. 22, 29 . This principle covers the question of who is the "purchaser." S. R. A., Inc. v. Minnesota, 327 U.S. 558, 564 ; Metropolitan Bank v. United States, 323 U.S. 454, 456 ; Standard Oil Co. v. Johnson, 316 U.S. 481, 483 . </s> [Footnote 12 See Oklahoma Tax Comm'n v. Texas Co., 336 U.S. 342, 365 : "True intergovernmental immunity remains for the most part. But, so far as concerns private persons claiming immunity for their ordinary business operations (even though in connection with governmental activities), no implied constitutional immunity can rest on the merely hypothetical interferences with governmental functions here asserted to sustain exemption." </s> [Footnote 13 Alabama v. King & Boozer, 314 U.S. 1 ; Carson v. Roane-Anderson Co., 342 U.S. 232 ; Esso Standard Oil Co. v. Evans, 345 U.S. 495 . </s> [Footnote 14 United States v. Allegheny County, 322 U.S. 174 ; Mayo v. United States, 319 U.S. 441 ; Pittman v. Home Owners' Corp., 308 U.S. 21, 31 . </s> MR. JUSTICE BLACK, with whom THE CHIEF JUSTICE and MR. JUSTICE DOUGLAS concur, dissenting. </s> The Court holds that Government purchasing agents can delegate to their subordinates authority to delegate to private persons power to buy goods for the Government and pledge its credit to pay for them. Alabama v. King & Boozer, 314 U.S. 1, 13 , rejected a similar contention. The Court points to no statute which either expressly or by fair implication grants any such broad delegation authority to Government agents. </s> Experiences through the years have caused Congress to hedge in Government purchases by many detailed safeguards such as competitive bidding after public advertising. * Due to a supposed necessity for haste, chosen Government officials have sometimes been granted temporary powers to buy supplies at their discretion. But these occasions, perhaps fortunately, have been rare, and have usually been limited to items costing little. The Court here, however, without any clear statutory authority, [347 U.S. 110, 124] makes a tremendous break with long established buying practices which embodied safeguards wisely adopted to prevent needless waste of Government money. Maybe Congress has power, though I am not sure it has, to delegate Government spending to private contractors. Even so, a purpose to have Government business handled in such a loose manner should not be attributed to Congress in the absence of much more explicit statutory language than the Court is able to cite here. </s> I think the Supreme Court of Arkansas was right in sustaining the State's tax on authority of Alabama v. King & Boozer, supra. The Court in effect overrules that case. In doing so it moves back in the direction of discredited tax immunities like that sustained in the case of Gillespie v. Oklahoma, 257 U.S. 501 , later disapproved. I would not do that, but would sustain application of this Arkansas tax to purchases of the cost-plus-a-fixed-fee contractor and affirm the State Supreme Court's judgment. </s> [Footnote * For illustrations of experience with abuse of wartime Government contracting and purchasing, see Hearings Before House Committee on Military Affairs, 74th Cong., 1st Sess., on H. R. 3 and H. R. 5293, pp. 590-616, discussing profiteering during the Revolution, the Civil War, the War with Spain, and World War I. The hearings were held on a bill to end profiteering in wartime. </s> MR. JUSTICE DOUGLAS, with whom THE CHIEF JUSTICE and MR. JUSTICE BLACK join, dissenting. </s> The Arkansas Gross Receipts Tax is laid, as the majority opinion points out, on the gross receipts from all sales to any person. Ark. Stat., 1947, 84-1903. The Act, however, spells out the incidence of the tax in detail. "Sales of service and tangible personal property including materials, supplies and equipment made to contractors who use same in the performance of any contract are hereby declared to be sales to consumers or users and not sales for resale." 84-1903 (e). "The term `consumer' or `user' means the person to whom the taxable sale is made . . . . All contractors are deemed to be consumers or users of all tangible personal property including materials, supplies and equipment used or consumed by them in performing any contract and the sales [347 U.S. 110, 125] of all such property to contractors are taxable sales within the meaning of this act." 84-1902 (i). </s> On the basis of this statutory language the Supreme Court of Arkansas held that the contractor was the "purchaser" of the tractors and that the sale involved was taxable. It seems clear that, as a matter of state law, the contractor was the "consumer" and "user" of these tractors, whether or not the contractor would have been a purchaser in the common-law view. Of course Arkansas could not impose its tax on the contractor in such a way as to discriminate against the United States. But that has not been attempted here. </s> What Arkansas has done is to define an independent contractor as the "consumer" or "purchaser" of tractors which the contractor uses. Obviously the contractor could be made liable for the tax, if its contract were with a private corporation rather than with the Federal Government. Arkansas has not tried to collect the tax from the United States, and it clearly could not do so. See Mayo v. United States, 319 U.S. 441 . Arkansas has collected the tax from the "purchaser" as that word is defined by the taxing statute. That is where the legal incidence of the tax falls. If the economic burden of the tax falls on the Federal Government, it falls there because the Government assumed it by contract, not because Arkansas placed it there. See Curry v. United States, 314 U.S. 14, 18 . </s> The constitutional problem, of course, is to determine whether the legal incidence of a tax will be disregarded because the economic burden of the tax is on the United States. When Congress has not spoken, that determination must be made by the Court. </s> In Alabama v. King & Boozer, 314 U.S. 1 , we allowed a sales tax to be exacted from an independent contractor acting for the Government on a cost-plus-a-fixed-fee basis. That tax was measured by the value of lumber [347 U.S. 110, 126] used by the contractor in performing its contract. The Government exercised much the same sort of detailed control over that transaction as it did over the present one. The Court was careful to point out, in rejecting the claim of immunity, that "Who, in any particular transaction like the present, is a `purchaser' within the meaning of the statute, is a question of state law on which only the Supreme Court of [the State] can speak with final authority." 314 U.S., at 9 -10. </s> In that case, however, the Supreme Court of Alabama had held the transaction immune from the tax. There was no authoritative state determination of the legal incidence of the tax. The Court therefore assumed, 314 U.S., at 10 , that the tax fell on the "purchaser" of the lumber in the common-law sense. The Court then went on to show, in answer to the same arguments which the Government has made in this case, that the United States was not a purchaser of the lumber even under common-law rules. It is this segment of the opinion which the Court now uses practically to overrule the decision itself. No doubt the United States was, under some of the language used in King & Boozer, the "purchaser" of these two tractors. But the United States is not the "purchaser" under the language used in the Arkansas statute, and it is the Arkansas statute that controls this case. What was important in King & Boozer was the substance of the transaction and the nature of the economic burden on the United States. On these two paramount issues it is impossible to distinguish the present case. </s> The concepts "title," "agency," and "obligation to pay" are no basis for this constitutional adjudication. Today they are used to permit any government functionary to draw the constitutional line by changing a few words in a contract. When the Congress deliberates over this [347 U.S. 110, 127] problem, as it often has, 1 it does not worry about the passing of title or other legal technicalities. The Congress debates whether as a matter of policy, including the need of the States for revenue, the holder of a cost-plus government contract should be immune from state taxation. </s> Alabama v. King & Boozer and the cases it followed 2 were a long step forward from the time when a State's power to tax was nullified whenever the federal treasury was even remotely affected. We should not take this equally long step backwards. We should hold that, until the Congress says differently, the States are free to tax all sales to cost-plus government contractors. We should dispense with fruitless talk of agency, titles, and obligations to pay. The legal incidence of a tax is a matter for the States to determine. We should decide today, as we did more than a decade ago, that a tax on a contractor for goods he uses is constitutional, even though the economic burden falls on the Federal Government. </s> [Footnote 1 See, for example, 86 Cong. Rec. 7528, 7532-7535; 88 Cong. Rec. 2835, 3464-3466, 4814; Hearings Before House Committee on Ways and Means on H. R. 6617, 77th Cong., 2d Sess. (1942). </s> [Footnote 2 James v. Dravo Contracting Co., 302 U.S. 134 ; Graves v. New York ex rel. O'Keefe, 306 U.S. 466 . </s> [347 U.S. 110, 128]

United States Supreme Court EDGAR v. MITE CORP.(1982) No. 80-1188 Argued: November 30, 1981Decided: June 23, 1982 </s> The Illinois Business Take-Over Act requires a tender offeror to notify the Secretary of State and the target company of its intent to make a tender offer and the terms of the offer 20 days before the offer becomes effective. During that time the offeror may not communicate its offer to the shareholders, but the target company is free to disseminate information to its shareholders concerning the impending offer. The Act also requires any takeover offer to be registered with the Secretary of State. A target company is defined as a corporation of which Illinois shareholders own 10% of the class of securities subject to the takeover offer or for which any two of the following conditions are met: the corporation has its principal office in Illinois, is organized under Illinois laws, or has at least 10% of its stated capital and paid-in surplus represented within the State. An offer becomes registered 20 days after a registration statement is filed with the Secretary of State unless he calls a hearing to adjudicate the fairness of the offer. Appellee MITE Corp., a corporation organized under Delaware laws with its principal office in Connecticut, initiated a tender offer for all outstanding shares of Chicago Rivet & Machine Co., an Illinois corporation, by filing with the Securities and Exchange Commission the schedule required by the Williams Act. MITE, however, did not comply with the Illinois Act, and brought an action in Federal District Court seeking a declaratory judgment that the Illinois Act was pre-empted by the Williams Act and violated the Commerce Clause, and also seeking injunctive relief. The District Court issued a preliminary injunction prohibiting enforcement of the Illinois Act against MITE's tender offer. MITE then published its offer. Subsequently, the District Court issued the requested declaratory judgment and a permanent injunction. Shortly thereafter, MITE and Chicago Rivet entered into an agreement whereby both MITE's tender offer and an offer made by Chicago Rivet before the District Court entered its judgment were withdrawn and MITE was given a specified time to make another offer. Ultimately, MITE decided not to make another offer. The Court of Appeals affirmed the District Court. </s> Held: </s> The judgment is affirmed. </s> 633 F.2d 486, affirmed. [457 U.S. 624, 625] </s> JUSTICE WHITE delivered the opinion of the Court with respect to Parts I, II, and V-B, concluding that: </s> 1. The case is not moot. Because the Secretary of State has indicated his intention to enforce the Illinois Act against MITE, a reversal of the District Court's judgment would expose MITE to civil and criminal liability for making an offer in violation of the Act. P. 630. </s> 2. The Illinois Act is unconstitutional under the Commerce Clause, because it imposes burdens on interstate commerce that are excessive in light of the local interests the Act purports to further. Pike v. Bruce Church, Inc., 397 U.S. 137 . Illinois' asserted interests in protecting resident security holders and regulating the internal affairs of companies incorporated under Illinois law are insufficient to outweigh such burdens. Pp. 643-646. </s> WHITE, J., delivered an opinion, joined in its entirety by BURGER, C. J., Parts I, II, and V-B of which are the opinion of the Court. BLACKMUN, J., joined Parts I, II, III, and IV. POWELL, J., joined Parts I and V-B. STEVENS and O'CONNOR, JJ., joined Parts I, II, and V. POWELL, J., filed an opinion concurring in part, post, p. 646. STEVENS, J., filed an opinion concurring in part and concurring in the judgment, post,p. 647. O'CONNOR, J., filed an opinion concurring in part, post, p. 655. MARSHALL, J., filed a dissenting opinion, in which BRENNAN, J., joined, post, p. 655. REHNQUIST, J., filed a dissenting opinion, post, p. 664. </s> Russell C. Grimes, Jr., Assistant Attorney General of Illinois, argued the cause for appellant. With him on the briefs were Tyrone C. Fahner, Attorney General, and Paul J. Bargiel, Assistant Attorney General. </s> Richard W. Hulbert argued the cause for appellees. With him on the brief was Christopher H. Lunding. </s> Eugene D. Berman, Assistant Attorney General, argued the cause for the State of New York as amicus curiae urging reversal. With him on the brief were Robert Abrams, Attorney General, Shirley Adelson Siegel, Solicitor General, Linda S. Martinson, Deputy Assistant Attorney General, and Elizabeth Block, Assistant Attorney General. </s> Stephen M. Shapiro argued the cause for the Securities and Exchange Commission as amicus curiae urging affirmance. With him on the brief were Acting Solicitor General [457 U.S. 624, 626] Wallace, Assistant Attorney General Baxter, Deputy Solicitor General Geller, Ralph C. Ferrara, Paul Gonson, Daniel L. Goelzer, and James R. Farrand. * </s> [Footnote * Briefs of amici curiae urging reversal were filed by William J. Brown, Attorney General, and Roger P. Sugarman, Assistant Attorney General, for the State of Ohio; by Marshall Coleman, Attorney General, Walter H. Ryland, Chief Deputy Attorney General, and Karen A. Gould, Assistant Attorney General, for the Commonwealth of Virginia; and by Orestes J. Mihaly, Stephen M. Coons, and K. Houston Matney for the North American Securities Administrators Association, Inc. </s> JUSTICE WHITE delivered an opinion, Parts I, II, and V-B of which are the opinion of the Court.Fn </s> The issue in this case is whether the Illinois Business Take-Over Act, Ill. Rev. Stat., ch. 121 1/2, § 137.51 et seq. (1979), is unconstitutional under the Supremacy and Commerce Clauses of the Federal Constitution. </s> I </s> Appellee MITE Corp. and its wholly owned subsidiary, MITE Holdings, Inc., are corporations organized under the laws of Delaware with their principal executive offices in Connecticut. Appellant James Edgar is the Secretary of State of Illinois and is charged with the administration and enforcement of the Illinois Act. Under the Illinois Act any takeover offer 1 for the shares of a target company must be [457 U.S. 624, 627] registered with the Secretary of State. Ill. Rev. Stat., ch. 121 1/2, § 137.54.A (1979). A target company is defined as a corporation or other issuer of securities of which shareholders located in Illinois own 10% of the class of equity securities subject to the offer, or for which any two of the following three conditions are met: the corporation has its principal executive office in Illinois, is organized under the laws of Illinois, or has at least 10% of its stated capital and paid-in surplus represented within the State. § 137.52-10. An offer becomes registered 20 days after a registration statement is filed with the Secretary unless the Secretary calls a hearing. § 137.54.E. The Secretary may call a hearing at any time during the 20-day waiting period to adjudicate the substantive fairness of the offer if he believes it is necessary to protect the shareholders of the target company, and a hearing must be held if requested by a majority of a target company's outside directors or by Illinois shareholders who own 10% of the class of securities subject to the offer. § 137.57.A. If the Secretary does hold a hearing, he is directed by the statute to deny registration to a tender offer if he finds that it "fails to provide full and fair disclosure to the offerees of all material information concerning the take-over offer, or that the take-over offer is inequitable or would work or tend to work a fraud or deceit upon the offerees . . . ." § 137.57.E. </s> On January 19, 1979, MITE initiated a cash tender offer for all outstanding shares of Chicago Rivet & Machine Co., a publicly held Illinois corporation, by filing a Schedule 14D-1 with the Securities and Exchange Commission in order to comply with the Williams Act. 2 The Schedule 14D-1 indicated [457 U.S. 624, 628] that MITE was willing to pay $28 per share for any and all outstanding shares of Chicago Rivet, a premium of approximately $4 over the then-prevailing market price. MITE did not comply with the Illinois Act, however, and commenced this litigation on the same day by filing an action in the United States District Court for the Northern District of Illinois. The complaint asked for a declaratory judgment that the Illinois Act was pre-empted by the Williams Act and violated the Commerce Clause. In addition, MITE sought a temporary restraining order and preliminary and permanent injunctions prohibiting the Illinois Secretary of State from enforcing the Illinois Act. </s> Chicago Rivet responded three days later by bringing suit in Pennsylvania, where it conducted most of its business, seeking to enjoin MITE from proceeding with its proposed tender offer on the ground that the offer violated the Pennsylvania Takeover Disclosure Law, Pa. Stat. Ann., Tit. 70, 71 et seq. (Purdon Supp. 1982-1983). After Chicago Rivet's efforts to obtain relief in Pennsylvania proved unsuccessful, 3 both Chicago Rivet and the Illinois Secretary of State [457 U.S. 624, 629] took steps to invoke the Illinois Act. On February 1, 1979, the Secretary of State notified MITE that he intended to issue an order requiring it to cease and desist further efforts to make a tender offer for Chicago Rivet. On February 2, 1979, Chicago Rivet notified MITE by letter that it would file suit in Illinois state court to enjoin the proposed tender offer. MITE renewed its request for injunctive relief in the District Court and on February 2 the District Court issued a preliminary injunction prohibiting the Secretary of State from enforcing the Illinois Act against MITE's tender offer for Chicago Rivet. </s> MITE then published its tender offer in the February 5 edition of the Wall Street Journal. The offer was made to all shareholders of Chicago Rivet residing throughout the United States. The outstanding stock was worth over $23 million at the offering price. On the same day Chicago Rivet made an offer for approximately 40% of its own shares at $30 per share. 4 The District Court entered final judgment on February 9, declaring that the Illinois Act was pre-empted by the Williams Act and that it violated the Commerce Clause. Accordingly, the District Court permanently enjoined enforcement of the Illinois statute against MITE. Shortly after final judgment was entered, MITE and Chicago Rivet entered into an agreement whereby both tender offers were withdrawn and MITE was given 30 days to examine the books and records of Chicago Rivet. Under the agreement MITE was either to make a tender offer of $31 per share before [457 U.S. 624, 630] March 12, 1979, which Chicago Rivet agreed not to oppose, or decide not to acquire Chicago Rivet's shares or assets. App. to Brief for Appellees 1a-4a. On March 2, 1979, MITE announced its decision not to make a tender offer. </s> The United States Court of Appeals for the Seventh Circuit affirmed sub nom. MITE Corp. v. Dixon, 633 F.2d 486 (1980). It agreed with the District Court that several provisions of the Illinois Act are pre-empted by the Williams Act and that the Illinois Act unduly burdens interstate commerce in violation of the Commerce Clause. We noted probable jurisdiction, 451 U.S. 968 (1981), and now affirm. </s> II </s> The Court of Appeals specifically found that this case was not moot, 633 F.2d, at 490, reasoning that because the Secretary has indicated he intends to enforce the Act against MITE, a reversal of the judgment of the District Court would expose MITE to civil and criminal liability 5 for making the February 5, 1979, offer in violation of the Illinois Act. We agree. It is urged that the preliminary injunction issued by the District Court is a complete defense to civil or criminal penalties. While, as JUSTICE STEVENS' concurrence indicates, that is not a frivolous question by any means; it is an issue to be decided when and if the Secretary of State initiates an action. That action would be foreclosed if we agree with the Court of Appeals that the Illinois Act is unconstitutional. Accordingly, the case is not moot. </s> III </s> We first address the holding that the Illinois Take-Over Act is unconstitutional under the Supremacy Clause. We note at the outset that in passing the Williams Act, which is [457 U.S. 624, 631] an amendment to the Securities Exchange Act of 1934, Congress did not also amend 28(a) of the 1934 Act, 15 U.S.C. 78bb(a). 6 In pertinent part, 28(a) provides as follows: </s> "Nothing in this title shall affect the jurisdiction of the securities commission (or any agency or officer performing like functions) of any State over any security or any person insofar as it does not conflict with the provisions of this title or the rules and regulations thereunder." 48 Stat. 903. </s> Thus Congress did not explicitly prohibit States from regulating takeovers; it left the determination whether the Illinois statute conflicts with the Williams Act to the courts. Of course, a state statute is void to the extent that it actually conflicts with a valid federal statute; and </s> "[a] conflict will be found `where compliance with both federal and state regulations is a physical impossibility . . .,' Florida Lime & Avocado Growers, Inc. v. Paul, 373 U.S. 132, 142 -143 (1963), or where the state `law stands as an obstacle to the accomplishment and execution of the full purposes and objectives of Congress.' Hines v. Davidowitz, 312 U.S. 52, 67 (1941); Jones v. Rath Packing Co., [430 U.S. 519 ,] 526, 540-541 [(1977)]. Accord, De Canas v. Bica, 424 U.S. 351, 363 (1976)." Ray v. Atlantic Richfield Co., 435 U.S. 151, 158 (1978). </s> Our inquiry is further narrowed in this case since there is no contention that it would be impossible to comply with both [457 U.S. 624, 632] the provisions of the Williams Act and the more burdensome requirements of the Illinois law. The issue thus is, as it was in the Court of Appeals, whether the Illinois Act frustrates the objectives of the Williams Act in some substantial way. </s> The Williams Act, passed in 1968, was the congressional response to the increased use of cash tender offers in corporate acquisitions, a device that had "removed a substantial number of corporate control contests from the reach of existing disclosure requirements of the federal securities laws." Piper v. Chris-Craft Industries, Inc., 430 U.S. 1, 22 (1977). The Williams Act filled this regulatory gap. The Act imposes several requirements. First, it requires that upon the commencement of the tender offer, the offeror file with the SEC, publish or send to the shareholders of the target company, and furnish to the target company detailed information about the offer. 15 U.S.C. 78n(d)(1); 17 CFR 240.24d-3 (1981). The offeror must disclose information about its background and identity; the source of the funds to be used in making the purchase; the purpose of the purchase, including any plans to liquidate the company or make major changes in its corporate structure; and the extent of the offeror's holdings in the target company. 15 U.S.C. 78m(d)(1) (1976 ed., Supp. IV); 17 CFR 240.13d-1 (1981). See also n. 2, supra. Second, stockholders who tender their shares may withdraw them during the first 7 days of a tender offer and if the offeror has not yet purchased their shares, at any time after 60 days from the commencement of the offer. 15 U.S.C. 78n(d)(5). 7 Third, all shares tendered must be purchased for the same price; if an offering price is increased, those who have already tendered receive the benefit of the increase. 15 U.S.C. 78n(d)(7). 8 </s> [457 U.S. 624, 633] </s> There is no question that in imposing these requirements, Congress intended to protect investors. Piper v. Chris-Craft Industries, Inc., supra, at 35; Rondeau v. Mosinee Paper Corp., 422 U.S. 49, 58 (1975); S. Rep. No. 550, 90th Cong., 1st Sess., 3-4 (1967) (Senate Report). But it is also crystal clear that a major aspect of the effort to protect the investor was to avoid favoring either management or the takeover bidder. As we noted in Piper, the disclosure provisions originally embodied in S. 2731 "were avowedly pro-management in the target company's efforts to defeat takeover bids." 430 U.S., at 30 . But Congress became convinced "that takeover bids should not be discouraged because they serve a useful purpose in providing a check on entrenched but inefficient management." Senate Report, at 3. 9 It also became apparent that entrenched management was often successful in defeating takeover attempts. As the legislation evolved, therefore, Congress disclaimed any "intention to provide a weapon for management to discourage takeover bids," Rondeau v. Mosinee Paper Corp., supra, at 58, and expressly embraced a policy of neutrality. As Senator Williams explained: "We have taken extreme care to avoid tipping the scales either in favor of management or in favor of the person making the takeover bids." 113 Cong. Rec. 24664 (1967). This policy of "evenhandedness," Piper v. Chris-Craft Industries, Inc., supra, at 31, represented a conviction that neither side in the contest should be extended additional advantages vis-a-vis the investor, who if furnished with adequate information would be in a position to make his [457 U.S. 624, 634] own informed choice. We, therefore, agree with the Court of Appeals that Congress sought to protect the investor not only by furnishing him with the necessary information but also by withholding from management or the bidder any undue advantage that could frustrate the exercise of an informed choice. 633 F.2d, at 496. </s> To implement this policy of investor protection while maintaining the balance between management and the bidder, Congress required the latter to file with the Commission and furnish the company and the investor with all information adequate to the occasion. With that filing, the offer could go forward, stock could be tendered and purchased, but a stockholder was free within a specified time to withdraw his tendered shares. He was also protected if the offer was increased. Looking at this history as a whole, it appears to us, as it did to the Court of Appeals, that Congress intended to strike a balance between the investor, management, and the takeover bidder. The bidder was to furnish the investor and the target company with adequate information but there was no "inten[tion] to do . . . more than give incumbent management an opportunity to express and explain its position." Rondeau v. Mosinee Paper Corp., supra, at 58. Once that opportunity was extended, Congress anticipated that the investor, if he so chose, and the takeover bidder should be free to move forward within the time frame provided by Congress. </s> IV </s> The Court of Appeals identified three provisions of the Illinois Act that upset the careful balance struck by Congress and which therefore stand as obstacles to the accomplishment and execution of the full purposes and objectives of Congress. We agree with the Court of Appeals in all essential respects. </s> A </s> The Illinois Act requires a tender offeror to notify the Secretary of State and the target company of its intent to make a [457 U.S. 624, 635] tender offer and the material terms of the offer 20 business days before the offer becomes effective. Ill. Rev. Stat., ch. 121 1/2, §§ 137.54.E, 137.54.B (1979). During that time, the offeror may not communicate its offer to the shareholders. § 137.54.A. Meanwhile, the target company is free to disseminate information to its shareholders concerning the impending offer. The contrast with the Williams Act is apparent. Under that Act, there is no precommencement notification requirement; the critical date is the date a tender offer is "first published or sent or given to security holders." 15 U.S.C. 78n(d)(1). See also 17 CFR 240.14d-2 (1981). </s> We agree with the Court of Appeals that by providing the target company with additional time within which to take steps to combat the offer, the precommencement notification provisions furnish incumbent management with a powerful tool to combat tender offers, perhaps to the detriment of the stockholders who will not have an offer before them during this period. 10 These consequences are precisely what Congress determined should be avoided, and for this reason, the precommencement notification provision frustrates the objectives of the Williams Act. </s> It is important to note in this respect that in the course of events leading to the adoption of the Williams Act, Congress several times refused to impose a precommencement disclosure requirement. In October 1965, Senator Williams introduced S. 2731, a bill which would have required a bidder to notify the target company and file a public statement with the Securities and Exchange Commission at least 20 days before commencement of a cash tender offer for more than 5% of a class of the target company's securities. 111 Cong. Rec. 28259 (1965). The Commission commented on the bill and stated that "the requirement of a 20-day advance notice to the issuer and the Commission is unnecessary for the protection of security holders . . . ." 112 Cong. Rec. 19005 (1966). [457 U.S. 624, 636] Senator Williams introduced a new bill in 1967, S. 510, which provided for a confidential filing by the tender offeror with the Commission five days prior to the commencement of the offer. S. 510 was enacted as the Williams Act after elimination of the advance disclosure requirement. As the Senate Report explained: </s> "At the hearings it was urged that this prior review was not necessary and in some cases might delay the offer when time was of the essence. In view of the authority and responsibility of the Securities and Exchange Commission to take appropriate action in the event that inadequate or misleading information is disseminated to the public to solicit acceptance of a tender offer, the bill as approved by the committee requires only that the statement be on file with the Securities and Exchange Commission at the time the tender offer is first made to the public." Senate Report, at 4. </s> Congress rejected another precommencement notification proposal during deliberations on the 1970 amendments to the Williams Act. 11 </s> B </s> For similar reasons, we agree with the Court of Appeals [457 U.S. 624, 637] that the hearing provisions of the Illinois Act frustrate the congressional purpose by introducing extended delay into the tender offer process. The Illinois Act allows the Secretary of State to call a hearing with respect to any tender offer subject to the Act, and the offer may not proceed until the hearing is completed. Ill. Rev. Stat., ch. 121 1/2, §§ 137.57.A and B (1979). The Secretary may call a hearing at any time prior to the commencement of the offer, and there is no deadline for the completion of the hearing. §§ 137.57.C and D. Although the Secretary is to render a decision within 15 days after the conclusion of the hearing, that period may be extended without limitation. Not only does the Secretary of State have the power to delay a tender offer indefinitely, but incumbent management may also use the hearing provisions of the Illinois Act to delay a tender offer. The Secretary is required to call a hearing if requested to do so by, among other persons, those who are located in Illinois "as determined by post office address as shown on the records of the target company and who hold of record or beneficially, or both, at least 10% of the outstanding shares of any class of equity securities which is the subject of the take-over offer." § 137.57.A. Since incumbent management in many cases will control, either directly or indirectly, 10% of the target company's shares, this provision allows management to delay the commencement of an offer by insisting on a hearing. As the Court of Appeals observed, these provisions potentially afford management a "powerful weapon to stymie indefinitely a takeover." 633 F.2d, at 494. 12 In enacting the Williams Act, Congress itself "recognized that delay can seriously impede a tender offer" and sought to avoid it. Great [457 U.S. 624, 638] Western United Corp. v. Kidwell, 577 F.2d 1256, 1277 (CA5 1978); Senate Report, at 4. 13 </s> Congress reemphasized the consequences of delay when it enacted the Hart-Scott-Radino Antitrust Improvements Act of 1976, Pub. L. 94-435, 90 Stat. 1397, 15 U.S.C. 12 et seq. </s> "[I]t is clear that this short waiting period [the 10-day period for proration provided for by 14(d)(6) of the Securities Exchange Act, which applies only after a tender offer is commenced] was founded on congressional concern that a longer delay might unduly favor the target firm's incumbent management, and permit them to frustrate many pro-competitive cash tenders. This ten-day waiting period thus underscores the basic purpose of the Williams Act - to maintain a neutral policy towards cash tender offers, by avoiding lengthy delays that might discourage their chances for success." H. R. Rep. No. 94-1373, p. 12 (1976). 14 </s> [457 U.S. 624, 639] </s> As we have said, Congress anticipated that investors and the takeover offeror would be free to go forward without unreasonable delay. The potential for delay provided by the hearing provisions upset the balance struck by Congress by favoring management at the expense of stockholders. We therefore agree with the Court of Appeals that these hearing provisions conflict with the Williams Act. </s> C </s> The Court of Appeals also concluded that the Illinois Act is pre-empted by the Williams Act insofar as it allows the Secretary of State of Illinois to pass on the substantive fairness of a tender offer. Under § 137.57.E of the Illinois law, the Secretary is required to deny registration of a takeover offer if he finds that the offer "fails to provide full and fair disclosure to the offerees . . . or that the take-over offer is inequitable . . ." (emphasis added). 15 The Court of Appeals understood the Williams Act and its legislative history to indicate that Congress intended for investors to be free to make their own decisions. We agree. Both the House and Senate Reports observed that the Act was "designed to make the relevant facts known so that shareholders have a fair opportunity to make their decision." H. R. Rep. No. 1711, 90th Cong., [457 U.S. 624, 640] 2d Sess., 4 (1968); Senate Report, at 3. Thus, as the Court of Appeals said, "[t]he state thus offers investor protection at the expense of investor autonomy - an approach quite in conflict with that adopted by Congress." 633 F.2d, at 494. </s> V </s> The Commerce Clause provides that "Congress shall have Power . . . [t]o regulate Commerce . . . among the several States." U.S. Const., Art. I, 8, cl. 3. "[A]t least since Cooley v. Board of Wardens, 12 How. 299 (1852), it has been clear that `the Commerce Clause. . . . even without implementing legislation by Congress is a limitation upon the power of the States.'" Great Atlantic & Pacific Tea Co. v. Cottrell, 424 U.S. 366, 370 -371 (1976), quoting Freeman v. Hewitt, 329 U.S. 249, 252 (1946). See also Lewis v. BT Investment Managers, Inc., 447 U.S. 27, 35 (1980). Not every exercise of state power with some impact on interstate commerce is invalid. A state statute must be upheld if it "regulates evenhandedly to effectuate a legitimate local public interest, and its effects on interstate commerce are only incidental . . . unless the burden imposed on such commerce is clearly excessive in relation to the putative local benefits." Pike v. Bruce Church, Inc., 397 U.S. 137, 142 (1970), citing Huron Cement Co. v. Detroit, 362 U.S. 440, 443 (1960). The Commerce Clause, however, permits only incidental regulation of interstate commerce by the States; direct regulation is prohibited. Shafer v. Farmers Grain Co., 268 U.S. 189, 199 (1925). See also Pike v. Bruce Church, Inc., supra, at 142. The Illinois Act violates these principles for two reasons. First, it directly regulates and prevents, unless its terms are satisfied, interstate tender offers which in turn would generate interstate transactions. Second, the burden the Act imposes on interstate commerce is excessive in light of the local interests the Act purports to further. [457 U.S. 624, 641] </s> A </s> States have traditionally regulated intrastate securities transactions, 16 and this Court has upheld the authority of States to enact "blue-sky" laws against Commerce Clause challenges on several occasions. Hall v. Geiger-Jones Co., 242 U.S. 539 (1917); Caldwell v. Sioux Falls Stock Yards Co., 242 U.S. 559 (1917); Merrick v. N. W. Halsey & Co., 242 U.S. 568 (1917). The Court's rationale for upholding blue-sky laws was that they only regulated transactions occurring within the regulating States. "The provisions of the law . . . apply to dispositions of securities within the State and while information of those issued in other States and foreign countries is required to be filed . . ., they are only affected by the requirement of a license of one who deals with them within the State. . . . Such regulations affect interstate commerce in [securities] only incidentally." Hall v. Geiger-Jones Co., supra, at 557-558 (citations omitted). Congress has also recognized the validity of such laws governing interstate securities transactions in 28(a) of the Securities Exchange Act, 15 U.S.C. 78bb(a), a provision "designed to save state blue-sky laws from pre-emption." Leroy v. Great Western United Corp., 443 U.S. 173, 182 , n. 13 (1979). </s> The Illinois Act differs substantially from state blue-sky laws in that it directly regulates transactions which take place across state lines, even if wholly outside the State of Illinois. A tender offer for securities of a publicly held corporation is ordinarily communicated by the use of the mails or other means of interstate commerce to shareholders across the country and abroad. Securities are tendered and transactions closed by similar means. Thus, in this case, MITE [457 U.S. 624, 642] Corp., the tender offeror, is a Delaware corporation with principal offices in Connecticut. Chicago Rivet is a publicity held Illinois corporation with shareholders scattered around the country, 27% of whom live in Illinois. MITE's offer to Chicago Rivet's shareholders, including those in Illinois, necessarily employed interstate facilities in communicating its offer, which, if accepted, would result in transactions occurring across state lines. These transactions would themselves be interstate commerce. Yet the Illinois law, unless complied with, sought to prevent MITE from making its offer and concluding interstate transactions not only with Chicago Rivet's stockholders living in Illinois, but also with those living in other States and having no connection with Illinois. Indeed, the Illinois law on its face would apply even if not a single one of Chicago Rivet's shareholders were a resident of Illinois, since the Act applies to every tender offer for a corporation meeting two of the following conditions: the corporation has its principal executive office in Illinois, is organized under Illinois laws, or has at least 10% of its stated capital and paid-in surplus represented in Illinois. Ill. Rev. Stat., ch. 121 1/2, § 137.52-10(2) (1979). Thus the Act could be applied to regulate a tender offer which would not affect a single Illinois shareholder. </s> It is therefore apparent that the Illinois statute is a direct restraint on interstate commerce and that it has a sweeping extraterritorial effect. Furthermore, if Illinois may impose such regulations, so may other States; and interstate commerce in securities transactions generated by tender offers would be thoroughly stifled. In Shafer v. Farmers Grain Co., supra, at 199, the Court held that "a state statute which by its necessary operation directly interferes with or burdens [interstate] commerce is a prohibited regulation and invalid, regardless of the purpose with which it was enacted." See also Hughes v. Alexandria Scrap Corp., 426 U.S. 794, 806 (1976). The Commerce Clause also precludes the application of a state statute to commerce that takes place wholly outside of the State's borders, whether or not the commerce has effects [457 U.S. 624, 643] within the State. In Southern Pacific Co. v. Arizona, 325 U.S. 761, 775 (1945), the Court struck down on Commerce Clause grounds a state law where the "practical effect of such regulation is to control [conduct] beyond the boundaries of the state . . . ." The limits on a State's power to enact substantive legislation are similar to the limits on the jurisdiction of state courts. In either case, "any attempt `directly' to assert extraterritorial jurisdiction over persons or property would offend sister States and exceed the inherent limits of the State's power." Shaffer v. Heitner, 433 U.S. 186, 197 (1977). </s> Because the Illinois Act purports to regulate directly and to interdict interstate commerce, including commerce wholly outside the State, it must be held invalid as were the laws at issue in Shafer v. Farmers Grain Co. and Southern Pacific. </s> B </s> The Illinois Act is also unconstitutional under the test of Pike v. Bruce Church, Inc., 397 U.S., at 142 , for even when a state statute regulates interstate commerce indirectly, the burden imposed on that commerce must not be excessive in relation to the local interests served by the statute. The most obvious burden the Illinois Act imposes on interstate commerce arises from the statute's previously described nationwide reach which purports to give Illinois the power to determine whether a tender offer may proceed anywhere. </s> The effects of allowing the Illinois Secretary of State to block a nationwide tender offer are substantial. Shareholders are deprived of the opportunity to sell their shares at a premium. The reallocation of economic resources to their highest valued use, a process which can improve efficiency and competition, is hindered. The incentive the tender offer mechanism provides incumbent management to perform well so that stock prices remain high is reduced. See Easterbrook & Fischel, The Proper Role of a Target's Management in Responding to a Tender Offer, 94 Harv. L. Rev. [457 U.S. 624, 644] 1161, 1173-1174 (1981); Fischel, Efficient Capital Market Theory, the Market for Corporate Control, and the Regulation of Cash Tender Offers, 57 Texas L. Rev. 1, 5, 27-28, 45 (1978); H. R. Rep. No. 94-1373, p. 12 (1976). </s> Appellant claims the Illinois Act furthers two legitimate local interests. He argues that Illinois seeks to protect resident security holders and that the Act merely regulates the internal affairs of companies incorporated under Illinois law. We agree with the Court of Appeals that these asserted interests are insufficient to outweigh the burdens Illinois imposes on interstate commerce. </s> While protecting local investors is plainly a legitimate state objective, the State has no legitimate interest in protecting nonresident shareholders. Insofar as the Illinois law burdens out-of-state transactions, there is nothing to be weighed in the balance to sustain the law. We note, furthermore, that the Act completely exempts from coverage a corporation's acquisition of its own shares. Ill. Rev. Stat., ch. 121 1/2, § 137.52-9(4) (1979). Thus Chicago Rivet was able to make a competing tender offer for its own stock without complying with the Illinois Act, leaving Chicago Rivet's shareholders to depend only on the protections afforded them by federal securities law, protections which Illinois views as inadequate to protect investors in other contexts. This distinction is at variance with Illinois' asserted legislative purpose, and tends to undermine appellant's justification for the burdens the statute imposes on interstate commerce. </s> We are also unconvinced that the Illinois Act substantially enhances the shareholders' position. The Illinois Act seeks to protect shareholders of a company subject to a tender offer by requiring disclosures regarding the offer, assuring that shareholders have adequate time to decide whether to tender their shares, and according shareholders withdrawal, proration, and equal consideration rights. However, the Williams Act provides these same substantive protections, compare Ill. Rev. Stat., ch. 121 1/2, §§ 137.59.C, D, and E (1979) (withdrawal, [457 U.S. 624, 645] proration, and equal consideration rights), with 15 U.S.C. 78n(d)(5), (6), and (7) and 17 CFR 240.14d-7 (1981) (same). As the Court of Appeals noted, the disclosures required by the Illinois Act which go beyond those mandated by the Williams Act and the regulations pursuant to it may not substantially enhance the shareholders' ability to make informed decisions. 633 F.2d, at 500. It also was of the view that the possible benefits of the potential delays required by the Act may be outweighed by the increased risk that the tender offer will fail due to defensive tactics employed by incumbent management. We are unprepared to disagree with the Court of Appeals in these respects, and conclude that the protections the Illinois Act affords resident security holders are, for the most part, speculative. </s> Appellant also contends that Illinois has an interest in regulating the internal affairs of a corporation incorporated under its laws. The internal affairs doctrine is a conflict of laws principle which recognizes that only one State should have the authority to regulate a corporation's internal affairs - matters peculiar to the relationships among or between the corporation and its current officers, directors, and shareholders - because otherwise a corporation could be faced with conflicting demands. See Restatement (Second) of Conflict of Laws 302, Comment b, pp. 307-308 (1971). That doctrine is of little use to the State in this context. Tender offers contemplate transfers of stock by stockholders to a third party and do not themselves implicate the internal affairs of the target company. Great Western United Corp. v. Kidwell, 577 F.2d, at 1280, n. 53; Restatement, supra, 302, Comment e, p. 310. Furthermore, the proposed justification is somewhat incredible since the Illinois Act applies to tender offers for any corporation for which 10% of the outstanding shares are held by Illinois residents, Ill. Rev. Stat., ch. 121 1/2, § 137.52-10 (1979). The Act thus applies to corporations that are not incorporated in Illinois and have their principal place of business in other States. Illinois has no interest [457 U.S. 624, 646] in regulating the internal affairs of foreign corporations. </s> We conclude with the Court of Appeals that the Illinois Act imposes a substantial burden on interstate commerce which outweighs its putative local benefits. It is accordingly invalid under the Commerce Clause. </s> The judgment of the Court of Appeals is </s> Affirmed. </s> Fn [457 U.S. 624, 626] THE CHIEF JUSTICE joins the opinion in its entirety; JUSTICE BLACKMUN joins Parts I, II, III, and IV; JUSTICE POWELL joins Parts I and V-B; and JUSTICE STEVENS and JUSTICE O'CONNOR join Parts I, II, and V. </s> Footnotes [Footnote 1 The Illinois Act defines "take-over offer" as "the offer to acquire or the acquisition of any equity security of a target company, pursuant to a tender offer . . . ." Ill. Rev. Stat., ch. 121 1/2, § 137.52-9 (1979). "A tender offer has been conventionally understood to be a publicly made invitation addressed to all shareholders of a corporation to tender their shares for sale at a specified price." Note, The Developing Meaning of "Tender Offer" Under the Securities Exchange Act of 1934, 86 Harv. L. Rev. 1250, 1251 (1973) (footnotes omitted). The terms "tender offer" and "takeover offer" are often used interchangeably. </s> [Footnote 2 The Williams Act, 82 Stat. 454, codified at 15 U.S.C. 78m(d)-(e) and 78n(d)-(f), added new 13(d), 13(e), and 14(d)-(f) to the Securities Exchange Act of 1934. Section 14(d)(1) of the Securities Exchange Act requires an offeror seeking to acquire more than 5% of any class of equity security by means of a tender offer to first file a Schedule 14D-1 with the Securities and Exchange Commission. The Schedule requires disclosure [457 U.S. 624, 628] of the source of funds used to purchase the target shares, past transactions with the target company, and other material financial information about the offeror. In addition, the offeror must disclose any antitrust or other legal problems which might result from the success of the offer. 17 CFR 240.14d-100 (1981). Section 14(d)(1) requires the offeror to publish or send a statement of the relevant facts contained in the Schedule 14D-1 to the shareholders of the target company. </s> In addition, 13(d), added by the Williams Act, requires a purchaser of any equity security registered pursuant to 12 of the Securities Exchange Act, 15 U.S.C. 78l, to file a Schedule 13D with the Commission within 10 days after its purchases have exceeded 5% of the outstanding shares of the security. Schedule 13D requires essentially the same disclosures as required by Schedule 14D-1. Compare 17 CFR 240.13d-101 (1981) with 17 CFR 240.14d-100 (1981). </s> [Footnote 3 In addition to filing suit in state court, Chicago Rivet filed a complaint with the Pennsylvania Securities Commission requesting the Commission to enforce the Pennsylvania Act against MITE. On January 31, 1979, the [457 U.S. 624, 629] Pennsylvania Securities Commission decided that it would not invoke the Pennsylvania Takeover Disclosure Law. The next day, the United States District Court for the Western District of Pennsylvania, to which MITE had removed the state-court action, denied Chicago Rivet's motion for a temporary restraining order. </s> [Footnote 4 Chicago Rivet's offer for its own shares was exempt from the requirements of the Illinois Act pursuant to Ill. Rev. Stat., ch. 121 1/2, § 137.52-9(4) (1979). </s> [Footnote 5 The Secretary of State may bring an action for civil penalties for violations of the Illinois Act. Ill. Rev. Stat., ch. 121 1/2, § 137.65 (1979), and a person who willfully violates the Act is subject to criminal prosecution, § 137.63. </s> [Footnote 6 There is no evidence in the legislative history that Congress was aware of state takeover laws when it enacted the Williams Act. When the Williams Act was enacted in 1968, only Virginia had a takeover statute. The Virginia statute, Va. Code 13.1-528 (1978), became effective March 5, 1968; the Williams Act was enacted several months later on July 19, 1968. Takeover statutes are now in effect in 37 States. Sargent, On the Validity of State Takeover Regulation: State Responses to MITE and Kidwell, 42 Ohio St. L. J. 689, 690, n. 7 (1981). </s> [Footnote 7 The 7-day withdrawal period contained in the Williams Act has been extended to 15 business days by the Commission. 17 CFR 240.14d-7(a)(1) (1981). </s> [Footnote 8 The Williams Act also provides that when the number of shares tendered exceeds the number of shares sought in the offer, those shares tendered during the first 10 days of the offer must be purchased on a pro rata [457 U.S. 624, 633] basis. 15 U.S.C. 78n(d)(6). The Act also contains a general antifraud provision, 15 U.S.C. 78n(e), which has been interpreted to require disclosure of material information known to the offeror even if disclosure were not otherwise required. See e. g., Sonesta International Hotels Corp. v. Wellington Associates, 483 F.2d 247, 250 (CA2 1973). </s> [Footnote 9 Congress also did not want to deny shareholders "the opportunities which result from the competitive bidding for a block of stock of a given company," namely, the opportunity to sell shares for a premium over their market price. 113 Cong. Rec. 24666 (1967) (remarks of Sen. Javits). </s> [Footnote 10 See n. 11 and accompanying text, infra. </s> [Footnote 11 H. R. 4285, 91st Cong., 2d Sess. (1970). The bill was not reported out of the Subcommittee. Instead, the Senate amendments to the Williams Act, which did not contain precommencement notification provisions, were adopted. Pub. L. 91-567, 84 Stat. 1497. </s> The Securities and Exchange Commission has promulgated detailed rules governing the conduct of tender offers. Rule 14d-2(b), 17 CFR 240.14d-2(b) (1981), requires that a tender offeror make its offer effective within five days of publicly announcing the material terms of the offer by disseminating specified information to shareholders and filing the requisite documents with the Commission. Otherwise the offeror must announce that it is withdrawing its offer. The events in this litigation took place prior to the effective date of Rule 14d-2(b), and because Rule 14d-2(b) operates prospectively only, see 44 Fed. Reg. 70326 (1979), it is not at issue in this case. </s> [Footnote 12 Delay has been characterized as "the most potent weapon in a tender-offer fight." Langevoort, State Tender-Offer Legislation: Interests, Effects, and Political Competency, 62 Cornell L. Rev. 213, 238 (1977). See also Wachtell, Special Tender Offer Litigation Tactics, 32 Bus. Law. 1433, 1437-1442 (1977); Wilner & Landy, The Tender Trap: State Takeover Statutes and Their Constitutionality, 45 Ford. L. Rev. 1, 9-10 (1976). </s> [Footnote 13 According to the Securities and Exchange Commission, delay enables a target company to: </s> "(1) repurchase its own securities; </s> "(2) announce dividend increases or stock splits; </s> "(3) issue additional shares of stock; </s> "(4) acquire other companies to produce an antitrust violation should the tender offer succeed; </s> "(5) arrange a defensive merger; </s> "(6) enter into restrictive loan agreements; and </s> "(7) institute litigation challenging the tender offer." Brief for Securities and Exchange Commission as Amicus Curiae 10, n. 8. </s> [Footnote 14 Representative Rodino set out the consequences of delay in greater detail when he described the relationship between the Hart-Scott-Rodino Act and the Williams Act: </s> "In the case of cash tender offers, more so than in other mergers, the equities include time and the danger of undue delay. This bill in no way intends to repeal or reverse the congressional purpose underlying the 1968 Williams Act, or the 1970 amendments to that act. . . . Lengthier delays will give the target firm plenty of time to defeat the offer, by abolishing cumulative voting, arranging a speedy defensive merger, quickly incorporating in a State with an antitakeover statute, or negotiating costly lifetime [457 U.S. 624, 639] employment contracts for incumbent management. And the longer the waiting period, the more the target's stock may be bid up in the market, making the offer more costly - and less successful. Should this happen, it will mean that shareholders of the target firm will be effectively deprived of the choice that cash tenders give to them: Either accept the offer and thereby gain the tendered premium, or reject the offer. Generally, the courts have construed the Williams Act so as to maintain these two options for the target company's shareholders, and the House conferees contemplate that the courts will continue to do so." 122 Cong. Rec. 30877 (1976). </s> [Footnote 15 Appellant argues that the Illinois Act does not permit him to adjudicate the substantive fairness of a tender offer. Brief for Appellant 21-22. On this state-law issue, however, we follow the view of the Court of Appeals that § 137.57.E allows the Secretary of State "to pass upon the substantive fairness of a tender offer . . . ." 633 F.2d 486, 493 (1980). </s> [Footnote 16 For example, the Illinois blue-sky law, Ill. Rev. Stat., ch. 121 1/2, § 137.1 et seq. (1979 and Supp. 1980), provides that securities subject to the law must be registered "prior to sale in this State . . . ." § 137.5. </s> JUSTICE POWELL, concurring in part. </s> I agree with JUSTICE MARSHALL that this case is moot. In view, however, of the decision of a majority of the Court to reach the merits, I join Parts I and V-B of the Court's opinion. </s> I join Part V-B because its Commerce Clause reasoning leaves some room for state regulation of tender offers. This period in our history is marked by conglomerate corporate formations essentially unrestricted by the antitrust laws. Often the offeror possesses resources, in terms of professional personnel experienced in takeovers as well as of capital, that vastly exceed those of the takeover target. This disparity in resources may seriously disadvantage a relatively small or regional target corporation. Inevitably there are certain adverse consequences in terms of general public interest when corporate headquarters are moved away from a city and State. * </s> The Williams Act provisions, implementing a policy of neutrality, seem to assume corporate entities of substantially equal resources. I agree with JUSTICE STEVENS that the [457 U.S. 624, 647] Williams Act's neutrality policy does not necessarily imply a congressional intent to prohibit state legislation designed to assure - at least in some circumstances - greater protection to interests that include but often are broader than those of incumbent management. </s> [Footnote * The corporate headquarters of the great national and multinational corporations tend to be located in the large cities of a few States. When corporate headquarters are transferred out of a city and State into one of these metropolitan centers, the State and locality from which the transfer is made inevitably suffer significantly. Management personnel - many of whom have provided community leadership - may move to the new corporate headquarters. Contributions to cultural, charitable, and educational life - both in terms of leadership and financial support - also tend to diminish when there is a move of corporate headquarters. </s> JUSTICE STEVENS, concurring in part and concurring in the judgment. </s> The question whether this case is moot depends on the effect of the preliminary injunction entered on February 2, 1979, restraining the Illinois Secretary of State from enforcing the Illinois Business Take-Over Act while the injunction remained in effect. If, as JUSTICE MARSHALL contends in his dissenting opinion, the injunction granted the MITE Corp. a complete immunity from state sanctions for any acts performed while the injunction was outstanding, I would agree that the case is moot. On the other hand, if the injunction did no more than it purported to do, setting aside the injunction would remove its protection and MITE would be subject to sanctions in the state courts. Those courts might regard the fact that an injunction was outstanding at the time MITE violated the Illinois statute as a defense to any enforcement proceeding, but unless the federal injunction was tantamount to a grant of immunity, there is no federal rule of law that would require the state courts to absolve MITE from liability. I believe, therefore, that to resolve the mootness issue - which, of course, is jurisdictional - we must answer the question that JUSTICE MARSHALL's dissent raises. </s> JUSTICE MARSHALL advances various reasons for adopting a rule that will give federal judges the power to grant complete immunity to persons who desire to test the constitutionality of a state statute. His proposed rule would treat any federal judge's preliminary injunction restraining enforcement of a state statute on federal grounds as a grant of immunity with respect to any conduct undertaken while the injunction [457 U.S. 624, 648] was outstanding. Under the rule he proposes, "if the statute is later determined to be valid, the State will never be able to prosecute the individual that obtained the preliminary injunction for action taken while the injunction was in effect." Post, at 657, n. 1. For me, the question is not whether such a rule would be wise; the question is whether federal judges possess the power to grant such immunity. In my opinion they do not. </s> I </s> The essential facts of this case are few and bear repeating. On February 2, 1979, MITE Corp. and MITE Holdings, Inc., obtained a preliminary injunction restraining the Illinois Secretary of State from invoking the provisions of the Illinois Business Take-Over Act to block MITE's intended takeover of Chicago Rivet & Machine Co. Three days later, without complying with the provisions of the Illinois statute, MITE published its offer in the Wall Street Journal. On February 9, 1979, the District Court entered a judgment declaring the Illinois statute unconstitutional; the court permanently enjoined the Secretary from enforcing the Illinois statute against MITE. </s> The State contends that the attempted takeover was subject to the provisions of the Illinois statute and that MITE violated the Act by failing to register with the Illinois Secretary of State. The State further argues that the Take-Over Act is consistent with federal law. For purposes of deciding the mootness issue, we must assume that these contentions are correct; a holding that this case is moot would mean that MITE is completely protected from any adverse action whether or not the statute is unconstitutional. Such a conclusion would be possible only if the District Court's preliminary injunction granted MITE absolute and permanent immunity from any prosecution - civil or criminal - brought to enforce the Illinois statute. </s> Neither the terms of the preliminary injunction nor prior equity practice provides any support for an interpretation of [457 U.S. 624, 649] the District Court's order as a grant of total immunity from future prosecution. More fundamentally, federal judges have no power to grant such blanket dispensation from the requirements of valid legislative enactments. </s> A </s> An injunction restrains conduct. Its effect is normally limited to the parties named in the instrument. Since a preliminary injunction may be granted on a mere probability of success on the merits, generally the moving party must demonstrate confidence in his legal position by posting bond in an amount sufficient to protect his adversary from loss in the event that future proceedings prove that the injunction issued wrongfully. 1 The bond, in effect, is the moving party's warranty that the law will uphold the issuance of the injunction. </s> These features of injunctive relief are inconsistent with a blanket grant of immunity, as this case demonstrates. The preliminary injunction did not purport to provide permanent immunity for violations of the statute that occurred during its effective period. It merely provided that the Secretary of State was enjoined from "issuing any cease and desist order or notice of hearing or from otherwise invoking, applying, or enforcing the Illinois Business Take-Over Act" against MITE. Record 16. It did not enjoin other parties who are authorized by the Act to enforce its provisions. Ill. Rev. [457 U.S. 624, 650] Stat., ch. 121 1/2, §§ 137.62, 137.64 (1979). Moreover, the preliminary injunction was entered without any declaration that the Illinois statute was unconstitutional. There simply is no basis on which to conclude that the preliminary injunction issued by the District Court should be construed as having granted MITE permanent immunity from future proceedings brought under the Illinois statute. </s> In Steffel v. Thompson, 415 U.S. 452 , the Court unanimously held that an individual who wished to engage in "constitutionally protected activity" but was threatened with prosecution under a state criminal statute could obtain a declaratory judgment in federal court declaring the statute invalid. The Court did not suggest that, armed with such a judgment from a federal district court, the individual could violate the statute with impunity; indeed, it stated just the opposite: </s> "`[A] federal declaration of unconstitutionality reflects the opinion of the federal court that the statute cannot be fully enforced. If a declaration of total unconstitutionality is affirmed by this Court, it follows that this Court stands ready to reverse any conviction under the statute.'" Id., at 469-470 (quoting Perez v. Ledesma, 401 U.S. 82, 124 (separate opinion of BRENNAN, J.)). 2 </s> JUSTICE WHITE attached possibly the greatest significance to a federal declaratory judgment, writing separately in Steffel that "I would anticipate that a final declaratory judgment entered by a federal court holding particular conduct of the federal plaintiff to be immune on federal constitutional grounds from prosecution under state law should be accorded res judicata effect in any later prosecution of that very conduct." [457 U.S. 624, 651] 415 U.S., at 477 (concurring opinion). A declaratory judgment reversed on appeal, however, certainly would not have such res judicata effect. </s> An individual who is imminently threatened with prosecution for conduct that he believes is constitutionally protected should not be forced to act at his peril. One purpose of the federal declaratory judgment statute is to permit such an individual to test the legality of a state statute before engaging in conduct that is prohibited by its terms. See S. Rep. No. 1005, 73d Cong., 2d Sess., 2-3 (1934). Recognition of this fact, however, does not determine the point at which an individual may act with absolute assurance that he may not be punished for his contemplated activity. The fact that a federal judge has entered a declaration that the law is invalid does not provide that assurance; every litigant is painfully aware of the possibility that a favorable judgment of a trial court may be reversed on appeal. To repeat the words of this Court in Steffel, the most that can be said is: "`If a declaration of total unconstitutionality is affirmed by this Court, it follows that this Court stands ready to reverse any conviction under the statute.'" 415 U.S., at 470 (quoting Perez v. Ledesma, supra, at 124 (separate opinion of BRENNAN, J.)). 3 </s> Since a final judgment declaring a state statute unconstitutional would not grant immunity for actions taken in reliance on the court's decision, certainly a preliminary injunction - which on its face does nothing more than temporarily restrain conduct - should not accomplish that result. Neither the [457 U.S. 624, 652] preliminary injunction nor the subsequent judgment declaring the statute unconstitutional can fairly be construed as a grant of absolute immunity from enforcement of the Illinois statute. 4 </s> B </s> My conclusions concerning the proper nature of injunctive and declaratory relief are not based upon arcane interpretations [457 U.S. 624, 653] of common law. Federal courts are courts of limited jurisdiction. 5 Before a federal court exercises any governmental power, it has a duty to determine its own jurisdiction to act. There simply is no constitutional or statutory authority that permits a federal judge to grant dispensation from a valid state law. 6 </s> As I have written before, the federal judiciary can continue to perform its vital function in our governmental structure only if it recognizes the limitations on its own legitimate authority. United States v. New York Telephone Co., 434 U.S. 159, 178 (STEVENS, J., dissenting in part). A belief that a particular result appears reasonable or wise is an insufficient predicate for the exercise of federal judicial power. [457 U.S. 624, 654] The District Court in this case entered both an injunction restraining certain conduct by the Illinois Secretary of State and a judgment declaring a state statute unconstitutional. It did not - because it could not - grant immunity from the requirements of a valid state law. 7 As a result, this Court has jurisdiction to consider whether the judgment and relief entered by the District Court were proper. 8 </s> II </s> On the merits, I agree with the Court that the Illinois Take-Over Act is invalid because it burdens interstate commerce. [457 U.S. 624, 655] I therefore join Part V of its opinion. I am not persuaded, however, that Congress' decision to follow a policy of neutrality in its own legislation is tantamount to a federal prohibition against state legislation designed to provide special protection for incumbent management. Accordingly, although I agree with the Court's assessment of the impact of the Illinois statute, I do not join its pre-emption holding. </s> [Footnote 1 As provided by Federal Rule of Civil Procedure 65(c): </s> "No restraining order or preliminary injunction shall issue except upon the giving of security by the applicant, in such sum as the court deems proper, for the payment of such costs and damages as may be incurred or suffered by any party who is found to have been wrongfully enjoined or restrained. No such security shall be required of the United States or of an officer or agency thereof." </s> In Illinois damages apparently may be recovered for injuries caused by a preliminary injunction issued wrongfully by a state court even in the absence of an indemnity bond or abuse of process. See Ill. Rev. Stat., ch. 69, § 12 (1979); Note, 73 Harv. L. Rev. 333, 347 (1959). </s> [Footnote 2 See also 415 U.S., at 480 (REHNQUIST, J., concurring) ("There is nothing in the [Declaratory Judgment] Act's history to suggest that Congress intended to provide persons wishing to violate state laws with a federal shield behind which they could carry on their contemplated conduct"); id., at 482 ("A declaratory judgment is simply a statement of rights, not a binding order supplemented by continuing sanctions"). </s> [Footnote 3 The fact that an unreviewed judgment does not provide absolute protection does not render the declaratory judgment of a district court or a court of appeals meaningless. As stated in Steffel: </s> "`Even where a declaration of unconstitutionality is not reviewed by this Court, the declaration may still be able to cut down the deterrent effect of an unconstitutional state statute. The persuasive force of the court's opinion and judgment may lead state prosecutors, courts, and legislators to reconsider their respective responsibilities toward the statute. Enforcement policies or judicial construction may be changed, or the legislature may repeal the statute and start anew.'" 415 U.S., at 470 (quoting Perez v. Ledesma, 401 U.S., at 125 (separate opinion of BRENNAN, J.)). </s> [Footnote 4 In Liner v. Jafco, Inc., 375 U.S. 301 , the respondent obtained an injunction from a state court that restrained picketing at a construction site. Petitioners moved to dissolve the injunction on the ground that the state court was without jurisdiction to adjudicate the controversy because the subject matter of the picketing was exclusively within the cognizance of the National Labor Relations Board. Petitioners' motion was denied by the state court and that decision was affirmed on appeal. This Court granted a petition for certiorari. </s> While the case was pending in the state appellate court, construction at the site was completed. This Court nevertheless held that the issue of whether the injunction had issued properly was not moot because the respondent remained liable on an indemnity bond if the injunction had issued wrongfully. The Court stated: </s> "The petitioners plainly have `a substantial stake in the judgment . . .,' Fiswick v. United States, 329 U.S. 211, 222 , which exists apart from and is unaffected by the completion of construction. Their interest derives from the undertaking of respondent Jafco, Inc., in the injunction bond to indemnify them in damages if the injunction was `wrongfully' sued out. Whether the injunction was wrongfully sued out turns solely upon the answer to the federal question which the petitioners have pressed from the beginning. If the answer of the Tennessee Court of Appeals to that question may not be challenged here, the petitioners have no recourse against Jafco on the bond." Id., at 305-306. </s> In this case it does not appear that MITE is liable on an injunction bond. The posting of an indemnity bond, however, merely creates a right of action - that may or may not otherwise exist - for damages caused during the period that a wrongfully issued injunction was in effect. In this case, such rights of action exist under an independent state law that we must presume to be valid. As in Liner, these rights of action may be pursued "if the injunction was `wrongfully' sued out"; and "[w]hether the injunction was wrongfully sued out turns solely upon the answer to the federal question which the petitioners have pressed from the beginning." </s> [Footnote 5 As stated by Chief Justice Marshall in Ex parte Bollman, 4 Cranch 75, 93: </s> "As preliminary to any investigation of the merits of this motion, this court deems it proper to declare that it disdains all jurisdiction not given by the constitution, or by the laws of the United States. </s> "Courts which originate in the common law possess a jurisdiction which must be regulated by the common law, until some statute shall change their established principles; but courts which are created by written law, and whose jurisdiction is defined by written law, cannot transcend that jurisdiction. It is unnecessary to state the reasoning on which this opinion is founded, because it has been repeatedly given by this court; and with the decisions heretofore rendered on this point, no member of the bench has, even for an instant, been dissatisfied." </s> [Footnote 6 I do not suggest that, if the state law is valid, a federal court lacks jurisdiction to enter an injunction restraining state officials from enforcing the statute. Such an injunction may be appropriate - and would be binding on the parties - to permit the federal court to preserve its jurisdiction pending a final decision on the constitutionality of the statute. United States v. Mine Workers, 330 U.S. 258, 289 -290. "Although only temporary, the injunction does prohibit state and local enforcement activities against the federal plaintiff pending final resolution of his case in the federal court." Doran v. Salem Inn, Inc., 422 U.S. 922, 931 . Such an injunction does not continue to be binding on the parties, however, if it is vacated on appeal; "an order issued by a court with jurisdiction over the subject matter and person must be obeyed by the parties until it is reversed by orderly and proper proceedings." United States v. Mine Workers, supra, at 293 (emphasis added). </s> [Footnote 7 A conflict between a federal rule of law and a state statute may nullify the state law. Although such invalidity may not be recognized or accepted until it is identified in litigation, in my opinion the conflict with a paramount rule of federal law nullifies a state law whether or not litigation is ever commenced. In other words, it is federal rules of law - and not the actions of federal judges - that may render a state law invalid. </s> [Footnote 8 JUSTICE REHNQUIST concludes that this case is moot because the injunction restrains an enforcement proceeding that has not yet begun. If his view were accepted, an injunction against a threatened criminal proceeding, see Dombrowski v. Pfister, 380 U.S. 479 , would never be appropriate, for the controversy between the parties would not yet be "ripe." MITE sought an injunction not only to prevent the Illinois Secretary of State from interfering with its attempted takeover of Chicago Rivet, but also to bar the Secretary from proceeding against MITE for actions taken in violation of the statute. What is critical to the mootness question in this case is not that MITE abandoned the takeover before it was completed, but that MITE engaged in conduct that violated the terms of the Illinois statute. The extent of MITE's violation of state law cannot be determinative of its interest in avoiding an enforcement proceeding based on what MITE believed was constitutionally protected activity. </s> Oil Workers v. Missouri, 361 U.S. 363 , relied on by JUSTICE REHNQUIST, does not compel a contrary result. In that case, the party subject to the injunction terminated the activity that had been enjoined. As a result, this Court refused to consider whether the injunction had issued properly, even though a resolution of that question would also have resolved other matters - based on similar questions of law - pending in another proceeding between the same parties. In this case, the party subject to the injunction - the Illinois Secretary of State - has not abandoned his desire to do what the injunction currently restrains him from doing. </s> JUSTICE O'CONNOR, concurring in part. </s> I agree with the Court that the case is not moot, and that portions of the Illinois Business Take-Over Act, Ill. Rev. Stat., ch. 121 1/2, § 137.51 et seq. (1979), are invalid under the Commerce Clause. Because it is not necessary to reach the pre-emption issue, I join only Parts I, II, and V of the Court's opinion, and would affirm the judgment of the Court of Appeals on that basis. </s> JUSTICE MARSHALL, with whom JUSTICE BRENNAN joins, dissenting. </s> The jurisdiction of this Court depends upon the existence of a live controversy. We may resolve a particular dispute only if the parties have a real interest in the outcome of that dispute. Otherwise, the case is moot, and must be dismissed. Roe v. Wade, 410 U.S. 113, 125 (1973); SEC v. Medical Committee for Human Rights, 404 U.S. 403, 407 (1972). In my view, this case should have been dismissed. The parties to this appeal have no adversary interest in the outcome of this case. Their positions would be the same whether the Court approved the Illinois Business Take-Over Act or struck it down. Because the Court finds that the Illinois Act is unconstitutional, there will be no further litigation. However, even if the Court had held that the Illinois Act is constitutional, and had lifted the permanent injunction that now restrains enforcement of the Act against MITE, there would be no basis for continued litigation. The Secretary stated that if the decision below were reversed, he would initiate enforcement proceedings against MITE in [457 U.S. 624, 656] state court, seeking civil and criminal penalties for its failure to comply with the Illinois Act. But a preliminary injunction was in effect at the time the alleged violations occurred. As I explain below, I believe that this injunction would have barred the Secretary from seeking either civil or criminal penalties for violations of the Act that occurred during that period. MITE would have a complete defense to such an action. </s> I </s> The Secretary argues that the case is not moot because the preliminary injunction would not be a complete defense to a state enforcement action. He contends that the preliminary injunction merely barred him from commencing an enforcement action during the period the injunction was in effect. Thus, if this Court had decided that the statute is constitutional and had lifted the permanent injunction, the State would have been able to commence an action seeking penalties for any violations that occurred during the period the preliminary injunction was in effect. In other words, argues the Secretary, the preliminary injunction only provided temporary security. It enabled MITE to go forward with the tender offer - subject to the risk that at some later stage, the constitutionality of the statute would be upheld, and the State would commence enforcement proceedings. </s> Federal courts undoubtedly have the power to issue a preliminary injunction that restrains enforcement of a state statute, subject to the condition that if the statute is later found to be valid, the State is free to seek penalties for violations that occurred during the period the injunction was in effect. In my view, however, federal courts also have the power to issue a preliminary injunction that offers permanent protection from penalties for violations of the statute that occurred during the period the injunction was in effect. 1 Determining [457 U.S. 624, 657] whether a particular injunction provides temporary or permanent protection becomes a question of interpretation. </s> I believe that in the ordinary case, unless the order contains specific language to the contrary, it should be presumed that an injunction secures permanent protection from penalties for violations that occurred during the period it was in effect; the burden should be on the State to show that the injunction provided only temporary security. 2 A presumption [457 U.S. 624, 658] in favor of permanent protection is likely to reflect the intentions of the court that granted the motion. In acting upon a request for an injunction, it will recognize that short-term protection is often only marginally better than no protection at all. Parties seek to restrain the enforcement of a state statute, not just because they want short-term protection, but because they desire permanent immunity for actions they take in reliance on the injunction. If they are contemplating action that might violate a state statute, they will take little solace from temporary immunity - when they know that if they decide to act, enforcement proceedings might be initiated at some later stage. 3 </s> [457 U.S. 624, 659] </s> Here, the preliminary injunction does not expressly state that it provides permanent immunity from penalties for violations of the Illinois Act that may occur during its effective period. The injunction provides only that the Secretary of State is enjoined from "issuing any cease and desist order or notice of hearing or from otherwise invoking, applying, or enforcing the Illinois Business Take-Over Act" against MITE. Record 16. However, I see no reason why the presumption in favor of permanent protection should not be applied here. In this context, as the District Court must have recognized, permanent protection was needed. MITE sought an injunction, not just because it desired protection from enforcement actions during the period it was actually making the tender offer, but also because it desired protection from such actions in the future. The Act provides for substantial civil and criminal penalties. MITE would have been reluctant to go forward with its offer, which entailed considerable expense, if there were some risk that it would be penalized later. Indeed, in the Schedule 14D-1 filed with the SEC, MITE expressly stated that it would not commence the tender offer unless it obtained injunctive relief. It also reserved the right to withdraw its offer if injunctive relief were initially granted, but later withdrawn. See Record, Plaintiff's Exhibit 14. 4 </s> [457 U.S. 624, 660] </s> Interpreting the injunction to provide permanent protection also ensures that MITE could never be penalized for acting in reliance on the injunction. 5 MITE went forward with the tender offer, reasonably believing that the District Court's order provided complete immunity. Under the circumstances, it would be improper to permit the State to penalize action taken while the injunction was in effect. In the past, this Court has recognized that reasonable reliance on judicial pronouncements may constitute a valid defense to criminal prosecution. See, e. g., Marks v. United States, 430 U.S. 188 (1977). 6 </s> In addition to arguing that the preliminary injunction should be interpreted to provide only temporary protection from a state enforcement action, the Secretary argues that resolution of the mootness issue in this case should be controlled by Leroy v. Great Western United Corp., 443 U.S. 173 (1979). In that case, Great Western announced its intention to make a tender offer to purchase stock in another corporation. Idaho officials responsible for administering an Idaho statute governing corporate takeovers, see Idaho Code 30-1501 et seq. (1980), objected to the offer and delayed its effective date. Great Western brought an action in [457 U.S. 624, 661] Federal District Court, seeking a declaration that the Idaho takeover law was unconstitutional, and an injunction restraining Idaho officials from enforcing the statute. The District Court granted injunctive relief that enabled Great Western to complete the acquisition. This Court, in reviewing the case, held that the controversy was not moot. "[T]he question whether Great Western has violated Idaho's statute will remain open unless and until the District Court's judgment is finally affirmed." Id., at 178. 7 </s> Leroy v. Great Western United Corp. is easily distinguishable from this case. Unlike MITE, Great Western took actions that might have violated the state takeover statute before it obtained injunctive relief. If this Court had decided that the Idaho statute was valid, Idaho officials might have been able to seek penalties for those preinjunction violations. 8 Leroy v. Great Western United Corp. can also be distinguished on the ground that the takeover offer in that case was successful. If the Idaho statute had been found to be valid, then Idaho officials would have been able to seek a rescission of the takeover. 9 Here, since the acquisition was never completed, Illinois officials could not seek rescission. 10 </s> [457 U.S. 624, 662] </s> Finally, this case does not fall within the exception to the mootness doctrine for cases that "are capable of repetition, yet evading review." Unless a class action is involved, that exception applies only when the challenged action is too short to be fully litigated before its cessation, and when there is a reasonable expectation or a demonstrated probability that the same complaining party will be subject to the same action in the future. Illinois State Board of Elections v. Socialist Workers Party, 440 U.S. 173, 187 (1979); Weinstein v. Bradford, 423 U.S. 147, 149 (1975). The second requirement has not been satisfied here. MITE has agreed not to renew its efforts to acquire Chicago Rivet. Thus, unless MITE breaches its agreement, 11 the State will never again have occasion to prevent MITE from making a takeover offer for Chicago Rivet. In addition, there has been no showing that MITE plans to acquire another corporation with substantial connection to Illinois. Thus, there is no demonstrated probability that the State will have occasion to prevent MITE from making a takeover offer for some other corporation. </s> II </s> The majority disposes of the mootness issue in a short paragraph. It concedes that the only possible basis for continued litigation in this case would be a state action for penalties. It further concedes that the preliminary injunction issued by the District Court may be a complete defense to an action for civil or criminal penalties. It argues, however, that the effect to be given the preliminary injunction should not be reached in this case. Rather, that question should be decided in a state enforcement action, if it is raised as a defense. Thus, contends the majority, the case is not moot. [457 U.S. 624, 663] </s> I am completely unpersuaded by the majority's facile analysis. In deciding whether a case is moot, the Court must determine whether there is a live controversy. There is a live controversy in this case only if the State could seek penalties from MITE. Here, the State could not seek penalties from MITE. It may be true that the State could file a complaint if this Court were to lift the permanent injunction. However, this fact is not enough to keep the case alive where, as a matter of federal law, the complaint must be dismissed. If the action that the State plans to commence in state court lacks any merit - if MITE has an automatic defense to that action - then there simply is no controversy. </s> This case is made more difficult because the Court has never before decided what effect should be given to preliminary injunctions. But the fact that we must decide a novel question does not make the case any less moot. Certainly, if the Court had already held that a preliminary injunction provides permanent immunity, the case would be moot even though the State could go into state court and seek penalties. Such a suit, which would be clearly frivolous, could not keep the dispute alive. </s> The Court's refusal to confront the question whether a preliminary injunction would provide a complete defense is particularly ironic, given its recent decision in Lane v. Williams, 455 U.S. 624 (1982). Respondents in that case had pleaded guilty in unrelated Illinois state-court prosecutions for burglary, an offense punishable by imprisonment and a mandatory 3-year parole term. Neither respondent was informed during his plea acceptance hearing that the negotiated sentence included the mandatory parole term. Each respondent completed his prison sentence but was reincarcerated for parole violation. While in custody, they filed petitions for federal habeas corpus, alleging that their guilty pleas were invalid because they were not informed of the mandatory parole requirement. The District Court decided to enter an order declaring the parole term void, and the United States [457 U.S. 624, 664] Court of Appeals for the Seventh Circuit affirmed. By the time the cases reached this Court, both respondents had completed their sentences, and their parole terms had expired. This Court held that the claims for relief were moot. In reaching this conclusion, the Court determined that as a matter of Illinois law, no collateral consequences would flow from the parole revocations. Thus, there would be no point in declaring the parole terms void. In other words, the Court reached out to decide a question of state law in order to hold that the case was moot. Here, by contrast, the Court refuses to confront an important question of federal law - deciding instead that the question should be left to a state court - so that it can avoid holding that the case is moot. </s> III </s> The parties to this appeal have no adversary interest in the resolution of the merits of this controversy. The majority acts without jurisdiction when it addresses the question whether the Illinois Business Take-Over Act is constitutional. Because I believe the case is moot, I would have vacated the judgment of the Court of Appeals, with instructions that it remand the case to the District Court with instructions to dismiss. </s> [Footnote 1 Unless the federal courts can grant preliminary injunctions that provide permanent protection, challenges to questionable state statutes may be deterred. [457 U.S. 624, 657] A state statute may be either repugnant to the Constitution, or pre-empted by some federal law. Parties who wish to engage in conduct proscribed by state statutes may be reluctant to challenge their validity unless they can obtain permanent immunity from penalties. But there is a strong federal interest in encouraging such challenges: the Constitution itself provides that the Constitution and federal statutes shall be "the supreme Law of the Land." Grants of permanent immunity help ensure that federal law will remain paramount. </s> Holding that federal courts have power to grant permanent protection would not substantially limit state power. In fact, the impact on state power will be relatively insignificant. A federal court may grant a preliminary injunction prohibiting the enforcement of a state statute only when there is substantial doubt about the validity of the statute, and when the party seeking relief is able to show that he will suffer irreparable injury if an injunction is not granted. It is true that under the rule I propose, if the statute is later determined to be valid, the State will never be able to prosecute the individual that obtained the preliminary injunction for action taken while the injunction was in effect. However, the State will be free to prosecute him for actions occurring either before or after the injunction, and will also be able to prosecute other persons who violated the statute. In other words, the State will be barred only from prosecuting the particular individual who requested the injunction for conduct undertaken during the pendency of the injunction. Moreover, it will be barred from prosecuting that individual, only because there was serious doubt about the constitutionality of the statute, and because he was able to show that he would suffer irreparable injury if an injunction was not granted. </s> [Footnote 2 It might be argued that because a party seeking a preliminary injunction must ordinarily post bond, there should be a presumption in favor of recovery of damages caused by a wrongfully issued preliminary injunction. However, the fact that an injunction bond is ordinarily required does not necessarily imply that the party against whom the injunction was issued is automatically entitled to damages. That party must still prove that damages [457 U.S. 624, 658] are appropriate; the injunction bond merely provides security, when the party is able to make such a showing. </s> It is true that when an injunction bond has been posted, and when the party challenging the injunction has a right to recover damages on the bond, the question whether an injunction was properly issued is not moot. See Liner v. Jafco, Inc., 375 U.S. 301 (1964). The District Court record does not reveal that a bond was posted in this case. Even if a bond had been posted, however, this case would probably be moot; I believe that the State would not have a cause of action for damages. If this Court had determined that the injunction was wrongfully entered, the State might argue that it was damaged because it was unable to recover penalties for violations of the Take-Over Act that occurred during the period the preliminary injunction was in effect. Such an argument should not prevail. Lost penalties do not constitute the sort of damages recoverable on a bond. In any event, as I suggest in this dissent, I believe that the preliminary injunction should be interpreted as protecting MITE from penalties. Thus, it should also protect MITE from liability for "damages" sustained by the State because it could not bring an action for penalties. </s> If a bond had been posted, the State might be able to recover costs or nominal damages on the bond. However, where there is no other basis for challenging the validity of an injunction, the possibility of such recovery is not sufficient to keep a case alive. If it were, then almost no case challenging an injunction could become moot. See Washington Market Co. v. District of Columbia, 137 U.S. 62 (1890) (court costs); Hernandez v. European Auto Collision, Inc., 487 F.2d 378, 387 (CA2 1973) (nominal damages); Kerrigan v. Boucher, 450 F.2d 487 (CA2 1971) (nominal damages). </s> [Footnote 3 Cf. Steffel v. Thompson, 415 U.S. 452, 462 (1974) (federal-court intervention is appropriate where the applicant for relief is situated "between [457 U.S. 624, 659] the Scylla of intentionally flouting state law and the Charybdis of forgoing what he believes to be constitutionally protected activity in order to avoid becoming enmeshed in a criminal proceeding"). See also Hygrade Provision Co. v. Sherman, 266 U.S. 497, 500 (1925); Terrace v. Thompson, 263 U.S. 197, 216 (1923); Salem Inn, Inc. v. Frank, 501 F.2d 18, 21 (CA2 1974), aff'd in relevant part sub nom. Doran v. Salem Inn, Inc., 422 U.S. 922 (1975). </s> [Footnote 4 I also find it significant that the District Court's final order granting a permanent injunction declares that the Illinois Act is "null and void and of no force and effect." App. to Juris. Statement 41a. A reasonable construction of the order granting a preliminary injunction is that it was also intended to render the act "null and void" while the injunction was in effect. </s> [Footnote 5 It is relevant to note that although MITE sought injunctive relief prior to engaging in any action that could subject it to civil or criminal penalties, the State never sought a stay of the District Court's injunction either in that court or in the Court of Appeals, and never expressed an intent to do so. </s> [Footnote 6 In Marks, a conviction for transporting obscene materials was overturned, where the materials were not obscene at the time of transportation, but were rendered obscene at the time of trial by an intervening decision of this Court. See also Cox v. Louisiana, 379 U.S. 559, 569 -571 (1965) (conviction for illegal picketing reversed where defendant had relied on permission from police officer); Raley v. Ohio, 360 U.S. 423, 437 -439 (1959) (conviction for refusal to testify before state commission reversed because witness had relied on opinion of commission chairman that he was privileged to remain silent); United States v. Mancuso, 139 F.2d 90 (CA3 1943) (defendant could not be held liable for ignoring induction notices issued while ex parte order staying induction was in effect). </s> [Footnote 7 The Court did not reach the question whether the Idaho statute was unconstitutional. It concluded that the action should have been dismissed on grounds of improper venue. </s> [Footnote 8 See Idaho Code 30-1502 to 30-1504, 30-1510 (1980). </s> [Footnote 9 See Idaho Code 30-1509 (1980) (allowing State to institute action for rescission). The Illinois Act also empowers the State to seek a court order rescinding sales that are unlawful under the Act. Ill. Rev. Stat., ch. 121 1/2, § 137.62 (1979). </s> [Footnote 10 It is true that a rescission action would have been predicated on acts that were taken under cover of the preliminary injunction. However, I believe that injunctions should ordinarily be interpreted only as providing permanent protection from penalties. The State should be barred from penalizing the offeror for acts that took place during the period the injunction was in effect. However, if a court determines that the state statute is valid, the State should be free to provide a remedy for the continuing effects of acts that violated the statute. In particular, a State should be permitted to dismantle a successful acquisition that violated a valid statute. </s> [Footnote 11 The possibility that MITE will breach its agreement does not bring this case within the "capable of repetition, yet evading review" exception. The likelihood that such a breach will occur is relatively small. The exception applies only when there is a reasonable expectation that the same action will occur in the future. </s> JUSTICE REHNQUIST, dissenting. </s> I agree with JUSTICE MARSHALL that this case does not present a justiciable controversy, but for a different reason. </s> MITE obtained an injunction in order to effect a cash tender offer for the stock of Chicago Rivet. The injunction restrained the Illinois Secretary of State from interfering with the Chicago Rivet tender offer by enforcing the Illinois Business Take-Over Act against MITE. Three days after the District Court issued a permanent injunction, MITE and Chicago Rivet reached an agreement and MITE withdrew its extant offer. Approximately one month later, MITE announced its decision not to make any tender offer. MITE is [457 U.S. 624, 665] not presently engaging in activity that is regulated by the Illinois statute, and there is no indication that MITE intends to engage in any such activity in the future. Therefore, the facts that gave rise to this controversy over the constitutionality of Illinois' anti-takeover statutes no longer exist, and it is unlikely that they will be repeated in the future. As the tender offer has met its demise for reasons having nothing to do with the validity of the Illinois statute, the injunction is no longer necessary to accomplish the purposes for which it was obtained. MITE no longer needs an injunction in order to effect a tender offer for the shares of Chicago Rivet or any other corporation subject to the Illinois Act. Nor does MITE need the injunction in order to preclude the Secretary from rescinding a completed tender offer. </s> Despite these developments which have occurred after the District Court issued the injunction, the Court concludes that the present controversy between the Illinois Secretary of State and MITE over the constitutionality of the Illinois Business Take-Over Act is not moot. According to the Court, the Illinois Secretary of State's intention to bring an enforcement action against MITE keeps the present controversy alive. The possibility of a future enforcement action, however, is insufficient for me to conclude that the controversy that is before the Court is not moot. 1 </s> This Court has no power over a suit not pending before it. "`Our power only extends over and is limited by the conditions of the case now before us.'" Oil Workers v. Missouri, 361 U.S. 363, 370 (1960), quoting American Book Co. v. Kansas ex rel. Nichols, 193 U.S. 49, 52 (1904). A case pending in this Court may not be kept alive simply because similar or identical issues are currently ripe for decision in a controversy between the same parties in another court. See Oil [457 U.S. 624, 666] Workers v. Missouri, supra, at 370-371; American Book Co. v. Kansas ex rel. Nichols, supra, at 51. A fortiori, this case may not be kept alive simply because there may exist a presently unripened controversy between these same parties over the constitutionality of the same Act. This is so even if our resolution of the merits of the instant case will resolve certain defenses that MITE could raise in an enforcement action were one to be brought by the Secretary. It follows that this case is not alive simply because a decision on the merits in this case will determine whether or not the Secretary's threatened enforcement action may ever ripen into a live controversy. </s> If an enforcement action were brought by the Secretary, "there is no way to know what the outcome of such a proceeding in the [Illinois] courts might be." Oil Workers v. Missouri, supra, at 371. The Illinois courts may well conclude that the injunction constitutes a defense either on state law grounds or upon the grounds suggested by JUSTICE MARSHALL in his dissent. The Illinois courts may also agree with MITE that the Business Take-Over Act is pre-empted by the Williams Act or that Illinois' regulation of interstate tender offers runs afoul of the Commerce Clause. The possibility that this Court might disagree with the Illinois courts' ultimate resolution of the issues arising in a presently unripe, but threatened, enforcement action hardly justifies the Court's resolution of important constitutional issues in the abstract posture in which they are currently presented. 2 </s> [457 U.S. 624, 667] </s> The Secretary and MITE dispute the propriety of the injunction issued by the District Court in this case only with respect to a controversy that may ripen in another court. Because the controversy that is before the Court is no longer alive, I would vacate the judgment of the Court of Appeals and order that court to remand this case to the District Court with instructions to dismiss the complaint. See Weinstein v. Bradford, 423 U.S. 147, 149 (1975); United States v. Munsingwear, Inc., 340 U.S. 36, 39 (1950). </s> [Footnote 1 This case is unlike those in which this Court has found justiciable an action to enjoin a threatened criminal prosecution. The plaintiff in the present posture of this case no longer intends to engage in, or is presently engaging in, what is asserted to be federally protected activity. </s> [Footnote 2 Bus Employees v. Missouri, 374 U.S. 74 (1963), and Super Tire Engineering Co. v. McCorkle, 416 U.S. 115 (1974), are clearly distinguishable. In each case, subsequent developments did not moot the controversy because the challenged statute affected the challenging party's current or planned activities. There is no suggestion in the instant case that the Illinois Business Take-Over Act has such an effect on MITE. Nor do I believe that this case remains alive merely because it is the enjoined party who seeks appellate review. Otherwise, an enjoined party could always litigate the legal bases for the injunction even though the party who sought [457 U.S. 624, 667] the injunction no longer needs the injunction for the purposes for which it was obtained. Cf. University of Texas v. Camenisch, 451 U.S. 390 (1981). </s> [457 U.S. 624, 668]

United States Supreme Court ZAHN v. INTERNATIONAL PAPER CO.(1973) No. 72-888 Argued: October 16, 1973Decided: December 17, 1973 </s> Multiple plaintiffs with separate and distinct claims must each satisfy the jurisdictional amount for suits in federal courts, and in this diversity class action under Fed. Rule Civ. Proc. 23 (b) (3) by owners of lakeshore property charging respondent with polluting the lake, where only the named plaintiffs but not the unnamed plaintiffs could show damages in the jurisdictional amount, a class action is not maintainable. Each plaintiff in a Rule 23 (b) (3) class action must satisfy the jurisdictional amount and any plaintiff who does not must be dismissed from the case. Snyder v. Harris, 394 U.S. 332 , followed. Pp. 292-302. </s> 469 F.2d 1033, affirmed. </s> WHITE, J., delivered the opinion of the Court, in which BURGER, C. J., and STEWART, BLACKMUN, POWELL, and REHNQUIST, JJ., joined. BRENNAN, J., filed a dissenting opinion, in which DOUGLAS and MARSHALL, JJ., joined, post, p. 302. </s> Peter F. Langrock argued the cause and filed a brief for petitioners. </s> Taggart Whipple argued the cause for respondent. With him on the brief were Richard E. Nolan, William H. Levit, Jr., Nicholas R. Weiskopf, and George W. Ray, Jr. * </s> [Footnote * Norman Redlich and Stanley Buchsbaum filed a brief for the city of New York as amicus curiae urging affirmance. </s> MR. JUSTICE WHITE delivered the opinion of the Court. </s> Petitioners, asserting that they were owners of property fronting on Lake Champlain in Orwell, Vermont, [414 U.S. 291, 292] brought this action in the District Court on behalf of a class consisting of themselves and 200 lakefront property owners and lessees. They sought damages from International Paper Co., a New York corporation, for allegedly having permitted discharges from its pulp and paper-making plant, located in New York, to flow into Ticonderoga Creek and to be carried by that stream into Lake Champlain, thereby polluting the waters of the lake and damaging the value and utility of the surrounding properties. The suit was brought as a diversity action, jurisdiction assertedly resting on 28 U.S.C. 1332 (a) (1). The claim of each of the named plaintiffs was found to satisfy the $10,000 jurisdictional amount, but the District Court was convinced "to a legal certainty" that not every individual owner in the class had suffered pollution damages in excess of $10,000. Reading Snyder v. Harris, 394 U.S. 332 (1969), as precluding maintenance of the action by any member of the class whose separate and distinct claim did not individually satisfy the jurisdictional amount and concluding that it would not be feasible to define a class of property owners each of whom had more than a $10,000 claim, the District Court then refused to permit the suit to proceed as a class action. 53 F. R. D. 430 (Vt. 1971). A divided Court of Appeals affirmed, 469 F.2d 1033 (CA2 1972), principally on the authority of Snyder v. Harris, supra. We granted the petition for writ of certiorari, 410 U.S. 925 (1973). </s> The Court of Appeals correctly held that this case is governed by the rationale of this Court's prior cases construing the statutes defining the jurisdiction of the District Court. We therefore affirm its judgment. </s> From the outset, Congress has provided that suits between citizens of different States are maintainable in the district courts only if the "matter in controversy" [414 U.S. 291, 293] exceeds the statutory minimum, now set at $10,000. 28 U.S.C. 1332 (a). 1 The same jurisdictional-amount requirement has applied when the general federal-question jurisdiction of the district courts, 28 U.S.C. 1331 (a), is sought to be invoked. 2 A classic statement of the dichotomy that developed in construing and applying [414 U.S. 291, 294] these sections is found in Troy Bank v. G. A. Whitehead & Co., 222 U.S. 39, 40 -41 (1911): </s> "When two or more plaintiffs, having separate and distinct demands, unite for convenience and economy in a single suit, it is essential that the demand of each be of the requisite jurisdictional amount; but when several plaintiffs unite to enforce a single title or right, in which they have a common and undivided interest, it is enough if their interests collectively equal the jurisdictional amount." </s> This distinction and rule that multiple plaintiffs with separate and distinct claims must each satisfy the jurisdictional-amount requirement for suit in the federal courts were firmly rooted in prior cases dating from 1832, 3 and have continued to be the accepted construction [414 U.S. 291, 295] of the controlling statutes, now 1331 and 1332. 4 The rule has been applied to forbid aggregation of claims where none of the claimants satisfies the jurisdictional amount, as was the case in Scott v. Frazier, 253 U.S. 243, 244 (1920), for example, where the Court stated the rule to be that "the amount in controversy must equal the jurisdictional sum as to each complainant." It also requires dismissal of those litigants whose claims do not satisfy the jurisdictional amount, even though other litigants assert claims sufficient to invoke the jurisdiction of the federal court. Clark v. Paul Gray, Inc., 306 U.S. 583 (1939); Stewart v. Dunham, 115 U.S. 61, 64 -65 (1885); Bernards Township v. Stebbins, 109 U.S. 341, 355 (1883). </s> In Clark v. Paul Gray, Inc., decided after the effective date of the Federal Rules of Civil Procedure in 1938, the Court applied the familiar rule that "when several plaintiffs assert separate and distinct demands in a single suit, the amount involved in each separate controversy must be of the requisite amount . . ., and . . . those amounts cannot be added together to satisfy jurisdictional requirements." 306 U.S., at 589 . Upon ascertaining on its own motion that only one of the plaintiffs in the District Court had presented a claim satisfying the [414 U.S. 291, 296] jurisdictional amount, the Court reached the merits of that claim but directed the District Court to dismiss the claims of all other plaintiffs for want of jurisdiction. </s> The same rules were applied to class actions contemplated by Fed. Rule Civ. Proc. 23. The spurious class action authorized by Rule 23 (a) (3), as it stood prior to amendment in 1966, 5 was viewed by Judge Frank, writing for himself and Judges Learned and Augustus Hand, as, "in effect, but a congeries of separate suits so that each claimant must, as to his own claim, meet the jurisdictional requirements." Steele v. Guaranty Trust Co. of N. Y., 164 F.2d 387, 388 (CA2 1947). 6 The direct precedent [414 U.S. 291, 297] for Steele was a 1941 decision in the same Circuit expressed in an opinion written by Judge Charles Clark, who, as a member of and Reporter for the Advisory Committee, was a principal architect of the Federal Rules of Civil Procedure. That case, Hackner v. Guaranty Trust Co. of N. Y., 117 F.2d 95 (CA2 1941), involved a class action brought on behalf of plaintiffs with separate and distinct claims. Judge Clark invoked a long line of authority in this Court, and in other courts, to hold that among parties related only by a common question of law and fact, "aggregation is improper" and that jurisdiction cannot be supplied for those without claims in the requisite amount "by adding a plaintiff who can show jurisdiction." Id., at 98. (Citations omitted.) This was the accepted view in the federal courts with respect to class actions. 7 In consequence, district courts were to [414 U.S. 291, 298] entertain the claims of only those class action plaintiffs whose individual cases satisfied the jurisdictional amount requirement. </s> The meaning of the "matter in controversy" language of 1332 as it applied to class actions under Rule 23 reached this Court in Snyder v. Harris, supra, the occasion being a division of opinion in the courts of appeals as to whether the 1966 amendments to Rule 23 had changed the jurisdictional-amount requirement of 1332 as applied to class actions involving separate and distinct claims. 8 None of the named plaintiffs and [414 U.S. 291, 299] none of the unnamed members of the class before the Court alleged claims in excess of the requisite amount. It was nevertheless urged that in class action situations, particularly in light of the 1966 amendments to the rule, aggregation of separate and distinct claims should be permitted. The Court was of a contrary view, holding that class actions involving plaintiffs with separate and distinct claims were subject to the usual rule that a federal district court can assume jurisdiction over only those plaintiffs presenting claims exceeding the $10,000 minimum specified in 1332. Aggregation of claims was impermissible, and the federal court was without jurisdiction where none of the plaintiffs presented a claim of the requisite size. The Court unmistakably rejected the notion that the 1966 amendments to Rule 23 were intended to effect, or effected, any change in the meaning and application of the jurisdictional-amount requirement insofar as class actions are concerned. </s> "The doctrine that separate and distinct claims could not be aggregated was never, and is not now, based upon the categories of old Rule 23 or of any rule of procedure. That doctrine is based rather upon this Court's interpretation of the statutory phrase `matter in controversy.' The interpretation of this phrase as precluding aggregation substantially predates the 1938 Federal Rules of Civil Procedure. . . . Nothing in the amended Rule 23 changes this doctrine. . . . The fact that judgments under class actions formerly classified as spurious may now have the same effect as claims brought under the joinder provisions is certainly no reason to treat [414 U.S. 291, 300] them differently from joined actions for purposes of aggregation." 394 U.S., at 336 -337. </s> The Court also refused to reconsider its prior constructions of the "matter in controversy" phrase, concluding that it should not do so where Congress, with complete understanding of how the courts had construed the statute, had not changed the governing language and down through the years had continued to specify and had progressively increased the jurisdictional amount necessary for instituting suit in the federal courts. </s> None of the plaintiffs in Snyder v. Harris alleged a claim exceeding $10,000, but there is no doubt that the rationale of that case controls this one. As previously indicated, Snyder invoked the well-established rule that each of several plaintiffs asserting separate and distinct claims must satisfy the jurisdictional-amount requirement if his claim is to survive a motion to dismiss. This rule plainly mandates not only that there may be no aggregation and that the entire case must be dismissed where none of the plaintiffs claims more than $10,000 but also requires that any plaintiff without the jurisdictional amount must be dismissed from the case, even though others allege jurisdictionally sufficient claims. </s> This follows inescapably from the Court's heavy reliance on Clark v. Paul Gray, Inc., supra, where only one of several plaintiffs had a sufficiently large claim and all other plaintiffs were dismissed from the suit. 9 Moreover, [414 U.S. 291, 301] the Court cited with approval the decision in Alvarez v. Pan American Life Insurance Co., 375 F.2d 992 (CA5), cert. denied, 389 U.S. 827 (1967), which was decided after the 1966 amendments to Rule 23 and which involved a class action with only one member of the class having a claim sufficient to satisfy 1332. Only that claim was held within the jurisdiction of the District Court. </s> We conclude, as we must, that the Court of Appeals in the case before us accurately read and applied Snyder v. Harris: 10 Each plaintiff in a Rule 23 (b) (3) class action must satisfy the jurisdictional amount, and any plaintiff who does not must be dismissed from the case - "one plaintiff may not ride in on another's coattails." 469 F.2d, at 1035. </s> Neither are we inclined to overrule Snyder v. Harris nor to change the Court's longstanding construction of the "matter in controversy" requirement of 1332. The Court declined a like invitation in Snyder v. Harris after surveying all relevant considerations and concluding that to do so would undermine the purpose and intent of Congress in providing that plaintiffs in diversity cases must present claims in excess of the specified jurisdictional amount. At this time, we have no good reason to disagree with Snyder v. Harris or with the historic construction of the jurisdictional statutes, left undisturbed by Congress over these many years. [414 U.S. 291, 302] </s> It also seems to us that the application of the jurisdictional-amount requirement to class actions was so plainly etched in the federal courts prior to 1966 that had there been any thought of departing from these decisions and, in so doing, of calling into question the accepted approach to cases involving ordinary joinder of plaintiffs with separate and distinct claims, some express statement of that intention would surely have appeared, either in the amendments themselves or in the official commentaries. But we find not a trace to this effect. As the Court thought in Snyder v. Harris, the matter must rest there, absent further congressional action. 11 </s> Affirmed. </s> Footnotes [Footnote 1 The section provides in pertinent part that: "(a) The district courts shall have original jurisdiction of all civil actions where the matter in controversy exceeds the sum or value of $10,000, exclusive of interest and costs, and is between - "(1) citizens of different States . . . ." Section 11 of the First Judiciary Act of 1789 set the jurisdictional amount in diversity suits at $500. 1 Stat. 78. In 1801, Congress lowered the requirement to $400 in the Midnight Judges Act, 2 Stat. 89, 92, but it was quickly restored to $500 the following year. 2 Stat. 132. The jurisdictional-amount requirement remained fixed at this level until the Act of Mar. 3, 1887, 24 Stat. 552, when it was raised to $2,000. The figure was subsequently increased by $1,000 by the Act of Mar. 3, 1911, 24, 36 Stat. 1091. See S. Rep. No. 388, 61st Cong., 2d Sess., pt. 2, pp. 30-32 (1910); H. R. Rep. No. 818, 61st Cong., 2d Sess. (1910); Conference Report, S. Doc. No. 848, 61st Cong., 3d Sess. (1911); 45 Cong. Rec. 3596-3599 (1910); 46 Cong. Rec. 4002, 4003, 4004 (1911). The current $10,000 jurisdictional amount, codified in 28 U.S.C. 1332 (a), was enacted by the Act of July 25, 1958, 72 Stat. 415. The legislative history discloses that the change was made "on the premise that the amount should be fixed at a sum of money that will make jurisdiction available in all substantial controversies where other elements of Federal jurisdiction are present. The jurisdictional amount should not be so high as to convert the Federal courts into courts of big business nor so low as to fritter away their time in the trial of petty controversies." S. Rep. No. 1830, 85th Cong., 2d Sess., 3-4 (1958); see also id., at 21; H. R. Rep. No. 1706, 85th Cong., 2d Sess., 3 (1958). </s> [Footnote 2 Section 1331 (a) provides: "(a) The district courts shall have original jurisdiction of all civil actions wherein the matter in controversy exceeds the sum or value of $10,000, exclusive of interest and costs, and arises under the Constitution, laws, or treaties of the United States." </s> [Footnote 3 The following are representative of innumerable cases confirming this principle: Woodside v. Beckham, 216 U.S. 117 (1910); Waite v. Santa Cruz, 184 U.S. 302, 328 -329 (1902); Wheless v. St. Louis, 180 U.S. 379, 382 (1901); Bernards Township v. Stebbins, 109 U.S. 341, 355 (1883). Cf. Clay v. Field, 138 U.S. 464 (1891); Russell v. Stansell, 105 U.S. 303 (1882); Seaver v. Bigelows, 5 Wall. 208 (1867); Stratton v. Jarvis, 8 Pet. 4 (1834); Oliver v. Alexander, 6 Pet. 143 (1832). Snyder v. Harris, 394 U.S. 332 (1969), noted that the judicial interpretation of "matter in controversy" to bar aggregation of separate and distinct claims dated back to at least Oliver v. Alexander, which is representative of the unbroken line of decisions of this Court interpreting our appellate jurisdiction when that jurisdiction was confined to review of lower court decisions in which the "matter in dispute" exceeded a designated monetary amount. Consistently, plaintiffs with separate and distinct claims could not aggregate their respective "matters in dispute" to bring an appeal to this Court. See, e. g., Stewart v. Dunham, 115 U.S. 61, 64 -65 (1885) (and cases cited therein). The original Alexander construction of our appellate jurisdiction was applied to the jurisdictional-amount requirement for federal trial courts in Walter v. Northeastern R. Co., 147 U.S. 370, 373 (1893): "Is the plaintiff entitled to join [all his actions] in a single suit [414 U.S. 291, 295] in a Federal court, and sustain the jurisdiction by reason of the fact that the total amount involved exceeds $2,000? We think not. It is well settled in this court that when two or more plaintiffs, having several interests, unite for the convenience of litigation in a single suit, it can only be sustained in the court of original jurisdiction, or on appeal in this court, as to those whose claims exceed the jurisdictional amount; and that when two or more defendants are sued by the same plaintiff in one suit the test of jurisdiction is the joint or several character of the liability to the plaintiff." </s> [Footnote 4 Rogers v. Hennepin County, 329 U.S. 621 (1916); Title Guaranty Co. v. Allen, 240 U.S. 136 (1916); Pinel v. Pinel, 240 U.S. 594, 596 (1916); Scott v. Frazier, 253 U.S. 243, 244 (1920); Clark v. Paul Gray, Inc., 306 U.S. 583 (1939). </s> [Footnote 5 Rule 23 (a) (3) provided: "If persons constituting a class are so numerous as to make it impracticable to bring them all before the court, such of them, one or more, as will fairly insure the adequate representation of all may, on behalf of all, sue or be sued, when the character of the right sought to be enforced for or against the class is . . . . . "(3) several, and there is a common question of law or fact affecting the several rights and a common relief is sought." </s> [Footnote 6 "The spurious class suit was a permissive joinder device. . . . "There was no jural relationship between the members of the class; unlike, for example, the members of an unincorporated association, they had taken no steps to create a legal relationship among themselves. They were not fellow travelers by agreement. The right or liability of each was distinct. The class was formed solely by the presence of a common question of law or fact. When a suit was brought by or against such a class, it was merely an invitation to joinder - an invitation to become a fellow traveler in the litigation, which might or might not be accepted. It was an invitation and not a command performance." 3B J. Moore, Federal Practice § 23 10 1., pp. 2601-2603 (2d ed. 1969). Professor Moore thus recognized that the jurisdictional-amount requirements governing the joinder of separate and distinct claims applied to spurious class suits: "These principles applied with equal force in the class action, since the class actions as constituted under original Rule 23 were but [414 U.S. 291, 297] procedural devices to permit some to prosecute or defend an action without the necessity of all appearing as plaintiffs or defendants." Id., § 23.13, p. 2957. </s> [Footnote 7 Alfonso v. Hillsborough County Aviation Authority, 308 F.2d 724 (CA5 1962); Troup v. McCart, 238 F.2d 289 (CA5 1956); Hughes v. Encyclopaedia Britannica, 199 F.2d 295 (CA7 1952); Ames v. Mengel Co., 190 F.2d 344 (CA2 1951); Miller v. National City Bank of New York, 166 F.2d 723 (CA2 1948); Matlaw Corp. v. War Damage Corp., 164 F.2d 281 (CA7 1947); Sturgeon v. Great Lakes Steel Corp., 143 F.2d 819 (CA6 1944); Black & Yates, Inc. v. Mahogany Assn., 129 F.2d 227 (CA3 1942); Woerter v. Orr, 127 F.2d 969 (CA10 1942); Central Mexico Light & Power Co. v. Munch, 116 F.2d 85 (CA2 1940); Independence Shares Corp. v. Deckert, 108 F.2d 51, 53 (CA3 1939), rev'd on other grounds, 311 U.S. 282 (1940); Ames v. Chestnut Knolls, Inc., 159 F. Supp. 791 (Del. 1958); Air Line Dispatchers Assn. v. California Eastern Airways, 127 F. Supp. 521 (ND Cal. 1954); Goldberg v. Whittier Corp., 111 F. Supp. 382 (ED Mich. 1953); Schuman v. Little Bay Constr. Corp., 110 F. Supp. 903 (SDNY 1953); Giesecke v. Denver Tramway Corp., 81 F. Supp. 957 (Del. 1949); Koster v. Turchi, 79 F. Supp. 268 (ED Pa.) aff'd, 173 F.2d 605 (CA3 1948); Shipley v. Pittsburgh & L. E. R. Co., 70 F. Supp. [414 U.S. 291, 298] 870, 873, 874-875 (WD Pa. 1947); Long v. Dravo Corp., 6 F. R. D. 226 (WD Pa. 1946); Scarborough v. Mountain States Tel. & Tel. Co., 45 F. Supp. 176 (WD Tex. 1942); Stevenson v. City of Bluefield, 39 F. Supp. 462 (SD W. Va. 1941). </s> [Footnote 8 The Court of Appeals for the Fifth Circuit held that there had been no change in the rule. Alvarez v. Pan American Life Insurance Co., 375 F.2d 992, cert. denied, 389 U.S. 827 (1967). The same result was reached in the Eighth Circuit in Snyder v. Harris, 390 F.2d 204, 205 (1968), but a contrary ruling developed in the Tenth Circuit, Gas Service Co. v. Coburn, 389 F.2d 831, 833-834 (1968). We granted the petitions for certiorari in the latter two cases and decided them together. Snyder v. Harris, 394 U.S. 332 (1969). In Snyder, the named plaintiff was a shareholder of an insurance company who brought a diversity suit against the company's board of directors on behalf of herself and approximately 4,000 other shareholders. Although Mrs. Snyder's claim totaled only $8,740 in damages, she defended the motion to dismiss for lack of jurisdiction on the ground that if all 4,000 potential claims were aggregated, the amount in controversy would well exceed $10,000. The District Court held that the claims could not be aggregated, and the Court of Appeals affirmed. In the consolidated case, Gas Service Co. v. Coburn, a customer of petitioner public utility brought a diversity suit on behalf of himself and 18,000 other similarly situated consumers, alleging the illegal collection of a city franchise tax. The single named plaintiff's damages amounted to only $7.81, but the District Court allowed all the claims to be aggregated to satisfy [414 U.S. 291, 299] the jurisdictional-amount requirement. The Court of Appeals affirmed. </s> [Footnote 9 The dissent recognizes that Clark requires the dismissal of any named plaintiff in an action whose case does not satisfy the jurisdictional amount. But apparently unnamed members of the class would enjoy advantages not shared by the named plaintiffs since their separate and distinct cases would be exempted from the jurisdictional-amount requirement. Why this should be the case and how this squares with Clark or with Snyder v. Harris are left unexplained. [414 U.S. 291, 301] We simply apply the rule governing named plaintiffs joining in an action to the unnamed members of a class, as Snyder v. Harris surely contemplated. </s> [Footnote 10 The inevitability of this conclusion was suggested by the dissent in Snyder v. Harris, 394 U.S., at 343 (Fortas, J., dissenting). The same result was reached in City of Inglewood v. City of Los Angeles, 451 F.2d 948, 952-954 (1971), by the Court of Appeals for the Ninth Circuit. </s> [Footnote 11 Because a class action invoking general federal-question jurisdiction under 28 U.S.C. 1331 would be subject to the same jurisdictional-amount rules with respect to plaintiffs having separate and distinct claims, the result here would be the same even if a cause of action under federal law could be stated, see Illinois v. City of Milwaukee, 406 U.S. 91, 98 -101 (1972), or if substantive federal law were held to control this case. Of course, Congress has exempted major areas of federal-question jurisdiction from any jurisdictional-amount requirements, see 28 U.S.C. 1333-1334, 1336-1340, 1343-1345, 1347-1358, 1361-1362, the exemption being so widely applicable, in fact, that the Court in Snyder v. Harris, 394 U.S., at 341 , discounted the impact of its holding in federal cases. </s> MR. JUSTICE BRENNAN, with whom MR. JUSTICE DOUGLAS and MR. JUSTICE MARSHALL join, dissenting. </s> The Court holds that, in a diversity suit, a class action under Fed. Rule Civ. Proc. 23 (b) (3) is maintainable only when every member of the class, whether an appearing party or not, meets the $10,000 jurisdictional-amount requirement of 28 U.S.C. 1332 (a). It finds this ruling compelled by the "rationale of this Court's prior cases construing the statutes defining the jurisdiction of the District Court." I disagree and respectfully dissent. [414 U.S. 291, 303] </s> The jurisdictional-amount provision of 1332 (a) tersely states that "the matter in controversy [must exceed] the sum or value of $10,000 . . . ." Those words, substantially unchanged since the passage of the Judiciary Act of 1789, 1 apply to "civil actions," and say nothing about the requirements applicable to individual claimants and individual claims. Although Congress has several times altered the amount required, 2 generally upward, 3 it has left the task of defining those requirements to the judiciary. 4 The result has been a relatively [414 U.S. 291, 304] complex and sensitive set of rules designed to implement Congress' broad directive in a way that is responsive to the demands of fairness and efficiency in adjudication. </s> One "bright line" has emerged to control all 1332 actions: there must be at least one plaintiff, or joint interest, seeking more than the statutory amount. Snyder v. Harris, 394 U.S. 332 (1969); Troy Bank v. G. A. Whitehead & Co., 222 U.S. 39 (1911). The "long-standing" and "well established" rule on aggregation of claims that the Court invokes was developed to determine whether a group of claims was sufficiently interrelated to constitute such a "joint" claim or "common and undivided interest." 5 </s> [414 U.S. 291, 305] </s> Once jurisdiction has attached to the "action," however, the "aggregation" rule has been but one of several ways to establish jurisdiction over additional claims and parties. In this case, the claims of the named plaintiffs provided the District Court with jurisdiction over the diversity action. And petitioners make no argument inconsistent with the Court's holding that the theory of "joint" claims or interests will not support jurisdiction over the nonappearing members of their class. Their contention is rather that a second theory, ancillary jurisdiction, supports a determination that those claims may be entertained. </s> Ancillary jurisdiction to adjudicate claims that cannot be fitted within the aggregation rules has long been recognized by this Court, see Freeman v. Howe, 24 How. 450 (1861); Phelps v. Oaks, 117 U.S. 236 (1886); Wichita R. & Light Co. v. Public Utilities Comm'n, 260 U.S. 48 (1922). But, as one commentator has pointed out, the rules developed to control the exercise of that jurisdiction cannot be explained by "any single rationalizing principle." C. Wright, Federal Courts 9, p. 21 (2d ed. 1970). They are instead accommodations that take into account the impact of the adjudication on parties and third persons, the susceptibility of the dispute or disputes in the case to resolution in a single adjudication, and the structure of the litigation as governed by the Federal Rules of Civil Procedure. 6 </s> [414 U.S. 291, 306] </s> After consideration of these factors, the Court has sustained the exercise of ancillary jurisdiction over compulsory counterclaims under Rule 13 (a), Horton v. Liberty Mutual Insurance Co., 367 U.S. 348 (1961), aff'g 275 F.2d 148 (CA5 1960); Moore v. New York Cotton Exchange, 270 U.S. 593 (1926). It has also done so where a party's intervention was held to be a matter of right, as is now provided by Rule 24 (a), Phelps v. Oaks, supra; see 2 W. Barron & A. Holtzoff, Federal Practice & Procedure 593 (C. Wright ed. 1961). Following this lead, the courts of appeals have sustained ancillary jurisdiction over cross-claims permitted by Rule 13 (g), R. M. Smythe & Co. v. Chase National Bank, 291 F.2d 721 (CA2 1961); Childress v. Cook, 245 F.2d 798 (CA5 1957); over impleaded defendants under Rule 14, Pennsylvania R. Co. v. Erie Avenue Warehouse Co., 302 F.2d 843 (CA3 1962); and over defendants interpleaded under Rule 22, Walmac Co. v. Isaacs, 220 F.2d 108 (CA1 1955). See Developments in the Law - Multi-party Litigation in the Federal Courts, 71 Harv. L. Rev. 874 passim (1958). 7 </s> Class actions under Rule 23 (b) (3) are equally appropriate for such treatment. There are ample assurances, [414 U.S. 291, 307] in the provisions of the Rule that "the questions of law or fact common to the members of the class [must] pre-dominate over any questions affecting only individual members," 8 to guarantee that ancillary jurisdiction will not become a facade hiding attempts to secure federal adjudication of nondiverse parties' disputes over unrelated claims. And the practical reasons for permitting adjudication of the claims of the entire class are certainly as strong as those supporting ancillary jurisdiction over compulsory counterclaims and parties that are entitled to intervene as of right. Class actions were born of necessity. 9 The alternatives were joinder of the entire class, or redundant litigation of the common issues. The cost to the litigants and the drain on the resources of the judiciary resulting from either alternative would have been intolerable. And this case presents precisely those difficulties: approximately 240 claimants are involved, and the issues will doubtless call for extensive use of expert testimony on difficult scientific issues. </s> It is, of course, true that an exercise of ancillary jurisdiction in such cases would result in some increase in the federal courts' workload, for unless the class action is permitted many of the claimants will be unable to obtain any federal determination of their rights. But that objection is applicable to every other exercise of ancillary [414 U.S. 291, 308] jurisdiction. It should be a sufficient answer that denial of ancillary jurisdiction will impose a much larger burden on the state and federal judiciary as a whole, and will substantially impair the ability of the prospective class members to assert their claims. </s> If the State provides a class action device comparable to Rule 23 (b) (3), some of this inefficiency and unfairness may be avoided, but certainly not all. The named plaintiffs, and any other members of their class who can meet the jurisdictional-amount requirement, may choose to litigate those claims in the district courts, as these plaintiffs have shown to be their preference. Moreover, they will probably now be required separately to litigate the common issues in their cases, 10 thus possibly enlarging the federal judiciary's burden, and ironically reversing the Court's apparent purpose. </s> Moreover, if the State does not provide a Rule 23 (b) (3) device, litigation of the claims of class members who either lack the jurisdictional amount or simply prefer to litigate their claims in the state courts - as they would be free to do under any construction of the jurisdictional requirement - will produce a multitude of suits. And the chief influence mitigating that flood - the fact that many of these landowners' claims are likely to be worthless because the cost of asserting them on a case-by-case basis will exceed their potential value - will do no judicial system credit. </s> Not only does the practical desirability of sustaining ancillary jurisdiction bring Rule 23 (b) (3) class actions within the logic of our decisions, but the Court has long [414 U.S. 291, 309] since recognized that fact, and has sustained ancillary jurisdiction over the nonappearing members in a class action who do not meet the requirements of traditional rule of complete diversity laid down in Strawbridge v. Curtiss, 3 Cranch 267 (1806). In Supreme Tribe of Ben Hur v. Cauble, 255 U.S. 356 (1921), the Court not only held that only the original named plaintiffs and defendants had to satisfy the diversity requirements, but it also stated that intervention by nondiverse members of the class would not destroy the District Court's jurisdiction. Id., at 366. Particularly in view of the constitutional background on which the statutory diversity requirements are written, see 469 F.2d 1033, 1038 (CA2 1972) (Timbers, J., dissenting), it is difficult to understand why the practical approach the Court took in Supreme Tribe of Ben-Hur must be abandoned where the purely statutory "matter in controversy" requirement is concerned. </s> Certainly this result is not compelled by Snyder v. Harris, 394 U.S. 332 (1969), for that decision turned solely on whether federal diversity jurisdiction could be established over the "action." Nor can I accept the Court's contention that Snyder's citation to Clark v. Paul Gray, Inc., 306 U.S. 583 (1939), controls here. That case dealt only with the jurisdictional-amount requirements for the original named plaintiffs who litigated the case. Here petitioners clearly meet that requirement. Snyder's characterization of Clark as a class action did not turn that case into a precedent for applying the jurisdictional-amount requirements to nonappearing class members who, so far as the Court indicated in Clark, were not even involved in that case. </s> It would be far more consistent with Clark for the Court to rule, as it did in Supreme Tribe of Ben-Hur, that only the original named plaintiffs must meet the jurisdictional requirements, and that nonappearing class members [414 U.S. 291, 310] and intervenors need not. Such a ruling, while going a step farther than petitioners seek, would be reasonable and pragmatically justified. There is a substantial difference between the impact on a case of an appearing party and a nonappearing class member, and intervention poses no threat since the district courts are given discretion by Rule 23 (d) (3) to permit intervention subject to appropriate conditions. See 3B J. Moore, Federal Practice § 23.73 (3), p. 1441 (2d ed. 1969). The question in this case is not whether the class action must be permitted, but whether the District Court has the power to determine whether to permit it, taking into account the elaborate guidance and discretion provided by Rule 23. </s> The Court also appears to rely on Snyder's rejection of "the notion that the 1966 amendments to Rule 23 were intended to effect, or effected, any change in the meaning and application of the jurisdictional amount requirement insofar as class actions are concerned." Ante, at 299. Snyder based this rejection on Rule 82's admonition that the Federal Rules of Civil Procedure are not to be "construed to extend or limit the jurisdiction of the United States district courts . . . ." Reliance on Rule 82 was proper there because the petitioner contended that the restructuring of Rule 23 to abolish "spurious" class actions in favor of a "functional" approach that took into account the nature of the litigation and its effects undercut this Court's long line of decisions establishing the minimum requirements for diversity jurisdiction over a "civil action." </s> But this case presents no suggestion that the 1966 amendments override the Court's decisions construing 1332. There are no earlier decisions construing the jurisdictional-amount requirements for the nonappearing members of a "spurious" class, probably because the old Rule did not bind members of the class unless they [414 U.S. 291, 311] affirmatively requested inclusion. 11 Nor did the 1966 amendments bring Rule 23 (b) (3) class actions within any other holdings. If anything, they merely made the determination whether the class should be permitted to turn more directly on the kinds of concerns that have motivated the exercise of ancillary jurisdiction. 12 </s> The question in this case ought, instead, to be whether changes in the Civil Rules may affect, and be affected by, the determination whether to exercise existing jurisdiction. Of course, they must. As the Reporter to the Advisory Committee on Civil Rules that prepared the 1966 amendments has observed: "From the start the Civil Rules, elaborating and complicating actions through joinder of claims and parties, have profoundly influenced jurisdictional result." 13 The Court's prior decisions upholding novel exercises of ancillary jurisdiction have made liberal use of the opportunities presented by the Civil Rules and amendments of them, and Rule 82 has stood as no bar to that action. </s> Indeed, the effects of today's decision will also be influenced by the form of Rule 23. The District Court, after ruling that ancillary jurisdiction could not be exercised, was confronted with a dilemma that did not exist prior to the 1966 amendments: identification of the members of the class that would be bound by the decision so that they could be provided the required notice. 14 After [414 U.S. 291, 312] determining that it was not possible to determine which of the 240 proposed members met the $10,000 requirement, the court denied class action status to all. But few, if any, Rule 23 (b) (3) classes will lend themselves to a determination, on the basis of the pleadings, that each proposed member meets that requirement. Intervention, at least for the purpose of establishing jurisdiction, may be necessary, and that is more than even the old Rule contemplated when it specified that class members had to request inclusion in order to be bound. </s> Thus, on the basis of the Court's implicit holding that ancillary jurisdiction would not support recognition of a Rule 23 (b) (3) class, the 1966 amendments will still influence the number of cases in which federal jurisdiction will be exercised. They will, as in this case, simply curtail the exercise of jurisdiction rather than expand it. In view of the Court's previous concern with practical realities in both its cases involving class actions and its cases involving the exercise of ancillary jurisdiction, I think that this limitation is both unwarranted and unwise. </s> [Footnote 1 Section 11, 1 Stat. 78. The First Judiciary Act used the term "matter in dispute," ibid., and that phrase was retained until 1911, when the jurisdictional amount was increased from $2,000 to $3,000, Act of Mar. 3, 1911, 24, 36 Stat. 1091, and the words "matter in controversy" were substituted. </s> [Footnote 2 The amendments are catalogued in n. 1 of the Court's opinion. </s> [Footnote 3 Adjustments for changes in the purchasing power of the dollar generally have been given as the explanation for this phenomenon. See, e. g., S. Rep. No. 1830, 85th Cong., 2d Sess., 4 (1958): "The present requirement of $3,000 has been on the statute books since 1911 and obviously the value of the dollar in terms of its purchasing power has undergone marked depreciation since that date. The Consumers Price Index for moderate income families in large cities indicates a rise of about 152 percent since 1913, shortly after the present $3,000 minimum was established. . . . Accordingly the committee believes that the standard for fixing jurisdictional amounts should be increased to $10,000." See H. R. Rep. No. 1706, 85th Cong., 2d Sess., 3 (1958) (containing identical language). The only decrease, in 1801, is discussed in n. 1 of the Court's opinion. </s> [Footnote 4 The only recent suggestion of congressional purpose is an oft-repeated statement in the legislative history of the 1958 amendments: "The recommendations of the Judicial Conference [of the United States] regarding the amount in controversy, which this committee approves, is based on the premise that the amount should be fixed at a sum of money that will make jurisdiction available in all substantial controversies where other elements of Federal jurisdiction are present. The jurisdictional amount should not be so high as to [414 U.S. 291, 303] convert the Federal courts into courts of big business nor so low as to fritter away their time in the trial of petty controversies." S. Rep. No. 1830, supra, at 3-4 (emphasis added); H. R. Rep. No. 1706, supra, at 3 (containing identical language). </s> [Footnote 5 See Troy Bank v. G. A. Whitehead & Co., 222 U.S. 39 (1911), and cases cited in n. 3 of the Court's opinion. The Court also observes, quite correctly, that the same rule on aggregation has been applied to the federal-question jurisdiction, 28 U.S.C. 1331. But the assertion, in the Court's final footnote, that the same jurisdictional rules it announces for 1332 will apply to 1331, is even more questionable than its application of those rules in this case. The continued need for exercise of diversity jurisdiction, at least where a showing of prejudice is not made, has been challenged by respected authorities. See Wechsler, Federal Jurisdiction and the Revision of the Judicial Code, 13 Law & Contemp. Prob. 216, 234-240 (1948); Currie, The Federal Courts and the American Law Institute (pts. I & II), 36 U. Chi. L. Rev. 1, 268 (1968, 1969). Cf. S. Rep. No. 1830, supra, n. 3. But a sharply different view has been taken of the federal-question jurisdiction, and the Court has reflected that view in its decisions upholding the exercise of jurisdiction over pendent claims under state law. See Mine Workers v. Gibbs, 383 U.S. 715 (1966). Similarly significant disincentives to assertion of federal rights in federal forums are likely if claimants are barred from combining to reduce the time and cost of litigation. </s> [Footnote 6 See Fraser, Ancillary Jurisdiction and the Joinder of Claims in the Federal Courts, 33 F. R. D. 27 (1963); H. Hart & H. Wechsler, The Federal Courts and the Federal System 1075-1081 (2d ed. 1973). Professor Kaplan, the Reporter for the 1966 amendments, has articulated his expectation that Rule 23 would be similarly accommodated: "New rule 23 alters the pattern of class actions; subdivision (b) (3), in particular, is a new category deliberately created. Like other innovations from time to time introduced into the Civil Rules, [414 U.S. 291, 306] those as to class actions change the total situation on which the statutes and theories regarding subject matter jurisdiction are brought to bear." Kaplan, Continuing Work of the Civil Committee: 1966 Amendments of the Federal Rules of Civil Procedure (I), 81 Harv. L. Rev. 356, 399-400 (1967). </s> [Footnote 7 See also 7 C. Wright & A. Miller, Federal Practice & Procedure 1756, pp. 564-565 (1972), approving as sound and "a natural corollary to other applications of the ancillary jurisdiction concept," a holding that only one representative party need meet the jurisdictional-amount requirement to support a class action in Lesch v. Chicago & Eastern Illinois R. Co., 279 F. Supp. 908 (ND Ill. 1968). </s> [Footnote 8 Rule 23 (b) (3). This Rule further states: "The matters pertinent to the findings include: (A) the interest of members of the class in individually controlling the prosecution or defense of separate actions; (B) the extent and nature of any litigation concerning the controversy already commenced by or against members of the class; (C) the desirability or undesirability of concentrating the litigation of the claims in the particular forum; (D) the difficulties likely to be encountered in the management of a class action." </s> [Footnote 9 See 3B J. Moore, Federal Practice §§ 23.02 1., 23.05 passim (2d ed. 1969). </s> [Footnote 10 This is the probable consequence of the District Court's determination, after holding that each class member had to meet the jurisdictional-amount requirement, that it could find "no appropriate class over which [it had] jurisdiction." 53 F. R. D. 430, 433 (Vt. 1971); see infra, at 311-312. </s> [Footnote 11 See Developments in the Law - Multiparty Litigation in the Federal Courts, 71 Harv. L. Rev. 874, 941-942 and cases cited n. 493 (1958). </s> [Footnote 12 See Rules 23 (a) (1), (2), (3) and (b) (3) (A), (B), (C). Cf. H. Hart & H. Wechsler, supra, n. 6, at 1078. ("Under the revised rule, which contemplates that in a class action all members of the class not properly excluded will be bound by the judgment, the `spurious' class action no longer exists, and ancillary jurisdiction may support intervention by class members in all cases.") </s> [Footnote 13 Kaplan, supra, n. 6, at 400. </s> [Footnote 14 Rules 23 (c) (2), (3). </s> [414 U.S. 291, 313]

United States Supreme Court SCRANTON v. DREW(1964) No. 201 Argued: Decided: November 16, 1964 </s> The judgment of the District Court holding invalid certain Pennsylvania apportionment statutes and constitutional provisions vacated and cause remanded for further consideration in the light of supervening decisions. Pp. 40-42. </s> 229 F. Supp. 310, vacated and remanded. </s> Walter E. Alessandroni, Attorney General of Pennsylvania, and Edward Friedman and Alan Miles Ruben, Deputy Attorneys General, for appellants. Marvin Comisky, Thomas D. McBride, Goncer M. Krestal and Marshall J. Seidman for appellees. </s> PER CURIAM. </s> The judgment of the District Court appealed from was entered on April 9, 1964, 229 F. Supp. 310 (D.C. M. D. Pa.). The District Court held invalid under the Fourteenth Amendment to the United States Constitution, the Pennsylvania Representative Apportionment Act of January 9, 1964, P. L. 1419, 25 Purdon's Pa. Stat. Ann. 2221-2222 (1963 Supp., including Acts of the 1963 Extra Session), the Pennsylvania Senatorial Apportionment Act of January 9, 1964, P. L. 1432, 25 Purdon's Pa. Stat. Ann. 2217-2220 (1963 Supp., including Acts of the 1963 Extra Session), and the Pennsylvania Constitution's legislative apportionment provisions, Art. II, 16, 17. The court restrained appellants from conducting any future elections under the apportionment acts, but stayed its order pending the disposition of an appeal to this [379 U.S. 40, 41] Court. Thereafter on June 15, 1964, this Court decided Reynolds v. Sims, 377 U.S. 533 , and companion cases: WMCA, Inc. v. Lomenzo, 377 U.S. 633 ; Maryland Comm. for Fair Representation v. Tawes, 377 U.S. 656 ; Davis v. Mann, 377 U.S. 678 ; Roman v. Sincock, 377 U.S. 695 ; Lucas v. Forty-Fourth General Assembly of Colorado, 377 U.S. 713 . On September 29, 1964, the Supreme Court of Pennsylvania handed down a decision construing the legislative apportionment provisions of the Pennsylvania Constitution, and holding these provisions constitutional as construed. The court, however, declared invalid, under the Fourteenth Amendment to the United States Constitution, the Pennsylvania legislative apportionment laws at issue in this appeal. Butcher v. Bloom, 415 Pa. 438, 203 A. 2d 556. The Pennsylvania court retained jurisdiction of the case, stating: </s> "We have indicated that it is our expectation that the Legislature will proceed in timely fashion to enact reapportionment laws which conform to constitutional requirements. We must recognize, however, that if the General Assembly fails to act in a timely fashion, we shall be obliged to take necessary affirmative action to insure that the 1966 election of Pennsylvania legislators will be conducted pursuant to a constitutionally valid plan. Proper regard for our responsibility compels us to retain jurisdiction of this matter pending legislative action. </s> "Should the Legislature fail to enact a constitutionally valid plan of reapportionment as soon as practical, but not later than September 1, 1965, we shall take such action as may be appropriate in light of the then existing situation. </s> "Jurisdiction retained in accordance with this opinion." Id., at 468-469, 203 A. 2d, at 573. [379 U.S. 40, 42] </s> The judgment of the District Court is therefore vacated and the cause is remanded for further consideration in light of the decisions supervening since the entry of the judgment of the District Court. </s> Vacated and remanded. </s> [379 U.S. 40, 43]

United States Supreme Court SERBIAN ORTHODOX DIOCESE v. MILIVOJEVICH(1976) No. 75-292 Argued: March 22, 1976Decided: June 21, 1976 </s> During the course of a protracted dispute over the control of the Serbian Eastern Orthodox Diocese for the United States and Canada, the Holy Assembly of Bishops and the Holy Synod of the Serbian Orthodox Church (Mother Church) suspended and ultimately removed and defrocked the Bishop, respondent Dionisije, and appointed petitioner Firmilian as Administrator of the Diocese, which the Mother Church then reorganized into three Dioceses. The Serbian Orthodox Church is a hierarchical church, and the sole power to appoint and remove its Bishops rests in the Holy Assembly and Holy Synod. Dionisije filed suit in the Illinois courts seeking to enjoin petitioners from interfering with Diocesan assets of respondent not-for-profit Illinois corporations and to have himself declared the true Diocesan Bishop. After a lengthy trial, the trial court resolved most of the disputed issues in favor of petitioners. The Supreme Court of Illinois affirmed in part and reversed in part, holding that Dionisije's removal and defrockment had to be set aside as "arbitrary" because the proceedings against him had not in its view been conducted in accordance with the Church's constitution and penal code, and that the Diocesan reorganization was invalid because it exceeded the scope of the Mother Church's authority to effectuate such changes without Diocesan approval. Held: </s> 1. The holding of the Illinois Supreme Court constituted improper judicial interference with the decisions of a hierarchical church and in thus interposing its judgment into matters of ecclesiastical cognizance and polity, the court contravened the First and Fourteenth Amendments. Pp. 708-725. </s> (a) "[W]henever the questions of discipline, or of faith, or ecclesiastical rule, custom, or law have been decided by the highest of [the] church judicatories to which the matter has been carried, the legal tribunals must accept such decisions as final, and as binding . . . ." Watson v. Jones, 13 Wall. 679, 727. Pp. 708-712. </s> (b) Under the guise of "minimal" review of the Mother [426 U.S. 696, 697] Church's decisions that the Illinois Supreme Court deemed "arbitrary" that court has unconstitutionally undertaken the adjudication of quintessentially religious controversies whose resolution the First Amendment commits exclusively to the highest ecclesiastical tribunals of this hierarchical church. Pp. 712-720. </s> 2. Though it did not rely on the "fraud, collusion, or arbitrariness" exception to the rule requiring recognition by civil courts of decisions by hierarchical tribunals, but rather on purported "neutral principles" for resolving property disputes in reaching its conclusion that the Mother Church's reorganization of the American-Canadian Diocese into three Dioceses was invalid, that conclusion also contravened the First and Fourteenth Amendments. The reorganization of the Diocese involves solely a matter of internal church government, an issue at the core of ecclesiastical affairs. Religious freedom encompasses the "power [of religious bodies] to decide for themselves, free from state interference, matters of church government as well as those of faith and doctrine." Kedroff v. St. Nicholas Cathedral, 344 U.S. 94, 116 . Pp. 720-724. </s> 60 Ill. 2d 477, 328 N. E. 2d 268, reversed. </s> BRENNAN, J., delivered the opinion of the Court, in which STEWART, WHITE, MARSHALL, BLACKMUN, and POWELL, JJ., joined. WHITE, J., filed a concurring opinion, post, p. 725. BURGER, C. J., concurred in the judgment. REHNQUIST, J., filed a dissenting opinion, in which STEVENS, J., joined, post, p. 725. </s> Albert E. Jenner, Jr., argued the cause for petitioners. With him on the briefs were Keith F. Bode, Robert L. Graham, Thomas J. Karacic, and Henry D. Fisher. </s> Leo J. Sullivan III argued the cause for respondents. With him on the brief were Richard J. Smith and Jerome H. Torshen. * </s> [Footnote * Don H. Reuben, Lawrence Gunnels, and James A. Serritella filed a brief for the Catholic Bishop of Chicago as amicus curiae. </s> MR. JUSTICE BRENNAN delivered the opinion of the Court. </s> In 1963, the Holy Assembly of Bishops and the Holy Synod of the Serbian Orthodox Church (Mother Church) [426 U.S. 696, 698] suspended and ultimately removed respondent Dionisije Milivojevich (Dionisije) as Bishop of the American-Canadian Diocese of that Church, and appointed petitioner Bishop Firmilian Ocokoljich (Firmilian) as Administrator of the Diocese, which the Mother Church then reorganized into three Dioceses. In 1964 the Holy Assembly and Holy Synod defrocked Dionisije as a Bishop and cleric of the Mother Church. In this civil action brought by Dionisije and the other respondents in Illinois Circuit Court, the Supreme Court of Illinois held that the proceedings of the Mother Church respecting Dionisije were procedurally and substantively defective under the internal regulations of the Mother Church and were therefore arbitrary and invalid. The State Supreme Court also invalidated the Diocesan reorganization into three Dioceses. 60 Ill. 2d 477, 328 N. E. 2d 268 (1975). 1 We granted certiorari to determine whether the actions of the Illinois Supreme Court constituted improper judicial interference with decisions of the highest authorities of a hierarchical church in violation of the First and Fourteenth Amendments. 423 U.S. 911 (1975). We hold that the inquiries made by the Illinois Supreme Court into matters of ecclesiastical cognizance and polity and the court's actions pursuant thereto contravened the First and Fourteenth Amendments. We therefore reverse. </s> I </s> The basic dispute is over control of the Serbian Eastern Orthodox Diocese for the United States of America and Canada (American-Canadian Diocese), its property and assets. Petitioners are Bishops Firmilian, Gregory Udicki, and Sava Vukovich, and the Serbian Eastern [426 U.S. 696, 699] Orthodox Diocese for the United States of America and Canada (the religious body in this country). Respondents are Bishop Dionisije, the Serbian Orthodox Monastery of St. Sava, and the Serbian Eastern Orthodox Diocese for the United States of America and Canada, an Illinois religious corporation. A proper perspective on the relationship of these parties and the nature of this dispute requires some background discussion. </s> The Serbian Orthodox Church, one of the 14 autocephalous, hierarchical churches which came into existence following the schism of the universal Christian church in 1054, is an episcopal church whose seat is the Patriarchate in Belgrade, Yugoslavia. Its highest legislative, judicial, ecclesiastical, and administrative authority resides in the Holy Assembly of Bishops, a body composed of all Diocesan Bishops presided over by a Bishop designated by the Assembly to be Patriarch. The Church's highest executive body, the Holy Synod of Bishops, is composed of the Patriarch and four Diocesan Bishops selected by the Holy Assembly. The Holy Synod and the Holy Assembly have the exclusive power to remove, suspend, defrock, or appoint Diocesan Bishops. The Mother Church is governed according to the Holy Scriptures, Holy Tradition, Rules of the Ecumenical Councils, the Holy Apostles, the Holy Faiths of the Church, the Mother Church Constitution adopted in 1931, and a "penal code" adopted in 1961. These sources of law are sometimes ambiguous and seemingly inconsistent. Pertinent provisions of the Mother Church Constitution provide that the Church's "main administrative division is composed of dioceses, both in regard to church hierarchical and church administrative aspect," Art. 12, and that "[d]ecisions of establishing, naming, liquidating, reorganizing, and the seat of the dioceses, and establishing or eliminating of position of vicar bishops, [426 U.S. 696, 700] is decided upon by the [Holy Assembly], in agreement with the Patriarchal Council," Art. 16. </s> During the late 19th century, migrants to North America of Serbian descent formed autonomous religious congregations throughout this country and Canada. These congregations were then under the jurisdiction of the Russian Orthodox Church, but that Church was unable to care for their needs and the congregations sought permission to bring themselves under the jurisdiction of the Serbian Orthodox Church. </s> In 1913 and 1916, Serbian priests and laymen organized a Serbian Orthodox Church in North America. The 32 Serbian Orthodox congregations were divided into 4 presbyteries, each presided over by a Bishop's Aide, and constitutions were adopted. In 1917, the Russian Orthodox Church commissioned a Serbian priest, Father Mardary, to organize an independent Serbian Diocese in America. Four years later, as a result of Father Mardary's efforts, the Holy Assembly of Bishops of the Mother Church created the Eastern Orthodox Diocese for the United States of America and Canada and designated a Serbian Bishop to complete the formal organization of a Diocese. From that time until 1963, each Bishop who governed the American-Canadian Diocese was a Yugoslav citizen appointed by the Mother Church without consultation with Diocesan officials. </s> In 1927, Father Mardary called a Church National Assembly embracing all of the known Serbian Orthodox congregations in the United States and Canada. The Assembly drafted and adopted the constitution of the Serbian Orthodox Diocese for the United States of America and Canada, and submitted the constitution to the Mother Church for approval. The Holy Assembly made changes to provide for appointment of the Diocesan Bishop by the Holy Assembly and to require Holy Assembly [426 U.S. 696, 701] approval for any amendments to the constitution, and with these changes approved the constitution. The American-Canadian Diocese was the only diocese of the Mother Church with its own constitution. </s> Article 1 of the constitution provides that the American-Canadian Diocese "is considered ecclesiastically-judicially as an organic part of the Serbian Patriarchate in the Kingdom of Yugoslavia," and Art. 2 provides that all "statutes and rules which regulate the ecclesiastical-canonical authority and position of the Serbian Orthodox Church in the Kingdom of Yugoslavia are also compulsory for" the American-Canadian Diocese. Article 3 states that the "jurisdiction of the . . . Diocese . . . includes the entire political territory of the United States of America and Canada, which as such by its geographical location enjoys full administrative freedom and accordingly, it can independently regulate and rule the activities of its church, school and other diocesan institutions and all funds and beneficiencies, through its organs . . . ." Article 9 provides that the Bishop of the Diocese "is appointed by the Holy Assembly of Bishops of the Serbian Patriarchate"; various provisions of the constitution accord that Bishop extensive powers with respect to both religious matters and control of Diocesan property. The constitution also provides for such Diocesan organs as a Diocesan National Assembly, which exercises considerable legislative and administrative authority within the Diocese. </s> In 1927, Father Mardary also organized a not-for-profit corporation, the Serbian Eastern Orthodox Council for the United States and Canada, under the laws of Illinois. The corporation was to hold title to 30 acres of land in Libertyville, Ill., that Father Mardary had personally purchased in 1924. The charter of that corporation was allowed to lapse, and Father Mardary organized [426 U.S. 696, 702] another Illinois not-for-profit corporation, respondent Serbian Eastern Orthodox Diocese for the United States and Canada, under Illinois laws governing incorporation of hierarchical religious organizations. In 1945, respondent not-for-profit monastery corporation, the Monastery of St. Sava, was organized under these same Illinois laws, and title to the Libertyville property was transferred to it. Similar secular property-holding corporations were subsequently organized in New York, California, and Pennsylvania. </s> Respondent Bishop Dionisije was elected Bishop of the American-Canadian Diocese by the Holy Assembly of Bishops in 1939. He became a controversial figure; during the years before 1963, the Holy Assembly received numerous complaints challenging his fitness to serve as Bishop and his administration of the Diocese. </s> During his tenure, however, the Diocese grew so substantially that Dionisije requested that the Patriarch and Holy Assembly appoint bishops to assist him but to serve under his supervision. Eventually, the Diocese sought its elevation by the Holy Assembly to the rank of Metropolia, that South America be added to the Diocese, and that several assistant bishops be appointed under Dionisije. Dionisije specifically recommended that petitioners Firmilian and Gregory Udicki, and one Stefan Lastavica be named assistant bishops. A delegation from the Diocese was sent to the May 1962 meeting of the Holy Assembly in Belgrade to urge adoption of these reorganization proposals, and on June 12, 1962, the Holy Synod appointed a delegation to visit the United States and study the proposals. The delegation was also directed to confer with Dionisije concerning the complaints made against him and his administration over the years. </s> The delegation remained in the United States for three [426 U.S. 696, 703] months, visiting parishes throughout the Diocese and discussing both the reorganization proposals and the complaints against Dionisije. After completion of its survey, the delegation suggested to the Holy Synod the assignment of vicar bishops to the Diocese and recommended that a commission be appointed to conduct a thorough investigation into the complaints against Dionisije. However, the Holy Assembly on May 10, 1963, instead recommended that the Holy Synod institute disciplinary proceedings against Dionisije. The Holy Synod thereupon met immediately and suspended Dionisije pending investigation and disposition of the complaints. The Holy Synod appointed petitioner Firmilian, Dionisije's chief episcopal deputy since 1955 and one of Dionisije's candidates for assistant bishop, as Administrator of the Diocese pending completion of the proceedings. </s> The Holy Assembly thereafter reconvened and, acting under Art. 16 of the constitution of the Mother Church, reorganized the American-Canadian Diocese into three new dioceses - the Middle Western, the Western, and the Eastern - whose boundaries were roughly those of the episcopal districts previously created by Dionisije. 2 The final fixing of boundaries for the new dioceses and all other organizational and administrative matters were left to be determined by the officials of the old American-Canadian Diocese. Dionisije was appointed Bishop of the Middle Western Diocese and, seven days later, petitioners Archimandrites Firmilian, Gregory, and Stefan 3 were appointed temporary administrators for the new Dioceses. [426 U.S. 696, 704] </s> Dionisije's immediate reaction to these decisions of the Mother Church was to refuse to accept the reorganization on the ground that it contravened the administrative autonomy of the Diocese guaranteed by the Diocesan constitution, and to refuse to accept his suspension on the ground that it was not effectuated in compliance with the constitution and laws of the Mother Church. On May 25, 1963, he prepared and mailed a circular to all American-Canadian parishes stating his refusal to recognize these actions, and on May 27 he issued a press release stating his refusal to recognize his suspension and his intent to litigate it in the civil courts. This refusal to recognize the Diocesan reorganization and his suspension as Bishop was again stated by Dionisije in a circular issued on June 3 and addressed to the Patriarch, the Holy Assembly, the Holy Synod, all clergy, congregations, Diocesan committees, and all Serbians in North America. He also continued to officiate as Bishop, refusing to turn administration of the Diocese over to Firmilian; in a May 30 letter to Firmilian, Dionisije repeated this refusal, asserted that he no longer recognized the decisions of the Holy Assembly and Holy Synod, and charged those bodies with being "communistic." </s> The Diocesan Council met on June 6, and Dionisije reaffirmed his refusal to turn over administration of the Diocese to Firmilian; he also announced that he had discharged two of his vicars general because of their loyalty to the Mother Church. The Council resolved at the meeting to advise the Holy Synod that the proposal to reorganize the Diocese into three dioceses would be submitted to the Diocesan National Assembly in August for acceptance or rejection. The Council also requested that the Holy Assembly promptly send a committee to investigate the complaints against Dionisije. </s> On June 13, the Holy Synod appointed such a commission, [426 U.S. 696, 705] composed of two Bishops and the Secretary of the Holy Synod. On July 5, the commission met with Dionisije, who reiterated his refusal to recognize his suspension or the Diocesan reorganization, and who demanded all accusations in writing. The commission refused to give Dionisije the written accusations on the ground that defiance of decisions of higher church authorities itself established wrongful conduct, and advised him that the Holy Synod would appoint a Bishop as court prosecutor to prepare an indictment against him. </s> On the basis of the commission's report and recommendations, which recited Dionisije's refusal to accept the decisions of the Holy Synod and Holy Assembly and his refusal to recognize the court of the Holy Synod or its competence to try him, the Holy Assembly met on July 27, 1963, and voted to remove Dionisije as Bishop. The minutes of the Holy Assembly meeting and the Patriarch's letter to Dionisije informing him of the Holy Assembly's actions made clear that the removal was based solely on his acts of defiance subsequent to his May 10, 1963, suspension, and his violation of his oath and loss of certain qualifications for Bishop under Art. 104 of the constitution of the Mother Church. </s> The Diocesan National Assembly, with Dionisije presiding despite his removal, met in August 1963 and issued a resolution repudiating the division of the Diocese into three Dioceses and demanding a revocation by the Mother Church of the decisions concerning that division. When the Holy Assembly refused to reconsider, the Diocesan National Assembly in November 1963 declared the Diocese completely autonomous and reinstated the provisions of the Diocesan constitution that provided for election of the Bishop of the Diocese itself and for amendments without the approval of the Holy Assembly. </s> Meanwhile, the Holy Synod in October 1963 forwarded [426 U.S. 696, 706] to Dionisije a formal written indictment based on the charges of canonical misconduct. In November 1963, Dionisije responded with a demand for the verified reports and complaints referred to in the indictment and for a six-month extension to answer the indictment. The Holy Assembly granted a 30-day extension in which to answer, but declined to furnish verified charges on the grounds that they were described in the indictment, that additional details would be evidentiary in nature, and that there was no legal or canonical basis for forwarding such material to an accused Bishop. </s> Dionisije returned the indictment in January, refusing to answer without the verified charges, denouncing the Holy Assembly and Holy Synod as schismatic and pro-Communist, and asserting that the Mother Church was proceeding in violation of its penal code and constitution. </s> The Holy Synod, on February 25, 1964, declared that it could not proceed further without Dionisije and referred the matter to the Holy Assembly, which tried Dionisije as a default case on March 5, 1964, because of his refusal to participate. The indictment was also amended at that time to include charges based on Dionisije's acts of rebellion such as those committed at the November meeting of the National Assembly which had declared the Diocese separate from the Mother Church. Considering the original and amended indictments, the Holy Assembly unanimously found Dionisije guilty of all charges and divested him of his episcopal and monastic ranks. </s> Even before the Holy Assembly had removed Dionisije as Bishop, he had commenced what eventually became this protracted litigation, now carried on for almost 13 years. Acting upon the threat contained in his May 27, 1963, press release, Dionisije filed suit in [426 U.S. 696, 707] the Circuit Court of Lake County, Ill., on July 26, 1963, seeking to enjoin petitioners from interfering with the assets of respondent corporations and to have himself declared the true Diocesan Bishop. Petitioners countered with a separate complaint, which was consolidated with the original action, seeking declaratory relief that Dionisije had been removed as Bishop of the Diocese and that the Diocese had been properly reorganized into three Dioceses, and injunctive relief granting petitioner Bishops control of the reorganized Dioceses and their property. After the trial court granted summary judgment for respondents and dismissed petitioners' counter-complaint, the Illinois Appellate Court reversed and remanded for a hearing on the merits. Serbian Orthodox Diocese v. Ocokoljich, 72 Ill. App. 2d 444, 219 N. E. 2d 343, appeal denied, 34 Ill. 2d 631 (1966). 4 </s> Following a lengthy trial, the trial court filed an unreported memorandum opinion and entered a final decree which concluded that "no substantial evidence was produced . . . that fraud, collusion or arbitrariness existed in any of the actions or decisions preliminary to or during the final proceedings of the decision to defrock Bishop Dionisije made by the highest Hierarchical bodies of the Mother Church," Pet. for Cert., App. 44; that the property held by respondent corporations is held in trust for all members of the American-Canadian Diocese; that it was "improper and beyond the power of the Mother Church to take its action in dividing the whole American Diocese into three new Dioceses, changing its boundaries, and in appointing new bishops for [426 U.S. 696, 708] said so-called new Dioceses," id., at 46; and that "Firmilian was validly appointed by the Holy Episcopal Synod as temporary Administrator of the whole American Diocese in place of the defrocked Bishop Dionisije," ibid. </s> On appeal, the Supreme Court of Illinois affirmed in part and reversed in part, essentially holding that Dionisije's removal and defrockment had to be set aside as "arbitrary" because the proceedings resulting in those actions were not conducted according to the Illinois Supreme Court's interpretation of the Church's constitution and penal code, and that the Diocesan reorganization was invalid because it was beyond the scope of the Mother Church's authority to effectuate such changes without Diocesan approval. 60 Ill. 2d 477, 328 N. E. 2d 268 (1975). Although the court denied rehearing, it amended its original opinion to hold that, although Dionisije had been properly suspended, that suspension terminated by operation of church law when he was not validly tried within one year of his indictment. Thus, the court purported in effect to reinstate Dionisije as Diocesan Bishop. </s> II </s> The fallacy fatal to the judgment of the Illinois Supreme Court is that it rests upon an impermissible rejection of the decisions of the highest ecclesiastical tribunals of this hierarchical church upon the issues in dispute, and impermissibly substitutes its own inquiry into church polity and resolutions based thereon of those disputes. Consistently with the First and Fourteenth Amendments "civil courts do not inquire whether the relevant [hierarchical] church governing body has power under religious law [to decide such disputes]. . . . Such a determination . . . frequently necessitates the interpretation of ambiguous religious law and usage. [426 U.S. 696, 709] To permit civil courts to probe deeply enough into the allocation of power within a [hierarchical] church so as to decide . . . religious law [governing church polity] . . . would violate the First Amendment in much the same manner as civil determination of religious doctrine." Md. & Va. Churches v. Sharpsburg Church, 396 U.S. 367, 369 (1970) (BRENNAN, J., concurring). For where resolution of the disputes cannot be made without extensive inquiry by civil courts into religious law and polity, the First and Fourteenth Amendments mandate that civil courts shall not disturb the decisions of the highest ecclesiastical tribunal within a church of hierarchical polity, but must accept such decisions as binding on them, in their application to the religious issues of doctrine or polity before them. Ibid. </s> Resolution of the religious disputes at issue here affects the control of church property in addition to the structure and administration of the American-Canadian Diocese. This is because the Diocesan Bishop controls respondent Monastery of St. Sava and is the principal officer of respondent property-holding corporations. Resolution of the religious dispute over Dionisije's defrockment therefore determines control of the property. Thus, this case essentially involves not a church property dispute, but a religious dispute the resolution of which under our cases is for ecclesiastical and not civil tribunals. Even when rival church factions seek resolution of a church property dispute in the civil courts there is substantial danger that the State will become entangled in essentially religious controversies or intervene on behalf of groups espousing particular doctrinal beliefs. Because of this danger, "the First Amendment severely circumscribes the role that civil courts may play in resolving church property disputes." Presbyterian Church v. Hull Church, 393 U.S. 440, 449 (1969). "First Amendment [426 U.S. 696, 710] values are plainly jeopardized when church property litigation is made to turn on the resolution by civil courts of controversies over religious doctrine and practice. If civil courts undertake to resolve such controversies in order to adjudicate the property dispute, the hazards are ever present of inhibiting the free development of religious doctrine and of implicating secular interests in matters of purely ecclesiastical concern. . . . [T]he [First] Amendment therefore commands civil courts to decide church property disputes without resolving underlying controversies over religious doctrine." Ibid. This principle applies with equal force to church disputes over church polity and church administration. </s> The principles limiting the role of civil courts in the resolution of religious controversies that incidentally affect civil rights were initially fashioned in Watson v. Jones, 13 Wall. 679 (1872), a diversity case decided before the First Amendment had been rendered applicable to the States through the Fourteenth Amendment. 5 With respect to hierarchical churches, Watson held: </s> "[T]he rule of action which should govern the civil courts . . . is, that, whenever the questions of discipline, or of faith, or ecclesiastical rule, custom, or law have been decided by the highest of these church judicatories to which the matter has been carried, the legal tribunals must accept such decisions as final, and as binding on them, in their application to the case before them." Id., at 727. </s> In language having "a clear constitutional ring," Presbyterian Church v. Hull Church, supra, at 446, Watson reasoned: </s> "The law knows no heresy, and is committed to the [426 U.S. 696, 711] support of no dogma, the establishment of no sect. The right to organize voluntary religious associations to assist in the expression and dissemination of any religious doctrine, and to create tribunals for the decision of controverted questions of faith within the association, and for the ecclesiastical government of all the individual members, congregations, and officers within the general association, is unquestioned. All who unite themselves to such a body do so with an implied consent to this government, and are bound to submit to it. But it would be a vain consent and would lead to the total subversion of such religious bodies, if any one aggrieved by one of their decisions could appeal to the secular courts and have them reversed. It is of the essence of these religious unions, and of their right to establish tribunals for the decision of questions arising among themselves, that those decisions should be binding in all cases of ecclesiastical cognizance, subject only to such appeals as the organism itself provides for." 13 Wall., at 728-729 (emphasis supplied). </s> Gonzalez v. Archbishop, 280 U.S. 1 (1929), applied this principle in a case involving dispute over entitlement to certain income under a will that turned upon an ecclesiastical determination as to whether an individual would be appointed to a chaplaincy in the Roman Catholic Church. The Court, speaking through Mr. Justice Brandeis, observed: </s> "Because the appointment [to the chaplaincy] is a canonical act, it is the function of the church authorities to determine what the essential qualifications of a chaplain are and whether the candidate possesses them. In the absence of fraud, collusion, or arbitrariness, the decisions of the proper church [426 U.S. 696, 712] tribunals on matters purely ecclesiastical, although affecting civil rights, are accepted in litigation before the secular courts as conclusive, because the parties in interest made them so by contract or otherwise." Id., at 16. </s> Thus, although Watson had left civil courts no role to play in reviewing ecclesiastical decisions during the course of resolving church property disputes, Gonzalez first adverted to the possibility of "marginal civil court review," Presbyterian Church v. Hull Church, supra, at 447, in cases challenging decisions of ecclesiastical tribunals as products of "fraud, collusion, or arbitrariness." However, since there was "not even a suggestion that [the Archbishop] exercised his authority [in making the chaplaincy decision] arbitrarily," 280 U.S., at 18 , the suggested "fraud, collusion, or arbitrariness" exception to the Watson rule was dictum only. And although references to the suggested exception appear in opinions in cases decided since the Watson rule has been held to be mandated by the First Amendment, 6 no decision of this Court has given concrete content to or applied the "exception." However, it was the predicate for the Illinois Supreme Court's decision in this case, and we therefore turn to the question whether reliance upon it in the circumstances of this case was consistent with the prohibition of the First and Fourteenth Amendments against rejection of the decisions of the Mother Church upon the religious disputes in issue. </s> The conclusion of the Illinois Supreme Court that the decisions of the Mother Church were "arbitrary" was grounded upon an inquiry that persuaded the Illinois Supreme [426 U.S. 696, 713] Court that the Mother Church had not followed its own laws and procedures in arriving at those decisions. We have concluded that whether or not there is room for "marginal civil court review" under the narrow rubrics of "fraud" or "collusion" when church tribunals act in bad faith for secular purposes, 7 no "arbitrariness" exception - in the sense of an inquiry whether the decisions of the highest ecclesiastical tribunal of a hierarchical church complied with church laws and regulations - is consistent with the constitutional mandate that civil courts are bound to accept the decisions of the highest judicatories of a religious organization of hierarchical polity on matters of discipline, faith, internal organization, or ecclesiastical rule, custom, or law. For civil courts to analyze whether the ecclesiastical actions of a church judicatory are in that sense "arbitrary" must inherently entail inquiry into the procedures that canon or ecclesiastical law supposedly requires the church judicatory to follow, or else into the substantive criteria by which they are supposedly to decide the ecclesiastical question. But this is exactly the inquiry that the First Amendment prohibits; recognition of such an exception would undermine the general rule that religious controversies are not the proper subject of civil court inquiry, and that a civil court must accept the ecclesiastical decisions of church tribunals as it finds them. Watson itself requires our conclusion in its rejection of the analogous argument that ecclesiastical decisions of the highest church judicatories need only be accepted if the subject matter of the dispute is within their "jurisdiction." </s> "But it is a very different thing where a subject-matter of dispute, strictly and purely ecclesiastical in its character, - a matter over which the civil courts [426 U.S. 696, 714] exercise no jurisdiction, - a matter which concerns theological controversy, church discipline, ecclesiastical government, or the conformity of the members of the church to the standard of morals required of them, - becomes the subject of its action. It may be said here, also, that no jurisdiction has been conferred on the tribunal to try the particular case before it, or that, in its judgment, it exceeds the powers conferred upon it, or that the laws of the church do not authorize the particular form of proceeding adopted; and, in a sense often used in the courts, all of those may be said to be questions of jurisdiction. But it is easy to see that if the civil courts are to inquire into all these matters, the whole subject of the doctrinal theology, the usages and customs, the written laws, and fundamental organization of every religious denomination may, and must, be examined into with minuteness and care, for they would become, in almost every case, the criteria by which the validity of the ecclesiastical decree would be determined in the civil court. This principle would deprive these bodies of the right of construing their own church laws, would open the way to all the evils which we have depicted as attendant upon the doctrine of Lord Eldon, and would, in effect, transfer to the civil courts where property rights were concerned the decision of all ecclesiastical questions." 13 Wall., at 733-734. (Emphasis supplied.) </s> Indeed, it is the essence of religious faith that ecclesiastical decisions are reached and are to be accepted as matters of faith 8 whether or not rational or measurable by [426 U.S. 696, 715] objective criteria. Constitutional concepts of due process, involving secular notions of "fundamental fairness" or impermissible objectives, are therefore hardly relevant to such matters of ecclesiastical cognizance. </s> The constitutional evils that attend upon any "arbitrariness" exception in the sense applied by the Illinois Supreme Court to justify civil court review of ecclesiastical decisions of final church tribunals are manifest in the instant case. The Supreme Court of Illinois recognized that all parties agree that the Serbian Orthodox Church is a hierarchical church, and that the sole power to appoint and remove Bishops of the Church resides in its highest ranking organs, the Holy Assembly and the Holy Synod. 9 Indeed, final authority with respect to the [426 U.S. 696, 716] promulgation and interpretation of all matters of church discipline and internal organization rests with the Holy Assembly, and even the written constitution of the Mother Church expressly provides: </s> "The Holy Assembly of Bishops, as the highest hierarchical body, is legislative authority in the matters of faith, officiation, church order (discipline) and internal organization of the Church, as well as the highest church juridical authority within its jurisdiction (Article 69 sec. 28)." Art. 57. </s> "All the decisions of the Holy Assembly of Bishops [426 U.S. 696, 717] and of the Holy Synod of Bishops of canonical and church nature, in regard to faith, officiation, church order and internal organization of the church, are valid and final." Art. 64. </s> "The Holy Assembly of Bishops, whose purpose is noted in Article 57 of this Constitution: </s> . . . . . </s> "9) interprets canonical-ecclesiastical rules, those which are general and obligatory, and particular ones, and publishes their collections; </s> . . . . . </s> "12) prescribes the ecclesiastical-judicial procedure for all Ecclesiastical Courts; </s> . . . . . </s> "26) settles disputes of jurisdiction between hierarchical and church-self governing organs; </s> "27) ADJUDGES: </s> "A) In first and in final instances: </s> "a) disagreements between bishops and the Holy Synod, and between the bishops and the Patriarch; </s> "b) canonical offenses of the Patriarch; </s> "B) In the second and final instance: </s> "All matters which the Holy Synod of Bishops judged in the first instance." Art. 69. </s> Nor is there any dispute that questions of church discipline and the composition of the church hierarchy are at the core of ecclesiastical concern; the bishop of a church is clearly one of the central figures in such a hierarchy and the embodiment of the church within his Diocese, and the Mother Church constitution states that "[h]e is, according to the church canonical regulations, chief representative and guiding leader of all church spiritual life and church order in the diocese." Art. 13. </s> Yet having recognized that the Serbian Orthodox Church is hierarchical and that the decisions to suspend and [426 U.S. 696, 718] defrock respondent Dionisije were made by the religious bodies in whose sole discretion the authority to make those ecclesiastical decisions was vested, the Supreme Court of Illinois nevertheless invalidated the decision to defrock Dionisije on the ground that it was "arbitrary" because a "detailed review of the evidence discloses that the proceedings resulting in Bishop Dionisije's removal and defrockment were not in accordance with the prescribed procedure of the constitution and the penal code of the Serbian Orthodox Church." 60 Ill. 2d, at 503, 328 N. E. 2d, at 281. Not only was this "detailed review" impermissible under the First and Fourteenth Amendments, but in reaching this conclusion, the court evaluated conflicting testimony concerning internal church procedures and rejected the interpretations of relevant procedural provisions by the Mother Church's highest tribunals. Id., at 492-500, 328 N. E. 2d, at 276-280. The court also failed to take cognizance of the fact that the church judicatories were also guided by other sources of law, such as canon law, which are admittedly not always consistent, and it rejected the testimony of petitioners' five expert witnesses 10 that church procedures were properly followed, denigrating the testimony of one witness as "contradictory" and discounting that of another on the ground that it was "premised upon an assumption which did not consider the penal code," even though there was some question whether that code even applied to discipline of Bishops. 11 The court [426 U.S. 696, 719] accepted, on the other hand, the testimony of respondents' sole expert witness that the Church's procedures had been contravened in various specifics. We need not, and under the First Amendment cannot, demonstrate the propriety or impropriety of each of Dionisije's procedural claims, but we can note that the state court even rejected petitioners' contention that Dionisije's failure to participate in the proceedings undermined all procedural contentions because Arts. 66 and 70 of the penal code specify that if a person charged with a violation fails to participate or answer the indictment, the allegations are admitted and due process will be concluded without his participation; the court merely asserted that "application of this provision . . . must be viewed from the perspective that Bishop Dionisije refused to participate because he maintained that the proceedings against him were in violation of the constitution and the penal code of the Serbian Orthodox Church." 60 Ill. 2d, at 502, 328 N. E. 2d, at 281. The court found no support in any church dogma for this judicial rewriting of church law, and compounded further the error of this intrusion into a religious thicket by declaring that although Dionisije had, even under the court's analysis, been properly suspended and replaced by Firmilian as temporary administrator, he had to be reinstated as Bishop because church law mandated a trial on ecclesiastical charges within one year of the indictment. Yet the only reason more time than that had expired was due to Dionisije's decision to resort to the civil courts for redress without attempting to vindicate himself by pursuing available [426 U.S. 696, 720] remedies within the church. Indeed, the Illinois Supreme Court overlooked the clear substantive canonical violations for which the Church disciplined Dionisije, violations based on Dionisije's conceded open defiance and rebellion against the church hierarchy immediately after the Holy Assembly's decision to suspend him (a decision which even the Illinois courts deemed to be proper) and Dionisije's decision to litigate the Mother Church's authority in the civil courts rather than participate in the disciplinary proceedings before the Holy Synod and the Holy Assembly. Instead, the Illinois Supreme Court would sanction this circumvention of the tribunals set up to resolve internal church disputes and has ordered the Mother Church to reinstate as Bishop one who espoused views regarded by the church hierarchy to be schismatic and which the proper church tribunals have already determined merit severe sanctions. In short, under the guise of "minimal" review under the umbrella of "arbitrariness," the Illinois Supreme Court has unconstitutionally undertaken the resolution of quintessentially religious controversies whose resolution the First Amendment commits exclusively to the highest ecclesiastical tribunals of this hierarchical church. And although the Diocesan Bishop controls respondent Monastery of St. Sava and is the principal officer of respondent property-holding corporations, the civil courts must accept that consequence as the incidental effect of an ecclesiastical determination that is not subject to judicial abrogation, having been reached by the final church judicatory in which authority to make the decision resides. </s> III </s> Similar considerations inform our resolution of the second question we must address - the constitutionality of the Supreme Court of Illinois' holding that the Mother Church's reorganization of the American-Canadian Diocese [426 U.S. 696, 721] into three Dioceses was invalid because it was "`in clear and palpable excess of its own jurisdiction.'" Essentially, the court premised this determination on its view that the early history of the Diocese "manifested a clear intention to retain independence and autonomy in its administrative affairs while at the same time becoming ecclesiastically and judicially an organic part of the Serbian Orthodox Church," and its interpretation of the constitution of the American-Canadian Diocese as confirming this intention. It also interpreted the constitution of the Serbian Orthodox Church, which was adopted after the Diocesan constitution, in a manner consistent with this conclusion. 60 Ill. 2d, at 506-507, 328 N. E. 2d, at 283-284. </s> This conclusion was not, however, explicitly based on the "fraud, collusion, or arbitrariness" exception. Rather, the Illinois Supreme Court relied on purported "neutral principles" for resolving property disputes which would "not in any way entangle this court in the determination of theological or doctrinal matters." Id., at 505, 328 N. E. 2d, at 282. Nevertheless the Supreme Court of Illinois substituted its interpretation of the Diocesan and Mother Church constitutions for that of the highest ecclesiastical tribunals in which church law vests authority to make that interpretation. This the First and Fourteenth Amendments forbid. </s> We will not delve into the various church constitutional provisions relevant to this conclusion, for that would repeat the error of the Illinois Supreme Court. It suffices to note that the reorganization of the Diocese involves a matter of internal church government, an issue at the core of ecclesiastical affairs; Arts. 57 and 64 of the Mother Church constitution commit such questions of church polity to the final province of the Holy Assembly. Kedroff v. St. Nicholas Cathedral, 344 U.S. 94, 116 (1952), stated that religious freedom encompasses the [426 U.S. 696, 722] "power [of religious bodies] to decide for themselves, free from state interference, matters of church government as well as those of faith and doctrine." The subordination of the Diocese to the Mother Church in such matters, which are not only "administrative" but also "hierarchical," 12 was provided, and the power of the Holy Assembly to reorganize the Diocese is expressed in the Mother Church constitution. 13 Contrary to the interpretation of the Illinois court, the church judicatories interpreted the provisions of the Diocesan constitution not to interdict or govern this action, but only to relate to the day-to-day administration of Diocesan property. 14 </s> [426 U.S. 696, 723] The constitutional provisions of the American-Canadian Diocese were not so express that the civil courts could enforce them without engaging in a searching and therefore impermissible inquiry into church polity. See Md. & Va. Churches v. Sharpsburg Church, 396 U.S., at 368 -370 (BRENNAN, J., concurring). 15 </s> The control of Diocesan property may be little affected by the changes; respondents' allegation that the reorganization was a fraudulent subterfuge to divert Diocesan property from its intended beneficiaries has been rejected by the Illinois courts. Formal title to the property remains in respondent property-holding corporations, to be held in trust for all members of the new Dioceses. The boundaries of the reorganized Dioceses generally conform to the episcopal districts which the American-Canadian Diocese had already employed for its internal government, and the appointed administrators of the new Dioceses were the same individuals nominated by Dionisije as assistant bishops to govern similar divisions under him. Indeed, even the Illinois courts' rationale that the reorganization would effectuate an abrogation of the Diocesan constitution has no support in the record, which establishes rather that the details of the reorganization and any decisions pertaining to a distribution of [426 U.S. 696, 724] the property among the three Dioceses were expressly left for the Diocesan National Assembly to determine. In response to inquiries from the Diocese, the Holy Assembly assured Bishop Firmilian: </s> "1. That all the rights of the former American-Canadian Diocese, as they relate to the autonomy in the administrative sense, remain unchanged. The only exception is the forming of three dioceses and </s> "2. That the Constitution of the former American-Canadian Diocese remains the same and that the Dioceses in America and Canada will not, in an administrative sense (the management (or direction) of the properties) be managed (or directed) in the same manner as those in Yugoslavia." App. 1446. </s> As a practical matter the effect of the reorganization is a tripling of the Diocesan representational strength in the Holy Assembly and a decentralization of hierarchical authority to permit closer attention to the needs of individual congregations within each of the new Dioceses, a result which Dionisije and Diocesan representatives had already concluded was necessary. Whether corporate bylaws or other documents governing the individual property-holding corporations may affect any desired disposition of the Diocesan property is a question not before us. </s> IV </s> In short, the First and Fourteenth Amendments permit hierarchical religious organizations to establish their own rules and regulations for internal discipline and government, and to create tribunals for adjudicating disputes over these matters. When this choice is exercised and ecclesiastical tribunals are created to decide disputes over [426 U.S. 696, 725] the government and direction of subordinate bodies, the Constitution requires that civil courts accept their decisions as binding upon them. </s> Reversed. </s> THE CHIEF JUSTICE concurs in the judgment. </s> Footnotes [Footnote 1 The opinion of the Illinois Appellate Court in an earlier appeal is reported sub nom. Serbian Orthodox Diocese v. Ocokoljich, 72 Ill. App. 2d 444, 219 N. E. 2d 343 (1966). </s> [Footnote 2 The Mother Church decided against creation of a "Metropolia" because it had not employed that organizational system and had not required one Bishop to serve under another. </s> [Footnote 3 Stefan has since died, and the Holy Assembly appointed petitioner Sava Vukovich in his place. </s> [Footnote 4 The Appellate Court initially held that the suspension, removal, and defrockment of Dionisije were valid and binding upon the civil courts but on rehearing directed that Dionisije should be afforded the opportunity at trial to prove that these were the result of fraud, collusion, or arbitrariness. </s> [Footnote 5 Since Watson predated Erie R. Co. v. Tompkins, 304 U.S. 64 (1938), it was based on general federal law rather than the state law of the forum in which it was brought. </s> [Footnote 6 See Kedroff v. St. Nicholas Cathedral, 344 U.S. 94, 115 -116, and n. 23 (1952); Presbyterian Church v. Hull Church, 393 U.S. 440, 447 , 450-451, and n. 7 (1969); Md. & Va. Churches v. Sharpsburg Church, 396 U.S. 367, 369 n. 3 (1970) (BRENNAN, J., concurring). </s> [Footnote 7 No issue of "fraud" or "collusion" is involved in this case. </s> [Footnote 8 Civil judges obviously do not have the competence of ecclesiastical tribunals in applying the "law" that governs ecclesiastical disputes, as Watson cogently remarked, 13 Wall., at 729: </s> "Nor do we see that justice would be likely to be promoted by [426 U.S. 696, 715] submitting those decisions to review in the ordinary judicial tribunals. Each of these large and influential bodies (to mention no others, let reference be had to the Protestant Episcopal, the Methodist Episcopal, and the Presbyterian churches), has a body of constitutional and ecclesiastical law of its own, to be found in their written organic laws, their books of discipline, in their collections of precedents, in their usage and customs, which as to each constitute a system of ecclesiastical law and religious faith that tasks the ablest minds to become familiar with. It is not to be supposed that the judges of the civil courts can be as competent in the ecclesiastical law and religious faith of all these bodies as the ablest men in each are in reference to their own. It would therefore be an appeal from the more learned tribunal in the law which should decide the case, to one which is less so." </s> [Footnote 9 "Plaintiffs argue and defendant Bishop Dionisije does not dispute that the Serbian Orthodox Church is a hierarchical and episcopal church. Moreover, the parties agree that in cases involving hierarchical churches the decisions of the proper church tribunals on questions of discipline, faith or ecclesiastical rule, though affecting civil rights, are accepted as conclusive in disputes before the civil courts. . . . All parties maintain that the sole limitation on this rule, when civil courts may entertain the `narrowest kind of review,' occurs when the decision of the church tribunal is claimed [426 U.S. 696, 716] to have resulted from fraud, collusion or arbitrariness." 60 Ill. 2d 477, 501, 328 N. E. 2d 268, 280 (1975). </s> Respondents conceded as much at oral argument. Tr. of Oral Arg. 24-25, 39-40. The hierarchical nature of the relationship between the American-Canadian Diocese and the Mother Church is confirmed by the fact that respondent corporations were organized under the provisions of the Illinois Religious Corporations Act governing the incorporation of religious societies that are subordinate parts of larger church organizations. Similarly, the Diocese's subordinate nature was manifested in resolutions of the Diocese which Dionisije supported, and by Dionisije's submission of corporate bylaws, proposed constitutional changes, and final judgments of the Diocesan Ecclesiastical Court to the Holy Synod or Holy Assembly for approval. Moreover, when Dionisije was originally elevated to Bishop, he signed an Episcopal-Hierarchical Oath by which he swore that he would "always be obedient to the Most Holy Assembly" and: </s> "Should I transgress against whatever I promised here, or should I be disobedient to the Divine Ordinances and Order of the Eastern Orthodox Church, or to the Most Holy Assembly (of Bishops) I, personally, will become a schismatic and should I make the Diocese entrusted to me in any manner to become disobedient to the Most Holy Assembly (of Bishops), may I, in that case, be defrocked of my rank and divested of the (episcopal) authority without any excuse or gainsay, and (may I) become an alien to the heavenly gift which is being given unto me by the Holy Spirit through the Consecration of the Laying of Hands." App. 1088. </s> Finally, the hierarchical relationship was confirmed by provisions in the constitutions of both the Diocese and the Mother Church. </s> [Footnote 10 Three of these witnesses, including the author of the Church penal code, were members of the Holy Assembly of Bishops, one was the Secretary of the Holy Synod, and one was a recognized expert in the field of ecclesiastical law. </s> [Footnote 11 Indeed Dionisije, who does not dispute the power of the Holy Assembly to discipline him for the substantive charges in his indictment, nevertheless inconsistently insists that the Holy Assembly must be bound by procedures which were not extant when he executed [426 U.S. 696, 719] his Episcopal-Hierarchical Oath, see n. 9, supra, and which were promulgated within a year of the beginning of this controversy, although at the same time he agrees that the Holy Assembly could formalize and promulgate any procedures it desired for the conduct of disciplinary action. </s> [Footnote 12 See Art. 12, quoted supra, at 699. Various provisions of the Diocesan constitution reaffirm the subordinate status of the Diocese. E. g., Arts. 1, 2, 10, 12, 23, 53. Moreover, the Mother Church exerts almost complete authority over most Diocesan matters through the Diocesan Bishop, and there is no question that the Diocese has no voice whatever in the appointment of the Bishop. </s> [Footnote 13 See Art. 16, quoted supra, at 699-700. In rejecting the Holy Assembly's interpretation of this provision, the Illinois court treated the creation and reorganization of dioceses as purely administrative, without recognizing the central role of a diocese in the hierarchical structure of the Church. In particular, the Illinois court noted that Art. 14 of the Mother Church constitution states "[t]hese are the Dioceses in the Serbian Orthodox Church," and lists only the Dioceses within Yugoslavia. In Art. 15, on the other hand, were listed Dioceses "under the jurisdiction of the Serbian Orthodox Church in spiritual and hierarchical aspect," including the American-Canadian Diocese. Although nothing in the constitution restricted the Mother Church's power with respect to reorganizing the Dioceses listed in Art. 15, the Illinois courts simply asserted that Art. 16 was only intended to apply to Dioceses named in Art. 14. Yet even the Diocese itself recognized the Holy Assembly's powers when it sought approval for institution of the "Metropolia" system. </s> [Footnote 14 The Illinois court, in refusing to follow the Holy Assembly's interpretation of these religious documents, relied primarily on Art. 3 of the Diocesan constitution, quoted supra, at 701. However, the Holy Assembly's construction of that provision limits its application [426 U.S. 696, 723] to administration of property within the Diocese, and as not restricting alterations in the Diocese itself. </s> [Footnote 15 No claim is made that the "formal title" doctrine by which church property disputes may be decided in civil courts is to be applied in this case. See Md. & Va. Churches v. Sharpsburg Church, 396 U.S., at 370 (BRENNAN, J., concurring). Indeed, the Mother Church decisions defrocking Dionisije and reorganizing the Diocese in no way change formal title to all Diocesan property, which continues to be in the respondent property-holding corporations in trust for all members of the reorganized Dioceses; only the identity of the trustees is altered by the Mother Church's ecclesiastical determinations. </s> MR. JUSTICE WHITE, concurring. </s> Major predicates for the Court's opinion are that the Serbian Orthodox Church is a hierarchical church and the American-Canadian Diocese, involved here, is part of that Church. These basic issues are for the courts' ultimate decision, and the fact that church authorities may render their opinions on them does not foreclose the courts from coming to their independent judgment. I do not understand the Court's opinion to suggest otherwise and join the views expressed therein. </s> MR. JUSTICE REHNQUIST, with whom MR. JUSTICE STEVENS joins, dissenting. </s> The Court's opinion, while long on the ecclesiastical history of the Serbian Orthodox Church, is somewhat short on the procedural history of this case. A casual reader of some of the passages in the Court's opinion could easily gain the impression that the State of Illinois had commenced a proceeding designed to brand Bishop Dionisije as a heretic, with appropriate pains and penalties. But the state trial judge in the Circuit Court of Lake County was not the Bishop of Beauvais, trying Joan of Arc for heresy; the jurisdiction of his court was invoked by petitioners themselves, who sought an injunction establishing their control over property of the American-Canadian Diocese of the church located in Lake County. </s> The jurisdiction of that court having been invoked [426 U.S. 696, 726] for such a purpose by both petitioners and respondents, contesting claimants to Diocesan authority, it was entitled to ask if the real Bishop of the American-Canadian Diocese would please stand up. The protracted proceedings in the Illinois courts were devoted to the ascertainment of who that individual was, a question which the Illinois courts sought to answer by application of the canon law of the church, just as they would have attempted to decide a similar dispute among the members of any other voluntary association. The Illinois courts did not in the remotest sense inject their doctrinal preference into the dispute. They were forced to decide between two competing sets of claimants to church office in order that they might resolve a dispute over real property located within the State. Each of the claimants had requested them to decide the issue. Unless the First Amendment requires control of disputed church property to be awarded solely on the basis of ecclesiastical paper title, I can find no constitutional infirmity in the judgment of the Supreme Court of Illinois. </s> Unless civil courts are to be wholly divested of authority to resolve conflicting claims to real property owned by a hierarchical church, and such claims are to be resolved by brute force, civil courts must of necessity make some factual inquiry even under the rules the Court purports to apply in this case. We are told that "a civil court must accept the ecclesiastical decisions of church tribunals as it finds them," ante, at 713. But even this rule requires that proof be made as to what these decisions are, and if proofs on that issue conflict the civil court will inevitably have to choose one over the other. In so choosing, if the choice is to be a rational one, reasons must be adduced as to why one proffered decision is to prevail over another. Such reasons will [426 U.S. 696, 727] obviously be based on the canon law by which the disputants have agreed to bind themselves, but they must also represent a preference for one view of that law over another. </s> If civil courts, consistently with the First Amendment, may do that much, the question arises why they may not do what the Illinois courts did here regarding the defrockment of Bishop Dionisije, and conclude, on the basis of testimony from experts on the canon law at issue, that the decision of the religious tribunal involved was rendered in violation of its own stated rules of procedure. Suppose the Holy Assembly in this case had a membership of 100; its rules provided that a bishop could be defrocked by a majority vote of any session at which a quorum was present, and also provided that a quorum was not to be less than 40. Would a decision of the Holy Assembly attended by 30 members, 16 of whom voted to defrock Bishop Dionisije, be binding on civil courts in a dispute such as this? The hypothetical example is a clearer case than the one involved here, but the principle is the same. If the civil courts are to be bound by any sheet of parchment bearing the ecclesiastical seal and purporting to be a decree of a church court, they can easily be converted into handmaidens of arbitrary lawlessness. </s> The cases upon which the Court relies are not a uniform line of authorities leading inexorably to reversal of the Illinois judgment. On the contrary, they embody two distinct doctrines which have quite separate origins. The first is a common-law doctrine regarding the appropriate roles for civil courts called upon to adjudicate church property disputes - a doctrine which found general application in federal courts prior to Erie R. Co. v. Tompkins, 304 U.S. 64 (1938), but which has never had any application to our review of a state-court [426 U.S. 696, 728] decision. The other is derived from the First Amendment to the Federal Constitution, and is of course applicable to this case; it, however, lends no more support to the Court's decision than does the common-law doctrine. </s> The first decision of this Court regarding the role of civil courts in adjudicating church property disputes was Watson v. Jones, 13 Wall. 679 (1872). There the Court canvassed the American authorities and concluded that where people had chosen to organize themselves into voluntary religious associations, and had agreed to be bound by the decisions of the hierarchy created to govern such associations, the civil courts could not be availed of to hear appeals from otherwise final decisions of such hierarchical authorities. The bases from which this principle was derived clearly had no constitutional dimension; there was not the slightest suggestion that the First Amendment or any other provision of the Constitution was relevant to the decision in that case. Instead the Court was merely recognizing and applying general rules as to the limited role which civil courts must have in settling private intraorganizational disputes. While those rules, and the reasons behind them, may seem especially relevant to intrachurch disputes, adherence or nonadherence to such principles was certainly not thought to present any First Amendment issues. For as the Court in Watson observed: </s> "Religious organizations come before us in the same attitude as other voluntary associations for benevolent or charitable purposes, and their rights of property, or of contract, are equally under the protection of the law, and the actions of their members subject to its restraints." Id., at 714. </s> The Court's equation of religious bodies with other private voluntary associations makes it clear that the principles [426 U.S. 696, 729] discussed in that case were not dependent upon those embodied in the First Amendment. </s> Less than a year later Watson's observations about the roles of civil courts were followed in Bouldin v. Alexander, 15 Wall. 131 (1872), where the Court held that the appointed trustees of the property of a congregational church </s> "cannot be removed from their trusteeship by a minority of the church society or meeting, without warning, and acting without charges, without citation or trial, and in direct contravention of the church rules." Id., at 140. </s> Again, there was nothing to suggest that this was based upon anything but commonsense rules for deciding an intraorganizational dispute: in an organization which has provided for majority rule through certain procedures, a minority's attempt to usurp that rule and those procedures need be given no effect by civil courts. </s> In Gonzalez v. Archbishop, 280 U.S. 1 (1929), the Court again recognized the principles underlying Watson in upholding a decision of the Supreme Court of the Philippine Islands that the petitioner was not entitled to the chaplaincy which he claimed because the decision as to whether he possessed the necessary qualifications for that post was one committed to the appropriate church authorities. In dicta which the Court today conveniently truncates, Mr. Justice Brandeis observed: </s> "In the absence of fraud, collusion, or arbitrariness, the decisions of the proper church tribunals on matters purely ecclesiastical, although affecting civil rights, are accepted in litigation before the secular courts as conclusive, because the parties in interest made them so by contract or otherwise. Under like circumstances, effect is given in the courts to the determinations of the judicatory bodies established [426 U.S. 696, 730] by clubs and civil associations." Id., at 16-17 (emphasis supplied; footnotes omitted). </s> Gonzalez clearly has no more relevance to the meaning of the First Amendment than do its two predecessors. </s> The year 1952 was the first occasion on which this Court examined what limits the First and Fourteenth Amendments might place upon the ability of the States to entertain and resolve disputes over church property. In Kedroff v. St. Nicholas Cathedral, 344 U.S. 94 (1952), the Court reversed a decision of the New York Court of Appeals which had upheld a statute awarding control of the New York property of the Russian Orthodox Church to an American group seeking to terminate its relationships with the hierarchical Mother Church in Russia. The New York Legislature had concluded that the Communist government of Russia was actually in control of the Mother Church and that "`the Moscow Patriarchate was no longer capable of functioning as a true religious body, but had become a tool of the Soviet Government primarily designed to implement its foreign policy,'" id., at 107 n. 10, quoting from 302 N. Y. 1, 32-33, 96 N. E. 2d 56, 73-74 (1950), and the New York Court of Appeals sustained the statute against the constitutional attack. This Court, however, held the statute was a violation of the Free Exercise Clause, noting: </s> "By fiat it displaces one church administrator with another. It passes the control of matters strictly ecclesiastical from one church authority to another. It thus intrudes for the benefit of one segment of a church the power of the state into the forbidden area of religious freedom contrary to the principles of the First Amendment." 344 U.S., at 119. </s> On remand from the decision in Kedroff, the New York Court of Appeals again held that the American [426 U.S. 696, 731] group was entitled to the church property at issue. This time relying upon the common law of the State, the Court of Appeals ruled that the Patriarch of Moscow was so dominated by the secular government of Russia that his appointee could not validly occupy the Church's property. On appeal, this Court reversed summarily, Kreshik v. Nicholas Cathedral, 363 U.S. 190 (1960), noting in its per curiam opinion that </s> "the decision now under review rests on the same premises which were found to have underlain the enactment of the statute struck down in Kedroff." Id., at 191. </s> Nine years later, in Presbyterian Church v. Hull Church, 393 U.S. 440 (1969), the Court held that Georgia's common law, which implied a trust upon local church property for the benefit of the general church only on the condition that the general church adhere to its tenets of faith and practice existing at the time of affiliation by the local churches, was inconsistent with the First and Fourteenth Amendments and therefore could not be utilized to resolve church property disputes. The Georgia law was held impermissible because </s> "[u]nder [the Georgia] approach, property rights do not turn on a church decision as to church doctrine. The standard of departure-from-doctrine, though it calls for resolution of ecclesiastical questions, is a creation of state, not church, law." Id., at 451. </s> Finally, in Md. & Va. Churches v. Sharpsburg Church, 396 U.S. 367 (1970), the Court considered an appeal from a judgment of the Court of Appeals of Maryland upholding the dismissal of two actions brought by the Eldership seeking to prevent two of its local churches from withdrawing from that general religious association. The Eldership had also claimed the rights to select the [426 U.S. 696, 732] clergy and to control the property of the two local churches, but the Maryland courts, relying "upon provisions of state statutory law governing the holding of property by religious corporations, upon language in the deeds conveying the properties in question to the local church corporations, upon the terms of the charters of the corporations, and upon provisions in the constitution of the General Eldership pertinent to the ownership and control of church property," ibid. (emphasis supplied; footnote omitted), concluded that the Eldership had no right to invoke the State's authority to compel their local churches to remain within the fold or to succeed to control of their property. This Court dismissed the Eldership's contention that this judgment violated the First Amendment for want of a substantial federal question. </s> Despite the Court's failure to do so, it does not seem very difficult to derive the operative constitutional principle from this line of decisions. As should be clear from even this cursory study, Watson, Bouldin, and Gonzalez have no direct relevance * to the question before us today: [426 U.S. 696, 733] whether the First Amendment, as made applicable to the States by the Fourteenth, prohibits Illinois from permitting its civil courts to settle religious property disputes in the manner presented to us on this record. I think it equally clear that the only cases which are relevant to that question - Kedroff, Kreshik, Hull, and Md. & Va. Churches - require that this question be answered in the negative. The rule of those cases, one which seems fairly implicit in the history of our First Amendment, is that the government may not displace the free religious choices of its citizens by placing its weight behind a particular religious belief, tenet, or sect. That is what New York attempted to do in Kedroff and Kreshik, albeit perhaps for nonreligious reasons, and the Court refused to permit it. In Hull, the State transgressed the line drawn by the First Amendment when it applied a state-created rule of law based upon "departure from doctrine" to prevent the national hierarchy of the Presbyterian Church in the United States from seeking to reclaim possession and use of two local churches. When the Georgia courts themselves required an examination into whether there had been a departure from the doctrine of the church in order to apply this state-created rule, they went beyond mere application of neutral principles of law to such a dispute. </s> There is nothing in this record to indicate that the Illinois courts have been instruments of any such impermissible intrusion by the State on one side or the other of a religious dispute. There is nothing in the Supreme Court of Illinois' opinion indicating that it placed its thumb on the scale in favor of the respondents. Instead that opinion appears to be precisely what it purports [426 U.S. 696, 734] to be: an application of neutral principles of law consistent with the decisions of this Court. Indeed, petitioners make absolutely no claim to the contrary. They agree that the Illinois courts should have decided the issues which they presented; but they contend that in doing so those courts should have deferred entirely to the representations of the announced representatives of the Mother Church. Such blind deference, however, is counseled neither by logic nor by the First Amendment. To make available the coercive powers of civil courts to rubber-stamp ecclesiastical decisions of hierarchical religious associations, when such deference is not accorded similar acts of secular voluntary associations, would, in avoiding the free exercise problems petitioners envision, itself create far more serious problems under the Establishment Clause. </s> In any event the Court's decision in Md. & Va. Churches demonstrates that petitioners' position in this regard is untenable. And as I read that decision, it seems to me to compel affirmance of at least that portion of the Illinois court's decision which denied petitioners' request for the aid of the civil courts in enforcing its desire to divide the American-Canadian Diocese. See ante, at 720-724 (Part III). I see no distinction between the Illinois courts' refusal to place their weight behind the representatives of the Serbian Mother Church who sought to prevent portions of their American congregation from splitting off from that body and the Maryland courts' refusal to do the same thing for the Eldership of the Church of God. The Court today expressly eschews any explanation for its failure to follow Md. & Va. Churches, see ante, at 721, contenting itself with this conclusory statement: </s> "The constitutional provisions of the American-Canadian Diocese were not so express that the civil [426 U.S. 696, 735] courts could enforce them without engaging in a searching and therefore impermissible inquiry into church polity." Ante, at 723. </s> But comparison of the relevant discussions by the state tribunals regarding their consideration of church documents makes this claimed distinction seem quite specious. Compare Md. & Va. Churches v. Sharpsburg Church, 254 Md. 162, 170, 254 A. 2d 162, 168 (1969), with Serbian Orthodox Diocese v. Ocokoljich, 72 Ill. App. 2d 444, 458-462, 219 N. E. 2d 343, 350-353 (1966). </s> In conclusion, while there may be a number of good arguments that civil courts of a State should, as a matter of the wisest use of their authority, avoid adjudicating religious disputes to the maximum extent possible, they obviously cannot avoid all such adjudications. And while common-law principles like those discussed in Watson, Bouldin, and Gonzalez may offer some sound principles for those occasions when such adjudications are required, they are certainly not rules to which state courts are required to adhere by virtue of the Fourteenth Amendment. The principles which that Amendment, through its incorporation of the First, does enjoin upon the state courts - that they remain neutral on matters of religious doctrine - have not been transgressed by the Supreme Court of Illinois. </s> [Footnote * I am far from persuaded, moreover, that these decisions would require the result reached today even if we were reviewing a federal decision rather than that of a state court. As demonstrated in the text, supra, these cases were applications of the general principle that persons who have contractually bound themselves to adhere to the decisions of the ruling hierarchy in a private association may not obtain relief from those decisions in a civil court. Here the underlying question addressed by the Illinois courts is the one assumed in Watson et al.: whether the members of the American-Canadian Diocese had bound themselves to abide by the decisions of the Mother Church in the matters at issue here. The Illinois courts concluded that in regard to some of these matters they had agreed to be bound only if certain procedures were followed and that as to others there had been no agreement to submit to the authority of the Belgrade Patriarchate at all. If these conclusions are correct, and there is little to indicate they are not, then the "Watson rule" which the Court brandishes so freely today properly would have no application to these facts even if this case had arisen in federal court. </s> [426 U.S. 696, 736]

United States Supreme Court UNITED STATES v. MARTIN LINEN SUPPLY CO.(1977) No. 76-120 Argued: February 23, 1977Decided: April 4, 1977 </s> After a deadlocked jury was discharged when unable to agree upon a verdict at the criminal contempt trial of respondent corporations, the District Judge granted respondents' timely motions for judgments of acquittal under Fed. Rule Crim. Proc. 29 (c), which provides that "a motion for judgment of acquittal may be made . . . within 7 days after the jury is discharged [and] the court may enter judgment of acquittal. . . ." The Government appealed pursuant to 18 U.S.C. 3731, which allows an appeal by the United States in a criminal case "to a court of appeals from a . . . judgment . . . of a district court dismissing an indictment . . ., except that no appeal shall lie where the double jeopardy clause of the United States Constitution prohibits further prosecution." The Court of Appeals dismissed the appeal. Held: The Double Jeopardy Clause bars appellate review and retrial following a judgment of acquittal entered under Rule 29 (c). Pp. 568-576. </s> (a) The "controlling constitutional principle" of the Double Jeopardy Clause focuses on prohibitions against multiple trials, United States v. Wilson, 420 U.S. 332, 346 , and where an appeal by the Government presents no threat of successive prosecutions, the Clause is not offended. Pp. 568-570. </s> (b) The normal policy granting the Government the right to retry a defendant after a mistrial that does not determine the outcome of a trial does not apply here since valid judgments of acquittal were entered on the express authority of and in strict compliance with Rule 29 (c), and a successful governmental appeal reversing the judgments of acquittal would necessitate another trial or further proceedings to resolve factual issues going to the elements of the offense charged. Pp. 570-571. </s> (c) The judgments of acquittal here were "acquittals" in substance as well as form, since the District Court plainly granted the Rule 29 (c) motion on the express view that the Government had not proved facts constituting criminal contempt. Pp. 571-572. </s> (d) Rule 29 recognizes no legal distinction between judge and jury with respect to the invocation of the protections of the Double Jeopardy Clause. P. 573. [430 U.S. 564, 565] </s> (e) Rule 29 contemplated no artificial distinctions between situations where the judge enters a judgment of acquittal prior to submission of the case to the jury under Rule 29 (a), or after submission but prior to the jury's return of a verdict under Rule 29 (b), and the jury is thereafter discharged, and the situation involved here, where the judge chose to await the outcome of the jury's deliberations and, upon its failure to reach a verdict, acted on a timely motion for acquittal after the jury's discharge. United States v. Sanford, 429 U.S. 14 , distinguished. Pp. 573-575. </s> 534 F.2d 585, affirmed. </s> BRENNAN, J., delivered the opinion of the Court, in which STEWART, WHITE, MARSHALL, BLACKMUN, and POWELL, JJ., joined. STEVENS, J., filed an opinion concurring in the judgment, post, p. 576. BURGER, C. J., filed a dissenting opinion, post, p. 581. REHNQUIST, J., took no part in the consideration or decision of the case. </s> Frank H. Easterbrook argued the cause for the United States pro hac vice. With him on the brief was Solicitor General Bork. </s> J. Burleson Smith argued the cause and filed a brief for respondents. </s> MR. JUSTICE BRENNAN delivered the opinion of the Court. </s> A "hopelessly deadlocked" jury was discharged when unable to agree upon a verdict at the criminal contempt trial of respondent corporations in the District Court for the Western District of Texas. 1 Federal Rule Crim. Proc. 29 (c) provides [430 U.S. 564, 566] that in such case "a motion for judgment of acquittal may be made . . . within 7 days after the jury is discharged [and] the court may enter judgment of acquittal. . . ." 2 Timely motions for judgments of acquittal under the Rule made by respondents six days after the discharge of the jury resulted two months later in the entry by the District Court of judgments of acquittal. 3 The sole question presented for our [430 U.S. 564, 567] decision is whether these judgments of acquittal under Rule 29 (c) are appealable by the United States pursuant to 18 U.S.C. 3731. Section 3731 provides that an appeal by the United States in a criminal case "shall lie to a court of appeals from a . . . judgment . . . of a district court dismissing an indictment . . ., except that no appeal shall lie where the double jeopardy clause of the United States Constitution prohibits further prosecution." 4 The Court of Appeals for the Fifth Circuit held that no appeal lay under 3731 from the judgments of acquittal entered by the District Court under Rule 29 (c). 534 F.2d 585 (1976). The Court of Appeals reasoned that, since reversal of the acquittals would enable the United States to try respondents a second time, the bar of the Double Jeopardy Clause "leads inescapably to the conclusion that no appeal lies from the directed verdict ordered by the court below." Id., at 589. 5 We granted certiorari. 429 U.S. 917 (1976). We affirm. [430 U.S. 564, 568] </s> I </s> It has long been established that the United States cannot appeal in a criminal case without express congressional authorization. United States v. Wilson, 420 U.S. 332, 336 (1975); United States v. Sanges, 144 U.S. 310 (1892). Only two Terms ago Wilson traced the uneven course of such statutory authority until 1970 when Congress amended the Criminal Appeals Act, 420 U.S., at 336 -339, and that history need not be repeated here. See also United States v. Sisson, 399 U.S. 267, 307 -308 (1970). It suffices for present purposes that this Court in Wilson found that in enacting 3731 as Title III of the Omnibus Crime Control Act of 1970, 84 Stat. 1890, "Congress intended to remove all statutory barriers to Government appeals and to allow appeals whenever the Constitution would permit." 420 U.S., at 337 . Therefore, unless barred by the Double Jeopardy Clause of the Constitution, appeals by the Government from the judgments of acquittal entered by the District Court under Rule 29 (c) are authorized by 3731. </s> Consideration of the reach of the constitutional limitations inhibiting governmental appeals was largely unnecessary during the prior regime of statutory restrictions. But see Fong Foo v. United States, 369 U.S. 141 (1962); Kepner v. United States, 195 U.S. 100 (1904). However, now that Congress has removed the statutory limitations to appeal and the relevant inquiry turns on the reach of the Double Jeopardy Clause itself, it has become "necessary to take a closer look at the policies underlying the Clause in order to determine more precisely the boundaries of the Government's appeal rights in criminal cases." United States v. Wilson, supra, at 339. In the few cases decided since 1970 that have taken this "closer look," many of the policies shaping restrictions on governmental appeal rights have been brought into sharper focus. </s> "The development of the Double Jeopardy Clause from its [430 U.S. 564, 569] common-law origins . . . suggests that it was directed at the threat of multiple prosecutions, not at Government appeals, at least where those appeals would not require a new trial." Id., at 342. Thus Wilson held that the "controlling constitutional principle" focuses on prohibitions against multiple trials. Id., at 346. At the heart of this policy is the concern that permitting the sovereign freely to subject the citizen to a second trial for the same offense would arm Government with a potent instrument of oppression. The Clause, therefore, guarantees that the State shall not be permitted to make repeated attempts to convict the accused, "thereby subjecting him to embarrassment, expense and ordeal and compelling him to live in a continuing state of anxiety and insecurity, as well as enhancing the possibility that even though innocent he may be found guilty." Green v. United States, 355 U.S. 184, 187 -188 (1957); see also Downum v. United States, 372 U.S. 734, 736 (1963). "[S]ociety's awareness of the heavy personal strain which a criminal trial represents for the individual defendant is manifested in the willingness to limit the Government to a single criminal proceeding to vindicate its very vital interest in enforcement of criminal laws." United States v. Jorn, 400 U.S. 470, 479 (1971) (Harlan, J.). 6 </s> In animating this prohibition against multiple prosecutions, the Double Jeopardy Clause rests upon two threshold conditions. The protections afforded by the Clause are implicated only when the accused has actually been placed in jeopardy. Serfass v. United States, 420 U.S. 377 (1975). This state of jeopardy attaches when a jury is empaneled and sworn, or, in a bench trial, when the judge begins to receive evidence. Illinois v. Somerville, 410 U.S. 458, 471 (1973) (WHITE, J., dissenting); Downum v. United States, supra. Further, where [430 U.S. 564, 570] a Government appeal presents no threat of successive prosecutions, the Double Jeopardy Clause is not offended. Thus a postverdict dismissal of an indictment after a jury rendered a guilty verdict has been held to be appealable by the United States because restoration of the guilty verdict, and not a new trial, would necessarily result if the Government prevailed. United States v. Wilson, supra. 7 </s> II </s> None of the considerations favoring appealability is present in the case of a Government appeal from the District Court's judgments of acquittal under Rule 29 (c) where the jury failed to agree on a verdict. The normal policy granting the Government the right to retry a defendant after a mistrial that does not determine the outcome of a trial, United States v. Perez, 9 Wheat. 579, 580 (1824), is not applicable since valid judgments of acquittal were entered on the express authority of, and strictly in compliance with, Rule 29 (c). Those judgments, according to the very wording of the Rule, act to terminate a trial in which jeopardy has long since attached. 8 And a successful governmental appeal reversing the judgments of acquittal would necessitate another trial, or, at least, "further proceedings of some sort, devoted to the resolution of factual issues going to the elements of the offense charged . . ." United States v. Jenkins, 420 U.S. 358, 370 (1975). Therefore, the present case is not one where the [430 U.S. 564, 571] double jeopardy bar to appealability is automatically averted. Rather, we must inquire further into the constitutional significance of a Rule 29 (c) acquittal. </s> Perhaps the most fundamental rule in the history of double jeopardy jurisprudence has been that "[a] verdict of acquittal . . . could not be reviewed, on error or otherwise, without putting [a defendant] twice in jeopardy, and thereby violating the Constitution." United States v. Ball, 163 U.S. 662, 671 (1896). In Fong Foo v. United States, supra, for example, a District Court directed jury verdicts of acquittal and subsequently entered formal judgments of acquittal. The Court of Appeals entertained the appeal of the United States and reversed the District Court's ruling on the ground that the trial judge was without power to direct acquittals under the circumstances disclosed by the record. We reversed, holding that, although the Court of Appeals may correctly have believed "that the acquittal was based upon an egregiously erroneous foundation, . . . [n]evertheless, `[t]he verdict of acquittal was final, and could not be reviewed . . . without putting [the defendants] twice in jeopardy, and thereby violating the Constitution.'" 369 U.S., at 143 . See also Kepner v. United States, supra; United States v. Sisson, 399 U.S., at 289 -290; Serfass v. United States, supra, at 392. In applying this teaching of Ball, Fong Foo, and like cases, we have emphasized that what constitutes an "acquittal" is not to be controlled by the form of the judge's action. United States v. Sisson, supra, at 270; cf. United States v. Wilson, 420 U.S., at 336 . 9 Rather, we must determine whether the ruling of the judge, whatever its label, actually represents a resolution, correct or not, of some or all of the factual elements of the offense charged. </s> There can be no question that the judgments of acquittal [430 U.S. 564, 572] entered here by the District Court were "acquittals" in substance as well as form. The District Court plainly granted the Rule 29 (c) motion on the view that the Government had not proved facts constituting criminal contempt. 10 The court made only too clear its belief that the prosecution was "`the weakest [contempt case that] I've ever seen.'" 534 F.2d, at 587. In entering the judgments of acquittal, the court also recorded its view that "`the Government has failed to prove the material allegations beyond a reasonable doubt'" and that "`defendant should be found "not guilty."'" </s> Thus, it is plain that the District Court in this case evaluated the Government's evidence and determined that it was legally insufficient to sustain a conviction. The Court of Appeals concluded that this determination of insufficiency of the evidence triggered double jeopardy protection. 11 The Government, however, disputes the constitutional significance of the District Court's action. It submits that only a verdict of acquittal formally returned by the jury should absolutely bar further proceedings and that "[o]nce the district court declared a mistrial and dismissed the jury, any double jeopardy bar to a second trial dissolved." Brief for United States 21. We cannot agree. </s> Of course, as the Government argues, in a jury trial the primary finders of fact are the jurors. Their overriding responsibility is to stand between the accused and a potentially arbitrary or abusive Government that is in command of the criminal sanction. For this reason, a trial judge is prohibited from entering a judgment of conviction or directing the jury to come forward with such a verdict, see Sparf & Hansen v. United States, 156 U.S. 51, 105 (1895); Carpenters v. United [430 U.S. 564, 573] States, 330 U.S. 395, 408 (1947), regardless of how overwhelmingly the evidence may point in that direction. The trial judge is thereby barred from attempting to override or interfere with the jurors' independent judgment in a manner contrary to the interests of the accused. </s> Such a limitation on the role of a trial judge, however, has never inhibited his ruling in favor of a criminal defendant. Fong Foo v. United States, 369 U.S. 141 (1962), establishing the binding nature of a directed verdict, is dispositive on that point. Since Rule 29 merely replaces the directed-verdict mechanism employed in Fong Foo, and accords the federal trial judge greater flexibility in timing his judgment of acquittal, no persuasive basis exists for construing the Rule as weakening the trial court's binding authority for purposes of double jeopardy. 12 Rather, the Notes of the Advisory Committee have confirmed that Rule 29 intends no substantive alteration in the role of judge or jury, but creates a purely formal modification of the directed-verdict device in order "to make the nomenclature accord with the realities." 18 U.S.C. App., p. 4504. Accordingly, United States v. Sisson, supra, at 290, held that Rule 29 recognizes no "legal distinction" between judge and jury with respect to the invocation of the protections of the Double Jeopardy Clause. </s> The Government, however, would read Fong Foo and, by implication, Rule 29 differently. It argues that the judge's directed verdict in Fong Foo was binding for double jeopardy [430 U.S. 564, 574] purposes because the formal verdict of acquittal, though on direction, was rendered not by the judge, but by the jury, which then was discharged. This in effect turns the constitutional significance of a Rule 29 judgment of acquittal on a matter of timing. Thus, if the judge orders entry of judgment of acquittal on his own or on defendant's motion prior to submission of the case to the jury, as he may under Rule 29 (a), or after submission but prior to the jury's return of a verdict, as authorized by Rule 29 (b) - and the jury thereafter is discharged - the Government's argument necessarily concedes that the Double Jeopardy Clause would preclude both appeal and retrial. If, however, the judge chooses to await the outcome of the jury's deliberations and, upon its failure to reach a verdict, acts on a timely motion for acquittal filed under Rule 29 (c) within seven days of its discharge, the Government submits that the Double Jeopardy Clause should not bar an appeal. </s> We are not persuaded. Rule 29 contemplated no such artificial distinctions. Rather the differentiations in timing were intentionally incorporated into the Rule to afford a trial judge the maximum opportunity to consider with care a pending acquittal motion. Insofar as the Government desires an appeal to correct error, irrational behavior, or prejudice on the part of the trial judge, its interest is not dependent on the point of trial when the judge enters his Rule 29 judgment, and suffers no special prejudice by a judge's acquittal after the jury disagrees and is discharged. 13 And to the extent that [430 U.S. 564, 575] the judge's authority under Rule 29 is designed to provide additional protection to a defendant by filtering out deficient prosecutions, the defendant's interest in such protection is essentially identical both before the jury is allowed to come to a verdict and after the jury is unable to reach a verdict: In either case, the defendant has neither been condemned nor exculpated by a panel of his peers and, in the absence of intervention by the trial judge, his vindication must await further action by a jury. </s> We thus conclude that judgments under Rule 29 are to be treated uniformly and, accordingly, the Double Jeopardy Clause bars appeal from an acquittal entered under Rule 29 (c) after a jury mistrial no less than under Rule 29 (a) or (b). United States v. Sanford, 429 U.S. 14 (1976), does not dictate a contrary result. In Sanford, a jury trial ended in the declaration of a mistrial. A judgment of acquittal was never entered. Some four months later, with the second trial well into the preparatory stage, the trial court dismissed the prosecution's indictment. Because the dismissal "occurred several months after the first trial had ended in a mistrial, but before the retrial of respondents had begun," id., at 16, the Court characterized the judge's dismissal as "a pretrial order," ibid., and concluded that its appealability was governed by Serfass v. United States, 420 U.S. 377 (1975). The Court's linking of Sanford with Serfass highlights the distinctiveness of an acquittal under Rule 29 (c). In Serfass the Court carefully distinguished between appeal of a pretrial order and appeal of "`a legal determination on the basis of facts adduced at the trial relating to the general issue of the case.'" 420 U.S., at 393 , quoting United States v. Sisson, 399 U.S., at 290 n. 19. A Rule 29 acquittal, however, falls squarely within the latter category: By the very language of [430 U.S. 564, 576] the Rule, such a judgment of acquittal plainly concludes a pending prosecution in which jeopardy has attached, following the introduction at trial of evidence on the general issue. In that circumstance we hold that "although retrial is sometimes permissible after a mistrial is declared but no verdict or judgment has been entered, the verdict of acquittal foreclosed retrial and thus barred appellate review." United States v. Wilson, 420 U.S., at 348 . </s> Affirmed. </s> MR. JUSTICE REHNQUIST took no part in the consideration or decision of this case. </s> Footnotes [Footnote 1 The criminal contempt proceeding was filed in 1971 and charged respondents, two commonly owned linen supply companies, and their president, William B. Troy, with violation of a consent decree entered in 1969 as the final judgment in an antitrust suit. The petitions were originally dismissed by the District Court but the dismissal was reversed by the Court of Appeals, 485 F.2d 1143 (1973). The Government filed a supplemental criminal contempt petition on which trial was had in February 1975. On February 21, 1975, the jury was discharged after returning the not-guilty verdict as to Troy and announcing that it was "hopelessly deadlocked" as to respondent corporations. Six days later, on February 27, 1975, respondents filed their motions for judgments of [430 U.S. 564, 566] acquittal under Rule 29 (c). On April 24, 1975, the District Court granted the motions and entered judgments of acquittal. </s> [Footnote 2 Rule 29 provides: "Motion for Judgment of Acquittal "(a) MOTION BEFORE SUBMISSION TO JURY. Motions for directed verdict are abolished and motions for judgment of acquittal shall be used in their place. The court on motion of a defendant or of its own motion shall order the entry of judgment of acquittal of one or more offenses charged in the indictment or information after the evidence on either side is closed if the evidence is insufficient to sustain a conviction of such offense or offenses. If a defendant's motion for judgment of acquittal at the close of the evidence offered by the government is not granted, the defendant may offer evidence without having reserved the right. "(b) RESERVATION OF DECISION ON MOTION. If a motion for judgment of acquittal is made at the close of all the evidence, the court may reserve decision on the motion, submit the case to the jury and decide the motion either before the jury returns a verdict or after it returns a verdict of guilty or is discharged without having returned a verdict. "(c) MOTION AFTER DISCHARGE OF JURY. If the jury returns a verdict of guilty or is discharged without having returned a verdict, a motion for judgment of acquittal may be made or renewed within 7 days after the jury is discharged or within such further time as the court may fix during the 7-day period. If a verdict of guilty is returned the court may on such motion set aside the verdict and enter judgment of acquittal. If no verdict is returned the court may enter judgment of acquittal. It shall not be necessary to the making of such a motion that a similar motion has been made prior to the submission of the case to the jury." </s> [Footnote 3 After dismissal of the jury, the District Judge advised counsel for all parties that he would be inclined "to enter a judgment of acquittal as to [respondents] if an appropriate motion was made." App. 31. He said that he had "almost instructed a verdict for all Defendants" because the [430 U.S. 564, 567] Government's case "is without a doubt the weakest [contempt case that] I've ever seen." Id., at 30. </s> [Footnote 4 In pertinent part, 3731 provides: " 3731. Appeal by United States "In a criminal case an appeal by the United States shall lie to a court of appeals from a decision, judgment, or order of a district court dismissing an indictment or information as to any one or more counts, except that no appeal shall lie where the double jeopardy clause of the United States Constitution prohibits further prosecution." Although this provision authorizes appeal from a district court "dismiss[al]" rather than "acquittal," it is now established that the form of the ruling is not dispositive of appealability in a statutory sense, see infra, at 568. </s> [Footnote 5 In characterizing the trial court's action as a "directed verdict," the Court of Appeals erred in terminology, for Rule 29 (a) expressly substitutes "judgment of acquittal" for "directed verdict." As shall be seen, however, see infra, at 573, the purely formal nature of the change in federal criminal procedure marked by Rule 29 speaks strongly in favor of treating Rule 29 judgments of acquittal the same as their predecessor directed verdicts for purposes of invoking double jeopardy. See Fong Foo v. United States, 369 U.S. 141 (1962). </s> [Footnote 6 The Double Jeopardy Clause also accords nonappealable finality to a verdict of guilty entered by judge or jury, disabling the Government from seeking to punish a defendant more than once for the same offense. See Ex parte Lange, 18 Wall. 163 (1874). </s> [Footnote 7 The absence of a threatened second trial mitigates the possibility of governmental jury shopping and substantially reduces the expense and anxiety to be borne by the defendant. In addition, the Government's interest in preserving a conviction fairly attained obviously is far greater than its interest in investing additional time and resources in reprosecuting a defendant following a jury's failure to reach a verdict and a trial court's judgment of acquittal. </s> [Footnote 8 A motion under Rule 29 for a judgment of acquittal can be entertained, at the earliest, "after the evidence on either side is closed . . . ." This stage of the trial obviously arises well after jeopardy has attached. </s> [Footnote 9 The Court must inquire whether "the ruling in [defendant's] favor was actually an `acquittal' even though the District Court characterized it otherwise." United States v. Wilson, 420 U.S. 332, 336 (1975). </s> [Footnote 10 Rule 29 (a) in terms authorizes a judgment of acquittal "if the evidence is insufficient to sustain a conviction of such offense or offenses." </s> [Footnote 11 The only other Court of Appeals specifically to address this issue reached the same conclusion. United States v. Suarez, 505 F.2d 166 (CA2 1974) (per curiam). </s> [Footnote 12 In the situation where a criminal prosecution is tried to a judge alone, there is no question that the Double Jeopardy Clause accords his determination in favor of a defendant full constitutional effect. See United States v. Jenkins, 420 U.S. 358, 365 -367 (1975). Even though, as proposed here by the Government with respect to a Rule 29 judgment of acquittal, it can be argued that the prosecution has a legitimate interest in correcting the possibility of error by a judge sitting without a jury, the Court in Jenkins refused to accept theories of double jeopardy that would permit reconsideration of a trial judge's ruling discharging a criminal defendant. </s> [Footnote 13 The Advisory Committee that framed Rule 29 explicitly noted that subdivision (c), permitting the entry of a judgment of acquittal after the jury's discharge, works no undue prejudice on the Government because the prosecution has no constitutionally sanctioned interest in receiving a verdict from the jury: "The constitutional requirement of a jury trial in criminal cases is primarily a right accorded to the defendant." 18 U.S.C. App., p. 4505. Cf. Singer v. United States, 380 U.S. 24 (1965). Any Government right to demand a jury verdict is limited to that afforded by Fed. Rule Crim. Proc. 23 (a) (jury trial waivable with the consent of the [430 U.S. 564, 575] Government) and, of course, can be qualified by authority granted the trial judge under Rule 29. </s> MR. JUSTICE STEVENS, concurring in the judgment. </s> There is no statutory authority for a Government appeal from a judgment of acquittal in a criminal case. The plain language of 18 U.S.C. 3731, together with its unambiguous legislative history, makes it perfectly clear that Congress did not authorize - and did not intend to authorize - appeals from acquittals. 1 </s> [430 U.S. 564, 577] </s> Prior to its most recent amendment in 1970, the Criminal Appeals Act had been a source of great confusion, "a most unruly child that has not improved with age," United States v. Sisson, 399 U.S. 267, 307 . The Act had been construed to incorporate obscure distinctions between various types of dismissals, some of which were appealable directly to this Court, some to the court of appeals, and some that could not be appealed to either court. 2 However, the one thing that had always been clear was that "no appeal [could] be taken by the Government from an acquittal no matter how erroneous the legal theory underlying the decision," id., at 299. </s> The 1970 amendment changed the law by eliminating all distinctions between different kinds of dismissals, but neither the present statute nor any of its predecessors has ever authorized an appeal from an acquittal. The statute, in relevant part, now reads: </s> "In a criminal case an appeal by the United States shall lie to a court of appeals from a decision, judgment, or order of a district court dismissing an indictment or information as to any one or more counts, except that no appeal shall lie where the double jeopardy clause of the United States Constitution prohibits further prosecution." 18 U.S.C. 3731 (emphasis added). [430 U.S. 564, 578] </s> There is nothing in this statutory language to suggest that a judgment of acquittal, as opposed to a dismissal, is appealable. </s> The legislative history demonstrates that Congress intended to eliminate nonconstitutional barriers to appeals from dismissals, but did not intend to allow appeals from acquittals. As this Court has recognized, the Senate Report is the key to the legislative history. 3 The Report opens by describing the purpose of the bill as being "to resolve serious problems which frequently have arisen with respect to the right of the United States to appeal rulings which terminate prosecutions other than by judgments of acquittal . . . ." S. Rep. No. 91-1296, p. 2 (1970) (emphasis added). Apart from the problem of direct Supreme Court review, the Report states that the "major problem that has arisen under the present statute concerns the total lack of appealability of certain kinds of dismissals and suppressions." Id., at 4 (emphasis added). The Report then discusses at length the then-existing limitations on appeals from dismissals. 4 The Committee believed [430 U.S. 564, 579] that the Constitution allowed the Government to appeal any dismissal, id., at 7-12, and stated that the bill was "intended to be liberally construed so as to effectuate its purpose of permitting the Government to appeal from dismissals of criminal prosecutions by district courts in all cases where the Constitution permits . . . ." Id., at 18 (emphasis added). On the other hand, the Committee believed that the Constitution barred any appeal from an acquittal or from a dismissal amounting to an acquittal; "[a] true acquittal is based upon the insufficiency of the evidence to prove an element of the offense." Id., at 11. </s> The same understanding was demonstrated by the bill's sponsor when he presented the Senate Report on the floor. He summarized the bill as providing that "the Government has the right to appeal any ruling by a district court in a criminal case which dismisses a prosecution in favor of a defendant except where the ruling is an acquittal"; he also presented a letter from the Solicitor General explaining that the bill would allow "an appeal from any dismissal except one amounting to a `judgment of acquittal,' i. e., a factual judgment that the defendant is not guilty of the crime charged and is thereby entitled to protection against double jeopardy." 116 Cong. Rec. 35659 (1970) (remarks of Sen. Hruska). [430 U.S. 564, 580] </s> As the Court explained in Wilson, the Conference Committee made a minor change in the wording of the bill. See Wilson, 420 U.S., at 338 . That change narrowed the bill in two respects. The Senate bill had allowed appeals from dismissals and also from any order "terminating a prosecution in favor of a defendant," and had expressly barred appeals from a judgment of acquittal. 5 In short, as the Conference Committee stated, the Senate bill authorized an appeal from "any decision or order terminating a prosecution except an acquittal," H. R. Conf. Rep. No. 91-1768, p. 21 (1970). The Conference Committee's change narrowed the bill by deleting the reference to orders "terminating a prosecution in favor of a defendant," leaving only dismissals appealable. (This deletion rendered superfluous the exception for acquittals, which was also deleted.) The Committee's change also narrowed the bill by barring any appeal, even from a dismissal, when further prosecution would violate double jeopardy. </s> An attempt to authorize the Government to appeal from acquittals would have represented a radical change in the law. The sponsor of the bill apparently did not understand the legislation to have such far-reaching effects; he described it as "noncontroversial legislation which would do away with unnecessary and perplexing jurisdictional problems in appeals by the Government in criminal cases . . . ." 116 Cong. Rec. 35659 (1970) (remarks of Sen. Hruska). Similarly, the Conference Report describes the Senate bill as merely eliminating "[t]echnical distinctions . . . on appeals by the United States," H. R. Conf. Rep. No. 91-1768, supra, at 21. 6 </s> [430 U.S. 564, 581] </s> Interpreting legislative history is sometimes a perplexing and uncertain task. In this instance, however, the legislative history is absolutely clear: Congress was interested solely in expanding the Government's right to appeal from the dismissal of an indictment; it had no desire to allow appeals from acquittals and believed such appeals would be unconstitutional. </s> Since I am satisfied that Congress has not authorized the Government to appeal from a judgment of acquittal, the only question presented is whether such a judgment was entered in this case. The answer to that question, as the Court demonstrates, is perfectly clear. By virtue of Fed. Rule Crim. Proc. 29 (c), the mistrial did not terminate the judge's power to make a decision on the merits. His ruling, in substance as well as form, was therefore an acquittal. 7 For this reason, I concur in the Court's judgment. </s> [Footnote 1 The contrary dictum in United States v. Wilson, 420 U.S. 332, 336 -339; United States v. Jenkins, 420 U.S. 358, 363 -364; Serfass v. United States, 420 U.S. 377, 383 -387, is not controlling for these reasons: First, the statutory issue was not in dispute in any of those cases. Two of the defendants expressly conceded the applicability of the statute in their cases, Brief for Respondent in United States v. Wilson, O. T. 1974, No. 73-1395, p. 2; Brief for Respondent in United States v. Jenkins, O. T. 1974, No. 73-1513, p. 10. The third defendant simply failed to address the statutory issue, see Brief for Petitioner in Serfass v. United States, O. T. 1974, No. 73-1424, probably because his case involved a pretrial dismissal of the indictment. Hence, the Court was unaided by an adversary presentation of the issue. Moreover, re-examination of the language used in the decisions would not undermine their holdings. The two cases in which the Court upheld the Government appeal clearly did not involve acquittals on the merits. (Serfass was a pretrial dismissal; Wilson was a dismissal on speedy trial grounds.) The third case, Jenkins, [430 U.S. 564, 577] arguably involved an acquittal, but the Court held on constitutional grounds that the appeal was barred. Second, as I indicate in the text, infra, at 581, it is perfectly clear that the dictum is incorrect. In view of our special responsibility for supervising the proper functioning of the federal criminal justice system, we should not hesitate to correct a plain mistake involving a technical problem of procedure when there has been no prejudicial reliance on that mistake. </s> [Footnote 2 The difficulty of the problems presented by the statute is illustrated by the sharply divided conclusions reached in the various opinions in cases such as United States v. Sisson, 399 U.S. 267 ; United States v. Ponto, 454 F.2d 657 (CA7 1971) (en banc); United States v. Apex Distributing Co., 270 F.2d 747 (CA9 1959) (en banc). </s> [Footnote 3 The significance of this Senate Report in understanding the Act was well expressed in Serfass v. United States, supra, at 387 n. 10: "The relevance and significance of the `well considered and carefully prepared' report of the Senate Judiciary Committee, see Schwegmann Bros. v. Calvert Distillers Corp., 341 U.S. 384, 395 (1951) (Jackson, J., concurring), is not affected by the fact that the amendments proposed by the Committee and adopted without change by the Senate were modified by the House-Senate Conference Committee. See H. R. Conf. Rep. No. 91-1768, p. 21 (1970). The latter report contains no explanation of the changes made, and the changes themselves are consistent with the intent expressed in the Senate Report. See United States v. Wilson, ante, at 337-339." </s> [Footnote 4 Subsection A is entitled "The Nature of the District Court Decision as a Limitation on Appeals from Dismissals," and begins with the statement that "[t]he now-archaic terminology employed in the original statute . . . unnecessarily precludes the Government from appealing many dismissals of prosecutions." S. Rep. No. 91-1296, at 5. The Report then states that the current Act "does not provide for an appeal by the United States to any court in a large variety of cases where the dismissal is based [430 U.S. 564, 579] on grounds having nothing to do with any defect in the indictment, or the construction or invalidity of the underlying statute." Ibid. The Report gives as examples dismissals for failure of the prosecution to comply with discovery or for lack of timely prosecution. The Report then refers to the use of old common-law terms like "`judgment sustaining a motion in bar,'" giving rise to problems like that which the Court confronted in United States v. Sisson, supra. S. Rep. No. 91-1296, p. 6. Subpart B of the Senate Report deals with "The Attachment of Jeopardy as a Limitation on Appeals from Dismissals." This section was concerned with appeal of "a decision sustaining a motion in bar after jeopardy has attached," ibid. Congress was concerned that a defendant could reserve issues of law until the trial and then preclude any possible review. Id., at 7. An example was a case in which the trial judge ruled the Selective Service Act unconstitutional during the trial. Id., at 11. </s> [Footnote 5 The bill provided that an appeal would lie "from a decision, judgment or order of a district court dismissing an indictment or information or terminating a prosecution in favor of a defendant as to one or more counts, except that no appeal shall lie from a judgment of acquittal." S. 3132. </s> [Footnote 6 When the Conference bill was reported back to both Houses, its provision on appeals was described in cautious terms hardly appropriate to a proposal to go to the constitutional limits: in the Senate, as "authoriz[ing] [430 U.S. 564, 581] appeals in certain classes of criminal cases," 116 Cong. Rec. 42147 (1970) (remarks of Sen. McClellan) (emphasis added); in the House, as an amendment "to broaden and clarify the right of the Government to appeal dismissals of criminal cases," id., at 42197 (remarks of Rep. Celler). </s> [Footnote 7 As we pointed out in United States v. Sanford, 429 U.S. 14 , the mistrial in that case was entirely different because the proceedings in the trial court terminated without any decision on the merits. "The trial of respondents on the indictment terminated, not in their favor, but in a mistrial declared, sua sponte, by the District Court. Where the trial is terminated in this manner, the classical test for determining whether the defendants may be retried without violating the Double Jeopardy Clause is stated in Mr. Justice Story's opinion for this Court in United States v. Perez, 9 Wheat. 579, 580 (1824): "`We are of opinion, that the facts constitute no legal bar to a future trial. The prisoner has not been convicted or acquitted, and may again be put upon his defense. . . .'" Id., at 15. </s> MR. CHIEF JUSTICE BURGER, dissenting. </s> The order of acquittal in favor of respondents was entered by the District Judge after a mistrial had been declared due to a jury deadlock. Once the jury was dismissed, respondents [430 U.S. 564, 582] ceased to be in jeopardy in that proceeding; they could no longer be convicted except after undergoing a new trial. For a century and a half it has been accepted that a defendant may properly be reprosecuted after the declaration of such a mistrial, United States v. Perez, 9 Wheat. 579 (1824). Therefore the District Judge's ruling here was made "prior to a trial that the Government had a right to prosecute and that the defendant was required to defend." United States v. Sanford, 429 U.S. 14, 16 (1976). 1 </s> The present case cannot be distinguished from Sanford in constitutionally material respects. It is true that the District Judge here phrased his order as an acquittal rather than as a dismissal, and that the order was entered pursuant to a timely Rule 29 (c) motion. However, such mechanical niceties are not dispositive of whether retrial would expose defendants to double jeopardy; our Fifth Amendment inquiry should focus on the substance rather than the form of the proceedings below. In ruling on a motion for acquittal the District Judge must pass on the sufficiency, not on the weight, of the Government's case, United States v. Isaacs, 516 F.2d 409, 410 (CA5), cert. denied, 423 U.S. 936 (1975); United States v. Wooten, 503 F.2d 65, 66 (CA4 1974). "[T]he applicable standard is whether [the District Judge as a trier of fact] [430 U.S. 564, 583] could, not whether he would, find the accused guilty on the Government's evidence." United States v. Consolidated Laundries Corp., 291 F.2d 563, 574 (CA2 1961) (emphasis in original). </s> The District Judge's ruling is thus plainly one of law, not of fact; it could only exonerate, not convict, the defendant. No legitimate interest of the defendant requires that this ruling be insulated from appellate review. On the other hand, barring the appeal jeopardizes the Government's substantial interest in presenting a legally sufficient case to the jury. The Court's holding today is thus wholly inconsistent with the intent of Rule 29 (c) as described by the drafters in the Advisory Committee Notes. In explaining the 1966 amendments to the Rule, the Notes expressly state: "No legitimate interest of the government is intended to be prejudiced by permitting the court to direct an acquittal on a post-verdict motion." 18 U.S.C. App., p. 4505. Surely the well-recognized right to reprosecute is such a "legitimate interest of the government," and should remain unaffected by the District Judge's order of acquittal. </s> Nor will the interest of clarity and consistency in the administration of the criminal justice system be served by today's holding. By hinging the outcome of this case on the timing of the post-trial motion and the label on the order, the Court is elevating form over substance and undermining the theoretical framework established by the Wilson-Jenkins-Serfass trilogy 2 of two Terms ago and the Sanford and United States v. Morrison, 429 U.S. 1 (1976), decisions earlier this Term. All litigants in our criminal courts - Government and defendants alike - are harmed by the uncertainty thus created. For these reasons, I cannot join the Court's holding and I respectfully dissent. </s> [Footnote 1 Fong Foo v. United States, 369 U.S. 141 (1962), on which the Court relies so heavily, is not in point. There the District Judge directed a verdict while the original trial was still in progress. Unlike the case before us, the jury there was still properly empaneled, and had not yet even begun to deliberate. Where the District Judge interrupts the trial process, important rights of the defendant may be jeopardized. The opportunity to try the case is frustrated so that the possibility of an acquittal from the originally empaneled jury is lost. No such rights are implicated where, as here, the original trial has ended when the jury cannot agree; at that point the defendant is already subject to a second trial. Thus, the timing of the District Court's order is not, as the Court suggests, an irrelevant technicality. A midtrial judgment of acquittal interrupts the trial process at a time when the defendant is constitutionally entitled to have it proceed to verdict. </s> [Footnote 2 United States v. Wilson, 420 U.S. 332 (1975); United States v. Jenkins, 420 U.S. 358 (1975); Serfass v. United States, 420 U.S. 377 (1975). </s> [430 U.S. 564, 584]

United States Supreme Court FPC v. TRANSCONTINENTAL GAS PIPE LINE CORP.(1976) No. 75-584 Argued: Decided: January 19, 1976 </s> Because of a claimed natural gas shortage, respondent pipeline company submitted to the Federal Power Commission (FPC) for approval an interim curtailment plan which resulted from a settlement agreement between respondent company and its customers providing for allocation of natural gas supplies among the customers during shortage periods and a monetary compensation scheme whereby customers receiving more gas than the systemwide average would compensate customers receiving less. The FPC rejected the plan on the ground that the compensation scheme would violate various provisions of the Natural Gas Act. Thereafter, respondent company and several of its customers sought review of the FPC's order. The Court of Appeals entered an interlocutory order directing the FPC to investigate the company's claims of reduced gas reserves and to report the result of the investigation directly to the court. Held: </s> 1. The Court of Appeals' order, although interlocutory, is properly reviewable by this Court on certiorari pursuant to 28 U.S.C. 1254 (1), since its effect is immediate and irreparable and any review by the Court of its propriety must be immediate to be meaningful. </s> 2. An actual gas shortage is a necessary predicate to the FPC's assertion of authority under its transportation jurisdiction to approve curtailment of gas already contracted for, and the Court of Appeals could properly conclude that the FPC would have abused its discretion had it approved curtailment plans absent evidence whereby it "could have reasonably believed" the shortage to exist, and that "substantial evidence" in the record is necessary to support any such finding. </s> 3. The Court of Appeals, however, exceeded its reviewing authority in ordering the gas shortage investigation, since 19 (b) of the Natural Gas Act providing for judicial review of FPC [423 U.S. 326, 327] decisions contemplates a mode of review that considers only the agency's decision and the evidence on which it is based and not some new record initially made by the reviewing court. If new evidence is needed, the case must be remanded so that the agency can decide in its discretion how best to develop the needed data and how its prior decision should be modified in the light thereof. </s> 4. Since it cannot be determined from the record whether evidence regarding respondent company's actual gas shortage is absolutely essential for the Court of Appeals' review, that court is free on remand either to consider the merits of the issues presented by the compensation scheme and only thereafter to deal with the adequacy of the record evidence as to the shortage, or immediately to remand the case to the FPC for the required inquiry. </s> 5. In light of the immediacy of the gas shortage problem, the protracted nature of the review proceedings, and the potential importance of a resolution on the merits of the compensation scheme issues, the Court of Appeals should give priority consideration to the case on remand. </s> Certiorari granted; 171 U.S. App. D.C. 66, 518 F.2d 459, î vacated and remanded. </s> Footnotes [Footnote î ERRATA: Delete "171 U.S. App. D.C. 66, 518 F.2d 459,". </s> PER CURIAM. </s> The Federal Power Commission seeks certiorari from an interlocutory order of the Court of Appeals for the District of Columbia Circuit, which defers that court's review of the Commission order at issue pending completion of a certain evidentiary investigation by the Commission directed by the court. The Commission challenges the authority of the Court of Appeals to order the investigation under the statutory review provision involved, 19 (b) of the Natural Gas Act, 52 Stat. 831, as amended, 15 U.S.C. 717r (b), and, in any event, contends that the Court of Appeals abused its discretion in the circumstances of this case. </s> The underlying case involves plans for coping with a natural gas shortage being experienced by respondent Transcontinental Gas Pipe Line Corp. (Transco). The [423 U.S. 326, 328] shortage is said to require curtailment of contracted natural gas deliveries by Transco to its customers during periods of high demand. The curtailment plans concern methods of allocating the shortfall among the various customers. The curtailment plan immediately at issue was submitted by Transco to cover the period of November 1974 to November 1975. This interim plan was filed in September 1974, and was the result of a settlement agreement negotiated between Transco and its various customers. The agreement provided for a plan of allocation of natural gas supplies among Transco's customers during periods of shortage, and a monetary compensation scheme under which customers receiving more gas than the systemwide average would compensate customers who received less natural gas than the average. The Commission rejected the proposed plan, determining that the compensation scheme would be violative of the Natural Gas Act. The Commission held that the compensation scheme would violate (1) 4 (a) of the Act, 15 U.S.C. 717c (a), which requires a pipeline's jurisdictional rate to be based on the pipeline's cost of service plus a reasonable rate of return; (2) 4 (b) of the Act, 15 U.S.C. 717c (b), which prohibits undue discrimination in rates among similarly situated customers; and (3) 7 (c) of the Act, 15 U.S.C. 717f (c), which requires persons engaging in resales of natural gas in interstate commerce first to obtain a certificate of public convenience and necessity. </s> Thereafter, Transco and several of the parties to the settlement agreement sought review of the Commission's determination. 1 Following oral argument on the petition [423 U.S. 326, 329] for review, the Court of Appeals, "desiring to be more fully informed about the `crisis' on the Transco system before reviewing questions pertaining to its solution," entered an order sua sponte directing the parties to submit certain information concerning Transco's natural gas reserves. After receiving responses to this order, and noting the refusal of the Commission to certify the accuracy of the data supplied by Transco regarding its reserves of natural gas, the court directed the parties to show cause why it should not order the Commission to conduct an immediate investigation of Transco's claim of reduced reserves. Thereafter, the Court of Appeals, observing that evidence of "actual shortage both underlies the concept of curtailment and justifies its application," issued the proposed order. That order directed the Commission to complete and report to the court an investigation "of Transco's claims of reduced reserves by immediate subpoena of Transco's books and records pertaining to all gas supplies in which it has any legal interest . . . and by field investigation [which] has determined the extent of the reduced reserves and the bona fides of Transco and its suppliers in meeting their past and future contract commitments. . . ." The court further directed that its decision reviewing [423 U.S. 326, 330] the Commission's order would be deferred pending the investigation and report, and that the investigation and report should be made by the Commission within 30 days. </s> It is this interlocutory order for which the Commission petitions for review by this Court. The Commission first argues that the Court of Appeals has overstepped the bounds of its reviewing authority in ordering this investigation by the Commission, and that in doing so the court has unwarrantedly interfered with the internal functional autonomy of an independent administrative agency. Additionally, the Commission argues, the Court of Appeals has abused its discretion in ordering the factual inquiry by the Commission in the circumstances presented by this case. The Commission maintains that the extent of Transco's natural gas shortage is not material to the legal issues - concerning the lawfulness of the proposed compensation scheme - which presently confront the Court of Appeals. This is said to be particularly true where, as here, the Commission has disapproved the proposed interim plan for dealing with the alleged shortage of gas. 2 Finally, the Commission argues that it is impossible to comply with the order, as such a complex investigation would require much longer than the 30 days allowed. </s> First. We agree with the Commission that the challenged order, although interlocutory in nature, is properly [423 U.S. 326, 331] reviewable by this Court pursuant to 28 U.S.C. 1254 (1). Clearly the effect of the order is immediate and irreparable, and any review by this Court of the propriety of the order must be immediate to be meaningful. </s> Second. We agree with the Court of Appeals that the existence of an actual shortage of gas supplies forms the factual predicate necessary to the Commission's assertion of authority under its transportation jurisdiction, 1 (b) of the Act, 15 U.S.C. 717 (b), to approve the curtailment of gas already contracted for. FPC v. Louisiana Power & Light Co., 406 U.S. 621 (1972). Certainly that court could properly conclude that the Commission would have abused its discretion had it approved curtailment plans in the absence of evidence whereby it "could have reasonably believed" the shortage to exist, Citizens to Preserve Overton Park v. Volpe, 401 U.S. 402, 416 (1971), and that "substantial evidence" in the record is necessary to support any such finding by the Commission. </s> Third. We are of the view, however, that the Court of Appeals overstepped the bounds of its reviewing authority in issuing the order presently before us. First, we have consistently expressed the view that ordinarily review of administrative decisions is to be confined to "consideration of the decision of the agency . . . and of the evidence on which it was based." United States v. Carlo Bianchi & Co., 373 U.S. 709, 714 -715 (1963). "[T]he focal point for judicial review should be the administrative record already in existence, not some new record made initially in the reviewing court." Camp v. Pitts, 411 U.S. 138, 142 (1973). If the decision of the agency "is not sustainable on the administrative record made, then the . . . decision must be vacated and the matter remanded . . . for further consideration." Id., at 143. Clearly it is this mode of review that is contemplated [423 U.S. 326, 332] by the statute providing for judicial review of Commission decisions, 19 (b) of the Act, 15 U.S.C. 717r (b). 3 Secondly, although we have recognized that [423 U.S. 326, 333] a court reviewing decisions of the Federal Power Commission sits as a court vested with equity powers and "may authorize the Commission in proper cases to take new evidence," Mobil Oil Corp. v. FPC, 417 U.S. 283, 311 -312 (1974), it is nevertheless true that ordinarily this will require a remand to the agency in order that it can exercise its administrative discretion in deciding how, in light of internal organizational considerations, it may best proceed to develop the needed evidence and how its prior decision should be modified in light of such evidence as develops. Certainly this is the procedure contemplated by the review statute, which provides that the Commission "may modify its findings as to the facts by reason of the additional evidence so taken," and that "such modified or new findings, . . . if supported by substantial evidence, shall be conclusive . . . ." 15 U.S.C. 717r (b). At least in the absence of substantial justification for doing otherwise, 4 a reviewing court may not, after determining that additional evidence is requisite for adequate review, proceed by dictating to the agency the methods, procedures, and time dimension of the needed inquiry and ordering the results to be reported to the court without opportunity for further consideration on the basis of the new evidence by the agency. Such a procedure clearly runs the risk of "propel[ling] the court into the domain which Congress has set aside exclusively for the administrative agency." SEC v. Chenery Corp., 332 U.S. 194, 196 (1947). "The Court, it is true, has power `to affirm, modify, or set aside' the order of the [423 U.S. 326, 334] Commission `in whole or in part.' . . . But that authority is not power to exercise an essentially administrative function." FPC v. Idaho Power Co., 344 U.S. 17, 21 (1952). </s> Fourth. We are unable to determine with certainty, from this vantage point and on the partial record now before us, whether the evidence regarding Transco's actual shortage with which the instant order is concerned is absolutely essential to a decision by the Court of Appeals on the issues presently before that court for review. Although Judge MacKinnon in his separate statement was apparently of the view that it was not, it is at least conceivable that the Court of Appeals could determine that the lawfulness of the proposed compensation scheme is partially a function of the actual severity of the shortage. Cf. FPC v. Louisiana Power & Light Co., supra. Accordingly, the court below is free on remand either to proceed to the merits of the issues presented by the compensation scheme and only thereafter deal with the adequacy of the record in regard to the evidence of shortage, or immediately to remand the case to the Commission for the required inquiry. It is apparent that under neither alternative need the Court of Appeals' ability fully and effectively to review the administrative process regarding the implementation of curtailment plans and their underlying factual premises be relinquished. </s> Fifth. In light of the immediacy of the natural gas shortage problem with which the Commission is attempting to cope, the already protracted nature of review proceedings in this case, and the potential importance of a resolution on the merits of the compensation issues presented by the instant case, 5 swift and priority consideration [423 U.S. 326, 335] of this case by the Court of Appeals on remand is merited. </s> Accordingly, the petition for certiorari is granted, the order of the Court of Appeals is vacated, and the case is remanded to that court for further proceedings consistent with this opinion. </s> It is so ordered. </s> MR. JUSTICE STEWART and MR. JUSTICE POWELL took no part in the consideration or decision of this case. </s> [Footnote 1 Although neither the petitioning Commission nor the two respondents who have filed responses to the petition for certiorari have addressed the issue, it appears that the underlying controversy is not now moot even though it concerns an interim plan covering a [423 U.S. 326, 329] period of time that has by now expired. The Court of Appeals earlier granted a motion by Transco and ordered the interim plan into effect pending that court's review of the Commission's order disallowing the plan. Consolidated Edison Co. v. FPC, 167 U.S. App. D.C. 134, 143, 511 F.2d 372, 381 (1974). The court ordered that the compensation payments under the plan be paid into an escrow account pending review of the Commission's determination that the compensation scheme was unlawful. Ibid. Therefore, it appears that at the least the disposition of these payments into the escrow account will be affected by the Court of Appeals' ultimate judgment on the merits of the case. </s> [Footnote 2 This argument appears to accord with the views of Judge MacKinnon which are set forth in a separate statement accompanying the challenged order. Judge MacKinnon expressed the view that the extent of the shortage is "peripheral," although "not wholly irrelevant" to the legal issues confronting the Court of Appeals. He indicated that he would instead first reach the merits, affirm the order of the Commission, and then direct that the Commission make the complex factual inquiry regarding the shortage "prior to passing on any subsequent curtailment plan." </s> [Footnote 3 Section 19 (b) of the Natural Gas Act provides: "Any party to a proceeding under this chapter aggrieved by an order issued by the Commission in such proceeding may obtain a review of such order in the court of appeals of the United States for any circuit wherein the natural-gas company to which the order relates is located or has its principal place of business, or in the United States Court of Appeals for the District of Columbia [Circuit], by filing in such court, within sixty days after the order of the Commission upon the application for rehearing, a written petition praying that the order of the Commission be modified or set aside in whole or in part. A copy of such petition shall forthwith be transmitted by the clerk of the court to any member of the Commission and thereupon the Commission shall file with the court the record upon which the order complained of was entered, as provided in section 2112 of Title 28. Upon the filing of such petition such court shall have jurisdiction, which upon the filing of the record with it shall be exclusive, to affirm, modify, or set aside such order in whole or in part. No objection to the order of the Commission shall be considered by the court unless such objection shall have been urged before the Commission in the application for rehearing unless there is reasonable ground for failure so to do. The finding of the Commission as to the facts, if supported by substantial evidence, shall be conclusive. If any party shall apply to the court for leave to adduce additional evidence, and shall show to the satisfaction of the court that such additional evidence is material and that there were reasonable grounds for failure to adduce such evidence in the proceedings before the Commission, the court may order such additional evidence to be taken before the Commission and to be adduced upon the hearing in such manner and upon such terms and conditions as to the court may seem proper. The Commission may modify its findings as to the facts by reason of the additional evidence so taken, and it shall file with the court such modified or new findings, which if supported by substantial evidence, shall be conclusive, and its recommendation, if any, for the modification or setting aside of the original order. The judgment and decree of the court, affirming, modifying, or setting aside, in whole or in part, any such order of the Commission, shall be final, subject to review [423 U.S. 326, 333] by the Supreme Court of the United States upon certiorari or certification as provided in sections 346 and 347 of Title 28." </s> [Footnote 4 We do not find the reasons stated by the Court of Appeals, largely that the Commission "has been long on notice" that data supporting the claimed existence of shortage was necessary, to be in the circumstances presented sufficient justification for the court's order. </s> [Footnote 5 See Mississippi Pub. Serv. Comm'n v. FPC, 522 F.2d 1345 (CA5 1975). </s> [423 U.S. 326, 336]

United States Supreme Court MACHINISTS & AEROSPACE WORKERS v. NLRB(1973) No. 71-1417 Argued: March 26, 1973Decided: May 21, 1973 </s> Where the Union's constitution and bylaws are silent on the subject of voluntary resignation from the Union, the Union committed an unfair labor practice when it sought court enforcement of fines imposed for strikebreaking activities by employees who had resigned from the Union, even though the Union constitution expressly prohibited members from strikebreaking. NLRB v. Textile Workers, 409 U.S. 213 . </s> 148 U.S. App. D.C. 119, 459 F.2d 1143, affirmed. </s> Bernard Dunau argued the cause for petitioner. With him on the briefs were Plato E. Papps, Louis P. Poulton, and C. Paul Barker. </s> Norton J. Come argued the cause for respondent National Labor Relations Board. With him on the brief were Solicitor General Griswold, Harriet S. Shapiro, Peter G. Nash, John S. Irving, and Patrick Hardin. Samuel Lang argued the cause for respondent Boeing Co. With him on the brief were C. Dale Stout and Frederick A. Kullman. * </s> [Footnote * J. Albert Woll, Laurence Gold, and Thomas E. Harris filed a brief for the American Federation of Labor and Congress of Industrial Organizations as amicus curiae urging reversal. Milton Smith, Gerard C. Smetana, and Jerry Kronenberg filed a brief for the Chamber of Commerce of the United States as amicus curiae urging affirmance. [412 U.S. 84, 85] </s> PER CURIAM. </s> In this companion case to NLRB v. Boeing Co., ante, p. 67, we must decide whether our decision in NLRB v. Textile Workers, 409 U.S. 213 , authorizes the Board to find that a union commits an unfair labor practice in seeking court enforcement of fines imposed for strikebreaking activities by employees who have resigned from the union, even though the union constitution expressly prohibits members from strikebreaking. We hold that it does. </s> On September 16, 1965, the day after the expiration of the collective-bargaining agreement between Booster Lodge No. 405, International Association of Machinists and Aerospace Workers, AFL-CIO (the Union), and the Boeing Co. (the Company), the Union called a lawful strike and picketed the Company's Michoud, Louisiana, plant to further its demands for a new contract. The strike continued for 18 days, during which time 143 of the 1,900 production and maintenance employees represented by the Union crossed the picket line to work. All of these employees had been members of the Union before the strike, 1 but 61 resigned their membership prior to returning to work and another 58 resigned after they returned to work. 2 These resignations were tendered in registered or certified letters to the Union. Neither its constitution nor its bylaws contained [412 U.S. 84, 86] any provision expressly permitting or forbidding such resignations. </s> The strike ended on October 4, 1965, after ratification of a new collective-bargaining agreement by the Union membership. During late October and early November, the Union notified all employees who had crossed the picket line to work during the strike that charges had been preferred against them under the Union constitution for "Improper Conduct of a Member" because of their having "accept[ed] employment . . . in an establishment where a strike or lockout exist[ed]." They were advised of the dates of their Union trials, which were to be held even in their absence, and of their right to be represented by any counsel who was a member of the International Union. Fines were imposed on all employees who had worked during the strike without regard to whether or not such employees had resigned or had remained members. 3 None of the disciplined employees processed intra-union appeals. To the extent that fines were not paid, 4 the Union sent written notices to the offending employees stating that the matter had been referred to an attorney for collection. Suits were initiated in state court against nine employees for the purpose of collecting the fines plus attorneys' fees and interest. None of these suits has been resolved. </s> The Company filed an unfair labor practice charge with the National Labor Relations Board alleging that the Union had violated 8 (b) (1) (A) of the National Labor Relations Act, 61 Stat. 141, 29 U.S.C. 158 (b) [412 U.S. 84, 87] (1) (A). 5 The General Counsel issued a complaint, and the Board held that the Union violated 8 (b) (1) (A), by fining those employees who had resigned from the Union before returning to work during the strike, and by fining those who had resigned after returning to work to the extent that such fines were based on post-resignation work. No violation was found in the Union's fining members for crossing the picket line to work during the strike or in its fining those employees who resigned after they returned to work for work performed prior to resignation. The Board ordered the Union to cease and desist from fining employees who had resigned from the Union for their post-resignation work during the strike and from seeking court enforcement of such fines. It further ordered reimbursement to employees who had already paid fines for any amount imposed because of post-resignation work. The Court of Appeals sustained these holdings, 148 U.S. App. D.C. 119, 459 F.2d 1143 (1972), and, on the Union's petition for review, we granted certiorari. 409 U.S. 1074 . </s> In NLRB v. Textile Workers, 409 U.S., at 217 , we held that "[w]here a member lawfully resigns from a union and thereafter engages in conduct which the union rule proscribes, the union commits an unfair labor practice when it seeks enforcement of fines for that conduct." Since in that case there was no provision in the Union's constitution or bylaws limiting the circumstances in which a member could resign, we concluded that the members [412 U.S. 84, 88] were free to resign at will and that 7 of the Act. 29 U.S.C. 157, 6 protected that right to return to work during a strike which had been commenced while they were union members. 7 The Union's imposition of court-collectible fines against the former members for such work was, therefore, held to violate 8 (b) (1) (A). </s> Here, as in Textile Workers, the Union's constitution and bylaws are silent on the subject of voluntary resignation from the Union. 8 And here, as there, we leave open the question of the extent to which contractual restriction on a member's right to resign may be limited by the Act. Since there is no evidence that the employees here either knew of or had consented to any limitation on their right to resign, we need "only to apply the law which normally is reflected in our free institutions - the right of the individual to join or to resign from associations, as he sees fit `subject of course to any financial obligations due and owing' the group with which he was associated." Textile Workers, supra, at 216. </s> The Union contends, however, that a result different from Textile Workers is warranted in this case because, [412 U.S. 84, 89] even though its constitution does not expressly restrict the right to resign during a strike, it does impose on members an obligation to refrain from strikebreaking. The Union asserts that this provision has been consistently interpreted to bind a member, notwithstanding his resignation, to abstain from strikebreaking for the duration of an existing strike. It urges that this provision may be enforced as a matter of contract law against one whose membership has ceased, because it was an obligation he undertook while a member. </s> The provision in the Union's constitution which proscribes strikebreaking by its terms purports only to define "misconduct of a member." Nothing in the record indicates that Union members were informed, prior to the bringing of the charges that were the basis of this action, that the provision was interpreted as imposing any obligation on a resignee. 9 Thus, in order to sustain the Union's position, we would first have to find, contrary to the determination of the Board and of the Court of Appeals, that the Union constitution by implication extended its sanctions to nonmembers, and then further conclude that such sanctions were consistent with the Act. But we are no more disposed to find an implied post-resignation commitment from the strikebreaking proscription in the Union's constitution here than we were to find it from the employees' participation in the strike vote and ratification of penalties in Textile [412 U.S. 84, 90] Workers. 10 Accordingly, the judgment of the Court of Appeals sustaining the Board's finding of an unfair labor practice on the part of petitioner Union is </s> Affirmed. </s> Footnotes [Footnote 1 The expired collective agreement contained a maintenance-of-membership provision that required new employees, as a condition of continued employment, to become members of the Union unless they notified both the Union and the Company within 40 days of accepting employment that they did not wish to join. Further, Union members were required to maintain their membership during the life of the contract. </s> [Footnote 2 The remaining employees who returned to work during the strike did not resign from the Union. </s> [Footnote 3 A standard fine of $450 was imposed on each of the disciplined employees. The amount was reduced, however, for those few members who appeared at their hearings, apologized for their actions, and pledged loyalty to the Union. </s> [Footnote 4 None of the $450 fines has been paid, but reduced fines have been paid in a few instances. </s> [Footnote 5 Section 8 (b) (1) (A) of the Act provides, in relevant part: "It shall be an unfair labor practice for a labor organization or its agents - "(1) to restrain or coerce (A) employees in the exercise of the rights guaranteed in section 7: Provided, That this paragraph shall not impair the right of a labor organization to prescribe its own rules with respect to the acquisition or retention of membership therein . . . ." </s> [Footnote 6 Section 7 of the Act provides, in relevant part: "Employees shall have the right to self-organization, to form, join, or assist labor organizations, to bargain collectively through representatives of their own choosing, and to engage in other concerted activities for the purpose of collective bargaining or other mutual aid or protection, and shall also have the right to refrain from any or all of such activities . . . ." </s> [Footnote 7 It was stipulated in that case that all 31 of the employees who resigned from the Union during the strike and returned to work participated in the strike vote, and voted in favor of the strike. NLRB v. Textile Workers, 409 U.S. 213, 219 n. 2 (BLACKMUN, J., dissenting). </s> [Footnote 8 Since the collective-bargaining agreement expired prior to the times of the resignations, the maintenance-of-membership clause therein was no impediment to resigning. </s> [Footnote 9 The Union points out in its brief that at the 1972 International Union convention its interpretation of the strikebreaking proscription was made explicit. This constitutional amendment, made seven years after the strike here, is persuasive evidence that it was not there before, or at a minimum, that the proscription then existing did not apprise the employees of their asserted obligations to the Union </s> [Footnote 10 In its reply brief, the Union argues that in Textile Workers there was no limiting rule on post-resignation return to work during the course of the strike, but that in this case, the Union constitution proscribed such conduct. In Textile Workers, however, there was a duly enacted rule prohibiting any member from aiding and abetting the employer during the strike and subjecting violators to a $2,000 fine. On its face, the constitutional proscription here advanced is no broader than that rule. </s> MR. JUSTICE BLACKMUN, concurring in the judgment. </s> In NLRB v. Textile Workers, 409 U.S. 213 (1972), the strikebreaking employees, while they were members of the union, had all voted to strike. On the day following the inception of the strike, these employees also voted in favor of a union resolution that anyone aiding or abetting the company during the strike would be subject to a fine. * And all had participated in the strike prior to resigning from the union. </s> I was in solitary dissent in Textile Workers, id., at 218. I emphasized there that "it seems likely that the three factors of a member's strike vote, his ratification of strikebreaking penalties, and his actual participation in the strike, would be far more reliable indicia of his obligation to the union and its members than the presence of boilerplate provisions in a union's constitution," id., at 220; that the Court's opinion seemed to me "to exalt the formality of resignation over the substance of the various interests and national labor policies that [were] at stake," id., at 221; that 7 of the National Labor Relations Act "does not necessarily give him [the employee] the right to abandon these [union] activities [412 U.S. 84, 91] in midcourse once he has undertaken them voluntarily," id., at 222, quoting from 446 F.2d 369, 373; and that the policy of 7 would not be frustrated by a holding that an employee, in the circumstances of that case, could "knowingly waive his 7 right to resign from the union and to return to work without sanction." 409 U.S., at 222 -223. </s> The present case, however, is a very different situation. None of the Boeing employees who resigned from the Union had been given notice of a strikebreaking penalty before the strike vote or before their participation in the strike. The imposition of a penalty was never ratified formally by the union membership. The members were not notified that post-resignation strikebreaking was proscribed and would subject them to union discipline. And the provision in the Union's constitution, referred to by the Court, ante, at 89, as to a member's general obligation to refrain from strikebreaking, surely does not make up for this lack of notice, and it would not do so even if it were clearly applicable, which it is not, to strikebreaking after resignation from the Union. </s> Without effective notice of obligations that are supposed to be assumed, there can be no waiver of member's 7 right to refrain from participation in a legal strike. In the absence of such notice, 8 (b) (1) (A) bars the union from subjecting a member to a choice between the substantial obligation of weathering the strike and that of being subjected to court-collectible fines for failure to do so. </s> I, therefore, join in the Court's judgment. </s> [Footnote * See 409 U.S., at 218 -219, nn. 1 and 2. </s> [412 U.S. 84, 92]

United States Supreme Court COLORADO v. BANNISTER(1980) No. 79-1901 Argued: Decided: October 20, 1980 </s> Shortly after a police officer observed a speeding automobile, he heard a police radio dispatch which reported that a theft of motor vehicle parts, including chrome lug nuts, had occurred in the area, and which described two suspects. A few minutes later, he again spotted the speeding automobile and followed it into a service station for the purpose of issuing a traffic citation. As he approached the car, respondent and his companion stepped out of it, and during an ensuring conversation with the car's occupants the officer observed chrome lug nuts and lug wrenches in plain view in the car. Recognizing that the car's occupants met the description of the suspects, the officer arrested them and seized the lug nuts and wrenches. Before respondent's trial on charges of stealing motor vehicle parts, the trial court granted his motion to suppress the seized items, and the Colorado Supreme Court affirmed. </s> Held: </s> The circumstances in this case provided probable cause for the officer's seizure of the incriminating items without a warrant. Cf. Carroll v. United States, 267 U.S. 132 ; Chambers v. Maroney, 399 U.S. 42 . </s> Certiorari granted; 199 Colo. 281, 607 P.2d 987, vacated and remanded. </s> PER CURIAM. </s> In the early morning of October 15, 1979, an officer of the Colorado Springs Police Department observed a blue 1967 [449 U.S. 1, 2] Pontiac GTO automobile moving along a road at a speed above the legal limit. Before the officer could pursue the vehicle, it disappeared from his sight. Shortly thereafter, the officer heard a police radio dispatch reporting that a theft of motor vehicle parts had occurred in the area he was patrolling in his car. The radio dispatch announced that a number of chrome lug nuts were among the items stolen, and provided a description of two suspects. A few minutes after hearing the report, the officer spotted the same automobile he had seen earlier, still speeding. He saw the car enter a service station, and followed it there for the purpose of issuing a traffic citation to its driver. </s> As the officer approached the car, both of its occupants, including the respondent, stepped out of it. A conversation between the officer and the respondent ensued, just outside the closed front door of the automobile. At this time, the officer observed chrome lug nuts in an open glove compartment located between the vehicle's front bucket seats, as well as two lug wrenches on the floorboard of the back seat. These items were in plain view, illuminated by the lights of the service station. Recognizing that the respondent and his companion met the description of those suspected of stealing motor vehicle parts, the officer immediately arrested both of them. He then seized the lug nuts and wrenches. </s> Before the date scheduled for his trial on charges of stealing motor vehicle parts, the respondent moved to suppress the items that the arresting officer had seized. The trial court granted the motion, and its decision was affirmed by the Supreme Court of Colorado. 1 The State subsequently filed a petition for certiorari in this Court. </s> The provisions of the Fourth Amendment are enforceable against the States through the Fourteenth, and it is axiomatic that "searches conducted outside the judicial process, without prior approval by judge or magistrate, are per se unreasonable [449 U.S. 1, 3] under the Fourth Amendment - subject only to a few specifically established and well-delineated exceptions." Katz v. United States, 389 U.S. 347, 357 (1967). One of these exceptions, recognized at least since Carroll v. United States, 267 U.S. 132 (1925), exists when an automobile or other vehicle is stopped and the police have probable cause to believe it contains evidence of a crime. See Arkansas v. Sanders, 442 U.S. 753, 760 (1979). Carroll upheld the legality of a search that was conducted immediately after a vehicle was stopped. Since Carroll, warrantless searches have been found permissible even when a car was searched after being seized and moved to a police station. Texas v. White, 423 U.S. 67 (1975); Chambers v. Maroney, 399 U.S. 42 (1970). In each of these latter cases, the search was constitutionally permissible because an immediate, on-the-scene search would have been permissible. Texas v. White, supra, at 68; Chambers v. Maroney, supra, at 52. </s> At issue in the present case is a seizure that occurred on the scene shortly after a speeding car was stopped. Thus, if there was probable cause "that the contents of the automobile offend against the law," Carroll, supra, at 159, the warrantless seizure was permissible. 2 </s> Probable cause in this case is self-evident. Indeed, the Supreme Court of Colorado acknowledged that there was probable cause, but mistakenly concluded that a warrant was required to open the car door and seize the items within. </s> The officer could not stop the vehicle the first time he [449 U.S. 1, 4] detected it speeding, but he accosted it at his next opportunity, when it entered the service station. His subsequent approach to the side of the automobile in order to issue a traffic citation to its driver was entirely legitimate. 3 Standing by the front door of the car, the officer happened to see items matching the description of some of those recently stolen in the vicinity, and observed that the occupants of the car met the description of those suspected of the crime. These circumstances provided not only probable cause to arrest, but also under Carroll and Chambers, probable cause to seize the incriminating items without a warrant. 4 </s> The petition for certiorari and the respondent's motion for leave to proceed in forma pauperis are granted, the judgment of the Supreme Court of Colorado is vacated, and the case is remanded to that court for proceedings not inconsistent with this opinion. </s> It is so ordered. </s> Footnotes [Footnote 1 199 Colo. 281, 607 P.2d 987 (1980). </s> [Footnote 2 Another factor that contributes to the justification for the absence of a warrant in such a situation is that "the circumstances that furnish probable cause to search a particular auto for particular articles are most often unforeseeable." Chambers, 399 U.S., at 50 -51. See also Cardwell v. Lewis, 417 U.S. 583, 595 (1974). This factor applies with particular force in this case. As the reason for the stop was wholly unconnected with the reason for the subsequent seizure, it would be especially unreasonable to require a detour to a magistrate before the unanticipated evidence could be lawfully seized. </s> [Footnote 3 There can be no question that the stopping of a vehicle and the detention of its occupants constitute a "seizure" within the meaning of the Fourth Amendment. Delaware v. Prouse, 440 U.S. 648, 653 (1979); United States v. Martinez-Fuerte, 428 U.S. 543, 556 -558 (1976); United States v. Brignoni-Ponce, 422 U.S. 873, 878 (1975). </s> [Footnote 4 The respondent does not dispute that the items seized were illuminated by the lights of the service station, or that they were in the plain view of the officer as he spoke to him beside the front door of the car. There was no evidence whatsoever that the officer's presence to issue a traffic citation was a pretext to confirm any other previous suspicion about the occupants. </s> [449 U.S. 1, 5]

United States Supreme Court STUMP v. SPARKMAN(1978) No. 76-1750 Argued: January 10, 1978Decided: March 28, 1978 </s> A mother filed a petition in affidavit form in an Indiana Circuit Court, a court of general jurisdiction under an Indiana statute, for authority to have her "somewhat retarded" 15-year-old daughter (a respondent here) sterilized, and petitioner Circuit Judge approved the petition the same day in an ex parte proceeding without a hearing and without notice to the daughter or appointment of a guardian ad litem. The operation was performed shortly thereafter, the daughter having been told that she was to have her appendix removed. About two years later she was married, and her inability to become pregnant led her to discover that she had been sterilized. As a result she and her husband (also a respondent here) filed suit in Federal District Court pursuant to 42 U.S.C. 1983 against her mother, the mother's attorney, the Circuit Judge, the doctors who performed or assisted in the sterilization, and the hospital where it was performed, seeking damages for the alleged violation of her constitutional rights. Holding that the constitutional claims required a showing of state action and that the only state action alleged was the Circuit Judge's approval of the serialization petition, the District Court held that no federal action would lie against any of the defendants because the Circuit Judge, the only state agent, was absolutely immune from suit under the doctrine of judicial immunity. The Court of Appeals reversed, holding that the "crucial issue" was whether the Circuit Judge acted within his jurisdiction, that he had not, that accordingly he was not immune from damages liability, and that in any event he had forfeited his immunity "because of his failure to comply with elementary principles of procedural due process." Held: The Indiana law vested in the Circuit Judge the power to entertain and act upon the petition for sterilization, and he is, therefore, immune from damages liability even if his approval of the petition was in error. Pp. 355-364. </s> (a) A judge will not be deprived of immunity because the action he took was in error, was done maliciously, or was in excess of his authority, but rather he will be subject to liability only when he has acted in the "clear absence of all jurisdiction," Bradley v. Fisher, 13 Wall. 335, 351. Pp. 355-357. [435 U.S. 349, 350] </s> (b) Here there was not "clear absence of all jurisdiction" in the Circuit Court to consider the sterilization petition. That court had jurisdiction under the Indiana statute granting it broad general jurisdiction, it appearing that neither by statute nor by case law had such jurisdiction been circumscribed to foreclose consideration of the petition. Pp. 357-358. </s> (c) Because the Circuit Court is a court of general jurisdiction, neither the procedual errors the Circuit Judge may have committed nor the lack of a specific statute authorizing his approval of the petition in question rendered him liable in damages for the consequences of his actions. Pp. 358-360. </s> (d) The factors determining whether an act by a judge is "judicial" relate to the nature of the act itself (whether it is a function normally performed by a judge) and the expectation of the parties (whether they dealt with the judge in his judicial capacity), and here both of these elements indicate that the Circuit Judge's approval of the sterilization petition was a judicial act, even though he may have proceeded with informality. Pp. 360-363. </s> (e) Disagreement with the action taken by a judge does not justify depriving him of his immunity, and thus the fact that in this case tragic consequences ensued from the judge's action does not deprive him of his immunity; moreover, the fact that the issue before the judge is a controversial one, as here, is all the more reason that he should be able to act without fear of suit. Pp. 363-364. </s> 552 F.2d 172, reversed and remanded. </s> WHITE, J., delivered the opinion of the Court, in which BURGER, C. J., and BLACKMUN, REHNQUIST, and STEVENS, JJ., joined. STEWART, J., filed a dissenting opinion, in which MARSHALL and POWELL, JJ., joined, post, p. 364. POWELL, J., filed a dissenting opinion, post, p. 369. BRENNAN, J., took no part in the consideration or decision of the case. </s> George E. Fruechtenicht argued the cause and filed briefs for petitioners. </s> Richard H. Finley argued the cause for respondents. With him on the brief was Eugene Gressman. * </s> [Footnote * Briefs of amici curiae urging affirmance were filed by Robert L. Burgdorf, Jr., for the American Coalition of Citizens with Disabilities et al.; by Bruce J. Ennis, Joel M. Gora, Paul Friedman, and Lawrence M. [435 U.S. 349, 351] Reuben for the American Civil Liberties Union et al.; and by Ronald M. Soskin for the National Center for Law and the Handicapped, Inc. [435 U.S. 349, 351] </s> MR. JUSTICE WHITE delivered the opinion of the Court. </s> This case requires us to consider the scope of a judge's immunity from damages liability when sued under 42 U.S.C. 1983. </s> I </s> The relevant facts underlying respondents' suit are not in dispute. On July 9, 1971, Ora Spitler McFarlin, the mother of respondent Linda Kay Spitler Sparkman, presented to Judge Harold D. Stump of the Circuit Court of DeKalb County, Ind., a document captioned "Petition To Have Tubal Ligation Performed On Minor and Indemnity Agreement." The document had been drafted by her attorney, a petitioner here. In this petition Mrs. McFarlin stated under oath that her daughter was 15 years of age and was "somewhat retarded," although she attended public school and had been promoted each year with her class. The petition further stated that Linda had been associating with "older youth or young men" and had stayed out overnight with them on several occasions. As a result of this behavior and Linda's mental capabilities, it was stated that it would be in the daughter's best interest if she underwent a tubal ligation in order "to prevent unfortunate circumstances. . . . " In the same document Mrs. McFarlin also undertook to indemnify and hold harmless Dr. John Hines, who was to perform the operation, and the DeKalb Memorial Hospital, where the operation was to take place, against all causes of action that might arise as a result of the performance of the tubal ligation. 1 </s> [435 U.S. 349, 352] </s> The petition was approved by Judge Stump on the same day. He affixed his signature as "Judge, DeKalb Circuit Court," to the statement that he did "hereby approve the [435 U.S. 349, 353] above Petition by affidavit form on behalf of Ora Spitler McFarlin, to have Tubal Ligation performed upon her minor daughter, Linda Spitler, subject to said Ora Spitler McFarlin covenanting and agreeing to indemnify and keep indemnified Dr. John Hines and the DeKalb Memorial Hospital from any matters or causes of action arising therefrom." </s> On July 15, 1971, Linda Spitler entered the DeKalb Memorial Hospital, having been told that she was to have her appendix removed. The following day a tubal ligation was performed upon her. She was released several days later, unaware of the true nature of her surgery. </s> Approximately two years after the operation, Linda Spitler was married to respondent Leo Sparkman. Her inability to become pregnant led her to discover that she had been sterilized during the 1971 operation. As a result of this revelation, the Sparkmans filed suit in the United States District Court for the Northern District of Indiana against Mrs. McFarlin, her attorney, Judge Stump, the doctors who had performed and assisted in the tubal ligation, and the DeKalb Memorial Hospital. respondents sought damages for the alleged violation of Linda Sparkman's constitutional rights; 2 also asserted were pendent state claims for assault [435 U.S. 349, 354] and battery, medical malpractice, and loss of potential fatherhood. </s> Ruling upon the defendants' various motions to dismiss the complaint, the District Court concluded that each of the constitutional claims asserted by respondents required a showing of state action and that the only state action alleged in the complaint was the approval by Judge Stump, acting as Circuit Court Judge, of the petition presented to him by Mrs. McFarlin. The Sparkmans sought to hold the private defendants liable on a theory that they had conspired with Judge Stump to bring about the allegedly unconstitutional acts. The District Court, however, held that no federal action would lie against any of the defendants because Judge Stump, the only state agent, was absolutely immune from suit under the doctrine of judicial immunity. The court stated that "whether or not Judge Stump's `approval' of the petition may in retrospect appear to have been premised on an erroneous [435 U.S. 349, 355] view of the law, Judge Stump surely had jurisdiction to consider the petition and to act thereon." Sparkman v. McFarlin, Civ. No. F 75-129 (ND Ind., May 13, 1976). Accordingly, under Bradley v. Fisher, 13 Wall. 335, 351 (1872), Judge Stump was entitled to judicial immunity. 3 </s> On appeal, the Court of Appeals for the Seventh Circuit reversed the judgment of the District Court, 4 holding that the "crucial issue" was "whether Judge Stump acted within his jurisdiction" and concluding that he had not. 552 F.2d, at 174. He was accordingly not immune from damages liability under the controlling authorities. The Court of Appeals also held that the judge had forfeited his immunity "because of his failure to comply with elementary principles of procedural due process." Id., at 176. </s> We granted certiorari, 434 U.S. 815 (1977), to consider the correctness of this ruling. We reverse. </s> II </s> The governing principle of law is well established and is not questioned by the parties. As early as 1872, the Court recognized that it was "a general principle of the highest importance to the proper administration of justice that a judicial officer, in exercising the authority vested in him, [should] be free to act upon his own convictions, without apprehension of personal consequences to himself." Bradley v. Fisher, supra, at 347. 5 For that reason the Court held that "judges [435 U.S. 349, 356] of courts of superior or general jurisdiction are not liable to civil actions for their judicial acts, even when such acts are in excess of their jurisdiction, and are alleged to have been done maliciously or corruptly." 6 13 Wall., at 351. Later we held that this doctrine of judicial immunity was applicable in suits under 1 of the Civil Rights Act of 1871, 42 U.S.C. 1983, for the legislative record gave no indication that Congress intended to abolish this long-established principle. Pierson v. Ray, 386 U.S. 547 (1967). </s> The Court of Appeals correctly recognized that the necessary inquiry in determining whether a defendant judge is immune from suit is whether at the time he took the challenged action he had jurisdiction over the subject matter before him. Because "some of the most difficult and embarrassing questions which a judicial officer is called upon to consider and determine relate to his jurisdiction . . .," Bradley, supra, at 352, the scope of the judge's jurisdiction must be construed broadly where the issue is the immunity of the judge. A judge will not be deprived of immunity because the action he took was in error, was done maliciously, or was in excess of his authority; rather, he will be subject to liability only [435 U.S. 349, 357] when he has acted in the "clear absence of all jurisdiction." 7 13 Wall., at 351. </s> We cannot agree that there was a "clear absence of all jurisdiction" in the DeKalb County Circuit Court to consider the petition presented by Mrs. McFarlin. As an Indiana Circuit Court Judge, Judge Stump had "original exclusive jurisdiction in all cases at law and in equity whatsoever . . .," jurisdiction over the settlement of estates and over guardianships, appellate jurisdiction as conferred by law, and jurisdiction over "all other causes, matters and proceedings where exclusive jurisdiction thereof is not conferred by law upon some other court, board or officer." Ind. Code 33-4-4-3 (1975). 8 This is indeed a broad jurisdictional grant; yet the Court of Appeals concluded that Judge Stump did not have jurisdiction over the petition authorizing Linda Sparkman's sterilization. [435 U.S. 349, 358] </s> In so doing, the Court of Appeals noted that the Indiana statutes provided for the sterilization of institutionalized persons under certain circumstances, see Ind. Code 16-13-13-1 through 16-13-13-4 (1973), but otherwise contained no express authority for judicial approval of tubal ligations. It is true that the statutory grant of general jurisdiction to the Indiana circuit courts does not itemize types of cases those courts may hear and hence does not expressly mention sterilization petitions presented by the parents of a minor. But in our view, it is more significant that there was no Indiana statute and no case law in 1971 prohibiting a circuit court, a court of general jurisdiction, from considering a petition of the type presented to Judge Stump. The statutory authority for the sterilization of institutionalized persons in the custody of the State does not warrant the inference that a court of general jurisdiction has no power to act on a petition for sterilization of a minor in the custody of her parents, particularly where the parents have authority under the Indiana statutes to "consent to and contract for medical or hospital care or treatment of [the minor] including surgery." Ind. Code 16-8-4-2 (1973). The District Court concluded that Judge Stump had jurisdiction under 33-4-4-3 to entertain and act upon Mrs. McFarlin's petition. We agree with the District Court, it appearing that neither by statute nor by case law has the broad jurisdiction granted to the circuit courts of Indiana been circumscribed to foreclose consideration of a petition for authorization of a minor's sterilization. </s> The Court of Appeals also concluded that support for Judge Stump's actions could not be found in the common law of Indiana, relying in particular on the Indiana Court of Appeals' intervening decision in A. L. v. G. R. H., 163 Ind. App. 636, 325 N. E. 2d 501 (1975). In that case the Indiana court held that a parent does not have a common-law right to have a minor child sterilized, even though the parent might "sincerely believe the child's adulthood would benefit therefrom." Id., at 638, 325 N. E. 2d, at 502. The opinion, however, [435 U.S. 349, 359] speaks only of the rights of the parents to consent to the sterilization of their child and does not question the jurisdiction of a circuit judge who is presented with such a petition from a parent. Although under that case a circuit judge would err as a matter of law if he were to approve a parent's petition seeking the sterilization of a child, the opinion in A. L. v. G. R. H. does not indicate that a circuit judge is without jurisdiction to entertain the petition. Indeed, the clear implication of the opinion is that, when presented with such a petition, the circuit judge should deny it on its merits rather than dismiss it for lack of jurisdiction. </s> Perhaps realizing the broad scope of Judge Stump's jurisdiction, the Court of Appeals stated that, even if the action taken by him was not foreclosed under the Indiana Statutory scheme, it would still be "an illegitimate exercise of his common law power because of his failure to comply with elementary principles of procedural due process." 552 F.2d, at 176. This misconceives the doctrine of judicial immunity. A judge is absolutely immune from liability for his judicial acts even if his exercise of authority is flawed by the commission of grave procedural errors. The Court made this point clear in Bradley, 13 Wall., at 357, where it stated: "[T]his erroneous manner in which [the court's] jurisdiction was exercised, however it may have affected the validity of the act, did not make the act any less a judicial act; nor did it render the defendant liable to answer in damages for it at the suit of the plaintiff, as though the court had proceeded without having any jurisdiction whatever . . . ." </s> We conclude that the Court of Appeals, employing an unduly restrictive view of the scope of Judge Stump's jurisdiction, erred in holding that he was not entitled to judicial immunity. Because the court over which Judge Stump presides is one of general jurisdiction, neither the procedural errors he may have committed nor the lack of a specific statute authorizing his approval of the petition in question rendered [435 U.S. 349, 360] him liable in damages for the consequences of his actions. </s> The respondents argue that even if Judge Stump had jurisdiction to consider the petition presented to him by Mrs. McFarlin, he is still not entitled to judicial immunity because his approval of the petition did not constitute a "judicial" act. It is only for acts performed in his "judicial" capacity that a judge is absolutely immune, they say. We do not disagree with this statement of the law, but we cannot characterize the approval of the petition as a nonjudicial act. </s> Respondents themselves stated in their pleadings before the District Court that Judge Stump was "clothed with the authority of the state" at the time that he approved the petition and that "he was acting as a country circuit court judge." Plaintiffs' Reply Brief to Memorandum Filed on Behalf of Harold D. Stump in Support of his Motion to Dismiss in Civ. No. F 75-129, p. 6. They nevertheless now argue that Judge Stump's approval of the petition was not a judicial act because the petition was not given a docket number, was not placed on file with the clerk's office, and was approved in an ex parte proceeding without notice to the minor, without a hearing, and without the appointment of a guardian ad litem. </s> This Court has not had occasion to consider, for purposes of the judicial immunity doctrine, the necessary attributes of a judicial act; but it has previously rejected the argument, somewhat similar to the one raised here, that the lack of formality involved in the Illinois Supreme Court's consideration of a petitioner's application for admission to the state bar prevented it from being a "judicial proceeding" and from presenting a case or controversy that could be reviewed by this Court. In re Summers, 325 U.S. 561 (1945). Of particular significance to the present case, the Court in Summers noted the following: "The record does not show that any process issued or that any appearance was made. . . . While no entry was placed by the Clerk in the file, on a docket, or in a judgment roll, the Court took cognizance of the petition and [435 U.S. 349, 361] passed an order which is validated by the signature of the presiding officer." Id., at 567. Because the Illinois court took cognizance of the petition for admission and acted upon it, the Court held that a case or controversy was presented. </s> Similarly, the Court of Appeals for the Fifth Circuit has held that a state district judge was entitled to judicial immunity, even though "at the time of the altercation [giving rise to the suit] Judge Brown was not in his judge's robes, he was not in the courtroom itself, and he may well have violated state and/or federal procedural requirements regarding contempt citations." McAlester v. Brown, 469 F.2d 1280, 1282 (1972). 9 Among the factors relied upon by the Court of Appeals in deciding that the judge was acting within his judicial capacity was the fact that "the confrontation arose directly and immediately out of a visit to the judge in his official capacity." Ibid. 10 </s> [435 U.S. 349, 362] </s> The relevant cases demonstrate that the factors determining whether an act by a judge is a "judicial" one relate to the nature of the act itself, i. e., whether it is a function normally performed by a judge, and to the expectations of the parties, i. e., whether they dealt with the judge in his judicial capacity. Here, both factors indicate that Judge Stump's approval of the sterilization petition was a judicial act. 11 State judges with general jurisdiction not infrequently are called upon in their official capacity to approve petitions relating to the affairs of minors, as for example, a petition to settle a minor's claim. Furthermore, as even respondents have admitted, at the time he approved the petition presented to him by Mrs. McFarlin, Judge Stump was "acting as a county circuit court judge." See supra, at 360. We may infer from the record that it was only because Judge Stump served in that position that Mrs. McFarlin, on the advice of counsel, submitted the petition to him for his approval. Because Judge Stump performed the type of act normally performed only by judges and because he did so in his capacity as a Circuit Court Judge, we find no [435 U.S. 349, 363] merit to respondents' argument that the informality with which he proceeded rendered his action nonjudicial and deprived him of his absolute immunity. 12 </s> Both the Court of Appeals and the respondents seem to suggest that, because of the tragic consequences of Judge Stump's actions, he should not be immune. For example, the Court of Appeals noted that "[t]here are actions of purported judicial character that a judge, even when exercising general jurisdiction, is not empowered to take," 552 F.2d, at 176, and respondents argue that Judge Stump's action was "so unfair" and "so totally devoid of judicial concern for the interests and well-being of the young girl involved" as to disqualify it as a judicial act. Brief for Respondents 18. Disagreement with the action taken by the judge, however, does not justify depriving that judge of his immunity. Despite the unfairness to litigants that sometimes results, the doctrine of judicial immunity is though to be in the best interests of "the proper administration of justice . . . [, for it allows] a judicial officer, in exercising the authority vested in him [to] be free to act upon his own convictions, without apprehension of personal consequences to himself." Bradley v. Fisher, 13 [435 U.S. 349, 364] Wall., at 347. The fact that the issue before the judge is a controversial one is all the more reason that he should be able to act without fear of suit. As the Court pointed out in Bradley: </s> "Controversies involving not merely great pecuniary interests, but the liberty and character of the parties, and consequently exciting the deepest feelings, are being constantly determined in those courts, in which there is great conflict in the evidence and great doubt as to the law which should impose govern their decision. It is this class of cases which impose upon the judge the severest labor, and often create in his mind a painful sense of responsibility." Id., at 348. </s> The Indiana law vested in Judge Stump the power to entertain and act upon the petition for sterilization. He is, therefore, under the controlling cases, immune from damages liability even if his approval of the petition was in error. Accordingly, the judgment of the Court of Appeals is reversed, and the case is remanded for further proceedings consistent with this opinion. 13 </s> It is so ordered. </s> MR. JUSTICE BRENNAN took no part in the consideration or decision of this case. </s> Footnotes [Footnote 1 The full text of the petition presented to Judge Stump read as follows: "STATE OF INDIANA ss: COUNTY OF DEKALB "PETITION TO HAVE TUBAL LIGATION PERFORMED ON MINOR AND INDEMNITY AGREEMENT "Ora Spitler McFarlin, being duly sworn upon her oath states that she [435 U.S. 349, 352] is the natural mother of and has custody of her daughter, Linda Spitler, age fifteen (15) being born January 24, 1956 and said daughter resides with her at 108 Iwo Street, Auburn, DeKalb County, Indiana. "Affiant states that her daughter's mentality is such that she is considered to be somewhat retarded although she is attending or has attended the public schools in DeKalb Central School System and has been passed along with other children in her age level even though she does not have what is considered normal mental capabilities and intelligence. Further, that said affiant has had problems in the home of said child as a result of said daughter leaving the home on several occasions to associate with older youth or young men and as a matter of fact having stayed overnight with said youth or men and about which incidents said affiant did not become aware of until after such incidents occurred. As a result of this behavior and the mental capabilities of said daughter, affiant believes that it is to the best interest of said child that a Tubal Ligation be performed on said minor daughter to prevent unfortunate circumstances to occur and since it is impossible for the affiant as mother of said minor child to maintain and control a continuous observation of the activities of said daughter each and every day. "Said affiant does hereby in consideration of the Court of the DeKalb Circuit Court approving the Tubal Ligation being performed upon her minor daughter does hereby [sic] covenant and agree to indemnify and keep indemnified and hold Dr. John Hines, Auburn, Indiana, who said affiant is requesting perform said operation and the DeKalb Memorial Hospital, Auburn, Indiana, whereas [sic] said operation will be performed, harmless from and against all or any matters or causes of action that could or might arise as a result of the performing of said Tubal Ligation. "IN WITNESS WHEREOF, said affiant, Ora Spitler McFarlin, has hereunto subscribed her name this 9th day of July, 1971. "/s/ ORA SPITLER McFARLIN Ora Spitler McFarlin Petitioner "Subscribed and sworn to before me this 9th day of July, 1971. "/s/ WARREN G. SUNDAY Warren G. Sunday Notary Public [435 U.S. 349, 353] "My commission expires January 4, 1975. "I, Harold D. Stump, Judge of the DeKalb Circuit Court, do hereby approve the above Petition by affidavit form on behalf of Ora Spitler McFarlin, to have Tubal Ligation performed upon her minor daughter, Linda Spitler, subject to said Ora Spitler McFarlin covenanting and agreeing to indemnify and keep indemnified Dr. John Hines and the DeKalb Memorial Hospital from any matters or causes of action arising therefrom. "/s/ HAROLD D. STUMP Judge, DeKalb Circuit Court "Dated July 9, 1971" </s> [Footnote 2 The District Court gave the following summary of the constitutional claims asserted by the Sparkmans: "Whether laid under section 1331 or 1343 (3) and whether asserted [435 U.S. 349, 354] directly or via section 1983 and 1985, plaintiffs' grounds for recovery are asserted to rest on the violation of constitutional rights. Plaintiffs urge that defendants violated the following constitutional guarantees: "1. that the actions were arbitrary and thus in violation of the due process clause of the Fourteenth Amendment; "2. that Linda was denied procedural safeguards required by the Fourteenth Amendment; "3. that the sterilization was permitted without the promulgation of standards; "4. that the sterilization was an invasion of privacy; "5. that the sterilization violated Linda's right to procreate; "6. that the sterilization was cruel and unusual punishment; "7. that the use of sterilization as punishment for her alleged retardation or lack of self-discipline violated various constitutional guarantees; "8. that the defendants failed to follow certain Indiana statutes, thus depriving Linda of due process of law; and "9. that defendants violated the equal protection clause, because of the differential treatment accorded Linda on account of her sex, marital status, and allegedly low mental capacity." Sparkman v. McFarlin, Civ. No. F 75-129 (ND Ind., May 13, 1976). </s> [Footnote 3 The District Court granted the defendants' motion to dismiss the federal claims for that reason and dismissed the remaining pendent state claims for lack of subject-matter jurisdiction. </s> [Footnote 4 Sparkman v. McFarlin, 552 F.2d 172 (CA7 1977). </s> [Footnote 5 Even earlier, in Randall v. Brigham, 7 Wall. 523 (1869), the Court stated that judges are not responsible "to private parties in civil actions for their judicial acts, however injurious may be those acts, and however much they may deserve condemnation, unless perhaps where the acts are palpably in excess of the jurisdiction of the judges, and are done maliciously or corruptly." Id., at 537. In Bradley the Court reconsidered that earlier [435 U.S. 349, 356] statement and concluded that "the qualifying words used were not necessary to a correct statement of the law . . . ." 13 Wall., at 351. </s> [Footnote 6 In holding that a judge was immune for his judicial acts, even when such acts were performed in excess of his jurisdiction, the Court in Bradley stated: "A distinction must be here observed between excess of jurisdiction and the clear absence of all jurisdiction over the subject-matter. Where there is clearly no jurisdiction over the subject-matter any authority exercised is a usurped authority, and for the exercise of such authority, when the want of jurisdiction is known to the judge, no excuse is permissible. But where jurisdiction over the subject-matter is invested by law in the judge, or in the court which he holds, the manner and extent in which the jurisdiction shall be exercised are generally as much questions for his determination as any other questions involved in the case, although upon the correctness of his determination in these particulars the validity of his judgments may depend." Id., at 351-352. </s> [Footnote 7 In Bradley, the Court illustrated the distinction between lack of jurisdiction and excess of jurisdiction with the following examples: if a probate judge, with jurisdiction over only wills and estates, should try a criminal case, he would be acting in the clear absence of jurisdiction and would not be immune from liability for his action; on the other hand, if a judge of a criminal court should convict a defendant of a nonexistent crime, he would merely be acting in excess of his jurisdiction and would be immune. Id., at 352. </s> [Footnote 8 Indiana Code 33-4-4-3 (1975) states as follows: "Jurisdiction. - Said court shall have original exclusive jurisdiction in all cases at law and in equity whatsoever, and in criminal cases and actions for divorce, except where exclusive or concurrent jurisdiction is, or may be conferred by law upon justices of the peace. It shall also have exclusive jurisdiction of the settlement of decedents' estates and of guardianships: Provided, however, That in counties in which criminal or superior courts exist or may be organized, nothing in this section shall be construed to deprive such courts of the jurisdiction conferred upon them by laws, and it shall have such appellate jurisdiction as may be conferred by law, and it shall have jurisdiction of all other causes, matters and proceedings where exclusive jurisdiction thereof is not conferred by law upon some other court, board or officer." </s> [Footnote 9 In McAlester the plaintiffs alleged that they had gone to the courthouse where their son was to be tried by the defendant in order to give the son a fresh set of clothes. When they went into the defendant judge's office, he allegedly ordered them out and had a deputy arrest one of them and place him in jail for the rest of the day. Several months later, the judge issued an order holding the plaintiff in contempt of court, nunc pro tunc. </s> [Footnote 10 Other Courts of Appeals, presented with different fact situations, have concluded that the challenged actions of defendant judges were not performed as part of the judicial function and that the judges were thus not entitled to rely upon the doctrine of judicial immunity. The Court of Appeals for the Ninth Circuit, for example, has held that a justice of the peace who was accused of forcibly removing a man from his courtroom and physically assaulting him was not absolutely immune. Gregory v. Thompson, 500 F.2d 59 (1974). While the court recognized that a judge has the duty to maintain order in his courtroom, it concluded that the actual eviction of someone from the courtroom by use of physical force, a task normally performed by a sheriff or bailiff, was "simply not an act of a judicial nature." Id., at 64. And the Court of Appeals for the Sixth Circuit held in Lynch v. Johnson, 420 F.2d 818 (1970), that the county judge sued in that case was not entitled to judicial immunity because his service on a board with only legislative and administrative powers did not constitute a judicial act. </s> [Footnote 11 MR. JUSTICE STEWART, in dissent, complains that this statement is inaccurate because it nowhere appears that judges are normally asked to approve parents' decisions either with respect to surgical treatment in general or with respect to sterilizations in particular. Of course, the opinion makes neither assertion. Rather, it is said that Judge Stump was performing a "function" normally performed by judges and that he was taking "the type of action" judges normally perform. The dissent makes no effort to demonstrate that Judge Stump was without jurisdiction to entertain and act upon the specific petition presented to him. Nor does it dispute that judges normally entertain petitions with respect to the affairs of minors. Even if it is assumed that in a lifetime of judging, a judge has acted on only one petition of a particular kind, this would not indicate that his function in entertaining and acting on it is not the kind of function that a judge normally performs. If this is the case, it is also untenable to claim that in entertaining the petition and exercising the jurisdiction with which the statutes invested him, Judge Stump was nevertheless not performing a judicial act or was engaging in the kind of conduct not expected of a judge under the Indiana statutes governing the jurisdiction of its courts. </s> [Footnote 12 MR. JUSTICE STEWART'S dissent, post, at 369, suggests that Judge Stump's approval of Mrs. McFarlin's petition was not a judicial act because of the absence of what it considers the "normal attributes of a judicial proceeding." These attributes are said to include a "case," with litigants and the opportunity to appeal, in which there is "principled decisionmaking." But under Indiana law, Judge Stump had jurisdiction to act as he did; the proceeding instituted by the petition placed before him was sufficiently a "case" under Indiana law to warrant the exercise of his jurisdiction, whether or not he then proceeded to act erroneously. That there were not two contending litigants did not make Judge Stump's act any less judicial. Courts and judges often act ex parte. They issue search warrants in this manner, for example, often without any "case" having been instituted, without any "case" ever being instituted, and without the issuance of the warrant being subject to appeal. Yet it would not destroy a judge's immunity if it is alleged and offer of proof is made that in issuing a warrant he acted erroneously and without principle. </s> [Footnote 13 The issue is not presented and we do not decide whether the District Court correctly concluded that the federal claims against the other defendants were required to be dismissed if Judge Stump, the only state agent, was found to be absolutely immune. Compare Kermit Constr. Corp. v. Banco Credito y Ahorro Ponceno, 547 F.2d 1 (CA1 1976), with Guedry v. Ford, 431 F.2d 660 (CA5 1970). </s> MR. JUSTICE STEWART, with whom MR. JUSTICE MARSHALL and MR. JUSTICE POWELL join, dissenting. </s> It is established federal law that judges of general jurisdiction are absolutely immune from monetary liability "for their [435 U.S. 349, 365] judicial acts, even when such acts are in excess of their jurisdiction, and are alleged to have been done maliciously or corruptly." Bradley v. Fisher, 13 Wall. 335, 351. It is also established that this immunity is in no way diminished in a proceeding under 42 U.S.C. 1983. Pierson v. Ray, 386 U.S. 547 . But the scope of judicial immunity is limited to liability for "judicial acts," and I think that what Judge Stump did on July 9, 1971, was beyond the pale of anything that could sensibly be called a judicial act. </s> Neither in Bradley v. Fisher nor in Pierson v. Ray was there any claim that the conduct in question was not a judicial act, and the Court thus had no occasion in either case to discuss the meaning of that term. 1 Yet the proposition that judicial immunity extends only to liability for "judicial acts" was emphasized no less than seven times in Mr. Justice Field's opinion for the Court in the Bradley case. 2 Cf. Imbler v. Pachtman, 424 U.S. 409, 430 . And if the limitations inherent in that concept have any realistic meaning at all, then I cannot believe that the action of Judge Stump in approving Mrs. McFarlin's petition is protected by judicial immunity. </s> The Court finds two reasons for holding that Judge Stump's approval of the sterilization petition was a judicial act. First, the Court says, it was "a function normally performed by a judge." Second, the Court says, the act was performed in Judge Stump's "judicial capacity." With all respect, I think that the first of these grounds is factually untrue and that the second is legally unsound. </s> When the Court says that what Judge Stump did was an act "normally performed by a judge," it is not clear to me whether the Court means that a judge "normally" is asked to approve a mother's decision to have her child given surgical [435 U.S. 349, 366] treatment generally, or that a judge "normally" is asked to approve a mother's wish to have her daughter sterilized. But whichever way the Court's statement is to be taken, it is factually inaccurate. In Indiana, as elsewhere in our country, a parent is authorized to arrange for and consent to medical and surgical treatment of his minor child. Ind. Code 16-8-4-2 (1973). And when a parent decides to call a physician to care for his sick child or arranges to have a surgeon remove his child's tonsils, he does not, "normally" or otherwise, need to seek the approval of a judge. 3 On the other hand, Indiana did in 1971 have statutory procedures for the sterilization of certain people who were institutionalized. But these statutes provided for administrative proceedings before a board established by the superintendent of each public hospital. Only if, after notice and an evidentiary hearing, an order of sterilization was entered in these proceedings could there be review in a circuit court. See Ind. Code 16-13-13-1 through 16-13-13-4 (1974). 4 </s> [435 U.S. 349, 367] </s> In sum, what Judge Stump did on July 9, 1971, was in no way an act "normally performed by a judge." Indeed, there is no reason to believe that such an act has ever been performed by any other Indiana judge, either before or since. </s> When the Court says that Judge Stump was acting in "his judicial capacity" in approving Mrs. McFarlin's petition, it is not clear to me whether the Court means that Mrs. McFarlin submitted the petition to him only because he was a judge, or that, in approving it, he said that he was acting as a judge. But however the Court's test is to be understood, it is, I think, demonstrably unsound. </s> It can safely be assumed that the Court is correct in concluding that Mrs. McFarlin came to Judge Stump with her petition because he was a County Circuit Court Judge. But false illusions as to a judge's power can hardly convert a judge's response to those illusions into a judicial act. In short, a judge's approval of a mother's petition to lock her daughter in the attic would hardly be a judicial act simply because the mother had submitted her petition to the judge in his official capacity. </s> If, on the other hand, the Court's test depends upon the fact that Judge Stump said he was acting in his judicial capacity, it is equally invalid. It is true that Judge Stump affixed his signature to the approval of the petition as "Judge, De Kalb Circuit Court." But the conduct of a judge surely does not become a judicial act merely on his own say-so. A judge is not free, like a loose cannon, to inflict indiscriminate damage whenever he announces that he is acting in his judicial capacity. 5 </s> [435 U.S. 349, 368] </s> If the standard adopted by the Court is invalid, then what is the proper measure of a judicial act? Contrary to implications in the Court's opinion, my conclusion that what Judge Stump did was not a judicial act is not based upon the fact that he acted with informality, or that he may not have been "in his judge's robes," or "in the courtroom itself." Ante, at 361. And I do not reach this conclusion simply "because the petition was not given a docket number, was not placed on file with the clerk's office, and was approved in an ex parte proceeding without notice to the minor, without a hearing, and without the appointment of a guardian ad litem." Ante, at 360. </s> It seems to me, rather, that the concept of what is a judicial act must take its content from a consideration of the factors that support immunity from liability for the performance of such an act. Those factors were accurately summarized by the Court in Pierson v. Ray, 386 U.S., at 554 : </s> "[I]t `is . . . for the benefit of the public, whose interest it is that the judges should be at liberty to exercise their functions with independence and without fear of consequences.' . . . It is a judge's duty to decide all cases within his jurisdiction that are brought before him, including controversial cases that arouse the most intense feelings in the litigants. His errors may be corrected on appeal, but he should not have to fear that unsatisfied litigants may hound him with litigation charging malice or corruption. Imposing such a burden on judges would contribute not to principled and fearless decision-making but to intimidation." </s> Not one of the considerations thus summarized in the Pierson opinion was present here. There was no "case," controversial [435 U.S. 349, 369] or otherwise. There were no litigants. There was and could be no appeal. And there was not even the pretext of principled decisionmaking. The total absence of any of these normal attributes of a judicial proceeding convinces me that the conduct complained of in this case was not a judicial act. </s> The petitioners' brief speaks of "an aura of deism which surrounds the bench . . . essential to the maintenance of respect for the judicial institution." Though the rhetoric may be overblown, I do not quarrel with it. But if aura there be, it is hardly protected by exonerating from liability such lawless conduct as took place here. And if intimidation would serve to deter its recurrence, that would surely be in the public interest. 6 </s> [Footnote 1 In the Bradley case the plaintiff was a lawyer who had been disbarred; in the Pierson case the plaintiffs had been found guilty after a criminal trial. </s> [Footnote 2 See 13 Wall., at 347, 348, 349, 351, 354, 357. </s> [Footnote 3 This general authority of a parent was held by an Indiana Court of Appeals in 1975 not to include the power to authorize the sterilization of his minor child. A. L. v. G. R. H., 163 Ind. App. 636, 325 N. E. 2d 501. Contrary to the Court's conclusion, ante, at 359, that case does not in the least demonstrate that an Indiana judge is or ever was empowered to act on the merits of a petition like Mrs. McFarlin's. The parent in that case did not petition for judicial approval of her decision, but rather "filed a complaint for declaratory judgment seeking declaration of her right under the common-law attributes of the parent-child relationship to have her son . . . sterilized." 163 Ind. App., at 636-637, 325 N. E. 2d, at 501. The Indiana Court of Appeals' decision simply established a limitation on the parent's common-law rights. It neither sanctioned nor contemplated any procedure for judicial "approval" of the parent's decision. Indeed, the procedure followed in that case offers an instructive contrast to the judicial conduct at issue here: "At the outset, we thank counsel for their excellent efforts in representing a seriously concerned parent and in providing the guardian ad litem defense of the child's interest. Id., at 638, 325 N. E. 2d, at 502. </s> [Footnote 4 These statutes were repealed in 1974. </s> [Footnote 5 Believing that the conduct of Judge Stump on July 9, 1971, was not a judicial act, I do not need to inquire whether he was acting in "the clear absence of all jurisdiction over the subject matter." Bradley v. Fisher, 13 Wall., at 351. "Jurisdiction" is a coat of many colors. I note only that the Court's finding that Judge Stump had jurisdiction to entertain Mrs. McFarlin's petition seems to me to be based upon dangerously broad [435 U.S. 349, 368] criteria. Those criteria are simply that an Indiana statute conferred "jurisdiction of all . . . causes, matters and proceedings," and that there was not in 1971 any Indiana law specifically prohibiting what Judge Stump did. </s> [Footnote 6 The only question before us in this case is the scope of judicial immunity. How the absence of a "judicial act" might affect the issue of whether Judge Stump was acting "under color of" state law within the meaning of 42 U.S.C. 1983, or the issue of whether his act was that of the State within the meaning of the Fourteenth Amendment that need not, therefore, be pursued here. </s> MR. JUSTICE POWELL, dissenting. </s> While I join the opinion of MR. JUSTICE STEWART, I wish to emphasize what I take to be the central feature of this case - Judge Stump's preclusion of any possibility for the vindication of respondents' rights elsewhere in the judicial system. </s> Bradley v. Fisher, 13 Wall. 335 (1872), which established the absolute judicial immunity at issue in this case, recognized that the immunity was designed to further the public interest in an independent judiciary, sometimes at the expense of legitimate individual grievances. Id., at 349; accord, Pierson v. Ray, 386 U.S. 547, 554 (1967). The Bradley Court accepted those costs to aggrieved individuals because the judicial system itself provided other means for protecting individual rights: </s> "Against the consequences of [judges'] erroneous or irregular action, from whatever motives proceeding, the law [435 U.S. 349, 370] has provided for private parties numerous remedies, and to those remedies they must, in such cases, resort." 13 Wall., at 354. </s> Underlying the Bradley immunity, then, is the notion that private rights can be sacrificed in some degree to the achievement of the greater public good deriving from a completely independent judiciary, because there exist alternative forums and methods for vindicating those rights. 1 </s> But where a judicial officer acts in a manner that precludes all resort to appellate or other judicial remedies that otherwise would be available, the underlying assumption of the Bradley doctrine is inoperative. See Pierson v. Ray, supra, at 554. 2 In this case, as MR. JUSTICE STEWART points out, ante, at 369, Judge Stump's unjudicial conduct insured that "[t]here was and could be no appeal." The complete absence of normal judicial process foreclosed resort to any of the "numerous remedies" that "the law has provided for private parties." Bradley, supra, at 354. </s> In sum, I agree with MR. JUSTICE STEWART that petitioner judge's actions were not "judicial," and that he is entitled to no judicial immunity from suit under 42 U.S.C. 1983. </s> [Footnote 1 See Handler & Klein, The Defense of Privilege in Defamation Suits Against Government Executive Officials, 74 Harv. L. Rev. 44, 53-55 (1960); Jaffe, Suits Against Governments and Officers: Damage Actions, 77 Harv. L. Rev. 209, 233-235 (1963); Note, Federal Executive Immunity From Civil Liability in Damages: A Reevaluation of Barr v. Mateo, 77 Colum. L. Rev. 625, 647 (1977). </s> [Footnote 2 In both Bradley and Pierson any errors committed by the judges involved were open to correction on appeal. </s> [435 U.S. 349, 371]

United States Supreme Court HOWSAM, individually and as trustee for the E. RICHARD HOWSAM, JR., IRREVOCABLE LIFE INSURANCE TRUST DATED MAY 14, 1982 v. DEAN WITTER REYNOLDS, INC.(2002) No. 01-800 Argued: October 9, 2002Decided: December 10, 2002 </s> Per respondent Dean Witter Reynolds, Inc.'s standard client agreement, petitioner Howsam chose to arbitrate her dispute with the company before the National Association of Securities Dealers (NASD). NASD's Code of Arbitration Procedure §10304 states that no dispute "shall be eligible for submission ... where six (6) years have elapsed from the occurrence or event giving rise to the dispute." Dean Witter filed this suit, asking the Federal District Court to declare the dispute ineligible for arbitration because it was more than six years old and seeking an injunction to prohibit Howsam from proceeding in arbitration. The court dismissed the action, stating that the NASD arbitrator should interpret and apply the NASD rule. In reversing, the Tenth Circuit found that the rule's application presented a question of the underlying dispute's "arbitrability"; and the presumption is that a court will ordinarily decide an arbitrability question. </s> Held:An NASD arbitrator should apply the time limit rule to the underlying dispute. Pp. 3-7. </s> (a)"[A]rbitration is a matter of contract and a party cannot be required to submit to arbitration any dispute which he has not agreed so to submit." Steelworkers v. Warrior & Gulf Nav. Co., 363 U.S. 574, 582. The question whether parties have submitted a particular dispute to arbitration, i.e., the "question of arbitrability," is "an issue for judicial determination [u]nless the parties clearly and unmistakably provide otherwise." AT&T Technologies, Inc. v. Communications Workers, 475 U.S. 643, 649. The phrase "question of arbitrability" has a limited scope, applicable in the kind of narrow circumstance where contracting parties would likely have expected a court to have decided the gateway matter. But the phrase is not applicable in other kinds of general circumstance where parties would likely expect that an arbitrator would decide the question--"procedural questions which grow out of the dispute and bear on its final disposition," John Wiley & Sons, Inc. v. Livingston, 376 U.S. 543, 557, and "allegation[s] of waiver, delay, or a like defense to arbitrability," Moses H. Cone Memorial Hospital v. Mercury Constr. Corp., 460 U.S. 1, 24-25. Following this precedent, the application of the NASD rule is not a "question of arbitrability" but an "aspec[t] of the [controversy] which called the grievance procedures into play." John Wiley & Sons, Inc., supra, at 559. NASD arbitrators, comparatively more expert about their own rule's meaning, are comparatively better able to interpret and to apply it. In the absence of any statement to the contrary in the arbitration agreement, it is reasonable to infer that the parties intended the agreement to reflect that understanding. And for the law to assume an expectation that aligns (1) decisionmaker with (2) comparative expertise will help better to secure the underlying controversy's fair and expeditious resolution. Pp. 3-6. </s> (b)Dean Witter's argument that, even without an antiarbitration presumption, the contracts call for judicial determination is unpersuasive. The word "eligible" in the NASD Code's time limit rule does not, as Dean Witter claims, indicate the parties' intent for the rule to be resolved by the court prior to arbitration. Parties to an arbitration contract would normally expect a forum-based decisionmaker to decide forum-specific procedural gateway matters, and any temptation here to place special antiarbitration weight on the word "eligible" in §10304 is counterbalanced by the NASD rule that "arbitrators shall be empowered to interpret and determine the applicability" of all code provisions, §10324. Pp. 6-7. </s> 261 F. 3d 956, reversed. </s> Breyer, J., delivered the opinion of the Court, in which Rehnquist, C.J., and Stevens, Scalia, Kennedy, Souter, and Ginsburg, JJ., joined. Thomas, J., filed an opinion concurring in the judgment. O'Connor, J., took no part in the consideration or decision of the case. </s> KAREN HOWSAM, etc., PETITIONER v. DEANWITTER REYNOLDS, INC. </s> on writ of certiorari to the united states court of appeals for the tenth circuit </s> [December 10, 2002] </s> Justice Breyer delivered the opinion of the Court. </s> This case focuses upon an arbitration rule of the National Association of Securities Dealers (NASD). The rule states that no dispute "shall be eligible for submission to arbitration ... where six (6) years have elapsed from the occurrence or event giving rise to the . . . dispute." NASD Code of Arbitration Procedure §10304 (1984) (NASD Code or Code). We must decide whether a court or an NASD arbitrator should apply the rule to the underlying controversy. We conclude that the matter is for the arbitrator. </s> I </s> The underlying controversy arises out of investment advice that Dean Witter Reynolds, Inc. (Dean Witter), provided its client, Karen Howsam, when, some time between 1986 and 1994, it recommended that she buy and hold interests in four limited partnerships. Howsam says that Dean Witter misrepresented the virtues of the partnerships. The resulting controversy falls within their standard Client Service Agreement's arbitration clause, which provides: </s> "all controversies ... concerning or arising from ... any account ... , any transaction ... , or ... the construction, performance or breach of ... any ... agreement between us ... shall be determined by arbitration before any self-regulatory organization or exchange of which Dean Witter is a member." App.6-7. </s> The agreement also provides that Howsam can select the arbitration forum. And Howsam chose arbitration before the NASD. </s> To obtain NASD arbitration, Howsam signed the NASD's Uniform Submission Agreement. That agreement specified that the "present matter in controversy" was submitted for arbitration "in accordance with" the NASD's "Code of Arbitration Procedure." Id., at 24. And that Code contains the provision at issue here, a provision stating that no dispute "shall be eligible for submission ... where six (6) years have elapsed from the occurrence or event giving rise to the ... dispute." NASD Code §10304. </s> After the Uniform Submission Agreement was executed, Dean Witter filed this lawsuit in Federal District Court. It asked the court to declare that the dispute was "ineligible for arbitration" because it was more than six years old. App. 45. And it sought an injunction that would prohibit Howsam from proceeding in arbitration. The District Court dismissed the action on the ground that the NASD arbitrator, not the court, should interpret and apply the NASD rule. The Court of Appeals for the Tenth Circuit, however, reversed. 261 F.3d 956 (2001). In its view, application of the NASD rule presented a question of the underlying dispute's "arbitrability"; and the presumption is that a court, not an arbitrator, will ordinarily decide an "arbitrability" question. See, e.g., First Options of Chicago, Inc. v. Kaplan, 514 U.S. 938 (1995). </s> The Courts of Appeals have reached different conclusions about whether a court or an arbitrator primarily should interpret and apply this particular NASD rule. Compare, e.g., 261 F.3d 956 (CA10 2001) (case below) (holding that the question is for the court); J. E. Liss & Co. v. Levin, 201 F.3d 848, 851 (CA7 2000) (same), with PaineWebber Inc. v. Elahi, 87 F.3d 589 (CA1 1996) (holding that NASD §15, currently §10304, is presumptively for the arbitrator); Smith Barney Shearson, Inc. v. Boone, 47 F.3d 750 (CA5 1995) (same). We granted Howsam's petition for certiorari to resolve this disagreement. And we now hold that the matter is for the arbitrator. </s> II </s> This Court has determined that "arbitration is a matter of contract and a party cannot be required to submit to arbitration any dispute which he has not agreed so to submit." Steelworkers v. Warrior & Gulf Nav. Co., 363 U.S. 574, 582 (1960); see also First Options, supra, at 942-943. Although the Court has also long recognized and enforced a "liberal federal policy favoring arbitration agreements," Moses H. Cone Memorial Hospital v. Mercury Constr. Corp., 460 U. S. 1, 24-25 (1983), it has made clear that there is an exception to this policy: The question whether the parties have submitted a particular dispute to arbitration, i.e., the "question of arbitrability," is "an issue for judicial determination [u]nless the parties clearly and unmistakably provide otherwise." AT&T Technologies, Inc. v. Communications Workers, 475 U. S. 643, 649 (1986) (emphasis added); First Options, supra, at 944. We must decide here whether application of the NASD time limit provision falls into the scope of this last-mentioned interpretive rule. </s> Linguistically speaking, one might call any potentially dispositive gateway question a "question of arbitrability," for its answer will determine whether the underlying controversy will proceed to arbitration on the merits. The Court's case law, however, makes clear that, for purposes of applying the interpretive rule, the phrase "question of arbitrability" has a far more limited scope. See 514 U.S., at 942. The Court has found the phrase applicable in the kind of narrow circumstance where contracting parties would likely have expected a court to have decided the gateway matter, where they are not likely to have thought that they had agreed that an arbitrator would do so, and, consequently, where reference of the gateway dispute to the court avoids the risk of forcing parties to arbitrate a matter that they may well not have agreed to arbitrate. </s> Thus, a gateway dispute about whether the parties are bound by a given arbitration clause raises a "question of arbitrability" for a court to decide. See id., at 943-946 (holding that a court should decide whether the arbitration contract bound parties who did not sign the agreement); John Wiley & Sons, Inc. v. Livingston, 376 U. S. 543, 546-547 (1964) (holding that a court should decide whether an arbitration agreement survived a corporate merger and bound the resulting corporation). Similarly, a disagreement about whether an arbitration clause in a concededly binding contract applies to a particular type of controversy is for the court. See, e.g., AT&T Technologies, supra, at 651-652 (holding that a court should decide whether a labor-management layoff controversy falls within the arbitration clause of a collective-bargaining agreement); Atkinson v. Sinclair Refining Co., 370 U. S. 238, 241-243 (1962) (holding that a court should decide whether a clause providing for arbitration of various "grievances" covers claims for damages for breach of a no-strike agreement). </s> At the same time the Court has found the phrase "question of arbitrability" not applicable in other kinds of general circumstance where parties would likely expect that an arbitrator would decide the gateway matter. Thus "`procedural' questions which grow out of the dispute and bear on its final disposition" are presumptively not for the judge, but for an arbitrator, to decide. John Wiley, supra, at 557 (holding that an arbitrator should decide whether the first two steps of a grievance procedure were completed, where these steps are prerequisites to arbitration). So, too, the presumption is that the arbitrator should decide "allegation[s] of waiver, delay, or a like defense to arbitrability." Moses H. Cone Memorial Hospital, supra, at 24-25. Indeed, the Revised Uniform Arbitration Act of 2000 (RUAA), seeking to "incorporate the holdings of the vast majority of state courts and the law that has developed under the [Federal Arbitration Act]," states that an "arbitrator shall decide whether a condition precedent to arbitrability has been fulfilled." RUAA §6(c) and comment 2, 7 U. L. A. 12-13 (Supp. 2002). And the comments add that "in the absence of an agreement to the contrary, issues of substantive arbitrability ... are for a court to decide and issues of procedural arbitrability, i.e., whether prerequisites such as time limits, notice, laches, estoppel, and other conditions precedent to an obligation to arbitrate have been met, are for the arbitrators to decide." Id., §6, comment 2, 7 U. L. A., at 13 (emphasis added). </s> Following this precedent, we find that the applicability of the NASD time limit rule is a matter presumptively for the arbitrator, not for the judge. The time limit rule closely resembles the gateway questions that this Court has found not to be "questions of arbitrability." E.g., Moses H. Cone Memorial Hospital, supra, at 24-25 (referring to "waiver, delay, or a like defense"). Such a dispute seems an "aspec[t] of the [controversy] which called the grievance procedures into play." John Wiley, supra, at 559. </s> Moreover, the NASD arbitrators, comparatively more expert about the meaning of their own rule, are comparatively better able to interpret and to apply it. In the absence of any statement to the contrary in the arbitration agreement, it is reasonable to infer that the parties intended the agreement to reflect that understanding. Cf. First Options, supra, at 944-945. And for the law to assume an expectation that aligns (1) decisionmaker with (2) comparative expertise will help better to secure a fair and expeditious resolution of the underlying controversy--a goal of arbitration systems and judicial systems alike. </s> We consequently conclude that the NASD's time limit rule falls within the class of gateway procedural disputes that do not present what our cases have called "questions of arbitrability." And the strong pro-court presumption as to the parties' likely intent does not apply. </s> III </s> Dean Witter argues that, in any event, i.e., even without an antiarbitration presumption, we should interpret the contracts between the parties here as calling for judicial determination of the time limit matter. Howsam's execution of a Uniform Submission Agreement with the NASD in 1997 effectively incorporated the NASD Code into the parties' agreement. Dean Witter notes the Code's time limit rule uses the word "eligible." That word, in Dean Witter's view, indicates the parties' intent for the time limit rule to be resolved by the court prior to arbitration. </s> We do not see how that is so. For the reasons stated in Part II, supra, parties to an arbitration contract would normally expect a forum-based decisionmaker to decide forum-specific procedural gateway matters. And any temptation here to place special antiarbitration weight on the appearance of the word "eligible" in the NASD Code rule is counterbalanced by a different NASD rule; that rule states that "arbitrators shall be empowered to interpret and determine the applicability of all provisions under this Code." NASD Code §10324. </s> Consequently, without the help of a special arbitration-disfavoring presumption, we cannot conclude that the parties intended to have a court, rather than an arbitrator, interpret and apply the NASD time limit rule. And as we held in Part II, supra, that presumption does not apply. </s> IV </s> For these reasons, the judgment of the Tenth Circuit is </s> Reversed. </s> Justice O'Connor took no part in the consideration or decision of this case. </s> KAREN HOWSAM, etc., PETITIONER v. DEANWITTER REYNOLDS, INC. </s> on writ of certiorari to the united states court of appeals for the tenth circuit </s> [December 10, 2002] </s> Justice Thomas, concurring in the judgment. </s> As our precedents make clear and as the Court notes, arbitration is a matter of contract. Ante, at 3. In Volt Information Sciences, Inc. v. Board of Trustees of Leland Stanford Junior Univ., 489 U.S. 468 (1989), we held that under the Federal Arbitration Act courts must enforce private agreements to arbitrate just as they would ordinary contracts: in accordance with their terms. Under Volt, when an arbitration agreement contains a choice-of-law provision, that provision must be honored, and a court interpreting the agreement must follow the law of the jurisdiction selected by the parties. See id., at 478-479 (enforcing a choice-of-law provision that incorporated a state procedural rule concerning arbitration proceedings); see also Mastrobuono v. Shearson Lehman Hutton, Inc., 514 U.S. 52, 67 (1995) (Thomas, J., dissenting) (concluding that the choice-of-law provision in question was indistinguishable from the one in Volt and, thus, should have been given effect). A straightforward application of these principles easily resolves the question presented in this case. </s> The agreement now before us provides that it "shall be construed and enforced in accordance with the laws of the State of New York." App. 6. Interpreting two agreements containing provisions virtually identical to the ones in dispute here, the New York Court of Appeals held that issues implicating §15 (now §10304) of the National Association of Securities Dealers Code of Arbitration Procedure are for arbitrators to decide. See Smith Barney Shearson Inc. v. Sacharow, 91 N.Y. 2d 39, 689 N.E.2d 884 (1997). Because the parties agreed to be bound by New York law and because Volt requires us to enforce their agreement, I would permit arbitrators to resolve the §10304 issues that have arisen in this case, just as New York case lawprovides. The Court follows a different route to reachthe same conclusion; accordingly, I concur only in the judgment.

United States Supreme Court ALEXANDER v. GARDNER-DENVER CO.(1974) No. 72-5847 Argued: November 5, 1973Decided: February 19, 1974 </s> Following discharge by his employer, respondent company, petitioner, a black, filed a grievance under the collective-bargaining agreement between respondent and petitioner's union, which contained a broad arbitration clause, petitioner ultimately claiming that his discharge resulted from racial discrimination. Upon rejection by the company of petitioner's claims, an arbitration hearing was held, prior to which petitioner filed with the Colorado Civil Rights Commission a racial discrimination complaint which was referred to the Equal Employment Opportunity Commission (EEOC). The arbitrator ruled that petitioner's discharge was for cause. Following the EEOC's subsequent determination that there was not reasonable ground to believe that a violation of Title VII of the Civil Rights Act of 1964 had occurred, petitioner brought this action in District Court, alleging that his discharge resulted from a racially discriminatory employment practice in violation of the Act. The District Court granted respondent's motion for summary judgment, holding that petitioner was bound by the prior arbitral decision and had no right to sue under Title VII. The Court of Appeals affirmed. Held: An employee's statutory right to trial de novo under Title VII of the Civil Rights Act of 1964 is not foreclosed by prior submission of his claim to final arbitration under the nondiscrimination clause of a collective-bargaining agreement. Pp. 44-60. </s> (a) Title VII was designed to supplement, rather than supplant, existing laws and institutions relating to employment discrimination, as may be inferred from the legislative history of Title VII, which manifests a congressional intent to allow an individual to pursue rights under Title VII and other applicable state and federal statutes. Pp. 47-49. </s> (b) The doctrine of election of remedies is inapplicable in the present context, which involves statutory rights distinctly separate from the employee's contractual rights, regardless of the fact that violation of both rights may have resulted from the same factual occurrence. Pp. 49-51. [415 U.S. 36, 37] </s> (c) By merely resorting to the arbitral forum petitioner did not waive his cause of action under Title VII; the rights conferred thereby cannot be prospectively waived and form no part of the collective-bargaining process. Pp. 51-52. </s> (d) The arbitrator's authority is confined to resolution of questions of contractual rights, regardless of whether they resemble or duplicate Title VII rights. Pp. 52-54. </s> (e) In instituting a Title VII action, the employee is not seeking review of the arbitrator's decision and thus getting (as the District Court put it) "two strings to his bow when the employer has only one," but is asserting a right independent of the arbitration process that the statute gives to employees, the only possible victims of discriminatory employment practices. P. 54. </s> (f) Permitting an employee to resort to the judicial forum after arbitration procedures have been followed does not undermine the employer's incentive to arbitrate, as most employers will regard the benefits from a no-strike pledge in the arbitration agreement as outweighing any costs resulting from giving employees an arbitral antidiscrimination remedy in addition to their Title VII judicial remedy. Pp. 54-55. </s> (g) A policy of deferral by federal courts to arbitral decisions (as opposed to adoption of a preclusion rule) would not comport with the congressional objective that federal courts should exercise the final responsibility for enforcement of Title VII and would lead to: the arbitrator's emphasis on the law of the shop rather than the law of the land; factfinding and other procedures less complete than those followed in a judicial forum; and perhaps employees bypassing arbitration in favor of litigation. Pp. 55-59. </s> (h) In considering an employee's claim, the federal court may admit the arbitral decision as evidence and accord it such weight as may be appropriate under the facts and circumstances of each case. Pp. 59-60. </s> 466 F.2d 1209, reversed. </s> POWELL, J., delivered the opinion for a unanimous Court. </s> Paul J. Spiegelman argued the cause for petitioner. With him on the brief was Russell Specter. </s> Robert G. Good argued the cause and filed a brief for respondent. [415 U.S. 36, 38] </s> Deputy Solicitor General Wallace argued the cause for the United States as amicus curiae urging reversal. With him on the brief were Solicitor General Bork, Assistant Attorney General Pottinger, Keith A. Jones, Denis F. Gordon, Eileen M. Stein, Joseph T. Eddins, and Beatrice Rosenberg. * </s> [Footnote * Briefs of amici curiae urging affirmance were filed by Milton A. Smith and Jay S. Siegel for the Chamber of Commerce of the United States, and by Gerard C. Smetana, Lawrence M. Cohen, and Alan Raywid for the American Retail Federation. </s> MR. JUSTICE POWELL delivered the opinion of the Court. </s> This case concerns the proper relationship between federal courts and the grievance-arbitration machinery of collective-bargaining agreements in the resolution and enforcement of an individual's rights to equal employment opportunities under Title VII of the Civil Rights Act of 1964, 78 Stat. 253, 42 U.S.C. 2000e et seq. Specifically, we must decide under what circumstances, if any, an employee's statutory right to a trial de novo under Title VII may be foreclosed by prior submission of his claim to final arbitration under the nondiscrimination clause of a collective-bargaining agreement. </s> I </s> In May 1966, petitioner Harrell Alexander, Sr., a black, was hired by respondent Gardner-Denver Co. (the company) to perform maintenance work at the company's plant in Denver, Colorado. In June 1968, petitioner was awarded a trainee position as a drill operator. He remained at that job until his discharge from employment on September 29, 1969. The company informed petitioner that he was being discharged for producing too many defective or unusable parts that had to be scrapped. [415 U.S. 36, 39] </s> On October 1, 1969, petitioner filed a grievance under the collective-bargaining agreement in force between the company and petitioner's union, Local No. 3029 of the United Steelworkers of America (the union). The grievance stated: "I feel I have been unjustly discharged and ask that I be reinstated with full seniority and pay." No explicit claim of racial discrimination was made. </s> Under Art. 4 of the collective-bargaining agreement, the company retained "the right to hire, suspend or discharge [employees] for proper cause." 1 Article 5, 2, provided, however, that "there shall be no discrimination against any employee on account of race, color, religion, sex, national origin, or ancestry," 2 and Art. 23, 6 (a), stated that "[n]o employee will be discharged, suspended or given a written warning notice except for just cause." [415 U.S. 36, 40] The agreement also contained a broad arbitration clause covering "differences aris[ing] between the Company and the Union as to the meaning and application of the provisions of this Agreement" and "any trouble aris[ing] in the plant." 3 Disputes were to be submitted to a multistep [415 U.S. 36, 41] grievance procedure, the first four steps of which involved negotiations between the company and the union. If the dispute remained unresolved, it was to be remitted to compulsory arbitration. The company and the union were to select and pay the arbitrator, and [415 U.S. 36, 42] his decision was to be "final and binding upon the Company, the Union, and any employee or employees involved." The agreement further provided that "[t]he arbitrator shall not amend, take away, add to, or change any of the provisions of this Agreement, and the arbitrator's decision must be based solely upon an interpretation of the provisions of this Agreement." The parties also agreed that there "shall be no suspension of work" over disputes covered by the grievance-arbitration clause. </s> The union processed petitioner's grievance through the above machinery. In the final pre-arbitration step, petitioner raised, apparently for the first time, the claim that his discharge resulted from racial discrimination. The company rejected all of petitioner's claims, and the grievance proceeded to arbitration. Prior to the arbitration hearing, however, petitioner filed a charge of racial discrimination with the Colorado Civil Rights Commission, which referred the complaint to the Equal Employment Opportunity Commission on November 5, 1969. </s> At the arbitration hearing on November 20, 1969, petitioner testified that his discharge was the result of racial discrimination and informed the arbitrator that he had filed a charge with the Colorado Commission because he "could not rely on the union." The union introduced a letter in which petitioner stated that he was "knowledgeable that in the same plant others have scrapped an equal amount and sometimes in excess, but by all logical reasoning I . . . have been the target of preferential discriminatory treatment." The union representative also testified that the company's usual practice was to transfer unsatisfactory trainee drill operators back to their former positions. </s> On December 30, 1969, the arbitrator ruled that petitioner had been "discharged for just cause." He made no reference to petitioner's claim of racial discrimination. [415 U.S. 36, 43] The arbitrator stated that the union had failed to produce evidence of a practice of transferring rather than discharging trainee drill operators who accumulated excessive scrap, but he suggested that the company and the union confer on whether such an arrangement was feasible in the present case. </s> On July 25, 1970, the Equal Employment Opportunity Commission determined that there was not reasonable cause to believe that a violation of Title VII of the Civil Rights Act of 1964, 42 U.S.C. 2000e et seq., had occurred. The Commission later notified petitioner of his right to institute a civil action in federal court within 30 days. Petitioner then filed the present action in the United States District Court for the District of Colorado, alleging that his discharge resulted from a racially discriminatory employment practice in violation of 703 (a) (1) of the Act, 42 U.S.C. 2000e-2 (a) (1). </s> The District Court granted respondent's motion for summary judgment and dismissed the action. 346 F. Supp. 1012 (1971). The court found that the claim of racial discrimination had been submitted to the arbitrator and resolved adversely to petitioner. 4 It then held that petitioner, having voluntarily elected to pursue his grievance to final arbitration under the nondiscrimination clause of the collective-bargaining agreement, was bound by the arbitral decision and thereby precluded from suing his employer under Title VII. The Court of Appeals for the Tenth Circuit affirmed per curiam on the basis of the District Court's opinion. 466 F.2d 1209 (1972). </s> We granted petitioner's application for certiorari. 410 U.S. 925 (1973). We reverse. [415 U.S. 36, 44] </s> II </s> Congress enacted Title VII of the Civil Rights Act of 1964, 42 U.S.C. 2000e et seq., to assure equality of employment opportunities by eliminating those practices and devices that discriminate on the basis of race, color, religion, sex, or national origin. McDonnell Douglas Corp. v. Green, 411 U.S. 792, 800 (1973); Griggs v. Duke Power Co., 401 U.S. 424, 429 -430 (1971). Cooperation and voluntary compliance were selected as the preferred means for achieving this goal. To this end, Congress created the Equal Employment Opportunity Commission and established a procedure whereby existing state and local equal employment opportunity agencies, as well as the Commission, would have an opportunity to settle disputes through conference, conciliation, and persuasion before the aggrieved party was permitted to file a lawsuit. In the Equal Employment Opportunity Act of 1972, Pub. L. 92-261, 86 Stat. 103, Congress amended Title VII to provide the Commission with further authority to investigate individual charges of discrimination, to promote voluntary compliance with the requirements of Title VII, and to institute civil actions against employers or unions named in a discrimination charge. </s> Even in its amended form, however, Title VII does not provide the Commission with direct powers of enforcement. The Commission cannot adjudicate claims or impose administrative sanctions. Rather, final responsibility for enforcement of Title VII is vested with federal courts. The Act authorizes courts to issue injunctive relief and to order such affirmative action as may be appropriate to remedy the effects of unlawful employment practices. 42 U.S.C. 2000e-5 (f) and (g) (1970 ed., Supp. II). Courts retain these broad remedial powers despite a Commission finding of no reasonable cause to believe that the Act has been violated. McDonnell [415 U.S. 36, 45] Douglas Corp. v. Green, supra, at 798-799. Taken together, these provisions make plain that federal courts have been assigned plenary powers to secure compliance with Title VII. </s> In addition to reposing ultimate authority in federal courts, Congress gave private individuals a significant role in the enforcement process of Title VII. Individual grievants usually initiate the Commission's investigatory and conciliatory procedures. And although the 1972 amendment to Title VII empowers the Commission to bring its own actions, the private right of action remains an essential means of obtaining judicial enforcement of Title VII. 42 U.S.C. 2000e-5 (f) (1) (1970 ed., Supp. II). In such cases, the private litigant not only redresses his own injury but also vindicates the important congressional policy against discriminatory employment practices. Hutchings v. United States Industries, 428 F.2d 303, 310 (CA5 1970); Bowe v. Colgate-Palmolive Co., 416 F.2d 711, 715 (CA7 1969); Jenkins v. United Gas Corp., 400 F.2d 28, 33 (CA5 1968). See also Newman v. Piggie Park Enterprises, 390 U.S. 400, 402 (1968). </s> Pursuant to this statutory scheme, petitioner initiated the present action for judicial consideration of his rights under Title VII. The District Court and the Court of Appeals held, however, that petitioner was bound by the prior arbitral decision and had no right to sue under Title VII. 5 Both courts evidently thought that this result was [415 U.S. 36, 46] dictated by notions of election of remedies and waiver and by the federal policy favoring arbitration of labor disputes, as enunciated by this Court in Textile Workers Union v. Lincoln Mills, 353 U.S. 448 (1957), and the Steelworkers trilogy. 6 See also Boys Markets v. [415 U.S. 36, 47] Retail Clerks Union, 398 U.S. 235 (1970); Gateway Coal Co. v. United Mine Workers of America, 414 U.S. 368 (1974). We disagree. </s> III </s> Title VII does not speak expressly to the relationship between federal courts and the grievance-arbitration machinery of collective-bargaining agreements. It does, however, vest federal courts with plenary powers to enforce the statutory requirements; and it specifies with precision the jurisdictional prerequisites that an individual must satisfy before he is entitled to institute a lawsuit. In the present case, these prerequisites were met when petitioner (1) filed timely a charge of employment discrimination with the Commission, and (2) received and acted upon the Commission's statutory notice of the right to sue. 42 U.S.C. 2000e-5 (b), (e), and (f). See McDonnell Douglas Corp. v. Green, supra, at 798. There is no suggestion in the statutory scheme that a prior arbitral decision either forecloses an individual's right to sue or divests federal courts of jurisdiction. </s> In addition, legislative enactments in this area have long evinced a general intent to accord parallel or overlapping remedies against discrimination. 7 In the Civil Rights Act of 1964, 42 U.S.C. 2000a et seq., Congress indicated that it considered the policy against discrimination to be of the "highest priority." Newman v. Piggie Park Enterprises, supra, at 402. Consistent with this view, Title VII provides for consideration of employment-discrimination claims in several forums. See 42 U.S.C. 2000e-5 (b) (1970 ed., Supp. II) (EEOC); 42 U.S.C. 2000e-5 (c) (1970 ed., Supp. II) (state and local agencies); 42 U.S.C. 2000e-5 (f) (1970 ed., Supp. II) (federal courts). And, in general, submission of a [415 U.S. 36, 48] claim to one forum does not preclude a later submission to another. 8 Moreover, the legislative history of Title VII manifests a congressional intent to allow an individual to pursue independently his rights under both Title VII and other applicable state and federal statutes. 9 The clear inference is that Title VII was designed to supplement, rather than supplant, existing laws and institutions relating [415 U.S. 36, 49] to employment discrimination. In sum, Title VII's purpose and procedures strongly suggest that an individual does not forfeit his private cause of action if he first pursues his grievance to final arbitration under the nondiscrimination clause of a collective-bargaining agreement. </s> In reaching the opposite conclusion, the District Court relied in part on the doctrine of election of remedies. 10 That doctrine, which refers to situations where an individual pursues remedies that are legally or factually inconsistent, 11 has no application in the present context. In submitting his grievance to arbitration, an employee seeks to vindicate his contractual right under a collective-bargaining agreement. By contrast, in filing a lawsuit under Title VII, an employee asserts independent statutory [415 U.S. 36, 50] rights accorded by Congress. The distinctly separate nature of these contractual and statutory rights is not vitiated merely because both were violated as a result of the same factual occurrence. And certainly no inconsistency results from permitting both rights to be enforced in their respectively appropriate forums. The resulting scheme is somewhat analogous to the procedure under the National Labor Relations Act, as amended, 12 where disputed transactions may implicate both contractual and statutory rights. Where the statutory right underlying a particular claim may not be abridged by contractual agreement, the Court has recognized that consideration of the claim by the arbitrator as a contractual dispute under the collective-bargaining agreement does not preclude subsequent consideration of the claim by the National Labor Relations Board as an unfair labor practice charge or as a petition for clarification of the union's representation certificate under the Act. Carey v. Westinghouse Corp., 375 U.S. 261 (1964). 13 Cf. Smith v. Evening News Assn., 371 U.S. 195 (1962). There, as here, the relationship between the forums is complementary since consideration of the claim by both forums may promote the policies underlying [415 U.S. 36, 51] each. Thus, the rationale behind the election-of-remedies doctrine cannot support the decision below. 14 </s> We are also unable to accept the proposition that petitioner waived his cause of action under Title VII. To begin, we think it clear that there can be no prospective waiver of an employee's rights under Title VII. It is true, of course, that a union may waive certain statutory rights related to collective activity, such as the right to strike. Mastro Plastics Corp. v. NLRB, 350 U.S. 270 (1956); Boys Markets v. Retail Clerks Union, 398 U.S. 235 (1970). These rights are conferred on employees collectively to foster the processes of bargaining and properly may be exercised or relinquished by the union as collective-bargaining agent to obtain economic benefits for union members. Title VII, on the other hand, stands on plainly different ground; it concerns not majoritarian processes, but an individual's right to equal employment opportunities. Title VII's strictures are absolute and represent a congressional command that each employee be free from discriminatory practices. Of necessity, the rights conferred can form no part of the collective-bargaining process since waiver of these rights would defeat the paramount congressional purpose behind Title VII. In these circumstances, an employee's rights under Title VII are not susceptible of [415 U.S. 36, 52] prospective waiver. See Wilko v. Swan, 346 U.S. 427 (1953). </s> The actual submission of petitioner's grievance to arbitration in the present case does not alter the situation. Although presumably an employee may waive his cause of action under Title VII as part of a voluntary settlement, 15 mere resort to the arbitral forum to enforce contractual rights constitutes no such waiver. Since an employee's rights under Title VII may not be waived prospectively, existing contractual rights and remedies against discrimination must result from other concessions already made by the union as part of the economic bargain struck with the employer. It is settled law that no additional concession may be exacted from any employee as the price for enforcing those rights. J. I. Case Co. v. NLRB, 321 U.S. 332, 338 -339 (1944). </s> Moreover, a contractual right to submit a claim to arbitration is not displaced simply because Congress also has provided a statutory right against discrimination. Both rights have legally independent origins and are equally available to the aggrieved employee. This point becomes apparent through consideration of the role of the arbitrator in the system of industrial self-government. 16 </s> [415 U.S. 36, 53] As the proctor of the bargain, the arbitrator's task is to effectuate the intent of the parties. His source of authority is the collective-bargaining agreement, and he must interpret and apply that agreement in accordance with the "industrial common law of the shop" and the various needs and desires of the parties. The arbitrator, however, has no general authority to invoke public laws that conflict with the bargain between the parties: </s> "[A]n arbitrator is confined to interpretation and application of the collective bargaining agreement; he does not sit to dispense his own brand of industrial justice. He may of course look for guidance from many sources, yet his award is legitimate only so long as it draws its essence from the collective bargaining agreement. When the arbitrator's words manifest an infidelity to this obligation, courts have no choice but to refuse enforcement of the award." United Steelworkers of America v. Enterprise Wheel & Car Corp., 363 U.S. 593, 597 (1960). </s> If an arbitral decision is based "solely upon the arbitrator's view of the requirements of enacted legislation," rather than on an interpretation of the collective-bargaining agreement, the arbitrator has "exceeded the scope of the submission," and the award will not be enforced. Ibid. Thus the arbitrator has authority to resolve only questions [415 U.S. 36, 54] of contractual rights, and this authority remains regardless of whether certain contractual rights are similar to, or duplicative of, the substantive rights secured by Title VII. </s> IV </s> The District Court and the Court of Appeals reasoned that to permit an employee to have his claim considered in both the arbitral and judicial forums would be unfair since this would mean that the employer, but not the employee, was bound by the arbitral award. In the District Court's words, it could not "accept a philosophy which gives the employee two strings to his bow when the employer has only one." 346 F. Supp., at 1019. This argument mistakes the effect of Title VII. Under the Steelworkers trilogy, an arbitral decision is final and binding on the employer and employee, and judicial review is limited as to both. But in instituting an action under Title VII, the employee is not seeking review of the arbitrator's decision. Rather, he is asserting a statutory right independent of the arbitration process. An employer does not have "two strings to his bow" with respect to an arbitral decision for the simple reason that Title VII does not provide employers with a cause of action against employees. An employer cannot be the victim of discriminatory employment practices. Oubichon v. North American Rockwell Corp., 482 F.2d 569, 573 (CA9 1973). </s> The District Court and the Court of Appeals also thought that to permit a later resort to the judicial forum would undermine substantially the employer's incentive to arbitrate and would "sound the death knell for arbitration clauses in labor contracts." 346 F. Supp., at 1019. Again, we disagree. The primary incentive for an employer to enter into an arbitration agreement is the union's reciprocal promise not to strike. As the [415 U.S. 36, 55] Court stated in Boys Markets v. Retail Clerks Union, 398 U.S., at 248 , "a no-strike obligation, express or implied, is the quid pro quo for an undertaking by the employer to submit grievance disputes to the process of arbitration." It is not unreasonable to assume that most employers will regard the benefits derived from a no-strike pledge as outweighing whatever costs may result from according employees an arbitral remedy against discrimination in addition to their judicial remedy under Title VII. Indeed, the severe consequences of a strike may make an arbitration clause almost essential from both the employees' and the employer's perspective. Moreover, the grievance-arbitration machinery of the collective-bargaining agreement remains a relatively inexpensive and expeditious means for resolving a wide range of disputes, including claims of discriminatory employment practices. Where the collective-bargaining agreement contains a nondiscrimination clause similar to Title VII, and where arbitral procedures are fair and regular, arbitration may well produce a settlement satisfactory to both employer and employee. An employer thus has an incentive to make available the conciliatory and therapeutic processes of arbitration which may satisfy an employee's perceived need to resort to the judicial forum, thus saving the employer the expense and aggravation, associated with a lawsuit. For similar reasons, the employee also has a strong incentive to arbitrate grievances, and arbitration may often eliminate those misunderstandings or discriminatory practices that might otherwise precipitate resort to the judicial forum. </s> V </s> Respondent contends that even if a preclusion rule is not adopted, federal courts should defer to arbitral decisions on discrimination claims where: (i) the claim [415 U.S. 36, 56] was before the arbitrator; (ii) the collective-bargaining agreement prohibited the form of discrimination charged in the suit under Title VII; and (iii) the arbitrator has authority to rule on the claim and to fashion a remedy. 17 Under respondent's proposed rule, a court would grant summary judgment and dismiss the employee's action if the above conditions were met. The rule's obvious consequence in the present case would be to deprive the petitioner of his statutory right to attempt to establish his claim in a federal court. </s> At the outset, it is apparent that a deferral rule would be subject to many of the objections applicable to a preclusion rule. The purpose and procedures of Title VII indicate that Congress intended federal courts to exercise final responsibility for enforcement of Title VII; deferral to arbitral decisions would be inconsistent with that goal. Furthermore, we have long recognized that "the choice of forums inevitably affects the scope of the substantive right to be vindicated." U.S. Bulk Carriers v. Arguelles, 400 U.S. 351, 359 -360 (1971) (Harlan, J., concurring). Respondent's deferral rule is necessarily premised on the assumption that arbitral processes are commensurate with judicial processes and that Congress impliedly intended federal courts to defer to arbitral decisions on Title VII issues. We deem this supposition unlikely. </s> Arbitral procedures, while well suited to the resolution of contractual disputes, make arbitration a comparatively inappropriate forum for the final resolution of rights created by Title VII. This conclusion rests first on the special role of the arbitrator, whose task is to effectuate the intent of the parties rather than the [415 U.S. 36, 57] requirements of enacted legislation. Where the collective-bargaining agreement conflicts with Title VII, the arbitrator must follow the agreement. To be sure, the tension between contractual and statutory objectives may be mitigated where a collective-bargaining agreement contains provisions facially similar to those of Title VII. But other facts may still render arbitral processes comparatively inferior to judicial processes in the protection of Title VII rights. Among these is the fact that the specialized competence of arbitrators pertains primarily to the law of the shop, not the law of the land. United Steelworkers of America v. Warrior & Gulf Navigation Co., 363 U.S. 574, 581 -583 (1960). 18 Parties usually choose an arbitrator because they trust his knowledge and judgment concerning the demands and norms of industrial relations. On the other hand, the resolution of statutory or constitutional issues is a primary responsibility of courts, and judicial construction has proved especially necessary with respect to Title VII, whose broad language frequently can be given meaning only by reference to public law concepts. </s> Moreover, the factfinding process in arbitration usually is not equivalent to judicial factfinding. The record of the arbitration proceedings is not as complete; the usual rules of evidence do not apply; and rights and procedures common to civil trials, such as discovery, compulsory process, cross-examination, and testimony under [415 U.S. 36, 58] oath, are often severely limited or unavailable. See Bernhardt v. Polygraphic Co., 350 U.S. 198, 203 (1956); Wilko v. Swan, 346 U.S., at 435 -437. And as this Court has recognized, "[a]rbitrators have no obligation to the court to give their reasons for an award." United Steelworkers of America v. Enterprise Wheel & Car Corp., 363 U.S., at 598 . Indeed, it is the informality of arbitral procedure that enables it to function as an efficient, inexpensive, and expeditious means for dispute resolution. This same characteristic, however, makes arbitration a less appropriate forum for final resolution of Title VII issues than the federal courts. 19 </s> It is evident that respondent's proposed rule would not allay these concerns. Nor are we convinced that the solution lies in applying a more demanding deferral standard, such as that adopted by the Fifth Circuit in Rios v. Reynolds Metals Co., 467 F.2d 54 (1972). 20 As [415 U.S. 36, 59] respondent points out, a standard that adequately insured effectuation of Title VII rights in the arbitral forum would tend to make arbitration a procedurally complex, expensive, and time-consuming process. And judicial enforcement of such a standard would almost require courts to make de novo determinations of the employees' claims. It is uncertain whether any minimal savings in judicial time and expense would justify the risk to vindication of Title VII rights. </s> A deferral rule also might adversely affect the arbitration system as well as the enforcement scheme of Title VII. Fearing that the arbitral forum cannot adequately protect their rights under Title VII, some employees may elect to bypass arbitration and institute a lawsuit. The possibility of voluntary compliance or settlement of Title VII claims would thus be reduced, and the result could well be more litigation, not less. </s> We think, therefore, that the federal policy favoring arbitration of labor disputes and the federal policy against discriminatory employment practices can best be accommodated by permitting an employee to pursue fully both his remedy under the grievance-arbitration clause [415 U.S. 36, 60] of a collective-bargaining agreement and his cause of action under Title VII. The federal court should consider the employee's claim de novo. The arbitral decision may be admitted as evidence and accorded such weight as the court deems appropriate. 21 </s> The judgment of the Court of Appeals is </s> Reversed. </s> Footnotes [Footnote 1 Article 4 of the agreement provided: </s> "MANAGEMENT </s> "The Union recognizes that all rights to manage the Plant, to determine the products to be manufactured, the methods of manufacturing or assembling, the scheduling of production, the control of raw materials, and to direct the working forces, including the right to hire, suspend or discharge for proper cause, and the right to relieve employees from duty because of lack of work or other legitimate reasons, and the right to maintain order and efficiency are vested exclusively in the Company. </s> "It is understood by the parties that all rights recognized in this Article are subject to the terms of this Agreement." </s> [Footnote 2 Article 5 of the agreement provided: </s> "MUTUAL RESPONSIBILITY </s> "Section 1. The parties agree that during the term of this Agreement there shall be no strike, slow-down or other interruption of production, and that for the same period there shall be no lockout, subject to the provisions of Article 26, Term of Agreement. </s> "Section 2. The Company and the Union agree that there shall be no discrimination against any employee on account of race, color, religion, sex, national origin, or ancestry. The Company further states and the Union approves that no such discrimination shall be practiced against any applicant for employment." </s> [Footnote 3 Article 23, containing the grievance-arbitration procedures of the agreement, provided in relevant part: </s> . . . . . </s> "Section 5. Should differences arise between the Company and the Union as to the meaning and application of the provisions of this Agreement, or should any trouble arise in the plant, there shall be no suspension of work, but an earnest effort shall be made by both the Company and the Union to settle such differences promptly. Grievances must be presented within five (5) working days after the date of the occurrence giving rise to the grievance or they shall be considered waived. Grievances shall be taken up in the following manner; except that any grievance filed by the Local Union shall be submitted in writing at Step 3 of the grievance procedure as set forth herein: </s> "Step 1. An attempt shall first be made by the employee with or without his assistant grievance committeeman (at the employee's option), and the employee's foreman to settle the grievance. The foreman shall submit his answer within one (1) working day and if the grievance is not settled, it shall be reduced to writing, signed by the employee and his assistant grievance committeeman, and the foreman shall submit his signed answer of such grievance. </s> "Step 2. If the grievance is not settled in Step 1, it shall be presented to the Superintendent, or his representative, within two (2) working days after the Union has received the Foreman's answer in Step 1. The Superintendent or his representative shall submit his signed answer two (2) working days after receiving the grievance. </s> "Step 3. If the grievance is not settled in Step 2, it shall be presented to the manager of Manufacturing or his representative within five (5) working days after the Union has received the Superintendent's answer in Step 2. The Manager of Manufacturing or his representative shall meet with the representatives of the Union to attempt to resolve the grievance within five (5) working days following the presentation of the grievance. The Manager of [415 U.S. 36, 41] Manufacturing or his representative shall submit his signed answer within three (3) working days after the date of such meeting. </s> "Step 4. If the grievance is not settled in Step 3, it shall be referred to the Personnel Manager, and/or his representatives, and the International representative and chairman of the grievance committee within five (5) working days after the Union has received the Step 3 answer. Within ten (10) working days after the grievance has been referred to Step 4, the above mentioned parties shall meet for the purpose of discussing such grievance. Within five (5) working days following the meeting, the Company representatives shall submit their signed answer to the Union. The Union representatives shall signify their concurrence or non-concurrence and affix their signatures to the grievance. </s> "Step 5. Grievances which have not been settled under the foregoing procedure may be referred to arbitration by notice in writing within ten (10) calendar days after the date of the Company's final answer in Step 4. Within five (5) days after receipt of referral to arbitration the parties shall select an impartial arbitrator. </s> "Should the parties be unable to agree upon an arbitrator, the selection shall be made by the Senior Judge of the U.S. Circuit Court of Appeals for the Tenth Circuit. The decision of the arbitrator shall be final and binding upon the Company, the Union, and any employee or employees involved. The expenses and fee of the arbitrator shall be divided equally between the Company and the Union. The arbitrator shall not amend, take away, add to, or change any of the provisions of this Agreement, and the arbitrator's decision must be based solely upon an interpretation of the provisions of this Agreement. </s> "Section 6. (a) No employee will be discharged, suspended or given a written warning notice except for just cause. </s> . . . . . </s> "(g) Should it be determined that the employee has been unjustly suspended or discharged the Company shall reinstate the employee and pay full compensation at the employee's basic hourly rate or earned rate, whichever is the higher, for the time lost." </s> [Footnote 4 In reaching this conclusion, the District Court relied on petitioner's deposition acknowledging that he had raised the racial discrimination claim during the arbitration hearing. 346 F. Supp., at 1014. </s> [Footnote 5 The District Court recognized that a conflict of authorities existed on this issue but chose to rely on Dewey v. Reynolds Metals Co., 429 F.2d 324, 332 (CA6 1970), affirmed by an equally divided Court, 402 U.S. 689 (1971). There, the Sixth Circuit held that prior submission of an employee's claim to arbitration under a collective-bargaining agreement precluded a later suit under Title VII. The Sixth Circuit appears to have since retreated in part from Dewey by suggesting that there is no preclusion where both arbitration and "court or agency processes" are pursued simultaneously. See Spann v. Kaywood Division, Joanna Western Mills Co., 446 F.2d 120, [415 U.S. 36, 46] 122 (1971). The Fifth, Seventh, and Ninth Circuits have squarely rejected a preclusion rule. See Hutchings v. United States Industries, 428 F.2d 303 (CA5 1970); Bowe v. Colgate-Palmolive Co., 416 F.2d 711 (CA7 1969); Oubichon v. North American Rockwell Corp., 482 F.2d 569 (CA9 1973). </s> [Footnote 6 United Steelworkers of America v. American Mfg. Co., 363 U.S. 564 (1960); United Steelworkers of America v. Warrior & Gulf Navigation Co., 363 U.S. 574 (1960); United Steelworkers of America v. Enterprise Wheel & Car Corp., 363 U.S. 593 (1960). In Textile Workers Union v. Lincoln Mills, 353 U.S. 448 (1957), this Court held that a grievance-arbitration provision of a collective-bargaining agreement could be enforced against unions and employers under 301 of the Labor Management Relations Act, 1947, 61 Stat. 156, 29 U.S.C. 185. The Court noted that the congressional policy, as embodied in 203 (d) of the LMRA, 61 Stat. 154, 29 U.S.C. 173 (d), was to promote industrial peace and that the grievance-arbitration provision of a collective agreement was a major factor in achieving this goal. 353 U.S., at 455 . In the Steelworkers trilogy, the Court further advanced this policy by declaring that an order to arbitrate will not be denied "unless it may be said with positive assurance that the arbitration clause is not susceptible of an interpretation that covers the asserted dispute." United Steelworkers of America v. Warrior & Gulf Navigation Co., supra, at 582-583. The Court also stated that "so far as the arbitrator's decision concerns construction of the contract, the courts have no business overruling him because their interpretation of the contract is different from his." United Steelworkers of America v. Enterprise Wheel & Car Corp., supra, at 599. And in Republic Steel Corp. v. Maddox, 379 U.S. 650 (1965), the Court held that grievance-arbitration procedures of a collective-bargaining agreement must be exhausted before an employee may file suit to enforce contractual rights. </s> For the reasons stated in Parts III, IV, and V of this opinion, we hold that the federal policy favoring arbitration does not establish that an arbitrator's resolution of a contractual claim is dispositive of a statutory claim under Title VII. </s> [Footnote 7 See, e. g., 42 U.S.C. 1981 (Civil Rights Act of 1866); 42 U.S.C. 1983 (Civil Rights Act of 1871). </s> [Footnote 8 For example, Commission action is not barred by "findings and orders" of state or local agencies. See 42 U.S.C. 2000e-5 (b) (1970 ed., Supp. II). Similarly, an individual's cause of action is not barred by a Commission finding of no reasonable cause to believe that the Act has been violated. See 42 U.S.C. 2000e-5 (f) (1970 ed., Supp. II); McDonnell Douglas Corp. v. Green, 411 U.S. 792 (1973). </s> [Footnote 9 For example, Senator Joseph Clark, one of the sponsors of the bill, introduced an interpretive memorandum which stated: </s> "Nothing in title VII or anywhere else in this bill affects rights and obligations under the NLRA and the Railway Labor Act . . . . [T]itle VII is not intended to and does not deny to any individual, rights and remedies which he may pursue under other Federal and State statutes. If a given action should violate both title VII and the National Labor Relations Act, the National Labor Relations Board would not be deprived of jurisdiction." 110 Cong Rec. 7207 (1964). Moreover, the Senate defeated an amendment which would have made Title VII the exclusive federal remedy for most unlawful employment practices. 110 Cong. Rec. 13650-13652 (1964). And a similar amendment was rejected in connection with the Equal Employment Opportunity Act of 1972. See H. R. 9247, 92d Cong., 1st Sess. (1971); H. R. Rep. No. 92-238 (1971). See also 2 U.S. Code Cong. & Ad. News, 92d Cong., 2d Sess., 2137, 2179, 2181-2182 (1972). The report of the Senate Committee responsible for the 1972 Act explained that neither the "provisions regarding the individual's right to sue under title VII, nor any of the other provisions of this bill, are meant to affect existing rights granted under other laws." S. Rep. No. 92-415, p. 24 (1971). For a detailed discussion of the legislative history of the 1972 Act, see Sape & Hart, Title VII Reconsidered: The Equal Opportunity Act of 1972, 40 Geo. Wash. L. Rev. 824 (1972). </s> [Footnote 10 The District Court adopted the reasoning of the Sixth Circuit in Dewey v. Reynolds Metals Co., 429 F.2d, at 332, affirmed by an equally divided Court, 402 U.S. 689 (1971), which was apparently based in part on the doctrine of election of remedies. See n. 5, supra. The Sixth Circuit, however, later described Dewey as resting instead on the doctrine of equitable estoppel and on "themes of res judicata and collateral estoppel." Newman v. Avco Corp., 451 F.2d 743, 747 n. 1 (1971). Whatever doctrinal label is used, the essence of these holdings remains the same. The policy reasons for rejecting the doctrines of election of remedies and waiver in the context of Title VII are equally applicable to the doctrines of res judicata and collateral estoppel. </s> [Footnote 11 See generally 5A A. Corbin, Contracts 1214-1227 (1964 ed. and Supp. 1971). Most courts have recognized that the doctrine of election of remedies does not apply to suits under Title VII. See, e. g., Bowe v. Colgate-Palmolive Co., 416 F.2d, at 714-715; Hutchings v. United States Industries, 428 F.2d, at 314; Macklin v. Spector Freight Systems, 156 U.S. App. D.C. 69, 80-81, 478 F.2d 979, 990-991 (1973); Voutsis v. Union Carbide Corp., 452 F.2d 889, 893-894 (CA2 1971), cert. denied, 406 U.S. 918 (1972); Newman v. Avco Corp., supra, at 746 n. 1; Oubichon v. North American Rockwell Corp., 482 F.2d, at 572-573. </s> [Footnote 12 61 Stat. 136, 29 U.S.C. 151 et seq. </s> [Footnote 13 As the Court noted in Carey: </s> "By allowing the dispute to go to arbitration . . . those conciliatory measures which Congress deemed vital to `industrial peace' . . . and which may be dispositive of the entire dispute, are encouraged. The superior authority of the Board may be invoked at any time. Meanwhile the therapy of arbitration is brought to bear in a complicated and troubled area." 375 U.S., at 272 . </s> Should disagreements arise between the Board and the arbitrator, the Board's ruling would, of course, take precedence as to those issues within its jurisdiction. Ibid. </s> [Footnote 14 Nor can it be maintained that election of remedies is required by the possibility of unjust enrichment through duplicative recoveries. Where, as here, the employer has prevailed at arbitration, there, of course, can be no duplicative recovery. But even in cases where the employee has first prevailed, judicial relief can be structured to avoid such windfall gains. See, e. g., Oubichon v. North American Rockwell Corp., supra; Bowe v. Colgate-Palmolive Co., supra. Furthermore, if the relief obtained by the employee at arbitration were fully equivalent to that obtainable under Title VII, there would be no further relief for the court to grant and hence no need for the employee to institute suit. </s> [Footnote 15 In this case petitioner and respondent did not enter into a voluntary settlement expressly conditioned on a waiver of petitioner's cause of action under Title VII. In determining the effectiveness of any such waiver, a court would have to determine at the outset that the employee's consent to the settlement was voluntary and knowing. In no event can the submission to arbitration of a claim under the nondiscrimination clause of a collective-bargaining agreement constitute a binding waiver with respect to an employee's rights under Title VII. </s> [Footnote 16 See Meltzer, Labor Arbitration and Overlapping and Conflicting Remedies for Employment Discrimination, 39 U. Chi. L. Rev. 30, 32-35 (1971). Meltzer, Ruminations About Ideology, Law, and [415 U.S. 36, 53] Labor Arbitration, 34 U. Chi. L. Rev. 545 (1967). As the late Dean Shulman stated: </s> "A proper conception of the arbitrator's function is basic. He is not a public tribunal imposed upon the parties by superior authority which the parties are obliged to accept. He has no general charter to administer justice for a community which transcends the parties. He is rather part of a system of self-government created by and confined to the parties. He serves their pleasure only, to administer the rule of law established by their collective agreement." Shulman, Reason, Contract, and Law in Labor Relations, 68 Harv. L. Rev. 999, 1016 (1955). </s> [Footnote 17 Brief for Respondent 37. Respondent's proposed rule is analogous to the NLRB's policy of deferring to arbitral decisions on statutory issues in certain cases. See Spielberg Mfg. Co., 112 N. L. R. B. 1080, 1082 (1955). </s> [Footnote 18 See also Gould, Labor Arbitration of Grievances Involving Racial Discrimination, 118 U. Pa. L. Rev. 40, 47-48 (1969); Platt, The Relationship between Arbitration and Title VII of the Civil Rights Act of 1964, 3 Ga. L. Rev. 398 (1969). Significantly, a substantial proportion of labor arbitrators are not lawyers. See Note, The NLRB and Deference to Arbitration, 77 Yale L. J. 1191, 1194 n. 28 (1968). This is not to suggest, of course, that arbitrators do not possess a high degree of competence with respect to the vital role in implementing the federal policy favoring arbitration of labor disputes. </s> [Footnote 19 A further concern is the union's exclusive control over the manner and extent to which an individual grievance is presented. See Vaca v. Sipes, 386 U.S. 171 (1967); Republic Steel Corp. v. Maddox, 379 U.S. 650 (1965). In arbitration, as in the collective-bargaining process, the interests of the individual employee may be subordinated to the collective interests of all employees in the bargaining unit. See J. I. Case Co. v. NLRB, 321 U.S. 332 (1944). Moreover, harmony of interest between the union and the individual employee cannot always be presumed, especially where a claim of racial discrimination is made. See, e. g., Steele v. Louisville & N. R. Co., 323 U.S. 192 (1944); Tunstall v. Brotherhood of Locomotive Firemen, 323 U.S. 210 (1944). And a breach of the union's duty of fair representation may prove difficult to establish. See Vaca v. Sipes, supra; Humphrey v. Moore, 375 U.S. 335, 342 , 348-351 (1964). In this respect, it is noteworthy that Congress thought it necessary to afford the protections of Title VII against unions as well as employers. See 42 U.S.C. 2000e-2 (c). </s> [Footnote 20 In Rios, the court set forth the following deferral standard: </s> "First, there may be no deference to the decision of the arbitrator unless the contractual right coincides with rights under Title VII. Second, it must be plain that the arbitrator's decision is in no way [415 U.S. 36, 59] violative of the private rights guaranteed by Title VII, nor of the public policy which inheres in Title VII. In addition, before deferring, the district court must be satisfied that (1) the factual issues before it are identical to those decided by the arbitrator; (2) the arbitrator had power under the collective agreement to decide the ultimate issue of discrimination; (3) the evidence presented at the arbitral hearing dealt adequately with all factual issues; (4) the arbitrator actually decided the factual issues presented to the court; (5) the arbitration proceeding was fair and regular and free of procedural infirmities. The burden of proof in establishing these conditions of limitation will be upon the respondent as distinguished from the claimant." 467 F.2d, at 58. For a discussion of the problems posed by application of the Rios standard, see Note, Judicial Deference to Arbitrators' Decisions in Title VII Cases, 26 Stan. L. Rev. 421 (1974). </s> [Footnote 21 We adopt no standards as to the weight to be accorded an arbitral decision, since this must be determined in the court's discretion with regard to the facts and circumstances of each case. Relevant factors include the existence of provisions in the collective-bargaining agreement that conform substantially with Title VII, the degree of procedural fairness in the arbitral forum, adequacy of the record with respect to the issue of discrimination, and the special competence of particular arbitrators. Where an arbitral determination gives full consideration to an employee's Title VII rights, a court may properly accord it great weight. This is especially true where the issue is solely one of fact, specifically addressed by the parties and decided by the arbitrator on the basis of an adequate record. But courts should ever be mindful that Congress, in enacting Title VII, thought it necessary to provide a judicial forum for the ultimate resolution of discriminatory employment claims. It is the duty of courts to assure the full availability of this forum. </s> [415 U.S. 36, 61]

United States Supreme Court GEORGIA v. ASHCROFT, ATTORNEY GENERAL, et al.(2003) No. 02-182 Argued: April 29, 2003Decided: June 26, 2003 </s> Georgia's 1997 State Senate districting plan is the benchmark plan for this litigation. That plan drew 56 districts, 11 of them with a total black population of over 50%, and 10 of them with a black voting age population of over 50%. The 2000 census revealed that these numbers had increased so that 13 districts had a black population of at least 50%, with the black voting age population exceeding 50% in 12 of those districts. After the 2000 census, the Georgia General Assembly began redistricting the Senate once again. It is uncontested that a substantial majority of Georgia's black voters vote Democratic, and that all elected black representatives in the General Assembly are Democrats. The Senator who chaired the subcommittee that developed the new plan testified he believed that as a district's black voting age population increased beyond what was necessary to elect a candidate, it would push the Senate more toward the Republicans, and correspondingly diminish the power of African-Americans overall. Thus, part of the Democrats' strategy was not only to maintain the number of majority-minority districts and increase the number of Democratic Senate seats, but also to increase the number of so-called "influence" districts, where black voters would be able to exert a significant--if not decisive--force in the election process. The new plan therefore "unpacked" the most heavily concentrated majority-minority districts in the benchmark plan, and created a number of new influence districts, drawing 13 districts with a majority-black voting age population, 13 additional districts with a black voting age population of between 30%-50%, and 4 other districts with a black voting age population of between 25%-30%. When the Senate adopted the new plan, 10 of the 11 black Senators voted for it. The Georgia House of Representatives passed the plan with 33 of the 34 black Representatives voting for it. No Republican in either body voted for the plan, making the votes of the black legislators necessary for passage. The Governor signed the Senate plan into law in 2001. </s> Because Georgia is a covered jurisdiction under §5 of the Voting Rights Act of 1965, it must submit any new voting "standard, practice, or procedure" for preclearance by either the United States Attorney General or the District Court for the District of Columbia in order to ensure that the change "does not have the purpose [or] effect of denying or abridging the right to vote on account of race or color," 42 U.S. C. §1973c. No change should be precleared if it "would lead to a retrogression in the position of racial minorities with respect to their effective exercise of the electoral franchise." Beer v. United States, 425 U.S. 130, 141. In order to preclear its 2001 plan, Georgia filed suit in the District Court seeking a declaratory judgment that the plan does not violate §5. To satisfy its burden of proving nonretrogression, Georgia submitted detailed evidence documenting, among other things, the total population, total black population, black voting age population, percentage of black registered voters, and the overall percentage of Democratic votes in each district; evidence about how each of these statistics compared to the benchmark districts; testimony from numerous participants in the plan's enactment that it was designed to increase black voting strength throughout the State as well as to help ensure a continued Democratic majority in the Senate; expert testimony that black and nonblack voters have equal chances of electing their preferred candidate when the black voting age population of a district is at 44.3%; and, in response to the United States' objections, more detailed statistical evidence with respect to three proposed Senate districts that the United States found objectionable--Districts 2, 12, and 26--and two districts challenged by the intervenors--Districts 15 and 22. The United States argued that the plan should not be precleared because the changes to the boundaries of Districts 2, 12, and 26 unlawfully reduced black voters' ability to elect candidates of their choice. The United States' evidence focused only on those three districts and was not designed to permit the court to assess the plan's overall impact. The intervenors, four African-Americans, argued that retrogression had occurred in Districts 15 and 22, and presented proposed alternative plans and an expert report critiquing the State's expert report. A three-judge District Court panel held that the plan violated §5, and was therefore not entitled to preclearance. Held: 1.The District Court did not err in allowing the private litigants to intervene. That court found that the intervenors' analysis of the plan identifies interests not adequately represented by the existing parties. Private parties may intervene in §5 actions assuming they meet the requirements of Federal Rule of Civil Procedure 24, NAACP v. New York, 413 U.S. 345, 365, and the District Court did not abuse its discretion in allowing intervention in this case, see id., at 367. Morris v. Gressette, 432 U.S. 491, 504-505, in which the Court held that that the decision to object belongs only to the Attorney General, is distinguished because it concerned the administrative, not the judicial, preclearance process. Morris itself recognized the difference between the two. See id., at 503-507. Pp.11-13. </s> 2.The District Court failed to consider all the relevant factors when it examined whether Georgia's Senate plan resulted in a retrogression of black voters' effective exercise of the electoral franchise. Pp.11-27. </s> (a)Georgia's argument that a plan should be precleared under §5 if it would satisfy §2 of the Voting Rights Act, 42 U.S. C. §1973, is rejected. A §2 vote dilution violation is not an independent reason to deny §5 preclearance, because that would inevitably make §5 compliance contingent on §2 compliance and thereby replace §5 retrogression standards with those for §2. Reno v. Bossier Parish School Bd., 520 U.S. 471, 477. Instead of showing that its plan is nondilutive under §2, Georgia must prove that it is nonretrogressive under §5. Pp.13-15. </s> (b)To determine the meaning of "a retrogression in the position of racial minorities with respect to their effective exercise of the electoral franchise," Beer, supra, at 141, the statewide plan must first be examined as a whole: First, the diminution of a minority group's effective exercise of the electoral franchise violates §5 only if the State cannot show that the gains in the plan as a whole offset the loss in a particular district. Second, all of the relevant circumstances must be examined, such as minority voters' ability to elect their candidate of choice, the extent of the minority group's opportunity to participate in the political process, and the feasibility of creating a nonretrogressive plan. See, e.g., Johnson v. De Grandy, 512 U.S. 997, 1011-1012, 1020-1021. In assessing the totality of the circumstances, a minority group's comparative ability to elect a candidate of its choice is an important factor, but it cannot be dispositive or exclusive. See, e.g., Thornburg, 478 U.S., at 47-50. To maximize such a group's electoral success, a State may choose to create either a certain number of "safe" districts in which it is highly likely that minority voters will be able to elect the candidate of their choice, see, e.g., id., at 48-49, or a greater number of districts in which it is likely, although perhaps not quite as likely as under the benchmark plan, that minority voters will be able to elect their candidates, see e.g., id., at 88-89 (O'Connor, J., concurring in judgment). Section 5 does not dictate that a State must pick one of these redistricting methods over the other. Id., at 89. In considering the other highly relevant factor in a retrogression inquiry--the extent to which a new plan changes the minority group's opportunity to participate in the political process--a court must examine whether the plan adds or subtracts "influence districts" where minority voters may not be able to elect a candidate of choice but can play a substantial, if not decisive, role in the electoral process, cf., e.g., Johnson, supra, at 1007. In assessing these influence districts' comparative weight, it is important to consider "the likelihood that candidates elected without decisive minority support would be willing to take the minority's interests into account." Thornburg, 478 U.S., at 100 (O'Connor, J., concurring in judgment). Various studies suggest that the most effective way to maximize minority voting strength may be to create more influence or coalitional districts. Section 5 allows States to risk having fewer minority representatives in order to achieve greater overall representation of a minority group by increasing the number of representatives sympathetic to the interests of minority voters. See, e.g., id., at 87-89, 99. Another method of assessing the group's opportunity to participate in the political process is to examine the comparative position of black representatives' legislative leadership, influence, and power. See Johnson, supra, at 1020. Maintaining or increasing legislative positions of power for minority voters' representatives of choice, while not dispositive by itself, can show the lack of retrogressive effect. And it is also significant, though not dispositive, whether the representatives elected from the very districts created and protected by the Voting Rights Act support the new plan. Pp.15-21. </s> (c)The District Court failed to consider all the relevant factors. First, although acknowledging the importance of assessing the statewide plan as a whole, the court focused too narrowly on proposed Senate Districts 2, 12, and 26, without examining the increases in the black voting age population that occurred in many of the other districts. Second, the court did not consider any factor beyond black voters' comparative ability to elect a candidate of their choice. It improperly rejected other evidence that the legislators representing the benchmark majority-minority districts support the plan; that the plan maintains those representatives' legislative influence; and that Georgia affirmatively decided that the best way to maximize black voting strength was to adopt a plan that "unpacked" the high concentration of minority voters in the majority-minority districts. In the face of Georgia's evidence of nonretrogression, the United States' only evidence was that it would be more difficult for minority voters to elect their candidate of choice in Districts 2, 12, and 26. Given the evidence submitted in this case, Georgia likely met its burden of showing nonretrogression. Section 5 gives States the flexibility to implement the type of plan that Georgia has submitted for preclearance--a plan that increases the number of districts with a majority-black voting age population, even if it means that minority voters in some of those districts will face a somewhat reduced opportunity to elect a candidate of their choice. Cf. Thornburg, supra, at 89 (O'Connor, J., concurring). While courts and the Justice Department should be vigilant in ensuring that States neither reduce minority voters' effective exercise of the electoral franchise nor discriminate against them, the Voting Rights Act, as properly interpreted, should encourage the transition to a society where race no longer matters. Pp.21-27. </s> (d)The District Court is in a better position to reweigh all the facts in the record in the first instance in light of this Court's explication of retrogression. P.27. 195 F.Supp. 2d 25, vacated and remanded. O'Connor, J., delivered the opinion of the Court, in which Rehnquist, C.J., and Scalia, Kennedy, and Thomas, JJ., joined. Kennedy, J., and Thomas, J., filed concurring opinions. Souter, J., filed a dissenting opinion, in which Stevens, Ginsburg, and Breyer, JJ., joined. </s> GEORGIA, APPELLANT v. JOHN ASHCROFT, ATTORNEY GENERAL, etal. on appeal from the united states district court for the district of columbia [June 26, 2003] </s> Justice O'Connor delivered the opinion of the Court. </s> In this case, we decide whether Georgia's State Senate redistricting plan should have been precleared under §5 of the Voting Rights Act of 1965, 79 Stat. 439, as renumbered and amended, 42 U.S.C. §1973c. Section 5 requires that before a covered jurisdiction's new voting "standard, practice, or procedure" goes into effect, it must be precleared by either the Attorney General of the United States or a federal court to ensure that the change "does not have the purpose and will not have the effect of denying or abridging the right to vote on account of race or color." 42 U.S.C. §1973c. Whether a voting procedure change should be precleared depends on whether the change "would lead to a retrogression in the position of racial minorities with respect to their effective exercise of the electoral franchise." Beer v. United States, 425 U.S. 130, 141 (1976). We therefore must decide whether Georgia's State Senate redistricting plan is retrogressive as compared to its previous, benchmark districting plan. I A </s> Over the past decade, the propriety of Georgia's state and congressional districts has been the subject of repeated litigation. In 1991, the Georgia General Assembly began the process of redistricting after the 1990 census. Because Georgia is a covered jurisdiction under §5 of the Voting Rights Act, see Miller v. Johnson, 515 U.S. 900, 905 (1995), Georgia submitted its revised State Senate plan to the United States Department of Justice for preclearance. The plan as enacted into law increased the number of majority-minority districts from the previous Senate plan. The Department of Justice nevertheless refused preclearance because of Georgia's failure to maximize the number of majority-minority districts. See Johnson v. Miller, 929 F.Supp. 1529, 1537, and n.23 (SD Ga. 1996). After Georgia made changes to the Senate plan in an attempt to satisfy the United States' objections, the State again submitted it to the Department of Justice for preclearance. Again, the Department of Justice refused preclearance because the plan did not contain a sufficient number of majority-minority districts. See id., at 1537, 1539. Finally, the United States precleared Georgia's third redistricting plan, approving it in the spring of 1992. See id., at 1537. Georgia's 1992 Senate plan was not challenged in court. See id., at 1533-1534. Its congressional districting plan, however, was challenged as unconstitutional under the Equal Protection Clause of the Fourteenth Amendment. See Shaw v. Reno, 509 U.S. 630 (1993). In 1995, we held in Miller v. Johnson that Georgia's congressional districting plan was unconstitutional because it engaged in "the very racial stereotyping the Fourteenth Amendment forbids" by making race the "predominant, overriding factor explaining" Georgia's congressional districting decisions. 515 U.S., at 928, 920. And even though it was "safe to say that the congressional plan enacted in the end was required in order to obtain preclearance," this justification did not permit Georgia to engage in racial gerrymandering. See id., at 921. Georgia's State Senate districts served as "building blocks" to create the congressional districting plan found unconstitutional in Miller v. Johnson. Johnson v. Miller, 929 F.Supp., at 1533, n.8 (internal quotation marks omitted); see also id., at 1536. </s> Georgia recognized that after Miller v. Johnson, its legislative districts were unconstitutional under the Equal Protection Clause. See 929 F.Supp., at 1533, 1540. Accordingly, Georgia attempted to cure the perceived constitutional problems with the 1992 State Senate districting plan by passing another plan in 1995. The Department of Justice refused to preclear the 1995 plan, maintaining that it retrogressed from the 1992 plan and that Miller v. Johnson concerned only Georgia's congressional districts, not Georgia's State Senate districts. See 929 F.Supp., at 1540-1541. </s> Private litigants subsequently brought an action challenging the constitutionality of the 1995 Senate plan. See id., at 1533. The three-judge panel of the District Court reviewing the 1995 Senate plan found that "[i]t is clear that a black maximization policy had become an integral part of the section 5 preclearance process ... when the Georgia redistricting plans were under review. The net effect of the DOJ's preclearance objection[s] ... was to require the State of Georgia to increase the number of majority black districts in its redistricting plans, which were already ameliorative plans, beyond any reasonable concept of non-retrogression." Id., at 1539-1540. The court noted that in Miller v. Johnson, we specifically disapproved of the Department of Justice's policy that the maximization of black districts was a part of the §5 retrogression analysis. See 929 F.Supp., at 1539. Indeed, in Miller, we found that the Department of Justice's objections to Georgia's redistricting plans were "driven by its policy of maximizing majority-black districts." 515 U.S., at 924. And "[i]n utilizing §5 to require States to create majority-minority districts wherever possible, the Department of Justice expanded its authority under the statute beyond what Congress intended and we have upheld." Id., at 925. </s> The District Court stated that the maximization of majority-minority districts in Georgia "artificially push[ed] the percentage of black voters within some majority black districts as high as possible." 929 Fed. Supp., at 1536. The plan that eventually received the Department of Justice's preclearance in 1992 "represented the General Assembly's surrender to the black maximization policy of the DOJ." Id., at 1540. The court then found that the 1995 plan was an unconstitutional racial gerrymander. See id., at 1543. </s> Under court direction, Georgia and the Department of Justice reached a mediated agreement on the constitutionality of the 1995 Senate plan. Georgia passed a new plan in 1997, and the Department of Justice quickly precleared it. The redrawn map resembled to a large degree the 1992 plan that eventually received preclearance from the Department of Justice, with some changes to accommodate the decision of this Court in Miller v. Johnson, and of the District Court in Johnson v. Miller. </s> All parties here concede that the 1997 plan is the benchmark plan for this litigation because it was in effect at the time of the 2001 redistricting effort. The 1997 plan drew 56 districts, 11 of them with a total black population of over 50%, and 10 of them with a black voting age population of over 50%. See Record, Doc. No. 148, Pl. Exh. 1C (hereinafter Pl. Exh.). The 2000 census revealed that these numbers had increased so that 13 districts had a black population of at least 50%, with the black voting age population exceeding 50% in 12 of those districts. See 195 F.Supp. 2d 25, 39 (DC 2002). </s> After the 2000 census, the Georgia General Assembly began the process of redistricting the Senate once again. No party contests that a substantial majority of black voters in Georgia vote Democratic, or that all elected black representatives in the General Assembly are Democrats. The goal of the Democratic leadership--black and white--was to maintain the number of majority-minority districts and also increase the number of Democratic Senate seats. See id., at 41-42. For example, the Director of Georgia's Legislative Redistricting Office, Linda Meggers, testified that the Senate Black Caucus "'wanted to maintain'" the existing majority-minority districts and at the same time "'not waste'" votes. Id., at 41. </s> The Vice Chairman of the Senate Reapportionment Committee, Senator Robert Brown, also testified about the goals of the redistricting effort. Senator Brown, who is black, chaired the subcommittee that developed the Senate plan at issue here. See id., at 42. Senator Brown believed when he designed the Senate plan that as the black voting age population in a district increased beyond what was necessary, it would "pus[h] the whole thing more towards [the] Republican[s]." Pl. Exh. 20, at 24. And "correspondingly," Senator Brown stated, "the more you diminish the power of African-Americans overall." Ibid. Senator Charles Walker was the majority leader of the Senate. Senator Walker testified that it was important to attempt to maintain a Democratic majority in the Senate because "we [African-Americans] have a better chance to participate in the political process under the Democratic majority than we would have under a Republican majority." Pl. Exh. 24, at 19. At least 7 of the 11 black members of the Senate could chair committees. See 195 F.Supp. 2d, at 41. </s> The plan as designed by Senator Brown's committee kept true to the dual goals of maintaining at least as many majority-minority districts while also attempting to increase Democratic strength in the Senate. Part of the Democrats' strategy was not only to maintain the number of majority-minority districts, but to increase the number of so-called "influence" districts, where black voters would be able to exert a significant--if not decisive--force in the election process. As the majority leader testified, "in the past, you know, what we would end up doing was packing. You put all blacks in one district and all whites in one district, so what you end up with is [a] black Democratic district and [a] white Republican district. That's not a good strategy. That does not bring the people together, it divides the population. But if you put people together on voting precincts it brings people together." Pl. Exh. 24, at 19. </s> The plan as designed by the Senate "unpacked" the most heavily concentrated majority-minority districts in the benchmark plan, and created a number of new influence districts. The new plan drew 13 districts with a majority-black voting age population, 13 additional districts with a black voting age population of between 30% and 50%, and 4 other districts with a black voting age population of between 25% and 30%. See Pl. Exh. 2C. According to the 2000 census, as compared to the benchmark plan, the new plan reduced by five the number of districts with a black voting age population in excess of 60%. Compare Pl. Exh. 1D with Pl. Exh. 2C. Yet it increased the number of majority-black voting age population districts by one, and it increased the number of districts with a black voting age population of between 25% and 50% by four. As compared to the benchmark plan enacted in 1997, the difference is even larger. Under the old census figures, Georgia had 10 Senate districts with a majority-black voting age population, and 8 Senate districts with a black voting age population of between 30% and 50%. See Pl. Exh. 1C. The new plan thus increased the number of districts with a majority black voting age population by three, and increased the number of districts with a black voting age population of between 30% and 50% by another five. Compare Pl. Exh. 1C with Pl. Exh. 2C. </s> The Senate adopted its new districting plan on August 10, 2001, by a vote of 29 to 26. Ten of the eleven black Senators voted for the plan. 195 F.Supp. 2d, at 55. The Georgia House of Representatives passed the Senate plan by a vote of 101 to 71. Thirty-three of the thirty-four black Representatives voted for the plan. Ibid. No Republican in either the House or the Senate voted for the plan, making the votes of the black legislators necessary for passage. See id., at 41. The Governor signed the Senate plan into law on August 24, 2001, and Georgia subsequently sought to obtain preclearance. B </s> Pursuant to §5 of the Voting Rights Act, a covered jurisdiction like Georgia has the option of either seeking administrative preclearance through the Attorney General of the United States or seeking judicial preclearance by instituting an action in the United States District Court for the District of Columbia for a declaratory judgment that the voting change comports with §5. 42 U.S.C. §1973c; Georgia v. United States, 411 U.S. 526 (1973). Georgia chose the latter method, filing suit seeking a declaratory judgment that the State Senate plan does not violate §5. Georgia, which bears the burden of proof in this action, see Pleasant Grove v. United States, 479 U.S. 462 (1987), attempted to prove that its Senate plan was not retrogressive either in intent or in effect. It submitted detailed evidence documenting in each district the total population, the total black population, the black voting age population, the percentage of black registered voters, and the overall percentage of Democratic votes (i.e., the overall likelihood that voters in a particular district will vote Democratic), among other things. See 195 F.Supp. 2d, at 36; see also Pl. Exhs. 2C, 2D. The State also submitted evidence about how each of these statistics compared to the benchmark districts. See 195 F.Supp. 2d, at 36; see also Pl. Exhs. 1C, 1D, 1E (revised). </s> Georgia also submitted testimony from numerous people who had participated in enacting the Senate plan into law, and from United States Congressman John Lewis, who represents the Atlanta area. These witnesses testified that the new Senate plan was designed to increase black voting strength throughout the State as well as to help ensure a continued Democratic majority in the Senate. The State also submitted expert testimony that African-American and non-African-American voters have equal chances of electing their preferred candidate when the black voting age population of a district is at 44.3%. Finally, in response to objections raised by the United States, Georgia submitted more detailed statistical evidence with respect to three proposed Senate districts that the United States found objectionable--Districts 2, 12, and 26--and two districts that the intervenors challenged--Districts 15 and 22. </s> The United States, through the Attorney General, argued in District Court that Georgia's 2001 Senate redistricting plan should not be precleared. It argued that the plan's changes to the boundaries of Districts 2, 12, and 26 unlawfully reduced the ability of black voters to elect candidates of their choice. See Brief for Federal Appellees 8; 195 F.Supp. 2d, at 72. The United States noted that in District 2, the black voting age population dropped from 60.58% to 50.31%; in District 12, the black voting age population dropped from 55.43% to 50.66%; and in District 26, the black voting age population dropped from 62.45% to 50.80%.1 Moreover, in all three of these districts, the percentage of black registered voters dropped to just under 50%. The United States also submitted expert evidence that voting is racially polarized in Senate Districts 2, 12, and 26. See id., at 69-71. The United States acknowledged that some limited percentage of whites would vote for a black candidate, but maintained that the percentage was not sufficient for black voters to elect their candidate of choice. See id., at 70-71. The United States also offered testimony from various witnesses, including lay witnesses living in the three districts, who asserted that the new contours of Districts 2, 12, and 26 would reduce the opportunity for blacks to elect a candidate of their choice in those districts; Senator Regina Thomas of District 2, the only black Senator who voted against the plan; Senator Eric Johnson, the Republican leader of the Senate; and some black legislators who voted for the plan but questioned how the plan would affect black voters. See Vols. 25-27 Record, Doc. No. 177, United States Exhs. 707-736 (Depositions). As the District Court stated, "the United States' evidence was extremely limited in scope--focusing only on three contested districts in the State Senate plan. That evidence was not designed to permit the court to assess the overall impact of [the Senate plan]." 195 F.Supp. 2d, at 37. </s> Pursuant to Federal Rule of Civil Procedure 24, the District Court also permitted four African-American citizens of Georgia to intervene. The intervenors identified two other districts--Districts 15 and 22--where they alleged retrogression had occurred. The intervenors "present[ed] little evidence other than proposed alternative plans and an expert report critiquing the State's expert report." 195 F.Supp. 2d, at 37. </s> A three-judge panel of the District Court held that Georgia's State Senate apportionment violated §5, and was therefore not entitled to preclearance. See id., at 97. Judge Sullivan, joined by Judge Edwards, concluded that Georgia had "not demonstrated by a preponderance of the evidence that the State Senate redistricting plan would not have a retrogressive effect on African American voters'" effective exercise of the electoral franchise. Ibid. The court found that Senate Districts 2, 12, and 26 were retrogressive because in each district, a lesser opportunity existed for the black candidate of choice to win election under the new plan than under the benchmark plan. See id., at 93-94. The court found that the reductions in black voting age population in Districts 2, 12, and 26 would "diminish African American voting strength in these districts," and that Georgia had "failed to present any ... evidence" that the retrogression in those districts "will be offset by gains in other districts." Id., at 88. </s> Judge Edwards, joined by Judge Sullivan, concurred. Judge Edwards emphasized that §§5 and 2 are "procedurally and substantively distinct provisions." Id., at 97. He therefore rejected Georgia's argument that a plan preserving an equal opportunity for minorities to elect candidates of their choice satisfies §5. Judge Edwards also rejected the testimony of the black Georgia politicians who supported the Senate plan. In his view, the testimony did not address whether racial polarization was occurring in Senate Districts 2, 12, and 26. See id., at 101-102. </s> Judge Oberdorfer dissented. He would have given "greater credence to the political expertise and motivation of Georgia's African-American political leaders and reasonable inferences drawn from their testimony and the voting data and statistics." Id., at 102. He noted that this Court has not answered "whether a redistricting plan that preserves or increases the number of districts statewide in which minorities have a fair or reasonable opportunity to elect candidates of choice is entitled to preclearance, or whether every district must remain at or improve on the benchmark probability of victory, even if doing so maintains a minority super-majority far in excess of the level needed for effective exercise of [the] electoral franchise." Id., at 117. </s> After the District Court refused to preclear the plan, Georgia enacted another plan, largely similar to the one at issue here, except that it added black voters to Districts 2, 12, and 26. The District Court precleared this plan. See 204 F.Supp. 2d 4 (2002). No party has contested the propriety of the District Court's preclearance of the Senate plan as amended. Georgia asserts that it will use the plan as originally enacted if it receives preclearance. </s> We noted probable jurisdiction to consider whether the District Court should have precleared the plan as originally enacted by Georgia in 2001, 537 U.S. 1151, and now vacate the judgment below. II </s> Before addressing the merits of Georgia's preclearance claim, we address the State's argument that the District Court was incorrect in allowing the private litigants to intervene in this lawsuit. Georgia maintains that private parties should not be allowed to intervene in §5 actions because States should not be subjected to the political stratagems of intervenors. While the United States disagrees with Georgia on the propriety of intervention here, the United States argues that this question is moot because the participation of the intervenors did not affect the District Court's ruling on the merits and the intervenors did not appeal the court's ruling. We do not think Georgia's argument is moot. The intervenors did not have to appeal because they were prevailing parties below. Moreover, the District Court addressed the evidence that the intervenors submitted, which is now in front of this Court. The issue whether intervenors are proper parties still has relevance in this Court because they argue here that the District Court correctly found that the Senate plan was retrogressive. </s> The District Court properly found that Federal Rule of Civil Procedure 24 governs intervention in this case. Section 5 permits a State to bring "an action in the United States District Court for the District of Columbia for a declaratory judgment." 42 U.S.C. §1973c. Section 5 does not limit in any way the application of the Federal Rules of Civil Procedure to this type of lawsuit, and the statute by its terms does not bar private parties from intervening. In NAACP v. New York, 413 U.S. 345, 365 (1973), we held that in an action under §5, "[i]ntervention in a federal court suit is governed by Fed. Rule Civ. Proc. 24." </s> To support its argument, Georgia relies on Morris v. Gressette, 432 U.S. 491 (1977). In Morris, we held that in an administrative preclearance action, the decision to object belongs only to the Attorney General and is not judicially reviewable. See id., at 504-505. But Morris concerned the administrative preclearance process, not the judicial preclearance process. Morris itself recognized the difference between administrative preclearance and judicial preclearance. See id., at 503-507. </s> Here, the District Court granted the motion to intervene because it found that the intervenors' "analysis of the ... Senate redistricting pla[n] identifies interests that are not adequately represented by the existing parties." App. to Juris. Statement 218a. Private parties may intervene in §5 actions assuming they meet the requirements of Rule 24, and the District Court did not abuse its discretion in granting the motion to intervene in this case. See NAACP v. New York, supra, at 367. III A </s> Section 5 of the Voting Rights Act "has a limited substantive goal: "'to insure that no voting-procedure changes would be made that would lead to a retrogression in the position of racial minorities with respect to their effective exercise of the electoral franchise.'" Miller, 517 U.S. 952, 982-983 (1996). Thus, a plan that merely preserves "current minority voting strength" is entitled to §5 preclearance. City of Lockhart v. United States, 460 U.S. 125, 134, n.10 (1983); Bush v. Vera, supra, at 983. Indeed, a voting change with a discriminatory but nonretrogressive purpose or effect does not violate §5. See Reno v. Bossier Parish School Bd., 528 U.S. 320, 341 (2000). And "no matter how unconstitutional it may be," a plan that is not retrogressive should be precleared under §5. Id., at 336. "[P]reclearance under §5 affirms nothing but the absence of backsliding." Id., at 335. Georgia argues that a plan should be precleared under §5 if the plan would satisfy §2 of the Voting Rights Act of 1965, 42 U.S.C. §1973. We have, however, "consistently understood" §2 to "combat different evils and, accordingly, to impose very different duties upon the States." Reno v. Bossier Parish School Bd., 520 U.S. 471, 477 (1997) (Bossier Parish I). For example, while §5 is limited to particular covered jurisdictions, §2 applies to all States. And the §2 inquiry differs in significant respects from a §5 inquiry. In contrast to §5's retrogression standard, the "essence" of a §2 vote dilution claim is that "a certain electoral law, practice, or structure ... cause[s] an inequality in the opportunities enjoyed by black and white voters to elect their preferred representatives." Thornburg v. Gingles, 478 U.S. 30, 47 (1986); see also id., at 48-50 (enunciating a three-part test to establish vote dilution); id., at 85-100 (O'Connor, J., concurring in judgment); 42 U.S.C. §1973(b). Unlike an inquiry under §2, a retrogression inquiry under §5, "by definition, requires a comparison of a jurisdiction's new voting plan with its existing plan." Bossier Parish I, supra, at 478. While some parts of the §2 analysis may overlap with the §5 inquiry, the two sections "differ in structure, purpose, and application." Holder v. Hall, 512 U.S. 874, 883 (1994) (plurality opinion). </s> In Bossier Parish I, we specifically held that a violation of §2 is not an independent reason to deny preclearance under §5. See 520 U.S., at 477. The reason for this holding was straightforward: "[R]ecognizing §2 violations as a basis for denying §5 preclearance would inevitably make compliance with §5 contingent upon compliance with §2. Doing so would, for all intents and purposes, replace the standards for §5 with those for §2." Ibid. </s> Georgia here makes the flip side of the argument that failed in Bossier Parish I--compliance with §2 suffices for preclearance under §5. Yet the argument fails here for the same reasons the argument failed in Bossier Parish I. We refuse to equate a §2 vote dilution inquiry with the §5 retrogression standard. Georgia's argument, like the argument in Bossier Parish I, would "shift the focus of §5 from nonretrogression to vote dilution, and [would] change the §5 benchmark from a jurisdiction's existing plan to a hypothetical, undiluted plan." Id., at 480. Instead of showing that the Senate plan is nondilutive under §2, Georgia must prove that its plan is nonretrogressive under §5. B </s> Georgia argues that even if compliance with §2 does not automatically result in preclearance under §5, its State Senate plan should be precleared because it does not lead to "a retrogression in the position of racial minorities with respect to their effective exercise of the electoral franchise." Beer v. United States, supra, at 141. See, e.g., Brief for Appellant 32, 36. While we have never determined the meaning of "effective exercise of the electoral franchise," this case requires us to do so in some detail. First, the United States and the District Court correctly acknowledge that in examining whether the new plan is retrogressive, the inquiry must encompass the entire statewide plan as a whole. See 195 F.Supp. 2d, at 73; Tr. of Oral Arg. 28-29. Thus, while the diminution of a minority group's effective exercise of the electoral franchise in one or two districts may be sufficient to show a violation of §5, it is only sufficient if the covered jurisdiction cannot show that the gains in the plan as a whole offset the loss in a particular district. </s> Second, any assessment of the retrogression of a minority group's effective exercise of the electoral franchise depends on an examination of all the relevant circumstances, such as the ability of minority voters to elect their candidate of choice, the extent of the minority group's opportunity to participate in the political process, and the feasibility of creating a nonretrogressive plan. See, e.g., Johnson v. De Grandy, 512 U.S. 997, 1011-1012, 1020-1021 (1994); Richmond v. United States, 422 U.S. 358, 371-372 (1975); Thornburg v. Gingles, supra, at 97-100 (O'Connor, J., concurring in judgment). "No single statistic provides courts with a shortcut to determine whether" a voting change retrogresses from the benchmark. Johnson v. De Grandy, supra, at 1020-1021. </s> In assessing the totality of the circumstances, a court should not focus solely on the comparative ability of a minority group to elect a candidate of its choice. While this factor is an important one in the §5 retrogression inquiry, it cannot be dispositive or exclusive. The standard in §5 is simple--whether the new plan "would lead to a retrogression in the position of racial minorities with respect to their effective exercise of the electoral franchise." Beer v. United States, 425 U.S., at 141. </s> The ability of minority voters to elect a candidate of their choice is important but often complex in practice to determine. In order to maximize the electoral success of a minority group, a State may choose to create a certain number of "safe" districts, in which it is highly likely that minority voters will be able to elect the candidate of their choice. See Thornburg v. Gingles, 478 U.S., at 48-49; id., at 87-89 (O'Connor, J., concurring in judgment). Alternatively, a State may choose to create a greater number of districts in which it is likely--although perhaps not quite as likely as under the benchmark plan--that minority voters will be able to elect candidates of their choice. See id., at 88-89 (O'Connor, J., concurring in judgment); cf. Pildes, Is Voting-Rights Law Now at War With Itself? Social Science and Voting Rights in the 2000s, 80 N.C. L.Rev. 1517 (2002). </s> Section 5 does not dictate that a State must pick one of these methods of redistricting over another. Either option "will present the minority group with its own array of electoral risks and benefits," and presents "hard choices about what would truly 'maximize' minority electoral success." Thornburg v. Gingles, supra, at 89 (O'Connor, J., concurring in judgment). On one hand, a smaller number of safe majority-minority districts may virtually guarantee the election of a minority group's preferred candidate in those districts. Yet even if this concentration of minority voters in a few districts does not constitute the unlawful packing of minority voters, see Voinovich v. Quilter, 507 U.S. 146, 153-154 (1993), such a plan risks isolating minority voters from the rest of the state, and risks narrowing political influence to only a fraction of political districts. Cf. Shaw v. Reno, 509 U.S., at 648-650. And while such districts may result in more "descriptive representation" because the representatives of choice are more likely to mirror the race of the majority of voters in that district, the representation may be limited to fewer areas. See H.Pitkin, The Concept of Representation 60-91 (1967). </s> On the other hand, spreading out minority voters over a greater number of districts creates more districts in which minority voters may have the opportunity to elect a candidate of their choice. Such a strategy has the potential to increase "substantive representation" in more districts, by creating coalitions of voters who together will help to achieve the electoral aspirations of the minority group. See id., at 114. It also, however, creates the risk that the minority group's preferred candidate may lose. Yet as we stated in Johnson v. De Grandy, supra, at 1020: "[T]here are communities in which minority citizens are able to form coalitions with voters from other racial and ethnic groups, having no need to be a majority within a single district in order to elect candidates of their choice. Those candidates may not represent perfection to every minority voter, but minority voters are not immune from the obligation to pull, haul, and trade to find common political ground, the virtue of which is not to be slighted in applying a statute meant to hasten the waning of racism in American politics." </s> Section 5 gives States the flexibility to choose one theory of effective representation over the other. </s> In addition to the comparative ability of a minority group to elect a candidate of its choice, the other highly relevant factor in a retrogression inquiry is the extent to which a new plan changes the minority group's op-portunity to participate in the political process. "'[T]he power to influence the political process is not limited to winning elections.'" Thornburg v. Gingles, supra, at 99 (O'Connor, J., concurring in judgment) (quoting Davis v. Bandemer, 478 U.S. 109, 132 (1986)); see also White v. Regester, 412 U.S. 755, 766-767 (1973); Whitcomb v. Chavis, 403 U.S. 124, 149-160 (1971); Johnson v. De Grandy, 512 U.S., at 1011-1012. </s> Thus, a court must examine whether a new plan adds or subtracts "influence districts"--where minority voters may not be able to elect a candidate of choice but can play a substantial, if not decisive, role in the electoral process. Cf. Shaw v. Hunt, 517 U.S. 899, 947, n.21 (1996) (Stevens, J., dissenting); Hays v. Louisiana, 936 F.Supp. 360, 364, n.17 (WD La. 1996); Johnson v. De Grandy, supra, at 1011-1012; Thornburg v. Gingles, 478 U.S., at 98-100 (O'Connor, J., concurring in judgment). In assessing the comparative weight of these influence districts, it is important to consider "the likelihood that candidates elected without decisive minority support would be willing to take the minority's interests into account." Id., at 100 (O'Connor, J., concurring in judgment). In fact, various studies have suggested that the most effective way to maximize minority voting strength may be to create more influence or coalitional districts. See, e.g., Lublin, Racial Redistricting and African-American Representation: A Critique of "Do Majority-Minority Districts Maximize Substantive Black Representation in Congress?" 93 Am. Pol. Sci. Rev. 183, 185 (1999) (noting that racial redistricting in the early 1990's, which created more majority-minority districts, made Congress "less likely to adopt initiatives supported by blacks"); Cameron, Epstein, & O'Halloran, Do Majority-Minority Districts Maximize Substantive Black Representation in Congress? 90 Am. Pol. Sci. Rev. 794, 808 (1996) (concluding that the "[d]istricting schemes that maximize the number of minority representatives do not necessarily maximize substantive minority representation"); C.Swain, Black Faces, Black Interests 193-234 (1995); Pildes, 80 N.C. L.Rev., at 1517; Grofman, Handley, & Lublin, Drawing Effective Minority Districts: A Conceptual Framework and Some Empirical Evidence, 79 N.C. L.Rev. 1383(2001). </s> Section 5 leaves room for States to use these types of influence and coalitional districts. Indeed, the State's choice ultimately may rest on a political choice of whether substantive or descriptive representation is preferable. See Pitkin, supra, at 142; Swain, supra, at 5. The State may choose, consistent with §5, that it is better to risk having fewer minority representatives in order to achieve greater overall representation of a minority group by increasing the number of representatives sympathetic to the interests of minority voters. See Thornburg v. Gingles, 478 U.S., at 87-89, 99 (O'Connor, J., concurring in judgment); cf. Johnson v. De Grandy, 512 U.S., at 1020. </s> In addition to influence districts, one other method of assessing the minority group's opportunity to participate in the political process is to examine the comparative position of legislative leadership, influence, and power for representatives of the benchmark majority-minority districts. A legislator, no less than a voter, is "not immune from the obligation to pull, haul, and trade to find common political ground." Ibid. Indeed, in a representative democracy, the very purpose of voting is to delegate to chosen representatives the power to make and pass laws. The ability to exert more control over that process is at the core of exercising political power. A lawmaker with more legislative influence has more potential to set the agenda, to participate in closed-door meetings, to negotiate from a stronger position, and to shake hands on a deal. Maintaining or increasing legislative positions of power for minority voters' representatives of choice, while not dispositive by itself, can show the lack of retrogressive effect under §5. </s> And it is also significant, though not dispositive, whether the representatives elected from the very districts created and protected by the Voting Rights Act support the new districting plan. The District Court held that the support of legislators from benchmark majority-minority districts may show retrogressive purpose, but it is not relevant in assessing retrogressive effect. See 195 F.Supp. 2d, at 89; see also post, at 12-13 (opinion of Souter,J.). But we think this evidence is also relevant for retrogressive effect. As the dissent recognizes, the retrogression inquiry asks how "voters will probably act in the circumstances in which they live." Post, at 19. The representatives of districts created to ensure continued minority participation in the political process have some knowledge about how "voters will probably act" and whether the proposed change will decrease minority voters' effective exercise of the electoral franchise. </s> The dissent maintains that standards for determining nonretrogression under §5 that we announce today create a situation where "[i]t is very hard to see anything left of" §5. Post, at 4. But the dissent ignores that the ability of a minority group to elect a candidate of choice remains an integral feature in any §5 analysis. Cf. Thornburg v. Gingles, supra, at 98 (O'Connor, J., concurring in judgment). And the dissent agrees that the addition or subtraction of coalitional districts is relevant to the §5 inquiry. See post, at 1, 14. Yet assessing whether a plan with coalitional districts is retrogressive is just as fact-intensive as whether a plan with both influence and coalitional districts is retrogressive. As Justice Souter recognized for the Court in the §2 context, a court or the Department of Justice should assess the totality of circumstances in determining retrogression under §5. See Johnson v. De Grandy, supra, at 1020-1021. And it is of course true that evidence of racial polarization is one of many factors relevant in assessing whether a minority group is able to elect a candidate of choice or to exert a significant influence in a particular district. See Thornburg v. Gingles, 478 U.S., at 37; id., at 100-104 (O'Connor, J., concurring in judgment); see also White v. Regester, 412 U.S., at 755 (1973); Zimmer v. McKeithen, 485 F.2d 1297 (CA5 1973) (en banc). </s> The dissent nevertheless asserts that it "cannot be right" that the §5 inquiry goes beyond assessing whether a minority group can elect a candidate of its choice. Post, at 3. But except for the general statement of retrogression in Beer, the dissent cites no law to support its contention that retrogression should focus solely on the ability of a minority group to elect a candidate of choice. As Justice Souter himself, writing for the Court in Johnson v. De Grandy, supra, at 1011-1012, has recognized, the "extent of the opportunities minority voters enjoy to participate in the political processes" is an important factor to consider in assessing a §2 vote-dilution inquiry. See also Thornburg v. Gingles, supra, at 98-100 (O'Connor, J., concurring in judgment). In determining how the new districting plan differs from the benchmark plan, the same standard should apply to §5. C </s> The District Court failed to consider all the relevant factors when it examined whether Georgia's Senate plan resulted in a retrogression of black voters' effective exercise of the electoral franchise. First, while the District Court acknowledged the importance of assessing the statewide plan as a whole, the court focused too narrowly on proposed Senate Districts 2, 12, and 26. It did not examine the increases in the black voting age population that occurred in many of the other districts. Second, the District Court did not explore in any meaningful depth any other factor beyond the comparative ability of black voters in the majority-minority districts to elect a candidate of their choice. In doing so, it paid inadequate attention to the support of legislators representing the benchmark majority-minority districts and the maintenance of the legislative influence of those representatives. The District Court correctly recognized that the increase in districts with a substantial minority of black voters is an important factor in the retrogression inquiry. See 195 F.Supp. 2d, at 75-78. Nevertheless, it did not adequately apply this consideration to the facts of this case. The District Court ignored the evidence of numerous other districts showing an increase in black voting age population, as well as the other evidence that Georgia decided that a way to increase black voting strength was to adopt a plan that "unpacked" the high concentration of minority voters in the majority-minority districts. Its statement that Georgia did not "presen[t] evidence regarding potential gains in minority voting strength in Senate Districts other than Districts 2, 12 and 26" is therefore clearly erroneous. Id., at 94. Like the dissent, we accept the District Court's findings that the reductions in black voting age population in proposed Districts 2, 12, and 26 to just over 50% make it marginally less likely that minority voters can elect a candidate of their choice in those districts, although we note that Georgia introduced evidence showing that approximately one-third of white voters would support a black candidate in those districts, see id., at 66, and that the United States' own expert admitted that the results of statewide elections in Georgia show that "there would be a 'very good chance' that ... African American candidates would win election in the reconstituted districts." Id., at 71; see also id., at 84-85. Nevertheless, regardless of any racially polarized voting or diminished opportunity for black voters to elect a candidate of their choice in proposed Districts 2, 12, and 26, the District Court's inquiry was too narrow. </s> In the face of Georgia's evidence that the Senate plan as a whole is not retrogressive, the United States introduced nothing apart from the evidence that it would be more difficult for minority voters to elect their candidate of choice in Districts 2, 12, and 26. As the District Court stated, the United States did not introduce any evidence to rebut Georgia's evidence that the increase in black voting age population in the other districts offsets any decrease in black voting age population in the three contested districts: "[T]he United States' evidence was extremely limited in scope--focusing only on three contested districts in the State Senate plan." Id., at 37. Indeed, the District Court noted that the United States' evidence "was not designed to permit the court to assess the overall impact" of the Senate plan. Ibid. </s> Given the evidence submitted in this case, we find that Georgia likely met its burden of showing nonretrogression. The increase in black voting age population in the other districts likely offsets any marginal decrease in the black voting age population in the three districts that the District Court found retrogressive. Using the overlay of the 2000 census numbers, Georgia's strategy of "unpacking" minority voters in some districts to create more influence and coalitional districts is apparent. Under the 2000 census numbers, the number of majority black voting age population districts in the new plan increases by one, the number of districts with a black voting age population of between 30% and 50% increases by two, and the number of districts with a black voting age population of between 25% and 30% increases by another 2. See Pl. Exhs. 1D, 2C; see also supra, at 6-7. </s> Using the census numbers in effect at the time the benchmark plan was enacted to assess the benchmark plan, the difference is even more striking. Under those figures, the new plan increases from 10 to 13 the number of districts with a majority-black voting age population and increases from 8 to 13 the number of districts with a black voting age population of between 30% and 50%. See Pl. Exhs. 1C, 2C. Thus, the new plan creates 8 new districts--out of 56--where black voters as a group can play a substantial or decisive role in the electoral process. Indeed, under the census figures in use at the time Georgia enacted its benchmark plan, the black voting age population in Districts 2, 12, and 26 does not decrease to the extent indicated by the District Court. District 2 drops from 59.27% black voting age population to 50.31%. District 26 drops from 53.45% black voting age population to 50.80%. And District 12 actually increases, from 46.50% black voting age population to 50.66%. See Pl. Exhs. 1C, 2C.2 And regardless of any potential retrogression in some districts, §5 permits Georgia to offset the decline in those districts with an increase in the black voting age population in other districts. The testimony from those who designed the Senate plan confirms what the statistics suggest--that Georgia's goal was to "unpack" the minority voters from a few districts to increase blacks' effective exercise of the electoral franchise in more districts. See supra, at 5-7. </s> Other evidence supports the implausibility of finding retrogression here. An examination of black voters' opportunities to participate in the political process shows, if anything, an increase in the effective exercise of the electoral franchise. It certainly does not indicate retrogression. The 34 districts in the proposed plan with a black voting age population of above 20% consist almost entirely of districts that have an overall percentage of Democratic votes of above 50%. See Pl. Exh. 2D. The one exception is proposed District 4, with a black voting age population of 30.51% and an overall Democratic percentage of 48.86%. See ibid. These statistics make it more likely as a matter of fact that black voters will constitute an effective voting bloc, even if they cannot always elect the candidate of their choice. See Thornburg v. Gingles, 478 U.S., at 100 (O'Connor, J., concurring in judgment). These statistics also buttress the testimony of the designers of the plan such as Senator Brown, who stated that the goal of the plan was to maintain or increase black voting strength and relatedly to increase the prospects of Democratic victory. See supra, at 5. </s> The testimony of Congressman John Lewis is not so easily dismissed. Congressman Lewis is not a member of the State Senate and thus has less at stake personally in the outcome of this litigation. Congressman Lewis testified that "giving real power to black voters comes from the kind of redistricting efforts the State of Georgia has made," and that the Senate plan "will give real meaning to voting for African Americans" because "you have a greater chance of putting in office people that are going to be responsive." Pl. Exh. 21, at 21-23. Section 5 gives States the flexibility to implement the type of plan that Georgia has submitted for preclearance--a plan that increases the number of districts with a majority-black voting age population, even if it means that in some of those districts, minority voters will face a somewhat reduced opportunity to elect a candidate of their choice. Cf. Thornburg v. Gingles, supra, at 89 (O'Connor, J., concurring in judgment). </s> The dissent's analysis presumes that we are deciding that Georgia's Senate plan is not retrogressive. See post, at 10-18. To the contrary, we hold only that the District Court did not engage in the correct retrogression analysis because it focused too heavily on the ability of the minority group to elect a candidate of its choice in the majority-minority districts. While the District Court engaged in a thorough analysis of the issue, we must remand the case for the District Court to examine the facts using the standard that we announce today. We leave it for the District Court to determine whether Georgia has indeed met its burden of proof. The dissent justifies its conclusion here on the ground that the District Court did not clearly err in its factual determination. But the dissent does not appear to dispute that if the District Court's legal standard was incorrect, the decision below should be vacated. </s> The purpose of the Voting Rights Act is to prevent discrimination in the exercise of the electoral franchise and to foster our transformation to a society that is no longer fixated on race. Cf. Johnson v. De Grandy, 512 U.S., at 1020; Shaw v. Reno, 509 U.S., at 657. As Congressman Lewis stated: "I think that's what the [civil rights] struggle was all about, to create what I like to call a truly interracial democracy in the South. In the movement, we would call it creating the beloved community, an all-inclusive community, where we would be able to forget about race and color and see people as people, as human beings, just as citizens." Pl. Exh. 21, at 14. While courts and the Department of Justice should be vigilant in ensuring that States neither reduce the effective exercise of the electoral franchise nor discriminate against minority voters, the Voting Rights Act, as properly interpreted, should encourage the transition to a society where race no longer matters: a society where integration and color-blindness are not just qualities to be proud of, but are simple facts of life. See Shaw v. Reno, supra, at 657. IV </s> The District Court is in a better position to reweigh all the facts in the record in the first instance in light of our explication of retrogression. The judgment of the District Court for the District of Columbia, accordingly, is vacated, and the case is remanded for further proceedings consistent with this opinion. It is so ordered. </s> GEORGIA, APPELLANT v. JOHN ASHCROFT, ATTORNEY GENERAL, etal. on appeal from the united states district court for the district of columbia [June 26, 2003] </s> Justice Kennedy, concurring. </s> As is evident from the Court's accurate description of the facts in this case, race was a predominant factor in drawing the lines of Georgia's State Senate redistricting map. If the Court's statement of facts had been written as the preface to consideration of a challenge brought under the Equal Protection Clause or under §2 of the Voting Rights Act of 1965, a reader of the opinion would have had sound reason to conclude that the challenge would succeed. Race cannot be the predominant factor in redistricting under our decision in Miller v. Johnson, 515 U.S. 900 (1995). Yet considerations of race that would doom a redistricting plan under the Fourteenth Amendment or §2 seem to be what save it under §5. </s> I agree that our decisions controlling the §5 analysis require the Court's ruling here. See, e.g., Reno v. Bossier Parish School Bd., 520 U.S. 471 (1997); Reno v. Bossier Parish School Bd., 528 U.S. 320 (2000). The discord and inconsistency between §§2 and 5 should be noted, however; and in a case where that issue is raised, it should be confronted. There is a fundamental flaw, I should think, in any scheme in which the Department of Justice is permitted or directed to encourage or ratify a course of unconstitutional conduct in order to find compliance with a statutory directive. This serious issue has not been raised here, and, as already observed, the Court is accurate both in its summary of the facts and its application of the controlling precedents. With these observations, I join the opinion of the Court. </s> GEORGIA, APPELLANT v. JOHN ASHCROFT, ATTORNEY GENERAL, etal. on appeal from the united states district court for the district of columbia [June 26, 2003] </s> Justice Thomas, concurring. </s> I continue to adhere to the views expressed in my opinion in Holder v. Hall, 512 U.S. 874, 891 (1994) (opinion concurring in judgment). I join the Court's opinion because it is fully consistent with our §5 precedents. </s> GEORGIA, APPELLANT v. JOHN ASHCROFT, ATTORNEY GENERAL, etal. on appeal from the united states district court for the district of columbia [June 26, 2003] </s> Justice Souter, with whom Justice Stevens, Justice Ginsburg, and Justice Breyer join, dissenting. I </s> I agree with the Court that reducing the number of majority-minority districts within a State would not necessarily amount to retrogression barring preclearance under §5 of the Voting Rights Act of 1965. See ante, at 16-18. The prudential objective of §5 is hardly betrayed if a State can show that a new districting plan shifts from supermajority districts, in which minorities can elect their candidates of choice by their own voting power, to coalition districts, in which minorities are in fact shown to have a similar opportunity when joined by predictably supportive nonminority voters. Cf. Johnson v. De Grandy, 512 U.S. 997, 1020 (1994) (explaining in the context of §2 that although "society's racial and ethnic cleavages sometimes necessitate majority-minority districts to ensure equal political and electoral opportunity, that should not obscure the fact that there are communities in which minority citizens are able to form coalitions with voters from other racial and ethnic groups, having no need to be a majority within a single district in order to elect candidates of their choice"). Before a State shifts from majority-minority to coalition districts, however, the State bears the burden of proving that nonminority voters will reliably vote along with the minority, See, e.g., Reno v. Bossier Parish School Bd., 520 U.S. 471, 478 (1997). It must show not merely that minority voters in new districts may have some influence, but that minority voters will have effective influence translatable into probable election results comparable to what they enjoyed under the existing district scheme. And to demonstrate this, a State must do more than produce reports of minority voting age percentages; it must show that the probable voting behavior of nonminority voters will make coalitions with minorities a real prospect. See, e.g., Pildes, Is Voting-Rights Law Now at War With Itself? Social Science and Voting Rights in the 2000s, 80 N.C.L.Rev. 1517, 1539 (2002). If the State's evidence fails to convince a factfinder that high racial polarization in voting is unlikely, or that high white crossover voting is likely, or that other political and demographic facts point to probable minority effectiveness, a reduction in supermajority districts must be treated as potentially and fatally retrogressive, the burden of persuasion always being on the State. </s> The District Court majority perfectly well understood all this and committed no error. Error enters this case here in this Court, whose majority unmoors §5 from any practical and administrable conception of minority influence that would rule out retrogression in a transition from majority-minority districts, and mistakes the significance of the evidence supporting the District Court's decision. II </s> The Court goes beyond recognizing the possibility of coalition districts as nonretrogressive alternatives to those with majorities of minority voters when it redefines effective voting power in §5 analysis without the anchoring reference to electing a candidate of choice. It does this by alternatively suggesting that a potentially retrogressive redistricting plan could satisfy §5 if a sufficient number of so-called "influence districts," in addition to "coalitio[n] districts" were created, ante, at 18-19, or if the new plan provided minority groups with an opportunity to elect a particularly powerful candidate, ante, at 19-20. On either alternative, the §5 requirement that voting changes be nonretrogressive is substantially diminished and left practically unadministrable. A </s> The Court holds that a State can carry its burden to show a nonretrogressive degree of minority "influence" by demonstrating that "'candidates elected without decisive minority support would be willing to take the minority's interests into account.'" Ante, at 18 (quoting Thornburg v. Gingles, 478 U.S. 30, 100 (1986) (O'Connor, J., concurring in judgment)). But this cannot be right. The history of §5 demonstrates that it addresses changes in state law intended to perpetuate the exclusion of minority voters from the exercise of political power. When this Court held that a State must show that any change in voting procedure is free of retrogression it meant that changes must not leave minority voters with less chance to be effective in electing preferred candidates than they were before the change. "[T]he purpose of §5 has always been to insure that no voting-procedure changes would be made that would lead to a retrogression in the position of racial minorities with respect to their effective exercise of the electoral franchise." Beer v. United States, 425 U.S. 130, 141 (1976); see, e.g., id., at 140-141 ("Section 5 was intended 'to insure that [the gains thus far achieved in minority political participation] shall not be destroyed through new [discriminatory] procedures and techniques'") (quoting S.Rep. No.94-295, p.19 (1975)). In addressing the burden to show no retrogression, therefore, "influence" must mean an opportunity to exercise power effectively. </s> The Court, however, says that influence may be adequate to avoid retrogression from majority-minority districts when it consists not of decisive minority voting power but of sentiment on the part of politicians: influence may be sufficient when it reflects a willingness on the part of politicians to consider the interests of minority voters, even when they do not need the minority votes to be elected. The Court holds, in other words, that there would be no retrogression when the power of a voting majority of minority voters is eliminated, so long as elected politicians can be expected to give some consideration to minority interests. </s> The power to elect a candidate of choice has been forgotten; voting power has been forgotten. It is very hard to see anything left of the standard of nonretrogression, and it is no surprise that the Court's cited precedential support for this reconception, see ante, at 18, consists of a footnote from a dissenting opinion in Shaw v. Hunt, 517 U.S. 899 (1996) and footnote dictum in a case from the Western District of Louisiana. </s> Indeed, to see the trouble ahead, one need only ask how on the Court's new understanding, state legislators or federal preclearance reviewers under §5 are supposed to identify or measure the degree of influence necessary to avoid the retrogression the Court nominally retains as the §5 touchstone. Is the test purely ad hominem, looking merely to the apparent sentiments of incumbents who might run in the new districts? Would it be enough for a State to show that an incumbent had previously promised to consider minority interests before voting on legislative measures? Whatever one looks to, however, how does one put a value on influence that falls short of decisive influence through coalition? Nondecisive influence is worth less than majority-minority control, but how much less? Would two influence districts offset the loss of one majority-minority district? Would it take three? Or four? The Court gives no guidance for measuring influence that falls short of the voting strength of a coalition member, let alone a majority of minority voters. Nor do I see how the Court could possibly give any such guidance. The Court's "influence" is simply not functional in the political and judicial worlds. B </s> Identical problems of comparability and administrability count at least as much against the Court's further gloss on nonretrogression, in its novel holding that a State may trade off minority voters' ability to elect a candidate of their choice against their ability to exert some undefined degree of influence over a candidate likely to occupy a position of official legislative power. See ante, at 19-20. The Court implies that one majority-minority district in which minority voters could elect a legislative leader could replace a larger number of majority-minority districts with ordinary candidates, without retrogression of overall minority voting strength. Under this approach to §5, a State may value minority votes in a district in which a potential committee chairman might be elected differently from minority votes in a district with ordinary candidates. It is impossible to believe that Congress could ever have imagined §5 preclearance actually turning on any such distinctions. In any event, if the Court is going to allow a State to weigh minority votes by the ambitiousness of candidates the votes might be cast for, it is hard to see any stopping point. I suppose the Court would not go so far as to give extra points to an incumbent with the charisma to attract a legislative following, but would it value all committee chairmen equally? (The committee chairmen certainly would not.) And what about a legislator with a network of influence that has made him a proven dealmaker? Thus, again, the problem of measurement: is a shift from 10 majority-minority districts to 8 offset by a good chance that one of the 8 may elect a new Speaker of the House? </s> I do not fault the Court for having no answers to these questions, for there are no answers of any use under §5. The fault is more fundamental, and the very fact that the Court's interpretation of nonretrogression under §5 invites unanswerable questions points to the error of a §5 preclearance regime that defies reviewable administration. We are left with little hope of determining practically whether a districting shift to one party's overall political advantage can be expected to offset a loss of majority-minority voting power in particular districts; there will simply be greater opportunity to reduce minority voting strength in the guise of obtaining party advantage. </s> One is left to ask who will suffer most from the Court's new and unquantifiable standard. If it should turn out that an actual, serious burden of persuasion remains on the States, States that rely on the new theory of influence should be guaranteed losers: nonretrogression cannot be demonstrated by districts with minority influence too amorphous for objective comparison. But that outcome is unlikely, and if in subsequent cases the Court allows the State's burden to be satisfied on the pretense that unquantifiable influence can be equated with majority-minority power, §5 will simply drop out as a safeguard against the "unremitting and ingenious defiance of the Constitution" that required the procedure of preclearance in the first place. South Carolina v. Katzenbach, 383 U.S. 301, 309 (1966). III </s> The District Court never reached the question the Court addresses, of what kind of influence districts (coalition or not) might demonstrate that a decrease in majority-minority districts was not retrogressive. It did not reach this question because it found that the State had not satisfied its burden of persuasion on an issue that should be crucial on any administrable theory:1 the State had not shown the possibility of actual coalitions in the affected districts that would allow any retreat from majority-minority districts without a retrogressive effect. This central evidentiary finding is invulnerable under the correct standard of review. This Court's review of the District Court's factual findings is for clear error. See, e.g., Miller v. Johnson, 515 U.S. 900, 917 (1995); Pleasant Grove v. United States, 479 U.S. 462, 469 (1987); McCain v. Lybrand, 465 U.S. 236, 258 (1984); City of Lockhart v. United States, 460 U.S. 125, 136 (1983). We have no business disturbing the District Court's ruling "simply because we would have decided the case differently," but only if based "on the entire evidence, [we are] left with the definite and firm conviction that a mistake has been committed." Easley v. Cromartie, 532 U.S. 234, 242 (2001) (internal quotation marks omitted). It is not, then, up to us to "decide whether Georgia's State Senate redistricting plan is retrogressive as compared to its previous, benchmark districting plan." Ante, at 1. Our sole responsibility is to see whether the District Court committed clear error in refusing to preclear the plan. It did not. A </s> The District Court began with the acknowledgement (to which we would all assent) that the simple fact of a decrease in black voting age population (BVAP) in some districts is not alone dispositive about whether a proposed plan is retrogressive: "'Unpacking' African American districts may have positive or negative consequences for the statewide electoral strength of African American voters. To the extent that voting patterns suggest that minority voters are in a better position to join forces with other segments of the population to elect minority preferred candidates, a decrease in a district's BVAP may have little or no effect on minority voting strength." 195 F.Supp. 2d 25, 76 (DC 2002). </s> See id., at 78 ("[T]he Voting Rights Act allows states to adopt plans that move minorities out of districts in which they formerly constituted a majority of the voting population, provided that racial divisions have healed to the point that numerical reductions will not necessarily translate into reductions in electoral power"); id., at 84 ("[T]he mere fact that BVAP decreases in certain districts is not enough to deny preclearance to a plan under Section 5").2 </s> The District Court recognized that the key to understanding the impact of drops in a district's BVAP on the minority group's "effective exercise of the electoral franchise," Beer, 425 U.S., at 141, is the level of racial polarization. If racial elements consistently vote in separate blocs, decreasing the proportion of black voters will generally reduce the chance that the minority group's favored candidate will be elected; whereas in districts with low racial bloc voting or significant white crossover voting, a decrease in the black proportion may have no effect at all on the minority's opportunity to elect their candidate of choice. See, e.g., 195 F. Supp. 2d, at 84 ("[R]acial polarization is critically important because its presence or absence in the Senate Districts challenged by the United States goes a long way to determining whether or not the decreases in BVAP and African American voter registration in those districts are likely to produce retrogressiveeffects"). </s> This indisputable recognition, that context determines the effect of decreasing minority numbers for purposes of the §5 enquiry, points to the nub of this case, and the District Court's decision boils down to a judgment about what the evidence showed about that context. The District Court found that the United States had offered evidence of racial polarization in the contested districts,3 id., at 86, and it found that Georgia had failed to present anything relevant on that issue. Georgia, the District Court said, had "provided the court with no competent, comprehensive information regarding white crossover voting or levels of polarization in individual districts across the State." Id., at 88. In particular, the District Court found it "impossible to extrapolate" anything about the level of racial polarization from the statistical submissions of Georgia's lone expert witness. Id., at 85. And the panel majority took note that Georgia's expert "admitted on cross-examination" that his evidence simply did not address racial polarization: "the whole point of my analysis," the expert stated, "is not to look at polarization per se. The question is not whether or not blacks and whites in general vote for different candidates." Ibid. (internal quotation marks omitted). </s> Accordingly, the District Court explained that Georgia's expert: "made no attempt to address the central issue before the court: whether the State's proposal is retrogressive. He failed even to identify the decreases in BVAP that would occur under the proposed plan, and certainly did not identify corresponding reductions in the electability of African American candidates of choice. The paucity of information in [the expert's] report thus leaves us unable to use his analysis to assess the expected change in African American voting strength statewide that will be brought by the proposed Senate plan." Id., at 81. B </s> How is it, then, that the majority of this Court speaks of "Georgia's evidence that the Senate plan as a whole is not retrogressive," against which "the United States did not introduce any evidence [in] rebut[tal]," ante, at 23? The answer is that the Court is not engaging in review for clear error. Instead, it is reweighing evidence de novo, discovering what it thinks the District Court overlooked, and drawing evidentiary conclusions the District Court supposedly did not see. The Court is mistaken on all points. 1 </s> Implicitly recognizing that evidence of voting behavior by majority voters is crucial to any showing of nonretrogression when minority numbers drop under a proposed plan, the Court tries to find evidence to fill the record's gap. It says, for example, that "Georgia introduced evidence showing that approximately one-third of white voters would support a black candidate in [the contested] districts." Ante, at 23. In support of this claim, however, the majority focuses on testimony offered by Georgia's expert relating to crossover voting in the pre-existing rather than proposed districts. 195 F.Supp. 2d, at 66. The District Court specifically noted that the expert did not calculate crossover voting under the proposed plan. Id., at 66, n.31 (" The court also emphasizes that Epstein did not attempt to rely on the table's calculations to demonstrate voting patterns in the districts, and calculated crossover in the existing, and not the proposed, Senate districts"). Indeed, in relying on this evidence the majority attributes a significance to it that Georgia's own expert disclaimed, as the District Court pointed out. See id., at 85 ("[I]t is impossible to extrapolate these voting patterns from Epstein's database. As Epstein admitted on cross-examination: the whole point of my analysis is not to look at polarization per se. The question is not whether or not blacks and whites in general vote for different candidates" (internal quotation marks omitted)). 2 </s> In another effort to revise the record, the Court faults the District Court, alleging that it "focused too narrowly on proposed Senate Districts 2, 12, and 26." Ante, at 22. In fact, however, it is Georgia that asked the District Court to consider only the contested districts and the District Court explicitly refused to limit its review in any such fashion: "we reject the State's argument that this court's review is limited only to those districts challenged by the United States, and should not encompass the redistricting plans in their entirety.... [T]he court's review necessarily extends to the entire proposed plan." 195 F.Supp. 2d, at 73. The District Court explained that it "is vested with the final authority to approve or disapprove the proposed change as a whole." Ibid. "[T]he question before us is whether the proposed Senate plan as a whole, has the 'purpose or effect of denying or abridging the right to vote on account of race or color.'" Id., at 103. (Edwards, J., joined by Sullivan, J., concurring) (quoting 42 U.S.C. §1973c). Though the majority asserts that "[t]he District Court ignored the evidence of numerous other districts showing an increase in black voting age population," ante, at 22, the District Court, in fact, specifically considered the parties' dispute over the statewide impact of the change in black voting age population. See, e.g., 195 F.Supp. 2d, at 93. ("The number of Senate Districts with majorities of BVAP would, according to Georgia's calculations, increase from twelve to thirteen; according to the Attorney General's interpretation of the census data, the number would decrease from twelve to eleven"). 3 </s> In a further try to improve the record, the Court focuses on the testimony of certain lay witnesses, politicians presented by the State to support its claim that the Senate plan is not retrogressive. Georgia, indeed, relied heavily on the near unanimity of minority legislators' support for the plan. But the District Court did not overlook this evidence; it simply found it inadequate to carry the State's burden of showing nonretrogression. The District Court majority explained that the "legislators' support is, in the end, far more probative of a lack of retrogressive purpose than of an absence of retrogressive effect." Id., at 89 (emphasis in original). As against the politicians' testimony, the District Court had contrary "credible," id., at 88, evidence of retrogressive effect. This evidence was the testimony of the expert witness presented by the United States, which "suggests the existence of highly racially polarized voting in the proposed districts," ibid., evidence of retrogressive effect to which Georgia offered "no competent" response, ibid. The District Court was clearly within bounds in finding that (1) Georgia's proposed plan decreased BVAP in the relevant districts, (2) the United States offered evidence of significant racial polarization in those districts, and (3) Georgia offered no adequate response to this evidence. The reasonableness of the District Court's treatment of the evidence is underscored in its concluding reflection that it was possible Georgia could have shown the plan to be nonretrogressive, but the evidence the State had actually offered simply failed to do that. "There are, without doubt, numerous other ways, given the limited evidence of racially polarized voting in State Senate and local elections, that Georgia could have met its burden of proof in this case. Yet, the court is limited to reviewing the evidence presented by the parties, and is compelled to hold that the State has not met its burden." Id., at 94. "[T]he lack of positive racial polarization data was the gap at the center of the State's case [and] the evidence presented by [the] estimable [legislators] does not come close to filling that void." Id., at 100. </s> As must be plain, in overturning the District Court's thoughtful consideration of the evidence before it, the majority of this Court is simply rejecting the District Court's evidentiary finding in favor of its own. It is reweighing testimony and making judgments about the competence, interest, and character of witnesses. The Court is not conducting clear error review. 4 </s> Next, the Court attempts to fill the holes in the State's evidence on retrogression by drawing inferences favorable to the State from undisputed statistics. See ante, at 23-26. This exercise comes no closer to demonstrating clear error than the others considered so far. In the first place, the District Court has already explained the futility of the Court's effort. Knowing whether the number of majority BVAP districts increases, decreases, or stays the same under a proposed plan does not alone allow any firm conclusion that minorities will have a better, or worse, or unvarying opportunity to elect their candidates of choice. Any such inference must depend not only on trends in BVAP levels, but on evidence of likely voter turnout among minority and majority groups, patterns of racial bloc voting, likelihood of white crossover voting, and so on.4 Indeed, the core holding of the Court today, with which I agree, that nonretrogression does not necessarily require maintenance of existing super-majority minority districts, turns on this very point; comparing the number of majority-minority districts under existing and proposed plans does not alone reliably indicate whether the new plan is retrogressive. </s> Lack of contextual evidence is not, however, the only flaw in the Court's numerical arguments. Thus, in its first example, ante, at 23-24, the Court points out that under the proposed plan the number of districts with majority BVAP increases by one over the existing plan,5 but the Court does not mention that the number of districts with BVAP levels over 55% decreases by four. See Record, Doc. No. 148, Pl. Exhs. 1D, 2C. Similarly, the Court points to an increase of two in districts with BVAP in the 30% to 50% range, along with a further increase of two in the 25% to 30% range. Ante, at 23-24. It fails to mention, however, that Georgia's own expert argued that 44.3% was the critical threshold for BVAP levels, 195 F.Supp. 2d, at 107, and the data on which the Court relies shows the number of districts with BVAP over 40% actually decreasing by one, see Record, Doc. No. 148, Pl. Exhs. 1D, 2C. My point is not that these figures conclusively demonstrate retrogression; I mean to say only that percentages tell us nothing in isolation, and that without contextual evidence the raw facts about population levels fail to get close to indicating that the State carried its burden to show no retrogression. They do not come close to showing clear error. 5 </s> Nor could error, clear or otherwise, be shown by the Court's comparison of the proposed plan with the description of the State and its districts provided by the 1990 census. Ante, at 24-25. The 1990 census is irrelevant. We have the 2000 census, and precedent confirms in no uncertain terms that the issue for §5 purposes in not whether Georgia's proposed plan would have had a retrogressive effect 13 years ago: the question is whether the proposed plan would be retrogressive now. See, e.g., Reno v. Bossier Parish School Bd., 528 U.S. 320, 334 (2000) (Under § 5 "the baseline is the status quo that is proposed to be changed"); Holder v. Hall, 512 U.S. 874, 883 (1994) (plurality opinion) (Under §5, "[t]he baseline for comparison is present by definition; it is the existing status"); City of Lockhart v. United States, 460 U.S., at 132 ("The proper comparison is between the new system and the system actually in effect"); Cf. 28 C.F.R. §51.54 (b)(2)(2003) (when determining if a change is retrogressive under §5 "[t]he Attorney General will make the comparison based on the conditions existing at the time of the submission"). The Court's assumption that a proper §5 analysis may proceed on the basis of obsolete data from a superseded census is thus as puzzling as it is unprecedented. It is also an invitation to perverse results, for if a State could carry its burden under §5 merely by showing no retrogression from the state of affairs 13 years ago, it could demand preclearance for a plan flatly diminishing minority voting strength under §5.6 6 </s> The Court's final effort to demonstrate that Georgia's plan is nonretrogressive focuses on statistics about Georgia Democrats. Ante, at 25. The Court explains that almost all the districts in the proposed plan with a BVAP above 20% have a likely overall Democratic performance above 50%, and from this the Court concludes that "[t]hese statistics make it more likely as a matter of fact that black voters will constitute an effective voting bloc." Ibid. But this is not so. The degree to which the statistics could support any judgment about the effect of black voting in State Senate elections is doubtful, and even on the Court's assumptions the statistics show no clear error by the District Court. As for doubt about what the numbers have to do with State Senate elections, it is enough to know that the majority's figures are taken from a table describing Democratic voting in statewide, not local elections. The Court offers no basis for assuming that voting for Democratic candidates in statewide elections correlates with voting behavior in local elections,7 and in fact, the record points to different, not identical, voting patterns. The District Court specifically noted that the United States's expert testified that "African American candidates consistently received less crossover voting in local election[s] than in statewide elections," 195 F.Supp. 2d, at 71, and the court concluded that there is "compelling evidence that racial voting patterns in State Senate races can be expected to differ from racial voting patterns in statewide races," id., at 85-86. </s> But even if we assume the data on Democratic voting statewide can tell us something useful about Democratic voting in State Senate districts, the Court's argument does not hold up. It proceeds from the faulty premise that even with a low BVAP, if enough of the district is Democratic, the minority Democrats will necessarily have an effect on which candidates are elected. But if the proportion of nonminority Democrats is high enough, the minority group may well have no impact whatever on which Democratic candidate is selected to run and ultimately elected. In districts, say, with 20% minority voters (all of them Democrats) and 51% nonminority Democrats, the Democratic candidate has no obvious need to take the interests of the minority group into account; if everybody votes (or the proportion of stay-at-homes is constant throughout the electorate) the Democrat can win the general election without minority support. Even in a situation where a Democratic candidate needs a substantial fraction of minority voters to win (say the population is 25% minority and 30% nonminority Democrats), the Democratic candidate may still be able to ignore minority interests if there is such ideological polarization as between the major parties that the Republican candidate is entirely unresponsive to minority interests. In that situation, a minority bloc would presumably still prefer the Democrat, who would not need to adjust any political positions to get the minority vote. </s> All of this reasoning, of course, carries a whiff of the lamp. I do not know how Georgia's voters will actually behave if the percentage of something is x, or maybe y, any more than the Court does. We are arguing about numerical abstractions, and my sole point is that the Court's abstract arguments do not hold up. Much less do they prove the District Court wrong. IV </s> Section 5, after all, was not enacted to address abstractions. It was enacted "to shift the advantage of time and inertia from the perpetrators of the evil to its victim," Beer, 425 U.S., at 140 (quoting H.R. Rep. No. 94-196, pp.57-58 (1970)), and the State of Georgia was made subject to the requirement of preclearance because Congress "had reason to suppose" it might "try ... to evade the remedies for voting discrimination" and thus justifies §5's "uncommon exercise of congressional power." South Carolina v. Katzenbach, 383 U.S., at 334-335. Section 5 can only be addressed, and the burden to prove no retrogression can only be carried, with evidence of how particular populations of voters will probably act in the circumstances in which they live. The State has the burden to convince on the basis of such evidence. The District Court considered such evidence: it received testimony, decided what it was worth, and concluded as the trier of fact that the State had failed to carry its burden. There was no error, and I respectfully dissent. </s> FOOTNOTESFootnote 1Georgia and the United States have submitted slightly different figures regarding the black voting age population of each district. The differing figures depend upon whether the total number of blacks includes those people who self-identify as both black and a member of another minority group, such as Hispanic. Georgia counts this group of people, while the United States does not do so. Like the District Court, we consider all the record information, "including total black population, black registration numbers and both [black voting age population] numbers." 195 F.Supp. 2d 25, 79 (DC 2002). We focus in particular on Georgia's black voting age population numbers in this case because all parties rely on them to some extent and because Georgia used its own black voting age population numbers when it enacted the Senate plan. Moreover, the United States does not count all persons who identify themselves as black. It counts those who say they are black and those who say that they are both black and white, but it does not count those who say they are both black and a member of another minority group. Using the United States' numbers may have more relevance if the case involves a comparison of different minority groups. Cf. Johnson v. De Grandy, 512 U.S. 997 (1994); Bush v. Vera, 517 U.S. 952 (1996). Here, however, the case involves an examination of only one minority group's effective exercise of the electoral franchise. In such circumstances, we believe it is proper to look at all individuals who identify themselves as black. Footnote 2The dissent summarily rejects any inquiry into the benchmark plan using the census numbers in effect at the time the redistricting plan was passed. See post, at 14-15. Yet we think it is relevant to examine how the new plan differs from the benchmark plan as originally enacted by the legislature. The §5 inquiry, after all, revolves around the change from the previous plan. The 1990 census numbers are far from "irrelevant." Post, at 14. Rather, examining the benchmark plan with the census numbers in effect at the time the State enacted its plan comports with the one-person, one-vote principle of Reynolds v. Sims, 377 U.S. 533 (1964), and its progeny. When the decennial census numbers are released, States must redistrict to account for any changes or shifts in population. But before the new census, States operate under the legal fiction that even 10 years later, the plans are constitutionally apportioned. After the new enumeration, no districting plan is likely to be legally enforceable if challenged, given the shifts and changes in a population over 10 years. And if the State has not redistricted in response to the new census figures, a federal court will ensure that the districts comply with the one-person, one-vote mandate before the next election. See, e.g., Branch v. Smith, 538 U.S. ____ (2003); Lawyer v. Department of Justice, 521 U.S. 567 (1997); Growe v. Emison, 507 U.S. 25 (1993). FOOTNOTESFootnote 1The District Court correctly recognized that the State bears the burden of proof in establishing that its proposed redistricting plan satisfied the standards of §5. See, e.g., 195 F.Supp. 2d 25, 86 (DC 2002) ("We look to the State to explain why retrogression is not present"); see also Reno v. Bossier Parish School Bd., 520 U.S. 471, 478 (1997) (covered jurisdiction "bears the burden of proving that the change does not have the purpose and will not have the effect of denying or abridging the right to vote on account of race or color" (internal quotation marks omitted)); id., at 480 (Section 5 "imposes upon a covered jurisdiction the difficult burden of proving the absence of discriminatory purpose and effect"); Reno v. Bossier Parish School Bd., 528 U.S. 330, 332 (2000) ("In the specific context of §5 ... the covered jurisdiction has the burden of persuasion"); cf. Beer v. United States, 425 U.S. 130, 140 (1976) (Congress in passing §5 sought to "freez[e] election procedures in the covered areas unless the changes can be shown to be nondiscriminatory" (internal quotation marks omitted)). Footnote 2Indeed, the other plans approved by the District Court, Georgia's State House plan, 195 F.Supp. 2d, at 95, congressional plan, ibid., and the interim plan approved for the State Senate, 204 F.Supp. 2d 4, 7 (DC 2002), all included decreases in BVAP in particular districts. Footnote 3The majority cites the District Court's comment that "the United States' evidence was extremely limited in scope--focusing only on three contested districts in the State Senate plan." Ante, at 9-10 (quoting 195 F.Supp. 2d, at 37). The District Court correctly did not require the United States to prove that the plan was retrogressive. As the District Court explained "[u]ltimately, the burden of proof in this matter lies with the State. We look to the State to explain why retrogression is not present, and to prove the absence of racially polarized voting that might diminish African American voting strength in light of several districts' decreased BVAPs." Id., at 86. Footnote 4The fact that the Court premises its analysis on BVAP alone is ironic given that the Court, incorrectly, chastises the District Court for committing the very error the Court now engages in, "fail[ing] to consider all the relevant factors." Ante, at 21. Footnote 5Though the Court does not acknowledge it in its discussion of why "Georgia likely met its burden," ante, at 23, even this claim was disputed. As the District Court explained: "[t]he number of Senate Districts with majorities of BVAP would, according to Georgia's calculations, increase from twelve to thirteen; according to the Attorney General's interpretation of the census data, the number would decrease from twelve to eleven." 195 F.Supp. 2d, at 93. Footnote 6For example, if a covered jurisdiction had two majority-minority districts in 1990, but rapidly changing demography had produced two more during the ensuing decade, a new redistricting plan, setting the number of majority-minority districts at three would conclusively rule out retrogression on the Court's calculus. This would be the case even when voting behavior showed that nothing short of four majority-minority districts would preserve the status quo as of 2000. Footnote 7Even if the majority wanted to rely on these figures to make a claim about Democratic voting in statewide elections the predictors sig-nificance is utterly unclear. The majority pulls its figures froman exhibit titled, "Political Data Report," and a column labeled, "%OVERDEMVOTES," Record, Doc. No. 148, Pl. Exh. 2D. See ante, at 25. The document provides no information regarding whether the numbers in the column reflect an average of past performance, a prediction for future performance, or something else altogether.

United States Supreme Court DIRECTOR, WORKERS' COMP. PROGS. v. RASMUSSEN(1979) No. 77-1465 Argued: November 28, 1978Decided: February 21, 1979 </s> [Footnote * Together with No. 77-1491, Geo Control, Inc., et al., v. Rasmussen et al., also on certiorari to the same court. </s> The Longshoremen's and Harbor Workers' Compensation Act (Act) Amendments of 1972, to combat inflation, replaced the Act's $70 maximum limitation on weekly disability benefits with a four-step limitation scheme tied to specified percentages of the "applicable national average weekly wage" determined annually by the Secretary of Labor. 6 (b) (1). At the same time, death benefits to surviving spouses and children were increased, respectively, from 35% to 50% and from 15% to 16 2/3% of the deceased's average weekly wages. Total weekly death benefits were still limited to 66 2/3% of the deceased's average weekly wages, but the former specific dollar minimum and maximum limitations on average weekly wages were replaced by a provision dealing only with a minimum limitation tied to the applicable national average weekly wage. Thus, as amended, 9 (e) provides that "[i]n computing death benefits the average weekly wages of the deceased shall be considered to have been not less than the applicable national average weekly wage as prescribed in section 6 (b) but the total weekly benefits shall not exceed the average weekly wages of the deceased." Respondents, the widow and son of a covered employee, claimed combined death benefits ($532 per week) equal to 66 2/3% of the deceased's average weekly wages. The employer, its insurance carrier, and the Director of the Department of Labor's Office of Workers' Compensation Programs (petitioners) contended that 6 (b) (1)'s limitation on disability payments (then $167 per week), was meant to apply to death benefits as well as disability benefits and that Congress' failure to place a maximum on death benefits when it amended 9 (e) was inadvertent. An administrative decision in respondents' favor was affirmed by the Court of Appeals. Held: Death benefits payable under the Act are not subject to the maximum limitations placed on disability payments [440 U.S. 29, 30] by 6 (b) (1). This conclusion is supported by both the language and legislative history of the 1972 Amendments. Pp. 35-47. </s> (a) That the omission of a maximum limitation on death benefits was inadvertent is disproved by the legislative history of the 1972 Amendments, especially the pertinent Committee Reports, which clearly reflect the Committees' understanding that the minimum and maximum limitations on death benefits of former 9 (e) were being eliminated and that only a minimum benefits provision tied to the applicable national average weekly wage was being substituted in their place. Pp. 37-41. </s> (b) Section 6 (d), which provides that "determinations" under 6 "with respect to a period" shall apply to employees currently receiving disability benefits or survivors currently receiving death benefits during such period, does not render the maximum limitations contained in 6 (b) (1) applicable to death benefits. Congress' use of the word "determinations" in 6 (d) and of its verb form elsewhere in 6 strongly suggests that it intended the term to refer only to the Secretary of Labor's annual determination under 6 (b) (3) of the national average weekly wage, not to the mathematical computation of disability benefit maximums contemplated under 6 (b) (1). This view is confirmed by 6 (d)'s legislative history. Pp. 41-44. </s> (c) Since both the language and legislative history of the 1972 Amendments show that Congress' omission of a ceiling on death benefits was intentional, this Court must reject petitioners' suggested interpretation of the Act. Pp. 45-47. </s> 567 F.2d 1385, affirmed. </s> REHNQUIST, J., delivered the opinion of the Court, in which all other Members joined except POWELL, J., who took no part in the consideration or decision of the cases. </s> Kent L. Jones argued pro hac vice for petitioner in No. 77-1465. On the brief were Solicitor General McCree, Louis F. Claiborne, Laurie M. Streeter, and Joshua T. Gillelan II. Albert H. Sennett argued the cause for petitioners in No. 77-1491. With him on the brief was Frank B. Hugg. </s> James Buckley Ostmann argued the cause for respondents in both cases. With him on the brief was John R. Coyle.Fn </s> Fn [440 U.S. 29, 30] David Bonderman filed a brief for the American Insurance Assn. et al. as amici curiae urging reversal in both cases. [440 U.S. 29, 31] </s> MR. JUSTICE REHNQUIST delivered the opinion of the Court. </s> In May 1973 William Rasmussen was employed as a hydrologist by Geo Control, Inc., which was under contract with the United States to perform work in South Vietnam. Rasmussen was fatally injured during the course of his employment when the vehicle in which he was riding was blown up by a land mine. His employment was within the coverage of the Defense Base Act, 42 U.S.C. 1651 et seq., which incorporates the provisions of the Longshoremen's and Harbor Workers' Compensation Act, 44 Stat. 1424, as amended, 33 U.S.C. 901 et seq. (Act). It is undisputed that Rasmussen's surviving widow and son, 1 respondents here, are entitled to death benefits under 9 of the Act, 33 U.S.C. 909; the issue dividing the parties and the Courts of Appeals 2 is whether death benefits payable under the Act are subject to the maximum limits expressly placed on disability payments by 6 (b) (1). The Act's language and legislative history persuade us that they are not. </s> I </s> Prior to passage of the Longshoremen's and Harbor Workers' Compensation Act Amendments of 1972, 86 Stat. 1251, both disability and death benefits payable under the Act were subject to the same minimum and maximum limitations. Former 6 (b) limited disability benefits to no more than $70 per week and no less than $18 per week. Death benefits were limited under 9 (b) to 66 2/3% of the deceased's "average weekly wages," which were "considered to have been not more than $105 nor less than $27 . . . ." 33 U.S.C. 909 (e) (1970 [440 U.S. 29, 32] ed.). Accordingly, weekly death benefits, like disability benefits, could not exceed $70 nor be less than $18. 3 The $70 maximum on death and disability benefits, established in 1961, gradually lost real value as inflation exacted its annual toll, 4 and in 1972 Congress moved to give covered workers added protection. </s> The basic formula for determining compensation for permanent total disability - 66 2/3% of the employee's average weekly wages - was left unchanged by the 1972 Amendments. The Amendments, however, replaced the $70 maximum limitation on disability benefits with an entirely new limitation scheme tied to the "applicable national average weekly wage." New 6 (b) (1) provides in pertinent part: </s> "[C]ompensation for disability shall not exceed the [440 U.S. 29, 33] following percentages of the applicable national average weekly wage as determined by the Secretary . . . </s> "(A) 125 per centum or $167, whichever is greater, during the period ending September 30, 1973. </s> "(B) 150 per centum during the period beginning October 1, 1973, and ending September 30, 1974. </s> "(C) 175 per centum during the period beginning October 1, 1974, and ending September 30, 1975. </s> "(D) 200 per centum beginning October 1, 1975." 33 U.S.C. 906 (b) (1). </s> The "applicable national average weekly wage" is determined annually by the Secretary of Labor. 33 U.S.C. 906 (b) (3). The Senate Committee on Labor and Public Welfare estimated that approximately 90% of the disabled workers covered under the amended Act would receive benefits equal to a full 66 2/3% of their average weekly wages. S. Rep. No. 92-1125, p. 5 (1972), Legislative History of the Longshoremen's and Harbor Workers' Act Amendments of 1972 (Committee Print compiled for the Senate Committee on Labor and Public Welfare by the Subcommittee on Labor), p. 67 (1972) (hereinafter Leg. Hist.). The four-step phase-in of the section's maximum limitation from 125% to 200% of the applicable national average weekly wage was designed to ease the impact on covered employers of the increase in compensation payments, which Congress expected to at least double for most covered workers. Ibid. </s> Section 9 (b) was amended in 1972 to increase death benefits to surviving spouses from 35% to 50% of the deceased's average weekly wages. Death benefits to surviving children were increased from 15% to 16 2/3% of the deceased's average weekly wages. Total weekly death benefits payable to survivors, however, are still limited to 66 2/3% of the deceased's average weekly wage. 33 U.S.C. 909 (b). The 1972 Amendments deleted the specific dollar minimum and maximum limitations on average weekly wages and substituted [440 U.S. 29, 34] in their place a provision dealing only with a minimum limitation, which was tied to the applicable national average weekly wage. Section 9 (e) now provides: </s> "In computing death benefits the average weekly wages of the deceased shall be considered to have been not less than the applicable national average weekly wage as prescribed in section 6 (b) but the total weekly benefits shall not exceed the average weekly wages of the deceased." 33 U.S.C. 909 (e). </s> Pursuant to 9, respondents claimed combined death benefits of $532 per week, two-thirds of Rasmussen's average weekly wages of $798. Geo Control, its insurance carrier, and the Director of the Department of Labor's Office of Workers' Compensation Programs (OWCP), petitioners here, contended that the limitations on disability payments contained in 6 (b) (1) of the Act - initially $167 per week and now $396.50 per week 5 - apply to death benefits in the same manner as to benefits for permanent total disability. 6 The [440 U.S. 29, 35] dispute was submitted to an Administrative Law Judge, who sustained respondents' position. Petitioners appealed the adverse ruling to the Benefits Review Board, which affirmed. The legislative history of the 1972 Amendments convinced the Board that "elimination of the maximum benefit provision from Section 9 (e) of the Act . . . was done consciously and intentionally" and that "failure to substitute a new maximum was . . . a deliberate action." App. to Pet. for Cert. in No. 77-1465, pp. 22A-23A. Petitioners appealed the Board's order directly to the United States Court of Appeals for the Ninth Circuit. 33 U.S.C. 921 (c). The Court of Appeals affirmed, largely adopting the reasoning of the Review Board. We granted certiorari to resolve a conflict among the Courts of Appeals on this issue, 7 </s> 436 U.S. 955 (1978), and we now affirm the judgment of the Court of Appeals for the Ninth Circuit. </s> II </s> Petitioners' case for incorporating the maximum limitations on disability benefits of 6 (b) (1) into the death benefit provisions of 9 rests entirely on 6 (d), which in pertinent part provides that "determinations" made under the section "shall apply to employees or survivors . . . receiving compensation for permanent total disability or death benefits . . . ." 33 U.S.C. 906 (d). This subsection's references to "survivors" and "death benefits" demonstrate, according to petitioners, that Congress intended death benefits to be limited by the compensation maximums contained in 6 (b) (1). Anticipating the obvious question - why did not Congress, either expressly or by reference to 6 (b) (1), put the ceiling on death benefits back into the section of the Act dealing with [440 U.S. 29, 36] death benefits - the Director of OWCP concedes that 9 (e) was "[u]ndeniably, the most obvious place to stipulate a maximum on death benefits," but suggests that Congress merely "overlooked" this fact when amending the death benefits provisions. Brief for Petitioner in No. 77-1465, pp. 28-29. </s> One need only state petitioners' argument to recognize its flaws. They suggest, on the one hand, that Congress forgot to stipulate a maximum on death benefits when it amended 9 (e), although that section had contained a fixed ceiling on death benefits since the Act's initial passage in 1927. 8 On the other hand, petitioners urge that Congress remembered the question of death benefit maximums while considering 6, and rather than incorporate a death benefits ceiling in the section of the Act dealing with death benefits, Congress consciously decided to limit death benefits in the section dealing with disability compensation. </s> The logic of petitioners' position is further weakened by the structure of 6 itself, for if Congress had chosen that section as the vehicle for limiting death benefits, it would have been a simple matter to add the words "and death" after the word "disability" in the opening sentence of 6 (b) (1). Nor does petitioners' contention deal with the fact that Congress had the collective presence of mind to include a minimum limitation on death benefits in 9 (e). The Director maintains that the path petitioners urge us to follow, while admittedly "tortuous," ultimately leads to "what [440 U.S. 29, 37] may be assumed to have been the congressional intent to avoid disparate treatment" of disability and death beneficiaries. Brief for Petitioner in No 77-1465, pp. 11, 32. We agree that petitioners' suggested interpretation of the Act is tortuous, and believe that it is refuted by the plain language and legislative history of the pertinent provisions of the 1972 Amendments. </s> A </s> The language of 9 (e) is unambiguous: the average weekly wages on which death benefits are calculated can be no less than the applicable national average weekly wage. In amending 9 (e), Congress replaced specific minimum and maximum limitations on average weekly wages, and hence on death benefits, with a minimum limitation governed by the applicable national average weekly wage. That the omission of a maximum limitation on death benefits was inadvertent is disproved by the legislative history of the 1972 Amendments. </s> In 1971 two pairs of identical bills were introduced in the 92d Congress and considered by the Senate Committee on Labor and Public Welfare and the House Committee on Education and Labor. S. 525 and H. R. 3505 would have retained fixed dollar maximums for both disability and death benefits. 9 In contrast, S. 2318 and H. R. 12006, which ultimately formed the nucleus of the 1972 Amendments, proposed [440 U.S. 29, 38] the elimination of fixed dollar ceilings on both disability and death benefits. 10 </s> The difference in treatment of benefit maximums between the competing bills could hardly have gone unnoticed. Senator Eagleton opened hearings on S. 2318 and S. 525 before the Subcommittee on Labor of the Committee on Labor and Public Welfare, summarizing the intent of the competing bills as follows: </s> "S. 2318, which I cosponsored with Senator Williams, would eliminate the maximum payment limitations. . . . </s> "The second bill, S. 525, introduced by the late Senator Prouty at the request of the administration, would also increase the benefits although retaining a maximum limitation." Hearings on S. 2318 et al. before the Subcommittee on Labor of the Senate Committee on Labor and Public Welfare, 92d Cong., 2d Sess., 2 (1972) (hereinafter Hearings). </s> Supporters of both measures vigorously debated the virtues and vices of fixed ceilings on disability and death benefit payments. 11 The provisions of S. 2318 and H. R. 12006 as [440 U.S. 29, 39] reported by their respective Committees were identical and were ultimately enacted as the Longshoremen's and Harbor [440 U.S. 29, 40] Workers' Act Amendments of 1972. 12 The Committee Reports accompanying the House and Senate bills clearly reflect the Committees' understanding that the minimum and maximum limitations on death benefits of former 9 (e) were being eliminated and that only a minimum benefit provision tied to the applicable national average weekly wage was being substituted in their place. 13 In light of this evidence of [440 U.S. 29, 41] congressional intent, we find it impossible to conclude that the absence of a fixed maximum limitation on death benefits in 9 (e) was the result of inadvertence. </s> B </s> The benefit maximums contained in 6 (b) (1) are plainly restricted to "compensation for disability." Petitioners argue, however, that Congress made 6 (b) (1)'s disability benefit maximums applicable to death benefits through 6 (d). Close examination of the wording used by Congress in the latter provision persuades us otherwise. </s> Section 6 (d) provides: </s> "Determinations under this subsection with respect to a period shall apply to employees or survivors currently receiving compensation for permanent total disability or death benefits during such period, as well as those newly awarded compensation during such period." </s> Since there are no "determinations" made under 6 (d), its reference to "this subsection" is plainly in error. The parties agree, and we conclude, that the words "this subsection" should read "this section." 14 The question thus becomes what "determinations . . . with respect to a period" did Congress have in mind when it enacted 6 (d). [440 U.S. 29, 42] </s> The operative words of the subsection, "determinations" and "period," appear together in 6 in only one other place. Paragraph (3) of 6 (b) provides: </s> "As soon as practicable after June 30 of each year, and in any event prior to October 1 of such year, the Secretary shall determine the national average weekly wage for the three consecutive calendar quarters ending June 30. Such determination shall be the applicable national average wage for the period beginning with October 1 of that year and ending with September 30 of the next year. The initial determination under this paragraph shall be made as soon as practicable after [October 27, 1972]." 33 U.S.C. 906 (b) (3). (Emphasis added.) </s> Elsewhere in 6, both minimum and maximum limits on total disability benefits are tied to the "applicable national average weekly wage as determined by the Secretary under paragraph (3) . . . ." 33 U.S.C. 906 (b) (1); see 906 (b) (2). Congress' careful use of the word "determination" and its verb form strongly suggests that it intended the term to refer only to the Secretary of Labor's annual determination under 6 (b) (3) of the national average weekly wage, not to the mathematical computation of disability benefit maximums contemplated under 6 (b) (1). This view of 6 (d) is confirmed by the provision's legislative history. The Senate Committee on Labor and Public Welfare, in its section-by-section analysis of S. 2318, stated: </s> "Subsection (d) states that determinations of national average weekly wage made with respect to a period apply to employees or survivors currently receiving compensation for permanent total disability or death benefits, as well as those who begin receiving compensation [440 U.S. 29, 43] for the first time during the period." S. Rep. No. 92-1125, p. 18 (1972), Leg. Hist. 80. 15 </s> Because determinations of the national average weekly wage govern minimum death benefits as well as both minimum and maximum total disability benefits, 6 (d)'s reference to "survivors . . . receiving . . . death benefits" is not surprising. Congress intended increases in the national average weekly wage to be reflected by corresponding increases in minimum death benefits and both minimum and maximum total disability benefits. 16 See S. Rep. No. 92-1125, [440 U.S. 29, 44] supra, at 5-6, Leg. Hist. 67-68 We conclude that 6 (d) does not render the maximum limitations contained in 6 (b) (1) applicable to death benefits. [440 U.S. 29, 45] </s> C </s> Finally, petitioners urge that, the Act's language and legislative history notwithstanding, Congress could not have intended to place a "premium on death." They cannot and do not dispute, however, that Congress did precisely that in situations in which the employee's average weekly wages are less than the applicable national average weekly wage and he is survived by a spouse and one or more children. 17 Congress [440 U.S. 29, 46] may well have retained maximum benefit limitations in 6 (b) (1) to discourage feigned disability, a consideration wholly inapplicable to death benefits. Nor is it inconceivable that the financial needs of the disabled worker's family could increase upon his death. The typical disabled worker, though no longer physically able to ply his trade, might be able to contribute to the family's livelihood by assuming a variety of domestic responsibilities, thus releasing his spouse into the work force. The disabled worker's death would under such circumstances rob the family of an economic asset. </s> Petitioners entreat us to interpret the 1972 Amendments "to avoid an absurd and discriminatory consequence." Even if we agreed with petitioners' characterization of Congress' failure to put a ceiling on death benefits, we would be required to decline petitioners' invitation, for our examination of the language and legislative history of the 1972 Amendments [440 U.S. 29, 47] convinces us that the omission was intentional. Congress has put down its pen, and we can neither rewrite Congress' words nor call it back "to cancel half a Line." Our task is to interpret what Congress has said; so doing, we conclude that death benefits payable under the Act are not subject to the maximum limitations contained in 6 (b) (1). The judgment of the Court of Appeals is </s> Affirmed. </s> MR. JUSTICE POWELL took to part in the consideration or decision of these cases. </s> Footnotes [Footnote 1 Rasmussen's surviving son is entitled to benefits until his 18th birthday, or, if he qualifies under the Act as a student, until his 23d birthday. See 33 U.S.C. 902 (14), (18), and 909 (b). </s> [Footnote 2 Compare 567 F.2d 1385 (case below), with Director, Office of Workers' Comp. v. O'Keefe, 545 F.2d 337 (CA3 1976), and Director, Office of Workers' Comp. v. Boughman, 178 U.S. App. D.C. 132, 545 F.2d 210 (1976). </s> [Footnote 3 Under former 9 (b) a surviving widow was entitled to 35% of her deceased husband's average wages and an additional 15% of the deceased's wages for each surviving child, subject to a limit of 66 2/3% of the deceased's wages. Thus, a widow without children, although nominally entitled by former 9 (b) to 35% of her deceased husband's average weekly wages was actually entitled only to 35% of $105. A widow with three or more children, however, was entitled to the maximum aggregate percentage of weekly wages (66 2/3), which would result in an award of $70 in weekly death benefits. The 1972 Amendments increased the percentage shares of surviving widows and children to 50 and 16 2/3, respectively, although the maximum aggregate percentage limitation of 66 2/3 was retained. </s> [Footnote 4 According to 1972 congressional reports, the average weekly wage for private, nonagricultural employees was $135 a week, while longshoremen averaged over $200 per week in some ports. H. R. Rep. No. 92-1441, p. 1 (1972), Legislative History of the Longshoremen's and Harbor Workers' Compensation Act Amendments of 1972 (Committee Print compiled for the Senate Committee on Labor and Public Welfare by the Subcommittee on Labor), p. 207 (1972) (hereinafter Leg. Hist.); S. Rep. No. 92-1125, p. 4 (1972), Leg. Hist. 66. The $70 limitation on death and disability benefits precluded most employees and their survivors from receiving 66 2/3% of the employee's average weekly wages, and in some cases the $70 maximum constituted as little as 30% of the employee's average weekly wages. S. Rep. No. 92-1125, p. 5, Leg. Hist. 67. </s> [Footnote 5 The national average weekly wages determined by the Secretary of Labor since 1972, along with corresponding maximum benefit levels under 6 (b) (1), are as follows: National Section Average 6 (b) (1) Effective Date Weekly Wage Maximum 11/26/72 $131.80 $167.00 10/1/73 140.36 210.54 10/1/74 149.14 261.00 10/1/75 159.19 318.38 10/1/76 171.27 342.54 10/1/77 183.61 367.22 10/1/78[*] 198.25 396.50 [*] Based on preliminary figures. </s> [Footnote 6 The dispute was initially litigated before the Deputy Commissioner for the Fifteenth Compensation District of the Department of Labor's Office of Workers' Compensation Programs (OWCP), who ruled that 6 (b) (1)'s limitations on compensation apply to death benefits as well [440 U.S. 29, 35] as to benefits for permanent total disability. On appeal the Benefits Review Board vacated the decision on the ground that the Deputy Commissioner lacked authority to resolve the issue. </s> [Footnote 7 See n. 2, supra. </s> [Footnote 8 The original Act provided that compensation benefits for disability were not to exceed $25 per week. Act of Mar. 4, 1927, 6 (b), 44 Stat. 1426. The maximum compensation benefit for death was 66 2/3% of the employee's average weekly wages, considered to be not more than $37.50 per week. 9 (c), 44 Stat. 1430. Thus, the maximum weekly benefit for both disability and death was $25. Subsequent amendments raised benefit levels, but did not disturb the relationship between disability and death compensation maximums. See Act of June 24, 1948, ch. 623, 1, 3, 62 Stat. 602; Act of July 26, 1956, ch. 735, 1, 4, 70 Stat. 655; Act of July 14, 1961, Pub. L. 87-87, 1, 2, 75 Stat. 203. </s> [Footnote 9 S. 525, 92d Cong., 1st Sess., 4 (a), 8 (c) (1971), Leg. Hist. 395, 399; H. R. 3505, 92d Cong., 1st Sess., 4 (a), 8 (c) (1971), Leg. Hist. 417, 421. Section 4 (a) of both the House and Senate bills provided in pertinent part: "Section 6 (b) of such Act is amended to read as follows: "`Compensation for disability shall not exceed $119 a week and compensation for total disability shall not be less than $35 per week . . . .'" Section 8 (c) of both bills would have amended 9 (e) of the Act to read: "In computing death benefits the average weekly wages of the deceased shall be considered to have been not more than $178.50, nor less than $52.50, but the total weekly compensation shall not exceed the weekly wages of the deceased." </s> [Footnote 10 S. 2318, 92d Cong., 2d Sess., 4 (a), 10 (b) (1971), Leg. Hist. 6, 10; H. R. 12006, 92d Cong., 1st Sess., 4 (a), 10 (b) (1971), Leg. Hist. 146, 149-150. As originally introduced, 10 (b) of both the House and Senate bills would have amended 9 (e) of the Act to read: "In computing death benefits the average weekly wages of the deceased shall be considered to have been not less than $80 but the total weekly compensation shall not exceed the weekly wages of the deceased." Original 4 (a) of both bills contained a similar provision for disability benefits: "Section 6 (b) of such Act is amended to read as follows: `(b) Compensation for total disability shall not be less than $54 per week: Provided, however, That, if the employee's average weekly wages as computed under section 10 are less than $54 per week, he shall receive as compensation for total disability his average weekly wages.'" </s> [Footnote 11 Witness representing workers covered by the Act generally supported removal of fixed ceilings on compensation payments. Witness [440 U.S. 29, 39] Thomas W. Gleason, President of the International Longshoremen's Association, AFL-CIO, testified: "We strongly support the enactment of S. 2318 as the most effective proposal to accomplish the long overdue increase in the benefit levels of injured longshoremen. First and foremost, that bill would eliminate the artificial and totally unrealistic restrictions on benefit amounts. This would enable compensation awards, for the first time, to reflect realistically the loss of earnings suffered by injured employees. . . . "The administration bill, S. 525, would also raise benefit levels. The proposed increase in maximum weekly compensation from $70.00 to $119.00 represents a substantial improvement, but one that is already obsolete. . . . . . . . . "We urge that the Congress not adopt a benefit level grounded on built-in obsolescence. Far more equitable is the approach manifested in S. 2318." Hearings 156-158. See id., at 63 (testimony of Howard McGuigan, Legislative Representative, AFL-CIO), 133 (testimony of Patrick Tobin, Washington Representative, International Longshoremen's and Warehousemen's Union), 700 (testimony of Frank E. Fitzsimmons, General President, International Brotherhood of Teamsters, Chauffeurs, Warehousemen and Helpers of America). Not surprisingly, representatives of employers subject to the Act's provisions were generally opposed to elimination of benefit maximums. Edward D. Vickery, representing the National Maritime Compensation Committee, opposed S. 2318, stating: "[W]e respectfully submit that it is not advisable to remove the monetary maximum benefits payable per week under the Longshoremen's Act and therefore recommend that the provisions of Section 8 of S. 525 be retained in this regard." Hearings 334. Witness Ralph Hartman, an assistant manager in the Safety and Workmen's Compensation Division of Bethlehem Steel Corporation, proposed a compromise position: "[W]e endorse the basic concepts of S. 2318, and propose innovations or variations which we consider urgent and demanding, yet equitable to all concerned. . . . . . "Of major impact and importance to the industry are the proposals to [440 U.S. 29, 40] increase weekly benefits. One such proposal would amend section 6 (b) of the act by increasing the minimum weekly rate from $18 to $54 and eliminating the present maximum weekly benefit rate of $70. "We agreed that the minimum rate should be increased. However, this proposal leaves us with a weekly benefit rate of two-thirds of the employee's average weekly earnings without limitation. . . . . . "We recognize the intent of the proposal, and we suggest for your consideration that the maximum weekly benefit be predicated upon the average weekly wage in the shipbuilding and ship repair industry, that it be 66 and two-thirds percent of the injured employee's average weekly wage computed under section 10, subject to a maximum of 150 percent of the average weekly wage of the shipbuilding and ship repair industry." Id., at 171-172. It is inconceivable that Congress, with this debate on benefit maximums raging all about it, unwittingly omitted a death benefit ceiling in amended 9 (b). </s> [Footnote 12 S. 2318 was passed by the Senate on September 14, 1972. 118 Cong. Rec. 30670, 30674. H. R. 12006 was passed by the House on October 14, 1972, 118 Cong. Rec. 36376, 36389, and returned to the Senate, which concurred in the identical House version. 118 Cong. Rec. 36265, 36274 (1972). </s> [Footnote 13 Precisely this understanding is expressed in the House Report which accompanied H. R. 12006: "Subsection (d) of this section amends section 9 (e) of the Act, eliminating the dollar minimum and maximum set out under present [sic] law for the average weekly wages of the deceased to be used in computing death benefits. The minimum substituted by this amendment is the applicable national average weekly wage as prescribed in section 6 (b) of the Act, except that the total weekly benefits may not exceed the actual average weekly wages of the deceased." H. R. Rep. No. 92-1441, p. 19 (1972), Leg. Hist. 225. Both the House and Senate Reports, in discussing the major provisions [440 U.S. 29, 41] of the respective bills, deal expressly with the subject of minimum and maximum death benefits, noting that such benefits are "subject to a maximum of 66 2/3% percent of the [deceased's] average weekly wages" and to "[a] minimum . . . tied to the applicable national average weekly wage . . . ." S. Rep. No. 92-1125, p. 6 (1972), Leg. Hist. 68; H. R. Rep. No. 92-1441, p. 4 (1972), Leg. Hist. 210. </s> [Footnote 14 Section 6 (d)'s reference to "this subsection" apparently refers to subsection (a) of 5 of the Longshoremen's and Harbor Workers' Compensation Act Amendments of 1972, 86 Stat. 1252, and hence to 6 (b)-(d) of the Act. See Director, Office of Workers' Comp. Programs v. O'Keefe, 545 F.2d, at 344; Director, Office of Workers' Comp. Programs v. Boughman, 178 App. D.C., at 137, 545 F.2d, at 215. </s> [Footnote 15 Petitioners place heavy reliance on the following passage from the Senate Report accompanying S. 2318: "To the extent that employees receiving compensation for total permanment [sic] disability or survivors receiving death benefits receive less than the compensation they would receive if there were no phase in, their compensation is to be increased as the ceiling moves to 200 percent." S. Rep. No. 92-1125, p. 5 (1972), Leg. Hist. 67. This language does indeed suggest that the gradual annual increase in maximum benefits from 125% to 200% of the national average provided in 6 (b) (1) applies to survivors as well as to disabled employees. The quoted statement, however, is followed immediately in the Senate Report by a conflicting statement. In apparent reference to the combined effect of 6 (b) (3) and 6 (d), the Senate Report states: "The bill also requires an annual redetermination by the Secretary which will allow any increase in the national average weekly wage to be reflected by an appropriate increase in compensation payable under the Act." S. Rep. No. 92-1125, supra, at 5-6, Leg. Hist. 67-68; see n. 17, infra. This latter statement is consistent with our reading of 6, and to the extent the earlier statement is an indication of legislative intent, we agree with the Court of Appeals that "it is overwhelmingly outweighed by the contrary purport of the legislative history as a whole." 567 F.2d, at 1388 n. 5. </s> [Footnote 16 Petitioners maintain that interpreting 6 (d) to refer to determinations of national average weekly wage would render the provision duplicative of 10 (f). Added by the 1972 Amendments, 10 (f) provides: "Effective October 1 of each year, the compensation or death benefits payable for permanent total disability or death arising out of injuries sustained after [October 27, 1972], shall be increased by a percentage equal to the percentage (if any) by which the applicable national weekly [440 U.S. 29, 44] wage for the period beginning on such October 1, as determined under section 6 (b), exceeds the applicable national average weekly wage, as so determined, for the period beginning with the preceding October 1." This provision makes clear that, in cases of permanent total disability and death, benefits are adjusted upward each year that the national average wage rises. Although 10 (f) gives the incremental increase in compensation payments to all beneficiaries in death and permanent total disability cases, including those unaffected by a statutory minimum or maximum, the incidental effect is partially to lift any ceiling and, to the same extent, any floor applicable to such benefits. Although 6 (d) and 10 (f) overlap substantially, they are not entirely duplicative. The latter section applies only when benefits of a particular type are received in two consecutive years. If an employee receiving benefits for total and permanent disability in year 1 died in year 2, his survivors must look to 6 (d) to determine whether the "applicable" national average weekly wage for purposes of computing minimum death benefits under 9 (e) is the national average wage determined by the Secretary for year 1, when the employee's injury occurred, or that determined for year 2, when the employee died. For example, suppose that a covered worker was permanently and totally disabled in year 1. Suppose further that at the time of the injury his average weekly wages were $90 and that the national average weekly wage was $100. The worker would be entitled under 8 (a) to disability benefits of $60 per week (66 2/3% of $90), significantly more than the minimum payment of $50 per week (50% of $100) provided under 6 (b) (2). If the worker died during the following year, leaving a widow and one or more children, his survivors would be entitled to death benefits amounting to 66 2/3% of the national average weekly wage. Assuming the national average weekly wage had increased 5% in year 2, the question would arise whether the worker's survivors were entitled to death benefits calculated on the higher national average weekly wage. Reference to 6 (d) reveals that the worker's widow and children, having been "newly awarded" death benefits during year 2, would be entitled to calculate their benefits on the higher national average weekly wage. Further, the legislative history of the 1972 Amendments indicates that Congress was fully aware of the similarities between 6 (d) and 10 (f). [440 U.S. 29, 45] In its discussion of "maximum and minimum benefit amounts," the Senate Report accompanying S. 2318 states: "The bill also requires an annual redetermination by the Secretary which will allow any increase in the national average weekly wage to be reflected by an appropriate increase in compensation payable under the Act. A similar provision for upgrading benefits in future years for cases of permanent total disability or death benefits is contained in section 10 of the Act (Section 11 of the bill)." S. Rep. No. 92-1125, pp. 5-6 (1972), Leg. Hist. 67-68 (emphasis added). </s> [Footnote 17 A totally disabled employee is entitled to 66 2/3% of his average weekly wages, 33 U.S.C. 908 (a), or 50% of the national average weekly wage, 33 U.S.C. 908 (b) (2), whichever is greater. If the disabled employee dies, however, his surviving spouse and children are entitled to no less than 66 2/3% of the national average weekly wage or 100% of the deceased employee's average weekly wages, whichever is lesser. 33 U.S.C. 909 (e). Thus, the death of a totally disabled employee whose average weekly wages were greater than half the national average weekly wage but less than the national average weekly wage would result in an increase in benefits payable under the Act. The Court of Appeals demonstrated this fact with the following examples: "If we assume the Secretary has determined that the applicable national average weekly wage is $100, the compensation for an employee whose actual average weekly wage was $60 would be determined as follows: "1. Total Disability Benefits "Under [33 U.S.C.] 908 (a) the employee would normally receive 66 2/3% percent of his average weekly wage, or $40. However, 906 (b) (2) states that the minimum compensation shall be 50 percent of the national average weekly wage, or $50. An employee in this situation would receive $50 compensation for total disability. "2. Death Benefits "Under [33 U.S.C.] 909 (b), if, for example, the employee is survived by a widow or widower and one or more children, the total amount payable [440 U.S. 29, 46] is 66 2/3% percent of the average weekly wage of the deceased, or $40. However, 909 (e) states that where the average weekly wage is less than the national average weekly wage, the national average should be used in place of the employee's actual average, and here we should take 66 2/3% percent of $100, or $66.66. 909 (e) then limits this minimum compensation to the actual average weekly wage, so the survivors would receive $60 compensation. "Making these same assumptions, the minimum compensation calculations for employees with average weekly wages greater than half the national average weekly wage and less than the national average weekly wage result in greater compensation for death than disability, as the following chart indicates: ____________________________________________________________________________ Nat'l. Avg. Employee's Avg. Death Benefits Total Disability ____________________________________________________________________________ $100 $100 $66.66 $66.66 100 99 66.66 66.00 100 75 66.66 50.00 100 60 60.00 50.00 100 51 51.00 50.00 100 50 50.00 50.00" 567 F.2d, at 1390 n. 9. </s> [440 U.S. 29, 48]

United States Supreme Court BEAL v. DOE(1977) No. 75-554 Argued: January 11, 1977Decided: June 20, 1977 </s> Title XIX of the Social Security Act establishes a Medical Assistance (Medicaid) program, under which participating States financially assist qualified individuals in five general categories of medical treatment, state plans being required to establish "reasonable standards . . . for determining . . . the extent of medical assistance under the plan which are consistent with" Title XIX's objectives. Respondents, who are eligible for medical assistance under Pennsylvania's Medicaid plan and who were denied financial assistance for desired nontherapeutic abortions pursuant to state regulations limiting such assistance to abortions certified by physicians as medically necessary, brought this action seeking injunctive and declaratory relief, contending that the certification requirement contravened Title XIX and denied them equal protection of the laws. A three-judge District Court decided the statutory issue against respondents but the constitutional issue partially in their favor. The Court of Appeals, not reaching the constitutional question, reversed on the statutory issue, holding that Title XIX prohibits participating States from requiring a medical-necessity certificate as a funding condition during the first two trimesters of pregnancy. Held: </s> 1. Title XIX of the Social Security Act does not require the funding of nontherapeutic abortions as a condition of participation in the Medicaid program established by that Act. Pp. 443-447. </s> (a) Nothing in the language of Title XIX requires a participating State to fund every medical procedure falling within the delineated categories of medical care. Each State is given broad discretion to determine the extent of medical assistance that is "reasonable" and "consistent with the objectives" of Title XIX. Pp. 443-444. </s> (b) Although serious statutory questions might be presented if state Medicaid plans did not cover necessary medical treatment, it is not inconsistent with the Act's goals to refuse to fund unnecessary (though perhaps desirable) medical services. Pp. 444-445. </s> (c) The State has a strong interest in encouraging normal childbirth [432 U.S. 438, 439] that exists throughout the course of a woman's pregnancy, and nothing in Title XIX suggests that it is unreasonable for a State to further that interest. It therefore will not be presumed that Congress intended to condition a State's participation in Medicaid on its willingness to undercut that interest by subsidizing the costs of nontherapeutic abortions. Pp. 445-446. </s> (d) When Congress passed Title XIX nontherapeutic abortions were unlawful in most States, a fact that undermines the contention that Congress intended to require - rather than permit - participating States to fund such abortions. Moreover, the Department of Health, Education, and Welfare, the agency that administers Title XIX, takes the position that the Title allows, but does not mandate, funding for such abortions. P. 447. </s> 2. Whether or not that aspect of Pennsylvania's program under which financial assistance is not provided for medically necessary abortions unless two physicians in addition to the attending physician have examined the patient and have concurred in writing as to the medical necessity of the abortion interferes with the attending physician's medical judgment in a manner not contemplated by Congress should be considered on remand. P. 448. </s> 523 F.2d 611, reversed and remanded. </s> POWELL, J., delivered the opinion of the Court, in which BURGER, C. J., and STEWART, WHITE, REHNQUIST, and STEVENS, JJ., joined. BRENNAN, J., filed a dissenting opinion, in which MARSHALL and BLACKMUN, JJ., joined, post, p. 448. MARSHALL, J., filed a dissenting opinion, post, p. 454. BLACKMUN, J., filed a dissenting opinion, in which BRENNAN and MARSHALL, JJ., joined, post, p. 462. </s> Norman J. Watkins, Deputy Attorney General of Pennsylvania, argued the cause for petitioners. With him on the briefs were Robert P. Kane, Attorney General, and J. Justin Blewitt, Jr., Deputy Attorney General. </s> Judd F. Crosby argued the cause and filed a brief for respondents. * </s> [Footnote * William F. Hyland, Attorney General, Stephen Skillman, Assistant Attorney General, and Erminie L. Conley, Deputy Attorney General, filed a brief for the State of New Jersey as amicus curiae urging reversal. </s> David S. Dolowitz, Melvin L. Wulf, and Judith M. Mears filed a brief [432 U.S. 438, 440] for the American Public Health Assn. et al. as amici curiae urging affirmance. </s> Patricia A. Butler and Michael A. Wolff filed a brief for Jane Doe as amicus curiae. [432 U.S. 438, 440] </s> MR. JUSTICE POWELL delivered the opinion of the Court. </s> The issue in this case is whether Title XIX of the Social Security Act, as added, 79 Stat. 343, and amended, 42 U.S.C. 1396 et seq. (1970 ed. and Supp. V), requires States that participate in the Medical Assistance (Medicaid) program to fund the cost of nontherapeutic abortions. </s> I </s> Title XIX establishes the Medicaid program under which participating States may provide federally funded medical assistance to needy persons. 1 The statute requires participating States to provide qualified individuals with financial assistance in five general categories of medical treatment. 2 42 [432 U.S. 438, 441] U.S.C. 1396a (a) (13) (B) (1970 ed., Supp. V), 1396d (a) (1)-(5) (1970 ed. and Supp. V). Although Title XIX does not require States to provide funding for all medical treatment falling within the five general categories, it does require that state Medicaid plans establish "reasonable standards . . . for determining . . . the extent of medical assistance under the plan which . . . are consistent with the objectives of [Title XIX]." 42 U.S.C. 1396a (a) (17) (1970 ed., Supp. V). </s> Respondents, who are eligible for medical assistance under Pennsylvania's federally approved Medicaid plan, were denied financial assistance for desired abortions pursuant to Pennsylvania regulations limiting such assistance to those abortions that are certified by physicians as medically necessary. 3 When [432 U.S. 438, 442] respondents' applications for Medicaid assistance were denied because of their failure to furnish the required certificates, they filed this action in the United States District Court for the Western District of Pennsylvania seeking declaratory and injunctive relief. Their complaint alleged that Pennsylvania's requirement of a certificate of medical necessity contravened relevant provisions of Title XIX and denied them equal protection of the laws in violation of the Fourteenth Amendment. </s> A three-judge District Court was convened pursuant to 28 U.S.C. 2281. After resolving the statutory issue against respondents, the District Court held that Pennsylvania's medical-necessity restriction denied respondents equal protection of the laws. Doe v. Wohlgemuth, 376 F. Supp. 173 (1974). 4 </s> [432 U.S. 438, 443] Accordingly, the court granted a declaratory judgment that the Pennsylvania requirement was unconstitutional as applied during the first trimester. The United States Court of Appeals for the Third Circuit, sitting en banc, reversed on the statutory issue, holding that Title XIX prohibits participating States from requiring a physician's certificate of medical necessity as a condition for funding during both the first and second trimesters of pregnancy. 5 523 F.2d 611 (1975). The Court of Appeals therefore did not reach the constitutional issue. 6 </s> We granted certiorari to resolve a conflict among the federal courts as to the requirements of Title XIX. 7 </s> 428 U.S. 909 (1976). </s> II </s> The only question before us is one of statutory construction: whether Title XIX requires Pennsylvania to fund under [432 U.S. 438, 444] its Medicaid program the cost of all abortions that are permissible under state law. "The starting point in every case involving construction of a statute is the language itself." Blue Chip Stamps v. Manor Drug Stores, 421 U.S. 723, 756 (1975) (POWELL, J., concurring). Title XIX makes no reference to abortions, or, for that matter, to any other particular medical procedure. Instead, the statute is cast in terms that require participating States to provide financial assistance with respect to five broad categories of medical treatment. See n. 2, supra. But nothing in the statute suggests that participating States are required to fund every medical procedure that falls within the delineated categories of medical care. Indeed, the statute expressly provides: </s> "A State plan for medical assistance must . . . include reasonable standards . . . for determining eligibility for and the extent of medical assistance under the plan which . . . are consistent with the objectives of this [Title] . . . ." 42 U.S.C. 1396a (a) (17) (1970 ed., Supp. V). </s> This language confers broad discretion on the States to adopt standards for determining the extent of medical assistance, requiring only that such standards be "reasonable" and "consistent with the objectives" of the Act. 8 </s> Pennsylvania's regulation comports fully with Title XIX's broadly stated primary objective to enable each State, as far as practicable, to furnish medical assistance to individuals whose income and resources are insufficient to meet the costs of necessary medical services. See 42 U.S.C. 1396, 1396a (10) (C) (1970 ed., Supp. V). Although serious statutory questions might be presented if a state Medicaid plan excluded necessary medical treatment from its coverage, it is hardly inconsistent with the objectives of the Act for a State [432 U.S. 438, 445] to refuse to fund unnecessary - though perhaps desirable - medical services. </s> The thrust of respondents' argument is that the exclusion of nontherapeutic abortions from Medicaid coverage is unreasonable on both economic and health grounds. 9 The economic argument is grounded on the view that abortion is generally a less expensive medical procedure than childbirth. Since a pregnant woman normally will either have an abortion or carry her child full term, a State that elects not to fund nontherapeutic abortions will eventually be confronted with the greater expenses associated with childbirth. The corresponding health argument is based on the view that an early abortion poses less of a risk to the woman's health than childbirth. Consequently, respondents argue, the economic and health considerations that ordinarily support the reasonableness of state limitations on financing of unnecessary medical services are not applicable to pregnancy. </s> Accepting respondents' assumptions as accurate, we do not agree that the exclusion of nontherapeutic abortions from Medicaid coverage is unreasonable under Title XIX. As we acknowledged in Roe v. Wade, 410 U.S. 113 (1973), the State has a valid and important interest in encouraging childbirth. We expressly recognized in Roe the "important and legitimate [432 U.S. 438, 446] interest [of the State] . . . in protecting the potentiality of human life." Id., at 162. That interest alone does not, at least until approximately the third trimester, become sufficiently compelling to justify unduly burdensome state interference with the woman's constitutionally protected privacy interest. But it is a significant state interest existing throughout the course of the woman's pregnancy. Respondents point to nothing in either the language or the legislative history of Title XIX that suggests that it is unreasonable for a participating State to further this unquestionably strong and legitimate interest in encouraging normal childbirth. 10 Absent such a showing, we will not presume that Congress intended to condition a State's participation in the Medicaid program on its willingness to undercut this important interest by subsidizing the costs of nontherapeutic abortions. 11 </s> [432 U.S. 438, 447] </s> Our interpretation of the statute is reinforced by two other relevant considerations. First, when Congress passed Title XIX in 1965, nontherapeutic abortions were unlawful in most States. 12 In view of the then-prevailing state law, the contention that Congress intended to require - rather than permit - participating States to fund nontherapeutic abortions requires far more convincing proof than respondents have offered. Second, the Department of Health, Education, and Welfare, the agency charged with the administration of this complicated statute, 13 takes the position that Title XIX allows - but does not mandate - funding for such abortions. "[W]e must be mindful that `the construction of a statute by those charged with its execution should be followed unless there are compelling indications that it is wrong . . . .'" New York Dept. of Soc. Services v. Dublino, 413 U.S. 405, 421 (1973), quoting Red Lion Broadcasting Co. v. FCC, 395 U.S. 367, 381 (1969). Here, such indications are completely absent. </s> We therefore hold that Pennsylvania's refusal to extend Medicaid coverage to nontherapeutic abortions is not inconsistent with Title XIX. 14 We make clear, however, that the federal statute leaves a State free to provide such coverage if it so desires. 15 </s> [432 U.S. 438, 448] </s> III </s> There is one feature of the Pennsylvania Medicaid program, not addressed by the Court of Appeals, that may conflict with Title XIX. Under the Pennsylvania program, financial assistance is not provided for medically necessary abortions unless two physicians in addition to the attending physician have examined the patient and have concurred in writing that the abortion is medically necessary. See n. 3, supra. On this record, we are unable to determine the precise role played by these two additional physicians, and consequently we are unable to ascertain whether this requirement interferes with the attending physician's medical judgment in a manner not contemplated by the Congress. The judgment of the Court of Appeals is therefore reversed, and the case is remanded for consideration of this requirement. </s> It is so ordered. </s> Footnotes [Footnote 1 Title XIX establishes two groups of needy persons: (1) the "categorically" needy, which includes needy persons with dependent children and the aged, blind, and disabled, 42 U.S.C. 1396a (a) (10) (A) (1970 ed., Supp. V); and (2) the "medically" needy, which includes other needy persons, 1396a (a) (10) (C) (1970 ed., Supp. V). Participating States are not required to extend Medicaid coverage to the "medically" needy, but Pennsylvania has chosen to do so. </s> [Footnote 2 The general categories of medical treatment enumerated are: </s> "(1) inpatient hospital services (other than services in an institution for tuberculosis or mental diseases); </s> "(2) outpatient hospital services; </s> "(3) other laboratory and X-ray services; </s> "(4) (A) skilled nursing facility services (other than services in an institution for tuberculosis or mental diseases) for individuals 21 years of age or older (B) effective July 1, 1969, such early and periodic screening and diagnosis of individuals who are eligible under the plan and are under the age of 21 to ascertain their physical or mental defects, and such health care, treatment, and other measures to correct or ameliorate defects and chronic conditions discovered thereby, as may be provided in regulations of the Secretary; and (C) family planning services and supplies furnished (directly or under arrangements with others) to individuals of childbearing age (including minors who can be considered to be sexually active) [432 U.S. 438, 441] who are eligible under the State plan and who desire such services and supplies; </s> "(5) physicians' services furnished by a physician (as defined in section 1395x (r) (1) of this title), whether furnished in the office, the patient's home, a hospital, or a skilled nursing facility, or elsewhere." 42 U.S.C. 1396d (a) (1970 ed. and Supp. V). </s> Participating States that elect to extend coverage to the "medically" needy, see n. 1, supra, have the option of providing somewhat different categories of medical services to those individuals. 42 U.S.C. 1396a (a) (13) (C) (ii) (1970 ed., Supp. V). </s> [Footnote 3 An abortion is deemed medically necessary under the Pennsylvania Medicaid program if: </s> "(1) There is documented medical evidence that continuance of the pregnancy may threaten the health of the mother; </s> "(2) There is documented medical evidence that an infant may be born with incapacitating physical deformity or mental deficiency; or </s> "(3) There is documented medical evidence that continuance of a pregnancy resulting from legally established statutory or forcible rape or incest, may constitute a threat to the mental or physical health of a patient; and </s> "(4) Two other physicians chosen because of their recognized professional competency have examined the patient and have concurred in writing; and </s> "(5) The procedure is performed in a hospital accredited by the Joint [432 U.S. 438, 442] Commission on Accreditation of Hospitals." Brief for Petitioners 4, citing 3 Pennsylvania Bulletin 2207, 2209 (Sept. 29, 1973). </s> In Doe v. Bolton, 410 U.S. 179, 192 (1973), this Court indicated that "[w]hether `an abortion is necessary' is a professional judgment that . . . may be exercised in the light of all factors - physical, emotional, psychological, familial, and the woman's age - relevant to the well-being of the patient. All these factors may relate to health. This allows the attending physician the room he needs to make his best medical judgment." We were informed during oral argument that the Pennsylvania definition of medical necessity is broad enough to encompass the factors specified in Bolton. Tr. of Oral Arg. 7-8. </s> The dissent of MR. JUSTICE BRENNAN emphasizes the "key" role of the physician within the Medicaid program, noting that "[t]he Medicaid statutes leave the decision as to the choice among pregnancy procedures exclusively with the doctor and his patient . . . ." Post, at 449-450. This is precisely what Pennsylvania has done. Its regulations provide for the funding of abortions upon certification of medical necessity, a determination that the physician is authorized to make on the basis of all relevant factors. </s> [Footnote 4 The District Court was of the view that the regulation creates "an unlawful distinction between indigent women who choose to carry their pregnancies to birth, and indigent women who choose to terminate their pregnancies by abortion." 376 F. Supp., at 191. In Maher v. Roe, post, p. 464, we today conclude that the Equal Protection Clause of the Fourteenth Amendment does not prevent a State from making the policy [432 U.S. 438, 443] choice to fund costs incident to childbirth without providing similar funding for costs incident to nontherapeutic abortions. </s> [Footnote 5 Petitioners appealed the District Court's declaratory judgment to the Court of Appeals. Respondents cross-appealed from the denial of declaratory relief with respect to the second and third trimesters of pregnancy. Since respondents did not seek review of the District Court's denial of injunctive relief, the Court of Appeals had jurisdiction over the appeals. Gerstein v. Coe, 417 U.S. 279 (1974). </s> [Footnote 6 As a result of the decision of the Court of Appeals, petitioners issued a Temporary Revised Policy on September 25, 1975. This interim policy allows financial assistance for abortions without regard to medical necessity. Brief for Petitioners 3 n. 3. </s> [Footnote 7 Two other Courts of Appeals have concluded that the federal statute does not require participating States to fund the cost of nontherapeutic abortions. Roe v. Norton, 522 F.2d 928 (CA2 1975); Roe v. Ferguson, 515 F.2d 279 (CA6 1975). See also, e. g., Doe v. Westby, 402 F. Supp. 140 (WDSD 1975) (three-judge court) (Title XIX requires funding of nontherapeutic abortions), appeal docketed, No. 75-813; Doe v. Stewart, Civ. No. 74-3197 (ED La., Jan. 26, 1976) (three-judge court) (Title XIX does not require funding of nontherapeutic abortions), appeal docketed, No. 75-6721. </s> [Footnote 8 Respondents concede that Title XIX "indicates that the states will have wide discretion in determining the extent of services to be provided." Brief for Respondents 9. </s> [Footnote 9 Respondents also contend that Pennsylvania's restriction on coverage is unreasonable within the meaning of Title XIX in that it interferes with the physician's professional judgment concerning appropriate treatment. With one possible exception addressed in Part III, infra, the Pennsylvania program does not interfere with the physician's medical judgment concerning his patient's needs. If a physician certifies that an abortion is medically necessary, see n. 3, supra, the medical expenses are covered under the Pennsylvania Medicaid program. If, however, the physician concludes that the abortion is not medically necessary, but indicates a willingness to perform the abortion at the patient's request, the expenses are not covered. The decision whether to fund the costs of the abortion thus depends solely on the physician's determination of medical necessity. Respondents point to nothing in the Pennsylvania Medicaid plan that indicates state interference with the physician's initial determination. </s> [Footnote 10 Respondents rely heavily on the fact that in amending Title XIX in 1972 to include "family planning services" within the five broad categories of required medical treatment, see n. 2, supra, Congress did not expressly exclude abortions as a covered service. Since Congress had expressly excluded abortions as a method of family planning services in prior legislation, see 42 U.S.C. 300a-6, respondents conclude that the failure of Congress to exclude coverage of abortions in the 1972 amendments to Title XIX "strongly indicates" an intention to require coverage of abortions. This line of reasoning is flawed. The failure to exclude abortions from coverage indicates only that Congress intended to allow such coverage, not that such coverage is mandatory for nontherapeutic abortions. </s> [Footnote 11 The Court of Appeals concluded that Pennsylvania's regulations also violated the equality provisions of Title XIX requiring that an individual's medical assistance "shall not be less in amount, duration, or scope than the medical assistance made available to any other such individual." 42 U.S.C. 1396a (a) (10) (B) (1970 ed., Supp. V). See 1396a (a) (10) (C) (1970 ed., Supp. V). According to the Court of Appeals, the Pennsylvania regulation "force[s] pregnant women to use the least voluntary method of treatment, while not imposing a similar requirement on other persons who qualify for aid." 523 F.2d 611, 619 (1975). We find the Pennsylvania regulation to be entirely consistent with the equality provisions of Title XIX. Pennsylvania has simply decided that there is [432 U.S. 438, 447] reasonable justification for excluding from Medicaid coverage a particular medically unnecessary procedure - nontherapeutic abortions. </s> [Footnote 12 At the time of our 1973 decision in Roe, some eight years after the enactment of Title XIX, at least 30 States had statutory prohibitions against nontherapeutic abortions. 410 U.S. 113, 118 n. 2 (1973). </s> [Footnote 13 Federal funds are made available only to those States whose Medicaid plans have been approved by the Secretary of HEW. 42 U.S.C. 1396 (1970 ed., Supp. V). </s> [Footnote 14 Congress by statute has expressly prohibited the use during fiscal year 1977 of federal Medicaid funds for abortions except when the life of the mother would be endangered if the fetus were carried to term. Departments of Labor and Health, Education, and Welfare Appropriation Act, 1977, 209, Pub. L. 94-439, 90 Stat. 1434. </s> [Footnote 15 Our dissenting Brothers, in this case and in Maher v. Roe, post, [432 U.S. 438, 448] p. 482, express in vivid terms their anguish over the perceived impact of today's decisions on indigent pregnant women who prefer abortion to carrying the fetus to childbirth. We think our Brothers misconceive the issues before us, as well as the role of the judiciary. </s> In these cases we have held merely that (i) the provisions of the Social Security Act do not require a State, as a condition of participation, to include the funding of elective abortions in its Medicaid program; and (ii) the Equal Protection Clause does not require a State that elects to fund expenses incident to childbirth also to provide funding for elective abortions. But we leave entirely free both the Federal Government and the States, through the normal processes of democracy, to provide the desired funding. The issues present policy decisions of the widest concern. They should be resolved by the representatives of the people, not by this Court. </s> MR. JUSTICE BRENNAN, with whom MR. JUSTICE MARSHALL and MR. JUSTICE BLACKMUN join, dissenting. </s> The Court holds that the "necessary medical services" which Pennsylvania must fund for individuals eligible for [432 U.S. 438, 449] Medicaid do not include services connected with elective abortions. I dissent. </s> Though the question presented by this case is one of statutory interpretation, a difficult constitutional question would be raised where Title XIX of the Social Security Act, as amended, 42 U.S.C. 1396 et seq. (1970 ed. and Supp. V), is read not to require funding of elective abortions. Maher v. Roe, post, p. 464; Doe v. Bolton, 410 U.S. 179 (1973); Roe v. Wade, 410 U.S. 113 (1973). Since the Court should "first ascertain whether a construction of the statute is fairly possible by which the [constitutional] question may be avoided," Ashwander v. TVA, 297 U.S. 288, 341 , 348 (1936) (Brandeis, J., concurring); see Westby v. Doe, 420 U.S. 968 (1975), Title XIX, in my view, read fairly in light of the principle of avoidance of unnecessary constitutional decisions, requires agreement with the Court of Appeals that the legislative history of Title XIX and our abortion cases compel the conclusion that elective abortions constitute medically necessary treatment for the condition of pregnancy. I would therefore find that Title XIX requires that Pennsylvania pay the costs of elective abortions for women who are eligible participants in the Medicaid program. </s> Pregnancy is unquestionably a condition requiring medical services. See Roe v. Norton, 380 F. Supp. 726, 729 (Conn. 1974); Klein v. Nassau County Medical Center, 347 F. Supp. 496, 500 (EDNY 1972), vacated for further consideration (in light of Roe v. Wade and Doe v. Bolton), 412 U.S. 925 (1973). Treatment for the condition may involve medical procedures for its termination, or medical procedures to bring the pregnancy to term, resulting in a live birth. "[A]bortion and childbirth, when stripped of the sensitive moral arguments surrounding the abortion controversy, are simply two alternative medical methods of dealing with pregnancy . . . ." Roe v. Norton, 408 F. Supp. 660, 663 n. 3 (Conn. 175). The [432 U.S. 438, 450] Medicaid statutes leave the decision as to choice among pregnancy procedures exclusively with the doctor and his patient, and make no provision whatever for intervention by the State in that decision. Section 1396a (a) (19) expressly imposes the obligation upon participating States to incorporate safeguards in their programs that assure medical "care and services will be provided, in a manner consistent with . . . the best interests of the recipients." And, significantly, the Senate Finance Committee Report on the Medicaid bill expressly stated that the "physician is to be the key figure in determining utilization of health services." S. Rep. No. 404, 89th Cong., 1st Sess., 46 (1965). Thus the very heart of the congressional scheme is that the physician and patient should have complete freedom to choose those medical procedures for a given condition which are best suited to the needs of the patient. </s> The Court's original abortion decisions dovetail precisely with the congressional purpose under Medicaid to avoid interference with the decision of the woman and her physician. Roe v. Wade, supra, at 163, held that "[t]he attending physician, in consultation with his patient, is free to determine, without regulation by the State, that, in his medical judgment, the patient's pregnancy should be terminated." And Doe v. Bolton, supra, at 192, held that "the medical judgment may be exercised in the light of all factors - physical, emotional, psychological, familial, and the woman's age - relevant to the well-being of the patient. All these factors may relate to health. This allows the attending physician the room he needs to make his best medical judgment. And it is room that operates for the benefit, not the disadvantage, of the pregnant woman." * Once medical treatment of some [432 U.S. 438, 451] sort is necessary, Title XIX does not dictate what that treatment should be. In the face of Title XIX's emphasis upon the joint autonomy of the physician and his patient in the decision of how to treat the condition of pregnancy, it is beyond comprehension how treatment for therapeutic abortions and live births constitutes "necessary medical services" under Title XIX, but that for elective abortions does not. </s> If Pennsylvania is not obligated to fund medical services rendered in performing elective abortions because they are not "necessary" within the meaning of 42 U.S.C. 1396 (1970 ed., Supp. V), it must follow that Pennsylvania also would not violate the statute if it refused to fund medical services for "therapeutic" abortions or live births. For if the [432 U.S. 438, 452] availability of therapeutic abortions and live births makes elective abortions "unnecessary," the converse must also be true. This highlights the violence done the congressional mandate by today's decision. If the State must pay the costs of therapeutic abortions and of live birth as constituting medically necessary responses to the condition of pregnancy, it must, under the command of 1396, also pay the costs of elective abortions; the procedures in each case constitute necessary medical treatment for the condition of pregnancy. </s> The 1972 family-planning amendment to the Act, 42 U.S.C. 1396d (a) (4) (C) (1970 ed., Supp. V), buttresses my conclusion that the Court's construction frustrates the objectives of the Medicaid program. Section 1396 (2) states that an explicit purpose of Medicaid is to assist eligible indigent recipients to "attain or retain capability for independence or self-care." The 1972 amendment furthered this objective by assisting those who "desire to control family size in order to enhance their capacity and ability to seek employment and better meet family needs." S. Rep. No. 92-1230, p. 297 (1972). Though far less than an ideal family-planning mechanism, elective abortions are one method for limiting family size and avoiding the financial and emotional problems that are the daily lot of the impoverished. See Special Sub-committee on Human Resources of the Senate Committee on Labor and Public Welfare, 92d Cong., 1st Sess., Report of the Secretary of Health, Education, and Welfare Submitting Five-Year Plan for Family Planning Services and Population Research Programs 319 (Comm. Print 1971). </s> It is no answer that abortions were illegal in 1965 when Medicaid was enacted, and in 1972 when the family-planning amendment was adopted. Medicaid deals with general categories of medical services, not with specific procedures, and nothing in the statute even suggests that Medicaid is designed to assist in payment for only those medical services that were [432 U.S. 438, 453] legally permissible in 1965 and 1972. I fully agree with the Court of Appeals statement: </s> "It is impossible to believe that in enacting Title XIX Congress intended to freeze the medical services available to recipients at those which were legal in 1965. Congress surely intended Medicaid to pay for drugs not legally marketable under the FDA's regulations in 1965 which are subsequently found to be marketable. We can see no reason why the same analysis should not apply to the Supreme Court's legalization of elective abortion in 1973." 523 F.2d 611, 622-623 (1975). </s> Nor is the administrative interpretation of the Department of Health, Education, and Welfare that funding of elective abortions is permissible but not mandatory dispositive of the construction of "necessary medical services." The principle of according weight to agency interpretation is inapplicable when a departmental interpretation, as here, is patently inconsistent with the controlling statute. Townsend v. Swank, 404 U.S. 282, 286 (1971). </s> Finally, there is certainly no affirmative policy justification of the State that aids the Court's construction of "necessary medical services" as not including medical services rendered in performing elective abortions. The State cannot contend that it protects its fiscal interests in not funding elective abortions when it incurs far greater expense in paying for the more costly medical services performed in carrying pregnancies to term, and, after birth, paying the increased welfare bill incurred to support the mother and child. Nor can the State contend that it protects the mother's health by discouraging an abortion, for not only may Pennsylvania's exclusion force the pregnant woman to use of measures dangerous to her life and health but, as Roe v. Wade, 410 U.S., at 149 , concluded, elective abortions by competent licensed physicians are now "relatively safe" and the risks to women [432 U.S. 438, 454] undergoing abortions by such means "appear to be as low as or lower than . . . for normal childbirth." </s> The Court's construction can only result as a practical matter in forcing penniless pregnant women to have children they would not have borne if the State had not weighted the scales to make their choice to have abortions substantially more onerous. Indeed, as the Court said only last Term: "For a doctor who cannot afford to work for nothing, and a woman who cannot afford to pay him, the State's refusal to fund an abortion is as effective an `interdiction' of it as would ever be necessary." Singleton v. Wulff, 428 U.S. 106, 118 -119, n. 7 (1976). The Court's construction thus makes a mockery of the congressional mandate that States provide "care and services . . . in a manner consistent with . . . the best interests of the recipients." We should respect the congressional plan by construing 1396 as requiring States to pay the costs of the "necessary medical services" rendered in performing elective abortions, chosen by physicians and their women patients who participate in Medicaid as the appropriate treatment for their pregnancies. </s> The Court does not address the question whether the provision requiring the concurrence in writing of two physicians in addition to the attending physician conflicts with Title XIX. I would hold that the provision is invalid as clearly in conflict with Title XIX under my view of the paramount role played by the attending physician in the abortion decision, and in any event is constitutionally invalid under Doe v. Bolton, 410 U.S., at 198 -200. </s> I would affirm the judgment of the Court of Appeals. </s> [Footnote * The Court states, ante, at 442 n. 3, that Pennsylvania has left the abortion decision to the patient and her physician in the manner prescribed in Doe v. Bolton. Pennsylvania indeed does allow the attending physician to provide a certificate of medical necessity "on the basis of all relevant factors," ante, at 442 n. 3, but Pennsylvania's concept of relevance does not extend far enough to permit doctors freely to provide certificates [432 U.S. 438, 451] of medical necessity for all elective abortions. At oral argument, counsel for petitioners carefully stated the State's position as follows: </s> "[L]et me make perfectly clear my concession. That is, that a physician, in examining a patient, may take psychological, physical, emotional, familial considerations into mind and in the light of those considerations, may determine if those factors affect the health of the mother to such an extent as he would deem an abortion necessary. </s> "I think the key in the Bolton language, and the key in the Vuitch [United States v. Vuitch, 402 U.S. 62 (1971)] language is the fact that the physician, using all of these facts - and there are probably more that he should use - must determine if the woman's health - that is, her physical or psychological health - is jeopardized by the condition of pregnancy. </s> "That is not to say, obviously, as I believe the Plaintiffs are asserting, that the fact that the family is going to increase makes an abortion medically necessary." Tr. of Oral Arg. 8. </s> Petitioners' "concession" only goes so far as to permit an attending physician to consider an abortion as it relates to a woman's health. Bolton recognized that the factors considered by a physician "may relate to health," but in the very same paragraph made clear that those factors were more broadly directed to the "well-being" of the woman. 410 U.S., at 192 (emphasis added). While the right to privacy does implicate health considerations, the constitutional right recognized and protected by the Court's abortion decisions is the "right of the individual, married or single, to be free from unwarranted governmental intrusion into matters so fundamentally affecting a person as the decision whether to bear or beget a child." Eisenstadt v. Baird, 405 U.S. 438, 453 (1972). </s> MR. JUSTICE MARSHALL, dissenting. * </s> It is all too obvious that the governmental actions in these cases, ostensibly taken to "encourage" women to carry pregnancies [432 U.S. 438, 455] to term, are in reality intended to impose a moral viewpoint that no State may constitutionally enforce. Roe v. Wade, 410 U.S. 113 (1973); Doe v. Bolton, 410 U.S. 179 (1973). Since efforts to overturn those decisions have been unsuccessful, the opponents of abortion have attempted every imaginable means to circumvent the commands of the Constitution and impose their moral choices upon the rest of society. See, e. g., Planned Parenthood of Missouri v. Danforth, 428 U.S. 52 (1976); Singleton v. Wulff, 428 U.S. 106 (1976); Bellotti v. Baird, 428 U.S. 132 (1976). The present cases involve the most vicious attacks yet devised. The impact of the regulations here falls tragically upon those among us least able to help or defend themselves. As the Court well knows, these regulations inevitably will have the practical effect of preventing nearly all poor women from obtaining safe and legal abortions. 1 </s> [432 U.S. 438, 456] </s> The enactments challenged here brutally coerce poor women to bear children whom society will scorn for every day of their lives. Many thousands of unwanted minority and mixed-race children now spend blighted lives in foster homes, orphanages, and "reform" schools. Cf. Smith v. Organization of Foster Families, 431 U.S. 816 (1977). Many children of the poor, sadly, will attend second-rate segregated schools. Cf. Milliken v. Bradley, 418 U.S. 717 (1974). And opposition remains strong against increasing Aid to Families With Dependent Children benefits for impoverished mothers and children, so that there is little chance for the children to grow up in a decent environment. Cf. Dandridge v. Williams, 397 U.S. 471 (1970). I am appalled at the ethical bankruptcy of those who preach a "right to life" that means, under present social policies, a bare [432 U.S. 438, 457] existence in utter misery for so many poor women and their children. </s> I </s> The Court's insensitivity to the human dimension of these decisions is particularly obvious in its cursory discussion of appellees' equal protection claims in Maher v. Roe. That case points up once again the need for this Court to repudiate its outdated and intellectually disingenuous "two-tier" equal protection analysis. See generally Massachusetts Bd. of Retirement v. Murgia, 427 U.S. 307, 317 (1976) (MARSHALL, J., dissenting). As I have suggested before, this "model's two fixed modes of analysis, strict scrutiny and mere rationality, simply do not describe the inquiry the Court has undertaken - or should undertake - in equal protection cases." Id., at 318. In the present case, in its evident desire to avoid strict scrutiny - or indeed any meaningful scrutiny - of the challenged legislation, which would almost surely result in its invalidation, see id., at 319, the Court pulls from thin air a distinction between laws that absolutely prevent exercise of the fundamental right to abortion and those that "merely" make its exercise difficult for some people. See Maher v. Roe, post, at 471-474. MR. JUSTICE BRENNAN demonstrates that our cases support no such distinction, post, at 485-489, and I have argued above that the challenged regulations are little different from a total prohibition from the viewpoint of the poor. But the Court's legal legerdemain has produced the desired result: A fundamental right is no longer at stake and mere rationality becomes the appropriate mode of analysis. To no one's surprise, application of that test - combined with misreading of Roe v. Wade to generate a "strong" state interest in "potential life" during the first trimester of pregnancy, see infra, at 460; Maher v. Roe, post, at 489-490 (BRENNAN, J., dissenting); post, at 462 (BLACKMUN, J., dissenting) - "leaves little doubt about the [432 U.S. 438, 458] outcome; the challenged legislation is [as] always upheld." Massachusetts Bd. of Retirement v. Murgia, supra, at 319. And once again, "relevant factors [are] misapplied or ignored," 427 U.S., at 321 , while the Court "forgo[es] all judicial protection against discriminatory legislation bearing upon" a right "vital to the flourishing of a free society" and a class "unfairly burdened by invidious discrimination unrelated to the individual worth of [its] members." Id., at 320. </s> As I have argued before, an equal protection analysis far more in keeping with the actions rather than the words of the Court, see id., at 320-321, carefully weighs three factors - "the importance of the governmental benefits denied, the character of the class, and the asserted state interests," id., at 322. Application of this standard would invalidate the challenged regulations. </s> The governmental benefits at issue here, while perhaps not representing large amounts of money for any individual, are nevertheless of absolutely vital importance in the lives of the recipients. The right of every woman to choose whether to bear a child is, as Roe v. Wade held, of fundamental importance. An unwanted child may be disruptive and destructive of the life of any woman, but the impact is felt most by those too poor to ameliorate those effects. If funds for an abortion are unavailable, a poor woman may feel that she is forced to obtain an illegal abortion that poses a serious threat to her health and even her life. See n. 1, supra. If she refuses to take this risk, and undergoes the pain and danger of state-financed pregnancy and childbirth, she may well give up all chance of escaping the cycle of poverty. Absent day-care facilities, she will be forced into full-time child care for years to come; she will be unable to work so that her family can break out of the welfare system or the lowest income brackets. If she already has children, another infant to feed and clothe may well stretch the budget past the breaking point. All [432 U.S. 438, 459] chance to control the direction of her own life will have been lost. </s> I have already adverted to some of the characteristics of the class burdened by these regulations. While poverty alone does not entitle a class to claim government benefits, it is surely a relevant factor in the present inquiry. See San Antonio School Dist. v. Rodriguez, 411 U.S. 1, 70 , 117-124 (1973) (MARSHALL, J., dissenting). Indeed, it was in the San Antonio case that MR. JUSTICE POWELL for the Court stated a test for analyzing discrimination on the basis of wealth that would, if fairly applied here, strike down the regulations. The Court there held that a wealth-discrimination claim is made out by persons who share "two distinguishing characteristics: because of their impecunity they [are] completely unable to pay for some desired benefit, and as a consequence, they sustai[n] an absolute deprivation of a meaningful opportunity to enjoy that benefit." Id., at 20. Medicaid recipients are, almost by definition, "completely unable to pay for" abortions, and are thereby completely denied "a meaningful opportunity" to obtain them. 2 </s> It is no less disturbing that the effect of the challenged regulations will fall with great disparity upon women of minority races. Nonwhite women now obtain abortions at nearly twice the rate of whites, 3 and it appears that almost [432 U.S. 438, 460] 40% of minority women - more than five times the proportion of whites - are dependent upon Medicaid for their health care. 4 Even if this strongly disparate racial impact does not alone violate the Equal Protection Clause, see Washington v. Davis, 426 U.S. 229 (1976); Jefferson v. Hackney, 406 U.S. 535 (1972), "at some point a showing that state action has a devastating impact on the lives of minority racial groups must be relevant." Id., at 558, 575-576 (MARSHALL, J., dissenting). </s> Against the brutal effect that the challenged laws will have must be weighed the asserted state interest. The Court describes this as a "strong interest in protecting the potential life of the fetus." Maher v. Roe, post, at 478. Yet in Doe v. Bolton, supra, the Court expressly held that any state interest during the first trimester of pregnancy, when 86% of all abortions occur, CDC Surveillance 3, was wholly insufficient to justify state interference with the right to abortion. [432 U.S. 438, 461] 410 U.S., at 192 -200. 5 If a State's interest in potential human life before the point of viability is insufficient to justify requiring several physicians' concurrence for an abortion, ibid., I cannot comprehend how it magically becomes adequate to allow the present infringement on rights of disfavored classes. If there is any state interest in potential life before the point of viability, it certainly does not outweigh the deprivation or serious discouragement of a vital constitutional right of especial importance to poor and minority women. 6 </s> Thus, taking account of all relevant factors under the flexible standard of equal protection review, I would hold the Connecticut and Pennsylvania Medicaid regulations and the St. Louis public hospital policy violative of the Fourteenth Amendment. </s> II </s> When this Court decided Roe v. Wade and Doe v. Bolton, it properly embarked on a course of constitutional adjudication no less controversial than that begun by Brown v. Board of Education, 347 U.S. 483 (1954). The abortion decisions are sound law and undoubtedly good policy. They have never been questioned by the Court, and we are told that today's cases "signa[l] no retreat from Roe or the cases applying it." Maher v. Roe, post, at 475. The logic of those cases inexorably requires invalidation of the present enactments. [432 U.S. 438, 462] Yet I fear that the Court's decisions will be an invitation to public officials, already under extraordinary pressure from well-financed and carefully orchestrated lobbying campaigns, to approve more such restrictions. The effect will be to relegate millions of people to lives of poverty and despair. When elected leaders cower before public pressure, this Court, more than ever, must not shirk its duty to enforce the Constitution for the benefit of the poor and powerless. </s> [Footnote * [This opinion applies also to No. 75-1440, Maher, Commissioner of Social Services of Connecticut v. Roe et al., post, p. 464, and No. 75-442, Poelker, Mayor of St. Louis, et al. v. Doe, post, p. 519.] </s> [Footnote 1 Although an abortion performed during the first trimester of pregnancy is a relatively inexpensive surgical procedure, usually costing under $200, even this modest sum is far beyond the means of most Medicaid recipients. And "if one does not have it and is unable to get it the fee might as well be" one hundred times as great. Smith v. Bennett, 365 U.S. 708, 712 (1961). </s> Even before today's decisions, a major reason that perhaps as much as one-third of the annual need for an estimated 1.8 million abortions went unmet was the fact that 8 out of 10 American countries did not have a single abortion provider. Sullivan, Tietze, & Dryfoos, Legal Abortion in the United States, 1975-1976, 9 Family Planning Perspectives 116-117, 121, 129 (1977). In 1975, 83,000 women had to travel from their home States to obtain abortions (there were 100 abortions performed in West Virginia and 310 in Mississippi), and about 300,000 more, or a total of nearly 40% of abortion patients, had to seek help outside their home countries. Id., at 116, 121, 124. In addition, only 18% of the public hospitals in the Nation performed even a single abortion in 1975 and in 10 States not one public hospital provided abortion services. Id., at 121, 128. </s> Given the political realities, it seems inevitable that the number and geographical distribution of abortion providers will diminish as a result of today's decisions. It is regrettable but likely that fewer public hospitals will provide the service and if Medicaid payments are unavailable, other [432 U.S. 438, 456] hospitals, clinics, and physicians will be unable to do so. Since most Medicaid and public hospital patients probably do not have the money, the time, or the familiarity with the medical delivery system to travel to distant States or cities where abortions are available, today's decisions will put safe and legal abortions beyond their reach. The inevitable human tragedy that will result is reflected in a Government report: </s> "[F]or some women, the lack of public funding for legal abortion acted as a deterrent to their obtaining the safer procedures. The following case history [of a death which occurred during 1975] exemplifies such a situation: </s> ". . . A 41-year-old married woman with a history of 6 previous pregnancies, 5 Living children, and 1 previous abortion sought an illegal abortion from a local dietician. Her stated reason for seeking an illegal procedure was financial, since Medicaid in her state of residence would not pay for her abortion. The illegal procedure cost $30, compared with an estimated $150 for a legal procedure . . . . Allegedly the operation was performed by inserting a metal rod to dilate the cervix . . . . [The woman died of cardiac arrest after two weeks of intensive hospital care and two operations.]" U.S. Dept. of Health, Education, and Welfare, Center for Disease Control, Abortion Surveillance, 1975, p. 9 (1977) (hereafter CDC Surveillance). </s> [Footnote 2 If public funds and facilities for abortions are sharply reduced, private charities, hospitals, clinics, and doctors willing to perform abortions for far less than the prevailing fee will, I trust, accommodate some of the need. But since abortion services are inadequately available even now, see n. 1, supra, such private generosity is unlikely to give many poor women "a meaningful opportunity" to obtain abortions. </s> [Footnote 3 Blacks and other nonwhite groups are heavily overrepresented among both abortion patients and Medicaid recipients. In 1975, about 13.1% of the population was nonwhite, Statistical Abstract of the United States, 1976, p. 25, yet 31% of women obtaining abortions were of a minority race. CDC Surveillance 2 and 24, Table 8. Furthermore, nonwhites [432 U.S. 438, 460] secured abortions at the rate of 476 per 1,000 live births, while the corresponding figure for whites was only 277. Id., at 2, and Tables 8, 9. Abortion is thus a family-planning method of considerably more significance for minority groups than for whites. </s> [Footnote 4 Although complete statistics are unavailable (three States, Puerto Rico, and the Virgin Islands having furnished no racial breakdown, and eight States giving incomplete data), nonwhites accounted for some 43.4% of Medicaid recipients during fiscal year 1974 in jurisdictions reporting. U.S. Dept. of HEW, National Center for Social Statistics, Medicaid Recipient Characteristics and Units of Selected Medical Services, Fiscal Year 1974, p. 2 (Feb. 1977). Extrapolating this percentage to cover the entire Medicaid caseload of over 17.6 million, minority racial groups would account for 7,656,000 recipients. Assuming comparability of the HEW and census figures, this amounts to 27.4% of the Nation's nonwhite population. See Statistical Abstract, supra, n. 3, at 25. Since there are 1.8 female Medicaid recipients for every male, see Medicaid Recipient Characteristics, supra, the proportion of nonwhite women who must rely upon Medicaid is probably far higher, about 38.5%. The comparable figure for white women appears to be about 7%. </s> [Footnote 5 Requirements that the abortion be performed by a physician exercising his best clinical judgment, and in a facility meeting narrowly tailored health standards, are allowable. Doe v. Bolton, 410 U.S., at 192 -200. </s> [Footnote 6 Application of the flexible equal protection standard would allow the Court to strike down the regulations in these cases without calling into question laws funding public education or English language teaching in public schools. See Maher v. Roe, post, at 476-477. By permitting a court to weigh all relevant factors, the flexible standard does not logically require acceptance of any equal protection claim that is "identical in principle" under the traditional approach to those advanced here. See Maher, post, at 477. </s> MR. JUSTICE BLACKMUN, with whom MR. JUSTICE BRENNAN and MR. JUSTICE MARSHALL join, dissenting. * </s> The Court today, by its decisions in these cases, allows the States, and such municipalities as choose to do so, to accomplish indirectly what the Court in Roe v. Wade, 410 U.S. 113 (1973), and Doe v. Bolton, 410 U.S. 179 (1973) - by a substantial majority and with some emphasis, I had thought - said they could not do directly. The Court concedes the existence of a constitutional right but denies the realization and enjoyment of that right on the ground that existence and realization are separate and distinct. For the individual woman concerned, indigent and financially helpless, as the Court's opinions in the three cases concede her to be, the result is punitive and tragic. Implicit in the Court's holdings is the condescension that she may go elsewhere for her abortion. I find that disingenuous and alarming, almost reminiscent of: "Let them eat cake." </s> The result the Court reaches is particularly distressing in Poelker v. Doe, post, p. 519, where a presumed majority, in electing as mayor one whom the record shows campaigned on the issue of closing public hospitals to nontherapeutic abortions, punitively impresses upon a needy minority its own [432 U.S. 438, 463] concepts of the socially desirable, the publicly acceptable, and the morally sound, with a touch of the devil-take-the-hind-most. This is not the kind of thing for which our Constitution stands. </s> The Court's financial argument, of course, is specious. To be sure, welfare funds are limited and welfare must be spread perhaps as best meets the community's concept of its needs. But the cost of a nontherapeutic abortion is far less than the cost of maternity care and delivery, and holds no comparison whatsoever with the welfare costs that will burden the State for the new indigents and their support in the long, long years ahead. </s> Neither is it an acceptable answer, as the Court well knows, to say that the Congress and the States are free to authorize the use of funds for nontherapeutic abortions. Why should any politician incur the demonstrated wrath and noise of the abortion opponents when mere silence and nonactivity accomplish the results the opponents want? </s> There is another world "out there," the existence of which the Court, I suspect, either chooses to ignore or fears to recognize. And so the cancer of poverty will continue to grow. This is a sad day for those who regard the Constitution as a force that would serve justice to all evenhandedly and, in so doing, would better the lot of the poorest among us. </s> [Footnote * [This opinion applies also to No. 75-1440, Maher, Commissioner of Social Services of Connecticut v. Roe et al., post, p. 464, and No. 75-442, Poelker, Mayor of St. Louis, et al. v. Doe, post, p. 519.] </s> [432 U.S. 438, 464]

United States Supreme Court RUSSELL v. UNITED STATES(1962) No. 10 Argued: December 7, 1961Decided: May 21, 1962 </s> [Footnote * Together with No. 9, Shelton v. United States, argued December 6-7, 1961; No. 10, Whitman v. United States, argued December 7, 11, 1961; No. 11, Liveright v. United States, argued December 11, 1961; No. 12, Price v. United States, argued December 11, 1961; and No. 128, Gojack v. United States, argued December 11-12, 1961, also on certiorari to the same Court. </s> The petitioners in these six cases were convicted of violating 2 U.S.C. 192, which makes it a misdemeanor for any person summoned to testify before a committee of Congress to refuse to answer "any question pertinent to the question under inquiry." In each case the indictment returned by the grand jury stated that the questions to which answers were refused "were pertinent to the question then under inquiry" by the subcommittee; but it failed to identify the subject under subcommittee inquiry when the witness was interrogated. In each case a motion was filed to quash the indictment before trial for failure to state the subject under inquiry; but in each case the motion was denied and the issue thus raised was preserved and properly presented in this Court. Held: The grand jury indictment required by 2 U.S.C. 194 as a prerequisite to a prosecution for a violation of 192 must state the question which was under inquiry at the time of the defendant's alleged default or refusal to answer, as found by the grand jury; and the judgment affirming the conviction of each of the petitioners is reversed. Pp. 751-772. </s> (a) The Congress which originally enacted in 1857 the law which was a predecessor of 2 U.S.C. 192 was expressly aware that pertinency to the subject under inquiry was the basic preliminary question which the federal courts would have to decide in determining whether a violation of the statute had been alleged or proved. Pp. 756-758. [369 U.S. 749, 750] </s> (b) Many decisions of this Court arising under 2 U.S.C. 192 have recognized the crucial importance of determining the issue of pertinency; and the obvious first step in determining whether the questions asked were pertinent to the subject under inquiry is to ascertain what that subject was. Pp. 758-760. </s> (c) While convictions are no longer reversed because of minor and technical deficiencies which did not prejudice the accused, the substantial safeguards to those charged with serious crimes cannot be eradicated under the guise of technical departures from the rules. Pp. 760-763. </s> (d) Omission from the indictments here involved of statements of the subject under inquiry deprived the defendants of one of the significant protections which the guaranty of a grand jury indictment was intended to confer - i. e., they failed adequately to apprise the defendants of what they must be prepared to meet. Pp. 763-768. </s> (e) These indictments were also insufficient to serve the corollary purpose of enabling the courts to decide whether the facts alleged were sufficient in law to support convictions. Pp. 768-769. </s> (f) The deficiencies in these indictments could not have been cured by bills of particulars, because under 2 U.S.C. 194 only a grand jury may determine whether a person should be held to answer in a criminal trial for refusing to give testimony pertinent to a question under congressional committee inquiry, and the grand jury itself must necessarily determine what the question under inquiry was. Pp. 769-771. </s> 108 U.S. App. D.C. 140, 280 F.2d 688; 108 U.S. App. D.C. 153, 280 F.2d 701; 108 U.S. App. D.C. 226, 281 F.2d 59; 108 U.S. App. D.C. 160, 280 F.2d 708; 108 U.S. App. D.C. 167, 280 F.2d 715; 108 U.S. App. D.C. 130, 280 F.2d 678, reversed. </s> Joseph A. Fanelli argued the cause for petitioner in No. 8. With him on the briefs was Benedict P. Cottone. </s> Joseph L. Rauh, Jr. argued the cause for petitioner in No. 9. With him on the briefs was John Silard. </s> Gerhard P. Van Arkel argued the cause for petitioner in No. 10. With him on the briefs was George Kaufman. [369 U.S. 749, 751] </s> Harry I. Rand argued the cause for petitioner in No. 11. With him on the briefs was Leonard B. Boudin. </s> Leonard B. Boudin argued the cause for petitioner in No. 12. With him on the briefs was Harry I. Rand. </s> Frank J. Donner argued the cause for petitioner in No. 128. With him on the brief was David Rein. </s> Kevin T. Maroney argued the causes for the United States in Nos. 8 and 128. With him on the briefs were Solicitor General Cox, Assistant Attorney General Yeagley, Bruce J. Terris and (in No. 128) Doris Spangenburg. </s> Bruce J. Terris argued the cause for the United States in No. 9. With him on the briefs were Solicitor General Cox, Assistant Attorney General Yeagley and Kevin T. Maroney. </s> J. William Doolittle argued the cause for the United States in Nos. 10, 11 and 12. On the briefs were Solicitor General Cox, Assistant Attorney General Yeagley, Bruce J. Terris, Kevin T. Maroney and Lee B. Anderson. </s> Nanette Dembitz filed a brief for New York Civil Liberties Union, as amicus curiae, urging reversal in No. 10. </s> MR. JUSTICE STEWART delivered the opinion of the Court. </s> In these six cases we review judgments of the Court of Appeals for the District of Columbia, 1 which affirmed convictions obtained in the District Court under 2 U.S.C. 192. 2 </s> [369 U.S. 749, 752] Each of the petitioners was convicted for refusing to answer certain questions when summoned before a congressional subcommittee. 3 The cases were separately briefed and argued here, and many issues were presented. We decide each case upon a single ground common to all, and we therefore reach no other questions. </s> In each case the indictment returned by the grand jury failed to identify the subject under congressional subcommittee inquiry at the time the witness was interrogated. The indictments were practically identical in this respect, stating only that the questions to which answers were refused "were pertinent to the question then under inquiry" by the subcommittee. 4 In each case a motion [369 U.S. 749, 753] was filed to quash the indictment before trial upon the ground that the indictment failed to state the subject under investigation at the time of the subcommittee's interrogation of the defendant. 5 In each case the motion was denied. In each case the issue thus raised was preserved on appeal, in the petition for writ of certiorari, and in brief and argument here. </s> Congress has expressly provided that no one can be prosecuted under 2 U.S.C. 192 except upon indictment by a grand jury. 6 This Court has never decided whether [369 U.S. 749, 754] the indictment must identify the subject which was under inquiry at the time of the defendant's alleged default or refusal to answer. 7 For the reasons that follow, we hold [369 U.S. 749, 755] that the indictment must contain such an averment, and we accordingly reverse the judgments before us. </s> In enacting the criminal statute under which these petitioners were convicted Congress invoked the aid of the federal judicial system in protecting itself against contumacious conduct. Watkins v. United States, 354 U.S. 178, 207 . The obvious consequence, as the Court has repeatedly emphasized, was to confer upon the federal courts the duty to accord a person prosecuted for this statutory offense every safeguard which the law accords in all other federal criminal cases. Sinclair v. United States, 279 U.S. 263, 296 -297; Watkins v. United States, supra, at 208; Sacher v. United States, 356 U.S. 576, 577 ; Flaxer v. United States, 358 U.S. 147, 151 ; Deutch v. United States, 367 U.S. 456, 471 . </s> Recognizing this elementary concept, the Sinclair case established several propositions which provide a relevant starting point here. First, there can be criminality under the statute only if the question which the witness refused to answer pertained to a subject then under investigation by the congressional body which summoned him. "[A] witness rightfully may refuse to answer where . . . the questions asked are not pertinent to the matter under inquiry." Sinclair v. United States, supra, at 292. Secondly, because the defendant is presumed to be innocent, it is "incumbent upon the United States to plead and show that the question [he refused to answer] pertained to some matter under investigation." Id., at 296-297. Finally, Sinclair held that the question of [369 U.S. 749, 756] pertinency is one for determination by the court as a matter of law. Id., at 298. </s> In that case the Court had before it an indictment which set out in specific and lengthy detail the subject under investigation by the Senate Committee which had summoned Sinclair. The Court was thereby enabled to make an enlightened and precise determination that the question he had refused to answer was pertinent to that subject. Id., at 285-289, 296-298. </s> That the making of such a determination would be a vital function of the federal judiciary in a prosecution brought under 2 U.S.C. 192 was clearly foreseen by the Congress which originally enacted the law in 1857. 8 Congress not only provided that a person could be prosecuted only upon an indictment by a grand jury, but, as the record of the legislative debates shows, Congress was expressly aware that pertinency to the subject under inquiry was the basic preliminary question which the federal courts were going to have to decide in determining [369 U.S. 749, 757] whether a criminal offense had been alleged or proved. The principal spokesman for the bill, Senator Bayard, repeatedly made this very point: </s> "The bill provides for punishing a witness who shall refuse to answer any question `pertinent' to the matter of inquiry under consideration before the House or its committee. If he refuses to answer an irrelevant question, he is not subject to the penalties of the bill. The question must be pertinent to the subject-matter, and that will have to be decided by the courts of justice on the indictment. That power is not given to Congress; it is given appropriately to the judiciary." Cong. Globe, 34th Cong., 3d Sess. 439 (1857). </s> . . . . . </s> "This law does not propose to give to this miscellaneous political body the power of punishment; but one of its greatest recommendations is, that it transfers that power of punishment to a court of justice after judicial inquiry. All that is to be done in the case of a refusal to testify is to certify the fact to the district attorney, who is to lay it before the grand jury, and if the party is indicted he is bound to answer according to the terms of the law, as any other person would for an offense against the laws of the land. . . . I am aware that legislative bodies have transcended their powers - that under the influence of passion and political excitement they have very often invaded the rights of individuals, and may have invaded the rights of coordinate branches of the Government; but if our institutions are to last, there can be no greater safeguard than will result from transferring that which now stands on an indefinite power (the punishment as well as the offense resting [369 U.S. 749, 758] in the breast of either House) from Congress to the courts of justice. When a case of this kind comes before a court, will not the first inquiry be, have Congress jurisdiction of the subject-matter? - has the House which undertakes to inquire, jurisdiction of the subject? If they have not, the whole proceedings are coram non judice and void, and the party cannot be held liable under indictment. The Court would quash the indictment if this fact appeared on its face; and if it appeared on the trial they would direct the jury to acquit." Cong. Globe, 34th Cong., 3d Sess. 440 (1857). </s> . . . . . </s> ". . . The law prescribes that, in case of such refusal, the House shall certify the fact to the district attorney, and he shall bring the matter before the grand jury. When that comes up by indictment before the court, must not the court decide whether the question put was pertinent to the inquiry? Of course they must; and they cannot hold the party guilty without doing it." Cong. Globe, 34th Cong., 3d Sess. 440 (1857). </s> These forecasts of the office which the federal courts would be called upon to perform under 2 U.S.C. 192 have been amply borne out by the cases which have arisen under the statute. The crucial importance of determining the issue of pertinency is reflected in many cases which have come here since Sinclair, supra. Watkins v. United States, 354 U.S. 178, 208 ; Sacher v. United States, 356 U.S. 576, 577 ; Barenblatt v. United States, 360 U.S. 109, 123 -125; Wilkinson v. United States, 365 U.S. 399, 407 -409, 413; Braden v. United States, 365 U.S. 431, 435 -436; Deutch v. United States, 367 U.S. 456, 467 -471. Our decisions have pointed out that the obvious first step in determining whether the questions asked were pertinent [369 U.S. 749, 759] to the subject under inquiry is to ascertain what that subject was. See, e. g., Deutch v. United States, supra, at 469. Identification of the subject under inquiry is also an essential preliminary to the determination of a host of other issues which typically arise in prosecutions under the statute. In Wilkinson v. United States, supra, for example, the Court pointed out that in order properly to consider any of the many issues there presented, "the starting point must be to determine the subject matter of the subcommittee's inquiry." 365 U.S., at 407 . </s> Where, as in the Sinclair case, the subject under inquiry has been identified in the indictment, this essential first step has presented no problem. Where, as in the more recent cases, the indictment has not identified the topic under inquiry, the Court has often found it difficult or impossible to ascertain what the subject was. The difficulty of such a determination in the absence of an allegation in the indictment is illustrated by Deutch v. United States, supra. In that case the members of this Court were in sharp disagreement as to what the subject under subcommittee inquiry had been. Moreover, all of us disagreed with the District Court's theory, and the Court of Appeals had not even ventured a view on the question. 367 U.S., at 467 . In Watkins v. United States, supra, the Court found it not merely difficult, but actually impossible, to determine what the topic under subcommittee inquiry had been at the time the petitioner had refused to answer the questions addressed to him. "Having exhausted the several possible indicia of the `question under inquiry,' we remain unenlightened as to the subject to which the questions asked petitioner were pertinent." 354 U.S., at 214 . 9 </s> [369 U.S. 749, 760] </s> To be sure, the fact that difficulties and doubts have beset the federal courts in trying to ascertain the subject under inquiry in cases arising under 2 U.S.C. 192 could hardly justify, in the abstract, a requirement that indictments under the statute contain averments which would simplify the courts' task. Difficult and doubtful questions are inherent in the judicial process, particularly under a system of criminal law which places heavy emphasis upon the protection of the rights and liberties of the individual. Courts sit to resolve just such questions, and rules of law are not to be made merely to suit judicial convenience. But a proliferation of doubtful issues which not only burden the judiciary, but, because of uncertainties inherent in their resolution, work a hardship upon both the prosecution and the defense in criminal cases, is hardly a desideratum. And the repeated appearance in prosecutions under a particular criminal statute of the same critical and difficult question, which could be obviated by a simple averment in the indictment, invites inquiry into the purposes and functions which a grand jury indictment is intended to serve. The cases we have discussed, therefore, furnish an appropriate background for the inquiry to which we now turn. </s> Any discussion of the purpose served by a grand jury indictment in the administration of federal criminal law must begin with the Fifth and Sixth Amendments to the Constitution. The Fifth Amendment provides that "No person shall be held to answer for a capital, or otherwise infamous crime, unless on a presentment or indictment of a Grand Jury, except in cases arising in the land or naval forces, or in the Militia, when in actual service in time of War or public danger; . . ." We need not pause [369 U.S. 749, 761] to consider whether an offense under 2 U.S.C. 192 is an "infamous crime," Duke v. United States, 301 U.S. 492 , since Congress has from the beginning explicitly conferred upon those prosecuted under the statute the protection which the Fifth Amendment confers, by providing that no one can be prosecuted for this offense except upon an indictment by a grand jury. This specific guaranty, as well as the Fifth Amendment's Due Process Clause, are, therefore, both brought to bear here. Of like relevance is the guaranty of the Sixth Amendment that "In all criminal prosecutions, the accused shall enjoy the right . . . to be informed of the nature and cause of the accusation; . . ." </s> The constitutional provision that a trial may be held in a serious federal criminal case only if a grand jury has first intervened reflects centuries of antecedent development of common law, going back to the Assize of Clarendon in 1166. 10 "The grand jury is an English institution, brought to this country by the early colonists and incorporated in the Constitution by the Founders. There is every reason to believe that our constitutional grand jury was intended to operate substantially like its English progenitor. The basic purpose of the English grand jury was to provide a fair method for instituting criminal proceedings against persons believed to have committed crimes." Costello v. United States, 350 U.S. 359, 362 . See McClintock, Indictment by a Grand Jury, 26 Minn. L. Rev. 153; Orfield, Criminal Procedure from Arrest to Appeal, 137-140, 144-146. </s> For many years the federal courts were guided in their judgments concerning the construction and sufficiency of grand jury indictments by the common law alone. Not until 1872 did Congress enact general legislation touching [369 U.S. 749, 762] upon the subject. In that year a statute was enacted which reflected the drift of the law away from the rules of technical and formalized pleading which had characterized an earlier era. The 1872 statute provided that "no indictment found and presented by a grand jury in any district or circuit or other court of the United States shall be deemed insufficient, nor shall the trial, judgment, or other proceeding thereon be affected by reason of any defect or imperfection in matter of form only, which shall not tend to the prejudice of the defendant." 17 Stat. 198. This legislation has now been repealed, but its substance is preserved in the more generalized provision of Rule 52 (a) of the Federal Rules of Criminal Procedure, which states that "Any error, defect, irregularity or variance which does not affect substantial rights shall be disregarded." 11 </s> There was apparently no other legislation dealing with the subject of indictments generally until the promulgation of Rule 7 (c), Fed. Rules Crim. Proc., in 1946. The Rule provides: </s> "The indictment or the information shall be a plain, concise and definite written statement of the essential facts constituting the offense charged. It shall be signed by the attorney for the government. It need not contain a formal commencement, a formal conclusion or any other matter not necessary to such statement. Allegations made in one count may be incorporated by reference in another count. It may be alleged in a single count that the means by which the defendant committed the offense are unknown or that he committed it by one or more specified means. The indictment or information [369 U.S. 749, 763] shall state for each count the official or customary citation of the statute, rule, regulation or other provision of law which the defendant is alleged therein to have violated. Error in the citation or its omission shall not be ground for dismissal of the indictment or information or for reversal of a conviction if the error or omission did not mislead the defendant to his prejudice." </s> As we have elsewhere noted, "This Court has, in recent years, upheld many convictions in the face of questions concerning the sufficiency of the charging papers. Convictions are no longer reversed because of minor and technical deficiencies which did not prejudice the accused. [Citing cases.] This has been a salutary development in the criminal law." Smith v. United States, 360 U.S. 1, 9 . "But," as the Smith opinion went on to point out, "the substantial safeguards to those charged with serious crimes cannot be eradicated under the guise of technical departures from the rules." Ibid. Resolution of the issue presented in the cases before us thus ultimately depends upon the nature of "the substantial safeguards" to a criminal defendant which an indictment is designed to provide. Stated concretely, does the omission from an indictment under 2 U.S.C. 192 of the subject under congressional committee inquiry amount to no more than a technical deficiency of no prejudice to the defendant? Or does such an omission deprive the defendant of one of the significant protections which the guaranty of a grand jury indictment was intended to confer? </s> In a number of cases the Court has emphasized two of the protections which an indictment is intended to guarantee, reflected by two of the criteria by which the sufficiency of an indictment is to be measured. These criteria are, first, whether the indictment "contains the elements of the offense intended to be charged, `and sufficiently apprises the defendant of what he must be prepared to meet,'" [369 U.S. 749, 764] and, secondly, "`in case any other proceedings are taken against him for a similar offence, whether the record shows with accuracy to what extent he may plead a former acquittal or conviction.' Cochran and Sayre v. United States, 157 U.S. 286, 290 ; Rosen v. United States, 161 U.S. 29, 34 ." Hagner v. United States, 285 U.S. 427, 431 . See Potter v. United States, 155 U.S. 438, 445 ; Bartell v. United States, 227 U.S. 427, 431 ; Berger v. United States, 295 U.S. 78, 82 ; United States v. Debrow, 346 U.S. 374, 377 -378. </s> Without doubt the second of these preliminary criteria was sufficiently met by the indictments in these cases. Since the indictments set out not only the times and places of the hearings at which the petitioners refused to testify, but also specified the precise questions which they then and there refused to answer, it can hardly be doubted that the petitioners would be fully protected from again being put in jeopardy for the same offense, particularly when it is remembered that they could rely upon other parts of the present record in the event that future proceedings should be taken against them. See McClintock, Indictment by a Grand Jury, 26 Minn. L. Rev. 153, 160; Bartell v. United States, 227 U.S. 427, 433 . The vice of these indictments, rather, is that they failed to satisfy the first essential criterion by which the sufficiency of an indictment is to be tested, i. e., that they failed to sufficiently apprise the defendant "of what he must be prepared to meet." </s> As has been pointed out, the very core of criminality under 2 U.S.C. 192 is pertinency to the subject under inquiry of the questions which the defendant refused to answer. What the subject actually was, therefore, is central to every prosecution under the statute. Where guilt depends so crucially upon such a specific identification of fact, our cases have uniformly held that an indictment must do more than simply repeat the language of the criminal statute. [369 U.S. 749, 765] </s> "It is an elementary principle of criminal pleading, that where the definition of an offence, whether it be at common law or by statute, `includes generic terms, it is not sufficient that the indictment shall charge the offence in the same generic terms as in the definition; but it must state the species, - it must descend to particulars.'" United States v. Cruikshank, 92 U.S. 542, 558 . An indictment not framed to apprise the defendant "with reasonable certainty, of the nature of the accusation against him . . . is defective, although it may follow the language of the statute." United States v. Simmons, 96 U.S. 360, 362 . "In an indictment upon a statute, it is not sufficient to set forth the offence in the words of the statute, unless those words of themselves fully, directly, and expressly, without any uncertainty or ambiguity, set forth all the elements necessary to constitute the offence intended to be punished; . . ." United States v. Carll, 105 U.S. 611, 612 . "Undoubtedly the language of the statute may be used in the general description of an offence, but it must be accompanied with such a statement of the facts and circumstances as will inform the accused of the specific offence, coming under the general description, with which he is charged." United States v. Hess, 124 U.S. 483, 487 . See also Pettibone v. United States, 148 U.S. 197, 202 -204; Blitz v. United States, 153 U.S. 308, 315 ; Keck v. United States, 172 U.S. 434, 437 ; Morissette v. United States, 342 U.S. 246, 270 , n. 30. Cf. United States v. Petrillo, 332 U.S. 1, 10 -11. 12 That these basic principles of fundamental [369 U.S. 749, 766] fairness retain their full vitality under modern concepts of pleading, and specifically under Rule 7 (c) of the Federal Rules of Criminal Procedure, is illustrated by many recent federal decisions. 13 </s> The vice which inheres in the failure of an indictment under 2 U.S.C. 192 to identify the subject under inquiry is thus the violation of the basic principle "that the accused must be apprised by the indictment, with reasonable certainty, of the nature of the accusation against him, . . ." United States v. Simmons, supra, at 362. A cryptic form of indictment in cases of this kind requires the defendant to go to trial with the chief issue undefined. It enables his conviction to rest on one point and the affirmance of the conviction to rest on another. It gives the prosecution free hand on appeal to fill in the gaps of proof by surmise or conjecture. The Court has had occasion before now to condemn just such a practice in a quite different factual setting. Cole v. Arkansas, 333 U.S. 196, 201 -202. And the unfairness and uncertainty which have characteristically infected criminal proceedings under this statute which were based upon indictments which failed to specify the subject under inquiry are illustrated by the cases in this Court we have already discussed. The same uncertainty and unfairness are underscored by the records of the cases now before us. A single example will suffice to illustrate the point. </s> In No. 12, Price v. United States, the petitioner refused to answer a number of questions put to him by the Internal [369 U.S. 749, 767] Security Subcommittee of the Senate Judiciary Committee. At the beginning of the hearing in question, the Chairman and other subcommittee members made widely meandering statements purporting to identify the subject under inquiry. It was said that the hearings were "not . . . an attack upon the free press," that the investigation was of "such attempt as may be disclosed on the part of the Communist Party . . . to influence or to subvert the American press." It was also said that "We are simply investigating communism wherever we find it." In dealing with a witness who testified shortly before Price, counsel for the subcommittee emphatically denied that it was the subcommittee's purpose "to investigate Communist infiltration of the press and other forms of communication." But when Price was called to testify before the subcommittee no one offered even to attempt to inform him of what subject the subcommittee did have under inquiry. At the trial the Government took the position that the subject under inquiry had been Communist activities generally. The district judge before whom the case was tried found that "the questions put were pertinent to the matter under inquiry" without indicating what he thought the subject under inquiry was. The Court of Appeals, in affirming the conviction, likewise omitted to state what it thought the subject under inquiry had been. In this Court the Government contends that the subject under inquiry at the time the petitioner was called to testify was "Communist activity in news media." 14 </s> It is difficult to imagine a case in which an indictment's insufficiency resulted so clearly in the indictment's failure to fulfill its primary office - to inform the defendant of the nature of the accusation against him. Price refused to answer some questions of a Senate subcommittee. He [369 U.S. 749, 768] was not told at the time what subject the subcommittee was investigating. The prior record of the subcommittee hearings, with which Price may or may not have been familiar, gave a completely confused and inconsistent account of what, if anything, that subject was. Price was put to trial and convicted upon an indictment which did not even purport to inform him in any way of the identity of the topic under subcommittee inquiry. At every stage in the ensuing criminal proceeding Price was met with a different theory, or by no theory at all, as to what the topic had been. Far from informing Price of the nature of the accusation against him, the indictment instead left the prosecution free to roam at large - to shift its theory of criminality so as to take advantage of each passing vicissitude of the trial and appeal. Yet Price could be guilty of no criminal offense unless the questions he refused to answer were in fact pertinent to a specific topic under subcommittee inquiry at the time he was interrogated. Sinclair v. United States, 279 U.S. 263 , at 292. </s> It has long been recognized that there is an important corollary purpose to be served by the requirement that an indictment set out "the specific offence, coming under the general description," with which the defendant is charged. This purpose, as defined in United States v. Cruikshank, 92 U.S. 542, 558 , is "to inform the court of the facts alleged, so that it may decide whether they are sufficient in law to support a conviction, if one should be had." 15 This criterion is of the greatest relevance [369 U.S. 749, 769] here, in the light of the difficulties and uncertainties with which the federal trial and reviewing courts have had to deal in cases arising under 2 U.S.C. 192, to which reference has already been made. See, e. g., Watkins v. United States, 354 U.S. 178 ; Deutch v. United States, 367 U.S. 456 . Viewed in this context, the rule is designed not alone for the protection of the defendant, but for the benefit of the prosecution as well, by making it possible for courts called upon to pass on the validity of convictions under the statute to bring an enlightened judgment to that task. Cf. Watkins v. United States, supra. </s> It is argued that any deficiency in the indictments in these cases could have been cured by bills of particulars. 16 </s> [369 U.S. 749, 770] But it is a settled rule that a bill of particulars cannot save an invalid indictment. See United States v. Norris, 281 U.S. 619, 622 ; United States v. Lattimore, 215 F.2d 847; Babb v. United States, 218 F.2d 538; Steiner v. United States, 229 F.2d 745; United States v. Dierker, 164 F. Supp. 304; 4 Anderson, Wharton's Criminal Law and Procedure, 1870. When Congress provided that no one could be prosecuted under 2 U.S.C. 192 except upon an indictment, Congress made the basic decision that only a grand jury could determine whether a person should be held to answer in a criminal trial for refusing to give testimony pertinent to a question under congressional committee inquiry. A grand jury, in order to make that ultimate determination, must necessarily determine what the question under inquiry was. To allow the prosecutor, or the court, to make a subsequent guess as to what was in the minds of the grand jury at the time they returned the indictment would deprive the defendant of a basic protection which the guaranty of the intervention of a grand jury was designed to secure. For a defendant could then be convicted on the basis of facts not found by, and perhaps not even presented to, the grand jury which indicted him. See Orfield, Criminal Procedure from Arrest to Appeal, 243. </s> This underlying principle is reflected by the settled rule in the federal courts that an indictment may not be amended except by resubmission to the grand jury, unless the change is merely a matter of form. Ex parte Bain, 121 U.S. 1 ; United States v. Norris, 281 U.S. 619 ; Stirone v. United States, 361 U.S. 212 . "If it lies within the province of a court to change the charging part of an indictment to suit its own notions of what it ought to have been, or what the grand jury would probably have made it if their attention had been called to suggested changes, the great importance which the common law attaches to [369 U.S. 749, 771] an indictment by a grand jury, as a prerequisite to a prisoner's trial for a crime, and without which the Constitution says `no person shall be held to answer,' may be frittered away until its value is almost destroyed. . . . Any other doctrine would place the rights of the citizen, which were intended to be protected by the constitutional provision, at the mercy or control of the court or prosecuting attorney; for, if it be once held that changes can be made by the consent or the order of the court in the body of the indictment as presented by the grand jury, and the prisoner can be called upon to answer to the indictment as thus changed, the restriction which the Constitution places upon the power of the court, in regard to the prerequisite of an indictment, in reality no longer exists." Ex parte Bain, supra, at 10, 13. We reaffirmed this rule only recently, pointing out that "The very purpose of the requirement that a man be indicted by grand jury is to limit his jeopardy to offenses charged by a group of his fellow citizens acting independently of either prosecuting attorney or judge." Stirone v. United States, supra, at 218. 17 </s> For these reasons we conclude that an indictment under 2 U.S.C. 192 must state the question under congressional committee inquiry as found by the grand jury. 18 </s> [369 U.S. 749, 772] Only then can the federal courts responsibly carry out the duty which Congress imposed upon them more than a century ago: </s> "The question must be pertinent to the subject-matter, and that will have to be decided by the courts of justice on the indictment." 19 </s> Reversed. </s> MR. JUSTICE FRANKFURTER took no part in the decision of these cases. </s> MR. JUSTICE BRENNAN took no part in the consideration or decision of No. 10. Whitman v. United States. </s> MR. JUSTICE WHITE took no part in the consideration or decision of these cases. </s> Footnotes [Footnote 1 108 U.S. App. D.C. 140, 280 F.2d 688; 108 U.S. App. D.C. 153, 280 F.2d 701; 108 U.S. App. D.C. 226, 281 F.2d 59; 108 U.S. App. D.C. 160, 280 F.2d 708; 108 U.S. App. D.C. 167, 280 F.2d 715; 108 U.S. App. D.C. 130, 280 F.2d 678. </s> [Footnote 2 "Every person who having been summoned as a witness by the authority of either House of Congress to give testimony or to produce papers upon any matter under inquiry before either House, or any joint committee established by a joint or concurrent resolution of the two Houses of Congress, or any committee of either House of Congress, willfully makes default, or who, having appeared, refuses to answer any question pertinent to the question under inquiry, shall be deemed guilty of a misdemeanor, punishable by a fine of not more than $1,000 nor less than $100 and imprisonment in a common jail for not less than one month nor more than twelve months." 2 U.S.C. 192. </s> [Footnote 3 No. 8 and No. 128 grew out of hearings before subcommittees of the House Committee on Un-American Activities. The other four cases grew out of hearings before the Internal Security Subcommittee of the Senate Judiciary Committee. </s> [Footnote 4 The indictment in No. 8 is typical: </s> "The Grand Jury charges: </s> "INTRODUCTION </s> "On November 17, 1954, in the District of Columbia, a subcommittee of the Committee on Un-American Activities of the House of Representatives was conducting hearings, pursuant to Public Law 601, Section 121, 79th Congress, 2d Session, (60 Stat. 828), and to H. Res. 5, 83d Congress. </s> "Defendant, Norton Anthony Russell, appeared as a witness before that subcommittee, at the place and on the date above stated, and [369 U.S. 749, 753] was asked questions which were pertinent to the question then under inquiry. Then and there the defendant unlawfully refused to answer those pertinent questions. The allegations of this introduction are adopted and incorporated into the counts of this indictment which follow, each of which counts will in addition merely describe the question which was asked of the defendant and which he refused to answer." </s> (The questions which Russell allegedly refused to answer were then quoted verbatim under separately numbered counts.) </s> [Footnote 5 The motion in No. 9 is typical: </s> "The defendant moves that the indictment be dismissed on the following grounds: </s> "1. The indictment fails to plead the following essential and material elements of the offense: </s> . . . . . </s> "c. the nature of the `question then under inquiry' to which the questions addressed to defendant are alleged to be relevant." </s> [Footnote 6 2 U.S.C. 194 provides: </s> "Whenever a witness summoned as mentioned in section 192 of this title fails to appear to testify or fails to produce any books, papers, records, or documents, as required, or whenever any witness so summoned refuses to answer any question pertinent to the subject under inquiry before either House, or any joint committee established by a joint or concurrent resolution of the two Houses of Congress, or any committee or subcommittee of either House of Congress, and the fact of such failure or failures is reported to either House while Congress is in session, or when Congress is not in session, a statement of fact constituting such failure is reported to and filed with the President of the Senate or the Speaker of the House, it shall be the duty of the said President of the Senate or Speaker of the House, as the case [369 U.S. 749, 754] may be, to certify, and he shall so certify, the statement of facts aforesaid under the seal of the Senate or House, as the case may be, to the appropriate United States attorney, whose duty it shall be to bring the matter before the grand jury for its action." </s> [Footnote 7 The question was presented but not reached in Sacher v. United States, 356 U.S. 576 , where the conviction was reversed on other grounds. The question was also raised in the petition for certiorari in Braden v. United States, 365 U.S. 431 , but was abandoned when the case was briefed and argued on the merits. Although the question was decided by the lower court in Barenblatt v. United States, 100 U.S. App. D.C. 13, 240 F.2d 875, it was not raised in this Court, 360 U.S. 109 . </s> The Court of Appeals for the District of Columbia Circuit has passed on the question, holding that the indictment need not set forth the subject under committee inquiry. See Barenblatt v. United States, 100 U.S. App. D.C. 13, 240 F.2d 875; Sacher v. United States, 102 U.S. App. D.C. 264, 252 F.2d 828. Indictments returned in that circuit of course reflect this rule. See cases cited in MR. JUSTICE HARLAN'S dissenting opinion, post, p. 782, n. 2. The Court of Appeals for the Second Circuit sustained an indictment under 2 U.S.C. 192 which did not set forth the subject under inquiry in United States v. Josephson, 165 F.2d 82. However, Josephson appears to have been substantially limited by the same court in United States v. Lamont, 236 F.2d 312, and indictments under 2 U.S.C. 192 currently being returned in the Second Circuit do in fact set forth the subject under inquiry. See the unreported indictments in United States v. Yarus (D.C. S. D. N. Y.) No. C 152-239 (the opinion acquitting defendant Yarus is reported at 198 F. Supp. 425); United States v. Turoff (D.C. W. D. N. Y.) No. 7539-C (the opinion of the Court of Appeals reversing defendant Turoff's conviction is reported at 291 F.2d 864). </s> No other Court of Appeals has passed squarely on the point. In Braden v. United States, 272 F.2d 653, the Court of Appeals for the Fifth Circuit ruled that the indictment need not explain how and why the questions were pertinent to the subject under inquiry, but did not discuss whether the subject itself had to be specified. In a number of other recent cases arising under 2 U.S.C. 192 the indictments have stated the subject under inquiry. See, in addition [369 U.S. 749, 755] to the examples cited above, the indictment set forth in United States v. Yellin, 287 F.2d 292, 293, n. 2 (C. A. 7th Cir.); the indictment described in Davis v. United States, 269 F.2d 357, 359 (C. A. 6th Cir.); and the unreported indictment in United States v. Lorch (D.C. S. D. Ohio) Cr. No. 3185 (an indictment arising out of the same series of hearings in which Russell, the petitioner in No. 8, was initially summoned to testify). </s> [Footnote 8 11 Stat. 155-156. The statute, now 2 U.S.C. 192-194, was enacted to supplement the established contempt power of Congress itself. Jurney v. MacCracken, 294 U.S. 125, 151 . The specific background of the statute's adoption is sketched in Watkins v. United States, 354 U.S., at 207 , n. 45. See Cong. Globe, 34th Cong., 3d Sess. 405. See also id., at 403-413, 426-433, 434-445. Except for a basic change in the immunity provisions in 1862, 12 Stat. 333, the legislation has continued substantially unchanged to the present time, with only a slight modification in language in R. S. 102 and 104. The only other amendment in the substantive provisions was made in 1938, 52 Stat. 942, so as to make the statute applicable to joint committees. The provision requiring grand jury indictment has been amended twice since 1857. The original legislation provided for certification only to the United States Attorney for the District of Columbia. In 1936 an amendment was made to permit certification to any United States Attorney, 49 Stat. 2041. In 1938 the provision was amended to bring it into accord with the joint committee amendment of the substantive provisions of the law. </s> [Footnote 9 In the Watkins case the Court's primary concern was not whether pertinency had been proved at the criminal trial, but whether the petitioner had been apprised of the pertinency of the questions at the time he had been called upon to answer them. These two issues [369 U.S. 749, 760] are, of course, quite different. See Deutch v. United States, 367 U.S., at 467 -468. But identification of the subject under inquiry is essential to the determination of either issue. See Barenblatt v. United States, 360 U.S., at 123 -125. </s> [Footnote 10 See I Holdsworth, History of English Law (7th ed. 1956), 321-323; I Pollock and Maitland, History of English Law (2d ed. 1909), 137-155, and Vol. II, pp. 647-653. </s> [Footnote 11 The 1872 statute became Rev. Stat. 1025 and ultimately 18 U.S.C. (1940 ed.) 556. The statute was repealed in the 1948 legislative reorganization of Title 18, 62 Stat. 862, because its substance was contained in Fed. Rules Crim. Proc., 52 (a). </s> [Footnote 12 Rosen v. United States, 161 U.S. 29 , heavily relied upon in the dissenting opinion, is inapposite. In that case the Court held that an indictment charging the mailing of obscene material did not need to specify the particular portions of the publication which were allegedly obscene. As pointed out in Bartell v. United States, 227 U.S. 427, 431 , the rule established in Rosen was always regarded as a "well recognized exception" to usual indictment rules, applicable only to "the pleading of printed or written matter which is alleged to be [369 U.S. 749, 766] too obscene or indecent to be spread upon the records of the court." Under Roth v. United States, 354 U.S. 476, 488 -489, the issue dealt with in Rosen would presumably no longer arise. </s> [Footnote 13 United States v. Lamont, 236 F.2d 312; Meer v. United States, 235 F.2d 65; Babb v. United States, 218 F.2d 538; United States v. Simplot, 192 F. Supp. 734; United States v. Devine's Milk Laboratories, Inc., 179 F. Supp. 799; United States v. Apex Distributing Co., 148 F. Supp. 365. </s> [Footnote 14 Brief for the United States, p. 26. </s> [Footnote 15 This principle enunciated in Cruikshank retains undiminished vitality, as several recent cases attest. "Another reason [for the requirement that every ingredient of the offense charged must be clearly and accurately alleged in the indictment], and one sometimes overlooked, is to enable the court to decide whether the facts alleged are sufficient in law to withstand a motion to dismiss the indictment or to support a conviction in the event that one should be had." United States v. Lamont, 18 F. R. D. 27, 31. "In addition to informing the defendant, another purpose served by the indictment is to [369 U.S. 749, 769] inform the trial judge what the case involves, so that, as he presides and is called upon to make rulings of all sorts, he may be able to do so intelligently." Puttkammer, Administration of Criminal Law, 125-126. See Flying Eagle Publications, Inc., v. United States, 273 F.2d 799; United States v. Goldberg, 225 F.2d 180; United States v. Silverman, 129 F. Supp. 496; United States v. Richman, 190 F. Supp. 889; United States v. Callanan, 113 F. Supp. 766. See 4 Anderson, Wharton's Criminal Law and Procedure, 506; Orfield, Indictment and Information in Federal Criminal Procedure, 13 Syracuse L. Rev. 389, 392. See also Orfield, Criminal Procedure from Arrest to Appeal, 226-230. </s> [Footnote 16 In No. 128, Gojack v. United States, the petitioner filed a timely motion for a bill of particulars, requesting that he be informed of the question under subcommittee inquiry. The motion was denied. </s> In No. 9, Shelton v. United States, the petitioner filed a similar motion. The motion was granted, and the Government responded orally as follows: </s> "As to the second asking, the Government contends, and the indictment states, that the inquiry being conducted was pursuant to this resolution. We do not feel, and it is not the case, that there was any smaller, more limited inquiry being conducted. </s> "This committee was conducting the inquiry for the purposes contained in the resolution and no lesser purpose so that, in that sense, the asking No. 2 of counsel will be supplied by his reading the resolution." </s> In the four other cases no motions for bills of particulars were filed. </s> [Footnote 17 See also Smith v. United States, 360 U.S. 1, 13 (dissenting opinion); Comment, 35 Mich. L. Rev. 456. </s> [Footnote 18 The federal perjury statute, 18 U.S.C. 1621, makes it a crime for a person under oath willfully to state or subscribe to "any material matter which he does not believe to be true." The Government, pointing to the analogy between the perjury materiality requirement and the pertinency requirement in 2 U.S.C. 192 recognized in Sinclair v. United States, 279 U.S. 263, 298 , contends that the present cases are controlled by Markham v. United States, 160 U.S. 319 , where the Court sustained a perjury indictment. But Markham is inapposite. The analogy between the perjury statute and 2 U.S.C. 192, while persuasive for some purposes, is not persuasive here, for the determination of the subject under inquiry does not play the central [369 U.S. 749, 772] role in a perjury prosecution which it plays under 2 U.S.C. 192. But even were the analogy perfect Markham would still not control, for it holds only that a perjury indictment need not set forth how and why the statements were allegedly material. The Court carefully pointed out that the indictment did in fact reveal the subject under inquiry, stating that "as [the fourth count of indictment] charged that such statement was material to an inquiry pending before, and within the jurisdiction of, the Commissioner of Pensions; and as the fair import of that count was that the inquiry before the Commissioner had reference to a claim made by the accused under the pension laws, on account of personal injuries received while he was a soldier, and made it necessary to ascertain whether the accused had, since the war or after his discharge from the army, received an injury to the forefinger of his right hand, we think that the fourth count, although unskilfully drawn, sufficiently informed the accused of the matter for which he was indicted, and, therefore, met the requirement that it should set forth the substance of the charge against him." 160 U.S., at 325 -326. (Emphasis added.) This has been equally true of other perjury indictments sustained by the Court. See Hendricks v. United States, 223 U.S. 178 ; United States v. Debrow, 346 U.S. 374 (the indictment in Debrow is set forth in the opinion of the Court of Appeals, 203 F.2d 699, 702, n. 1). </s> [Footnote 19 See p. 757, supra. [369 U.S. 749, 773] </s> MR. JUSTICE DOUGLAS, concurring. </s> While I join the opinion of the Court, I think it is desirable to point out that in a majority of the six cases that we dispose of today no indictment, however drawn, could in my view be sustained under the requirements of the First Amendment. </s> The investigation was concededly an investigation of the press. This was clearly brought out by the record in Shelton, wherein the following colloquy was alleged to have taken place at the commencement of the Subcommittee hearings: </s> "Senator Hennings. On the same subject matter. I do believe it is very important at the outset for us to make it abundantly clear, if that is the purpose of counsel, and if it is the purpose of this committee, that this is not in any sense an attack upon the free press of the United States. </s> "The Chairman. Why, certainly, that is true. </s> "Senator Hennings. And I think, too, that it should be clear that the best evidence of any subversion or infiltration into any news-dispensing agency or opinion-forming journal is certainly the product itself. </s> "The Chairman. That is correct. </s> "Senator Hennings. Of course, the committee is interested in the extent and nature of so-called Communist infiltration, if such exists, into any news-dispensing agency. </s> "The Chairman. Correct. </s> "Senator Hennings. But I would like to have the position of the committee, if it be the position of the majority of this committee, since the committee has not met to determine whether one policy or another is to be pursued in the course of these hearings - that it be generally known and understood that this is not [369 U.S. 749, 774] an attack upon any one newspaper, upon any group of newspapers as such, but an effort on the part of this committee to show such participation and such attempt as may be disclosed on the part of the Communist Party in the United States or elsewhere, indeed, to influence or to subvert the American press. </s> "And I do think that at some later time, perhaps, it might be appropriate for executives of some of the newspapers under inquiry, whose employees are under inquiry, to be called and to testify and for them to show, if they can show, that the end product, the newspaper itself, has not been influenced by these efforts. </s> "The Chairman. The Chair thinks that is a very fine and very accurate statement, one with which the Chair certainly agrees, in its entirety. </s> "We are not singling out any newspaper and not investigating any newspaper or any group of newspapers. We are simply investigating communism wherever we find it, * and I think that when this series [369 U.S. 749, 775] of hearing is over that no one can say that any newspaper or any employees of any one newspaper has been singled out. </s> "Senator Hennings. Thank you, Mr. Chairman. </s> "Senator Watkins. I would like to say I agree with Senator Hennings' statement, Mr. Chairman." R. 72-73. </s> The New York Times was a prime target of the investigation, 30 of the 38 witnesses called at the 1955 executive session and 15 of the 18 called at the 1956 public hearings being present or past employees of that paper. </s> The power to investigate is limited to a valid legislative function. Inquiry is precluded where the matter investigated [369 U.S. 749, 776] is one on which "no valid legislation" can be enacted. Kilbourn v. Thompson, 103 U.S. 168, 195 . Since the First Amendment provides that "Congress shall make no law . . . abridging the freedom . . . of the press," this present investigation was plainly unconstitutional. As we said in Watkins v. United States, 354 U.S. 178, 197 : </s> "Clearly, an investigation is subject to the command that the Congress shall make no law abridging freedom of speech or press or assembly. While it is true that there is no statute to be reviewed, and that an investigation is not a law, nevertheless an investigation is part of lawmaking. It is justified solely as an adjunct to the legislative process. The First Amendment may be invoked against infringement of the protected freedoms by law or by lawmaking." </s> Under our system of government, I do not see how it is possible for Congress to pass a law saying whom a newspaper or news agency or magazine shall or shall not employ. If this power exists, it can reach the rightist as well as the leftist press, as United States v. Rumely, 345 U.S. 41 , shows. Whether it is used against the one or the other will depend on the mood of the day. Whenever it is used to ferret out the ideology of those collecting news or writing articles or editorials for the press, it is used unconstitutionally. The theory of our Free Society is that government must be neutral when it comes to the press - whether it be rightist or leftist, orthodox or unorthodox. The theory is that in a community where men's minds are free, all shades of opinion must be immune from governmental inquiry lest we end with regimentation. Congress has no more authority in the field of the press than it does where the pulpit is involved. Since the editorials written and the news printed and the policies advocated by the press are none of the Government's [369 U.S. 749, 777] business, I see no justification for the Government investigating the capacities, leanings, ideology, qualifications, prejudices or politics of those who collect or write the news. It was conceded on oral argument that Congress would have no power to establish standards of fitness for those who work for the press. It was also conceded that Congress would have no power to prescribe loyalty tests for people who work for the press. Since this investigation can have no legislative basis as far as the press is concerned, what then is its constitutional foundation? </s> It is said that Congress has the power to determine the extent of Communist infiltration so that it can know how much tighter the "security" laws should be made. This proves too much. It would give Congress a roving power to inquire into fields in which it could not legislate. If Congress can investigate the press to find out if Communists have infiltrated it, it could also investigate the churches for the same reason. Are the pulpits being used to promote the Communist cause? Were any of the clergy ever members of the Communist Party? How about the governing board? How about those who assist the pastor and perhaps help prepare his sermons or do the research? Who comes to the confession and discloses that he or she once was a Communist? </s> There is a dictum in United States v. Rumely, 345 U.S. 41, 43 , that the reach of the investigative power of Congress is measured by the "informing function of Congress," a phrase taken from Woodrow Wilson's Congressional Government (1885), p. 303. But the quotation from Wilson was mutilated, because the sentences which followed his statement that "The informing function of Congress should be preferred even to its legislative function" were omitted from the Rumely opinion. Those omitted sentences make abundantly clear that Wilson was speaking, [369 U.S. 749, 778] not of a congressional inquiry roaming at large, but of one that inquired into and discussed the functions and operations of government. Wilson said: </s> "The informing function of Congress should be preferred even to its legislative function. The argument is not only that discussed and interrogated administration is the only pure and efficient administration, but, more than that, that the only really self-governing people is that people which discusses and interrogates its administration. The talk on the part of Congress which we sometimes justly condemn is the profitless squabble of words over frivolous bills or selfish party issues. It would be hard to conceive of there being too much talk about the practical concerns and processes of government. Such talk it is which, when earnestly and purposefully conducted, clears the public mind and shapes the demands of public opinion." Id., at 303-304. </s> The power to inform is, in my view, no broader than the power to legislate. </s> Congress has no power to legislate either on "religion" or on the "press." If an editor or a minister violates the law, he can be prosecuted. But the investigative power, as I read our Constitution, is barred from certain areas by the First Amendment. If we took the step urged by the prosecution, we would allow Congress to enter the forbidden domain. </s> The strength of the "press" and the "church" is in their freedom. If they pervert or misuse their power, informed opinion will in time render the verdict against them. A paper or pulpit might conceivably become a mouthpiece for Communist ideology. That is typical of the risks a Free Society runs. The alternative is governmental oversight, governmental investigation, governmental questioning, governmental harassment, governmental exposure for [369 U.S. 749, 779] exposure's sake. Once we crossed that line, we would sacrifice the values of a Free Society for one that has a totalitarian cast. </s> Some think a certain leeway is necessary or desirable, leaving it to the judiciary to curb what judges may from time to time think are excessive practices. Thus, a judge with a professorial background may put the classroom in a preferred position. One with a background of a prosecutor dealing with "subversives" may be less tolerant. When a subjective standard is introduced, the line between constitutional and unconstitutional conduct becomes vague, uncertain, and unpredictable. The rationalization, of course, reduces itself ultimately to the idea that "the judges know best." My idea is and has been that those who put the words of the First Amendment in the form of a command knew best. That is the political theory of government we must sustain until a constitutional amendment is adopted that puts the Congress astride the "press." </s> [Footnote * The Subcommittee in its Report to the Senate Judiciary Committee, S. Rep. No. 131, 85th Cong., 1st Sess., p. 95, stated: </s> "The Communists in the United States have their own daily newspaper, the Daily Worker, and control various weekly and monthly periodicals, including Political Affairs and Masses and Mainstream. But those publications are so brazenly slanted that their propaganda value, except for certain elements of the foreign language press in this country, is sharply limited (pts. 28 and 29). </s> "In order to overcome this disadvantage, and for other reasons, Communists have made vigorous and sustained efforts to infiltrate the American press and radio and to entrench their members in all other forms of mass communications, where, by emphasis or omission of the written or spoken word, it may be turned to the advantage of the conspiracy." </s> The Report referred to the ruling of an arbiter in a case where a paper had discharged a "rewrite man" because he invoked the Fifth [369 U.S. 749, 775] Amendment. It said that the following quotations from his opinion were "of more than passing interest:" </s> "A metropolitan newspaper in America today is more than a mirror to the happenings of the day. It is a moulder of public opinion; capable of leading crusades; capable of introducing new ideas; capable of propagating truth or propaganda as it wills. By its very nature, whether it would abdicate or not, a newspaper maintains a position of leadership and responsibility in this cold war that is vital to our national security. Other industries (atomic energy, defense, et cetera) may be more vital but this fact does not impair the vital role of our press. </s> "Each worker performs his task in life with tools, and these tools run the gamut from an ax to a zither. The rewrite man has his tools, too. They are words. Words but express ideas and so it follows that the rewrite man works all day with ideas. This is a war of ideas. Can his position then be deemed nonsensitive? A rewrite man can select the facts he considers important as relayed to him by the reporter in the field. His is the choice of the topic sentence and the lead paragraph. His selection of words sets the tone of the article and influences, too, the choice of headline. The conclusion is irresistible that a rewrite man occupies a sensitive position on a newspaper." Id., at 97. </s> The Committee concluded, "Communists have infiltrated mass communications media in the United States, and efforts to increase such infiltration continue." Id., at 117. </s> MR. JUSTICE CLARK, dissenting. </s> Although I have joined Brother HARLAN in dissenting on the grounds ably expressed in his opinion, the Court today so abruptly breaks with the past that I must visually add my voice in protest. The statute under which these cases were prosecuted, 2 U.S.C. 192, was originally passed 105 years ago. Case after case has come here during that period. Still the Court is unable to point to one case - not one - in which there is the remotest suggestion that indictments thereunder must include any of the underlying facts necessary to evaluate the propriety of the unanswered questions. Following the universal art and practice, indictments under this statute have commonly phrased the element of pertinency in the statutory language, i. e., the unanswered question was "pertinent to the question under inquiry." This Court in Sacher v. [369 U.S. 749, 780] United States, 356 U.S. 576 (1958), had an opportunity to put a stop to this widespread practice but instead reversed on other, rather unsubstantial grounds without even acknowledging that numerous defendants were being denied "one of the significant protections which the guaranty of a grand jury indictment was intended to confer." In requiring these indictments to "identify the subject which was under inquiry at the time of the defendant's alleged default or refusal to answer," the Court has concocted a new and novel doctrine to upset congressional contempt convictions. A rule has been sown which, as pointed out by Brother HARLAN, has no seeds in general indictment law and which will reap no real benefits in congressional contempt cases. If knowing the subject matter under investigation is actually important to these recalcitrant witnesses, they can utilize the right recognized in Watkins v. United States, 354 U.S. 178 (1957), of demanding enlightenment from the questioning body or the time-honored practice of requesting a bill of particulars from the prosecutor. Let us hope that the reasoning of the Court today does not apply to indictments under other criminal statutes, for if it does an uncountable number of indictments will be invalidated. If, however, the rule is only cast at congressional contempt cases, it is manifestly unjust. </s> By fastening upon indictment forms under 192 its superficial luminosity requirement the Court creates additional hazards to the successful prosecution of congressional contempt cases, which impair the informing procedures of the Congress by encouraging contumacy before its committees. It was only five years ago in my dissenting opinion in Watkins that I indicated the rule in that case might "well lead to trial of all contempt cases before the bar . . ." of the House of Congress affected. Watkins v. United States, supra, at p. 225. In that short period the Court has now upset 10 convictions [369 U.S. 749, 781] under 192. This continued frustration of the Congress in the use of the judicial process to punish those who are contemptuous of its committees indicates to me that the time may have come for Congress to revert to "its original practice of utilizing the coercive sanction of contempt proceedings at the bar of the House [affected]." Id., at 206. Perhaps some simplified method may be found to handle such matters without consuming too much of the time of the full House involved. True, a recalcitrant witness would have to be released at the date of adjournment, but at least contumacious conduct would then receive some punishment. The dignity of the legislative process deserves at least that much sanction. </s> MR. JUSTICE HARLAN, whom MR. JUSTICE CLARK joins, dissenting. </s> The ground rules for testing the sufficiency of an indictment are twofold: (1) does the indictment adequately inform the defendant of the nature of the charge he will have to meet; (2) if the defendant is convicted, and later prosecuted again, will a court, under what has been charged, be able to determine the extent to which the defense of double jeopardy is available? United States v. Debrow, 346 U.S. 374 . </s> Rule 7 (c) of the Federal Rules of Criminal Procedure, effective in 1946, was of course not intended to abrogate or weaken either of these yardsticks. Its purpose simply was to do away with the subtleties and uncertainties that had characterized criminal pleading at common law. The rule provides in pertinent part: </s> "The indictment . . . shall be a plain, concise and definite written statement of the essential facts constituting the offense charged. . . . It need not contain . . . any other matter not necessary to such statement." [369 U.S. 749, 782] </s> The rule was "designed to eliminate technicalities" and is "to be construed to secure simplicity in procedure." Debrow, at 376. </s> An essential element of the offense established by 2 U.S.C. 192 1 is that the questions which the defendant refused to answer were "pertinent to the question under inquiry" before the inquiring congressional committee. Each of the indictments in these cases charged this element of the offense in the language of the statute, following the practice consistently employed since 1950 in the District of Columbia, where most of the 192 cases have been brought. 2 The Court now holds, however, that [369 U.S. 749, 783] without a statement of the actual subject under inquiry, this allegation was inadequate to satisfy the "apprisal" requisite of a valid indictment. At the same time the allegation is found sufficient to satisfy the "jeopardy" requisite. </s> The Court's holding is contrary to the uniform course of decisions in the lower federal courts. The Court of Appeals for the District of Columbia Circuit, sitting first as a panel and later en banc, has upheld "pertinency" allegations which, like the present indictment, did not identify the particular subject being investigated. Barenblatt v. United States, 100 U.S. App. D.C. 13, 240 F.2d 875 (panel); Sacher v. United States, 102 U.S. App. D.C. 264, 252 F.2d 828 (en banc). 3 The Court of Appeals for the Second Circuit is of the same view. United States [369 U.S. 749, 784] v. Josephson, 165 F.2d 82; 4 United States v. Lamont, 236 F.2d 312. 5 And so, quite evidently, is the Court of Appeals for the Fifth Circuit. Braden v. United States, 272 F.2d 653. 6 No Court of Appeals has held otherwise. [369 U.S. 749, 785] And nothing in this Court's more recent cases could possibly be taken as foreshadowing the decision made today. 7 </s> The reasons given by the Court for its sudden holding, which unless confined to contempt of Congress cases bids fair to throw the federal courts back to an era of criminal pleading from which it was thought they had finally emerged, are novel and unconvincing. </s> I. </s> It is first argued that an allegation of "pertinency" in the statutory terms will not do, because that element is at "the very core of criminality" under 192. This is said to follow from what "our cases have uniformly held." Ante, p. 764. I do not so understand the cases on which the Court relies. It will suffice to examine the three cases from which quotations have been culled. Ante, pp. 765-766. </s> United States v. Cruikshank, 92 U.S. 542 , involved an indictment under the Enforcement Act of 1870 (16 Stat. 140) making it a felony to conspire to prevent any person from exercising and enjoying "any right or privilege granted or secured to him by the Constitution or laws of the United States." Most of the counts were dismissed on the ground that they stated no federal offense whatever. The remainder were held inadequate from the standpoint of "apprisal," in that they simply alleged a conspiracy to prevent certain citizens from enjoying rights "granted and secured to them by the constitution and laws of the United States," such rights not being otherwise described or identified. Small wonder that these opaque allegations drew from the Court the comment [369 U.S. 749, 786] that the indictment "`must descend to particulars.'" Id., at 558. Indeed, the Court observed: "According to the view we take of these counts, the question is not whether it is enough, in general, to describe a statutory offence in the language of the statute, but whether the offence has here been described at all." Id., at 557. (Emphasis supplied.) </s> United States v. Simmons, 96 U.S. 360 , was concerned with an indictment involving illegal distilling. Revised Statutes 3266 made it an offense to distill spirits on premises where vinegar "is" manufactured. One count of the indictment charged the defendant with causing equipment on premises where vinegar "was" manufactured to be used for distilling. This count was dismissed for its failure (1) to identify the person who had so used the equipment or to allege that his identity was unknown to the grand jurors; and (2) to allege that the distilling and manufacture of vinegar were coincidental, as required by the statute. 8 What is more significant from the standpoint of the present cases is that in sustaining another count of the indictment charging the defendant with engaging in the business of distilling "with the intent to defraud the United States of the tax" on the spirits (R. S. 3281), the Court held that it was not necessary to allege "the particular means by which the United States was to be defrauded of the tax." Id., at 364. [369 U.S. 749, 787] </s> United States v. Carll, 105 U.S. 611 , held no more than that an indictment charging forgery was insufficient for failure to allege scienter, which, though not expressly required by the statute, the Court found to be a necessary element of the crime. Hence a charge in the statutory language would not suffice. Section 192 of course contains no such gap in its provisions. What the Court now requires of these indictments under 192 involves not the supplying of a missing element of the crime, but the addition of the particulars of an element already clearly alleged. </s> To me it seems quite clear that even under these cases, decided long before Rule 7 (c) came into being, the "pertinency" allegations of the present indictments would have been deemed sufficient. Other early cases indicate the same thing. See, e. g., United States v. Mills, 7 Pet. 138, 142; Evans v. United States, 153 U.S. 584, 587 ; 9 Markham v. United States, 160 U.S. 319, 325 ; 10 Bartell [369 U.S. 749, 788] v. United States, 227 U.S. 427, 433 -434. 11 I think there can be no doubt about the matter after Rule 7 (c). </s> In United States v. Debrow, supra, the Court in reversing the dismissal of perjury indictments which had gone on the ground that they had not alleged the name or authority of the persons administering the oath, said ( 346 U.S., at 376 -378): </s> "The Federal Rules of Criminal Procedure were designed to eliminate technicalities in criminal pleading and are to be construed to secure simplicity in procedure. </s> . . . . . </s> "The charges of the indictments followed substantially the wording of the statute, which embodies all the elements of the crime, and such charges clearly informed the defendants of that with which they [369 U.S. 749, 789] were accused, so as to enable them to prepare their defense and to plead the judgment in bar of any further prosecutions for the same offense. It is inconceivable to us how the defendants could possibly be misled as to the offense with which they stood charged. The sufficiency of the indictment is not a question of whether it could have been more definite and certain. If the defendants wanted more definite information as to the name of the person who administered the oath to them, they could have obtained it by requesting a bill of particulars. Rule 7 (f), F. R. Crim. Proc." (Emphasis supplied.) </s> It is likewise "inconceivable" to me how the indictments in the present cases can be deemed insufficient to advise these petitioners of the nature of the charge they would have to meet. The indictments gave them the name of the committee before which they had appeared; the place and the dates of their appearances; the references to the enabling legislation under which the committee acted; and the questions which the petitioners refused to answer. The subject matter of the investigations had been stated to the petitioners at the time of their appearances before the committees. And the committee transcripts of the hearings were presumably in their possession and, if not, were of course available to them. </s> Granting all that the Court says about the crucial character of pertinency as an element of this offense, it is surely not more so than the element of premeditation in the crime of first degree murder. If from the standpoint of "apprisal" it is necessary to particularize "pertinency" in a 192 indictment, it should follow, a fortiori, that, contrary to what is prescribed in Forms 1 and 2 of the Federal Rules of Criminal Procedure, a first degree murder indictment should particularize "premeditation." [369 U.S. 749, 790] </s> II. </s> The Court says that its holding is needed to prevent the Government from switching on appeal, to the prejudice of the defendants, to a different theory of pertinency from that on which the conviction may have rested. Ante, pp. 766-768. There are several good answers to this. </s> To the extent that this fear relates to the subject under investigation, the Government cannot of course travel outside the confines of the trial record, of which the defendant has full knowledge. If what is meant is that the Government may not modify on appeal its "trial" view of the "connective reasoning" (supra, p. 784, note 6) relied on to establish the germaneness of the questions asked to the subject matter of the inquiry, surely it would be free to do so, this aspect of pertinency being simply a matter of law, Sinclair v. United States, 279 U.S. 263, 299 . Moreover the Court does not find these indictments deficient because they failed to allege the "connective reasoning." </s> Beyond these considerations, a defendant has ample means for protecting himself in this regard. By objecting at the committee hearing to the pertinency of any question asked him he may "freeze" this issue, since the Government's case on this score must then stand or fall on the pertinency explanation given by the committee in response to such an objection. Deutch v. United States, 367 U.S. 456, 472 -473 (dissenting opinion); cf. Watkins v. United States, supra, at 214-215; Barenblatt v. United States, 360 U.S. 109, 123 -125. If he has failed to make a pertinency objection at the committee hearing, thereby leaving the issue "at large" for the trial (Deutch, ibid.), he may still seek a particularization through a bill of particulars. Cf. United States v. Kamin, 136 F. Supp. 791, 795 n. 4. [369 U.S. 749, 791] </s> It should be noted that no pertinency objection was made by any of these petitioners at the committee hearings. Further, no motions for a bill of particulars were made in No. 12, Price, to which the Court especially addresses itself (ante, pp. 766-768), or in No. 8, Russell, No. 10, Whitman, and No. 11, Liveright. In No. 9, Shelton, and No. 128, Gojack, such motions were made. However, no appeal was taken from the denial of the motion in Gojack, and in Shelton the sufficiency of the particulars furnished by the Government was not questioned either by a motion for a further bill or on appeal. </s> III. </s> Referring to certain language in the Cruikshank case, supra, the Court suggests that the present holding is supported by a further "important corollary purpose" which an indictment is intended to serve: to make "it possible for courts called upon to pass on the validity of convictions under the statute to bring an enlightened judgment to that task." Ante, pp. 768, 769. </s> But whether or not the Government has established its case on "pertinency" is something that must be determined on the record made at the trial, not upon the allegations of the indictment. There is no such thing as a motion for summary judgment in a criminal case. While appellate courts might be spared some of the tedium of going through these 192 records were the allegations of indictments to spell out the "pertinency" facts, the Court elsewhere in its opinion recognizes that the issue at hand can hardly be judged in terms of whether fuller indictments "would simplify the courts' task." Ante, p. 760. </s> The broad language in Cruikshank on which the Court relies cannot properly be taken as meaning more than that an indictment must set forth enough to enable a court to determine whether a criminal offense over which [369 U.S. 749, 792] the court has jurisdiction has been alleged. Cf. McClintock, Indictment by a Grand Jury, 26 Minn. L. Rev. 153, 159-160 (1942); Orfield, Criminal Procedure from Arrest to Appeal, 222-226, 227 n. 107. 12 Certainly the allegations of these indictments meet such requirements. </s> IV. </s> The final point made by the Court is perhaps the most novel of all. It is said that a statement of the subject under inquiry is necessary in the indictment in order to fend against the possibility that a defendant may be convicted on a theory of pertinency based upon a subject under investigation different from that which may have been found by the grand jury. An argument similar to this was rejected by this Court many years ago in Rosen v. United States, 161 U.S. 29, 34 , where an indictment charging the defendant with mailing obscene matter, only generally described, was upheld over strong dissent (id., at 45-51) asserting that the accused was entitled to know the particular parts of the material which the grand jury had deemed obscene. 13 </s> This proposition is also certainly unsound on principle. In the last analysis it would mean that a prosecutor could not safely introduce or advocate at a trial evidence or theories, however relevant to the crime charged in the indictment, which he had not presented to the grand jury. Such cases as Ex parte Bain, 121 U.S. 1 , United States v. [369 U.S. 749, 793] Norris, 281 U.S. 619 , and Stirone v. United States, 361 U.S. 212 , lend no support to the Court's thesis. They held only that, consistently with the Fifth Amendment, a trial judge could not amend the indictment itself, either by striking or adding material language, or, amounting to the latter, by permitting a conviction on evidence or theories not fairly embraced in the charges made in the indictment. To allow this would in effect permit a defendant to be put to trial upon an indictment found not by a grand jury but by a judge. 14 </s> If the Court's reasoning in this part of its opinion is sound, I can see no escape from the conclusion that a defendant convicted on a lesser included offense, not alleged by the grand jury in an indictment for the greater offense, would have a good plea in arrest of judgment. (Fed. Rules Crim. Proc., 34.) </s> In conclusion, I realize that one in dissent is sometimes prone to overdraw the impact of a decision with which he does not agree. Yet I am unable to rid myself of the view that the reversal of these convictions on such insubstantial grounds will serve to encourage recalcitrance to legitimate congressional inquiry, stemming from the belief that a refusal to answer may somehow be requited in this Court. And it is not apparent how the seeds which this decision plants in other fields of criminal pleading can well be prevented from sprouting. What is done today calls [369 U.S. 749, 794] to mind the trenchant observation made by Mr. Justice Holmes many years ago in Paraiso v. United States, 207 U.S. 368, 372 : </s> "The bill of rights for the Philippines giving the accused the right to demand the nature and cause of the accusation against him does not fasten forever upon those islands the inability of the seventeenth century common law to understand or accept a pleading that did not exclude every misinterpretation capable of occurring to intelligence fired with a desire to pervert." </s> No more so does the Bill of Rights of the United States Constitution "fasten" on this country these primitive notions of the common law. </s> On the merits these convictions are of course squarely ruled against the petitioners by principles discussed in our recent decisions in the Barenblatt, Wilkinson, and Braden 15 cases, as was all but acknowledged at the bar. </s> I would affirm. </s> [Footnote 1 "Every person who having been summoned as a witness by the authority of either House of Congress to give testimony or to produce papers upon any matter under inquiry before either House, or any joint committee established by a joint or concurrent resolution of the two Houses of Congress, or any committee of either House of Congress, willfully makes default, or who, having appeared, refuses to answer any question pertinent to the question under inquiry, shall be deemed guilty of a misdemeanor, punishable by a fine of not more than $1,000 nor less than $100 and imprisonment in a common jail for not less than one month nor more than twelve months." (Emphasis added.) </s> [Footnote 2 [The following abbreviations have been used to indicate where the indictment may be found: TR, the transcript of the record in this Court; JA, the joint appendix in the Court of Appeals; Cr. No. ___, the docket number in the District Court.] See Grumman v. United States, 368 U.S. 925 (TR, p. 2); Silber v. United States, 368 U.S. 925 (TR, p. 2); Hutcheson v. United States, 369 U.S. 599 (TR, p. 4); Deutch v. United States, 367 U.S. 456 (TR, p. 7); Barenblatt v. United States, 360 U.S. 109 (TR, p. 1); Flaxer v. United States, 358 U.S. 147 (TR, p. 2); Sacher v. United States, 356 U.S. 576 (JA, p. 2); Watkins v. United States, 354 U.S. 178 (TR, p. 2); Bart v. United States, 349 U.S. 219 (TR, p. 108); Emspak v. United States, 349 U.S. 190 (TR, p. 4); Quinn v. United States, 349 U.S. 155 (TR, p. 3); United States v. Rumely, 345 U.S. 41 (TR, pp. 2-4); Knowles v. United States, 108 U.S. App. D.C. 148, 280 F.2d 696 (Cr. No. 1211-56); Watson v. United States, 108 U.S. App. D.C. 141, 280 F.2d 689 (Cr. No. 1151-54); Miller v. United [369 U.S. 749, 783] States, 104 U.S. App. D.C. 30, 259 F.2d 187 (Cr. No. 164-57); La Poma v. United States, 103 U.S. App. D.C. 151, 255 F.2d 903 (Cr. No. 290-57); Brewster v. United States, 103 U.S. App. D.C. 147, 255 F.2d 899 (Cr. No. 289-57); Singer v. United States, 100 U.S. App. D.C. 260, 244 F.2d 349 (Cr. No. 1150-54); O'Connor v. United States, 99 U.S. App. D.C. 373, 240 F.2d 404 (Cr. No. 1650-53); Keeney v. United States, 94 U.S. App. D.C. 366, 218 F.2d 843 (Cr. No. 870-52); Bowers v. United States, 92 U.S. App. D.C. 79, 202 F.2d 447 (Cr. No. 1252-51); Kamp v. United States, 84 U.S. App. D.C. 187, 176 F.2d 618 (Cr. No. 1788-50); United States v. Peck, 149 F. Supp. 238 (Cr. No. 1214-56); United States v. Hoag, 142 F. Supp. 667 (Cr. No. 574-55); United States v. Fischetti, 103 F. Supp. 796 (Cr. No. 1254-51); United States v. Nelson, 103 F. Supp. 215 (Cr. No. 1796-50); United States v. Jaffe, 98 F. Supp. 191 (Cr. No. 1786-50); United States v. Raley, 96 F. Supp. 495 (Cr. No. 1748-50); United States v. Fitzpatrick, 96 F. Supp. 491 (Cr. No. 1743-50). </s> For a short period after Rule 7 (c), Fed. Rules Crim. Proc., came into effect in 1946, vestiges of common-law pleading continued to be found in some, but not all, 192 indictments. Compare United States v. Fleischman, 339 U.S. 349 (TR, pp. 2-3), with United States v. Bryan, 339 U.S. 323 (TR, p. 2A). By 1950, however, all such indictments had come to be in statutory form. </s> [Footnote 3 Four judges dissented on other grounds. </s> [Footnote 4 The record on appeal shows that one of the grounds of attack was the indictment's failure to allege "the nature of any matter under inquiry before said Committee." Record on Appeal in the Court of Appeals for the Second Circuit, No. 91, Doc. 20790, p. 7. </s> [Footnote 5 This case evinces no purpose to depart from Josephson. The District Court, although dismissing the indictment on other grounds, quite evidently found the statutory "pertinency" allegation sufficient. 18 F. R. D., at 30, 37. And in affirming, the Court of Appeals, citing the Josephson case among others, stated that "the result might well be different" had the authority of the investigating committee appeared in the indictment. 236 F.2d, at 316 (note 6). (The committee in Lamont was a Subcommittee of the Senate Committee on Government Operations whose enabling legislation the court found did not authorize investigation of "subversive activities.") As regards the issue decided in the present cases, the following observations by Chief Judge Clark, who speaks with special authority in procedural matters, are significant (id., at 317): </s> "Pleading, either civil or criminal, should be a practical thing. Its purpose is to convey information succinctly and concisely. In older days the tendency was to defeat this purpose by overelaboration and formalism. Now we should avoid the opposite trend, but of like consequence, that of a formalism of generality. There seems to be some tendency to confuse general pleadings with entire absence of statement of claim or charge. [Footnote omitted.] But this is a mistake, for general pleadings, far from omitting a claim or charge, do convey information to the intelligent and sophisticated circle for which they are designed. Thus the charge that at a certain time and place `John Doe with premeditation shot and murdered John Roe,' F. R. Cr. P., Form 2, even though of comparatively few words, has made clear the offense it is bringing before the court. [Footnote omitted.] The present indictments, however, do not show the basis upon which eventual conviction can be had; rather, read in the light of the background of facts and Congressional action, they show that conviction cannot be had." (Emphasis supplied.) </s> [Footnote 6 That case was concerned with the "connective reasoning" aspect of "pertinency," Watkins v. United States, 354 U.S. 178, 214 -215, [369 U.S. 749, 785] rather than the "subject under inquiry" aspect; but it is not perceived how this can be thought to make a difference in principle. </s> [Footnote 7 This is not the first opportunity the Court has had to consider the matter. Ante, p. 754, note 7. </s> [Footnote 8 The Court stated (id., at 362): </s> "Where the offence is purely statutory . . . it is, `as a general rule, sufficient in the indictment to charge the defendant with acts coming fully within the statutory description, in the substantial words of the statute, without any further expansion of the matter.' 1 Bishop, Crim. Proc., sect. 611, and authorities there cited. But to this general rule there is the qualification, fundamental in the law of criminal procedure, that the accused must be apprised by the indictment, with reasonable certainty, of the nature of the accusation against him . . . . An indictment not so framed is defective, although it may follow the language of the statute." (Emphasis supplied.) </s> [Footnote 9 The Mills and Evans cases suggest that a more lenient rule of pleading applies in misdemeanor than in felony cases. Although that distinction seems to have disappeared in the later cases, it may be noted that 192 in terms makes this offense a misdemeanor. Note 1, supra. </s> [Footnote 10 In that case the Court spoke, doubtless by way of dictum, concerning the method of pleading "materiality" in a perjury indictment (an element akin to "pertinency" under 192, Sinclair v. United States, 279 U.S. 263, 298 ): </s> "It was not necessary that the indictment should set forth all the details or facts involved in the issue as to materiality of [the false] statement . . . . In 2 Chittey's Criminal Law, 307, the author says: `It is undoubtedly necessary that it should appear on the face of the indictment that the false allegations were material to the matter in issue. But it is not requisite to set forth all the circumstances which render them material; the simple averment that they were so, will suffice.' In King v. Dowlin . . . Lord Kenyon said that it had always been adjudged to be sufficient in an indictment for perjury, to allege generally that the particular question became a material question. . . ." 160 U.S., at 325 . </s> [Footnote 11 There, under an exception, prevailing in "obscenity" cases, to the then general rule that in "documentary" crimes the contents of the document must be set forth in the indictment, the Court in sustaining an indictment charging the unlawful mailing of an "indecent" letter, only generally described, said (id., at 433-434): </s> "The present indictment specifically charged that the accused had knowingly violated the laws of the United States by depositing on a day named, in the post-office specifically named, a letter of such indecent character as to render it unfit to be set forth in detail, enclosed in an envelope bearing a definite address. In the absence of a demand for a bill of particulars we think this description sufficiently advised the accused of the nature and cause of the accusation against him. This fact is made more evident when it is found that this record shows no surprise to the accused in the production of the letter at the trial . . . ." </s> The Court suggests that Bartell and Rosen v. United States (infra, p. 792) are inapposite because of the special rule of pleading applicable in "obscenity" cases. Ante, p. 765. However, considering that the "apprisal" requisite of an indictment arises from constitutional requirements, this factor far from lessening the weight of these two cases adds to their authority. </s> [Footnote 12 The other cases and commentaries referred to by the Court in Note 15, ante, pp. 768-769, indicate nothing different. </s> [Footnote 13 It seems clear that the Court proceeded on the premise that the "isolated excerpt" rule of Regina v. Hicklin, 1868. L. R. 3 Q. B. 360, recently rejected in Roth v. United States, 354 U.S. 476, 488 -489, in favor of the "whole book" rule, obtained, for the Court relied on United States v. Bennett, 24 Fed. Cas. 1093 (16 Blatchford 338), where the "excerpt" test was applied. </s> [Footnote 14 While the "connective reasoning" aspect of "pertinency" is again evidently not involved in the Court's reasoning, it is appropriate to note that it is scarcely realistic to consider that issue of law as one on which the grand jury has exercised an independent judgment in determining whether an indictment should be returned. For that body may be expected, quite naturally and properly, to follow the District Attorney's advice on this score, as with any other matter of law. That the legal premises on which the grand jury acted in this respect may turn out to have been wrong could hardly vitiate the indictment itself. </s> [Footnote 15 360 U.S. 109 ; 365 U.S. 399 ; 365 U.S. 431 . </s> [369 U.S. 749, 795]

United States Supreme Court PAULUSSEN v. HERION(1986) No. 85-88 Argued: March 5, 1986Decided: March 25, 1986 </s> In 1980, appellant filed a paternity and child support petition in a Pennsylvania court on behalf of her 7-year-old daughter, who had been born out of wedlock, alleging that appellee was the natural father and had ceased making contributions to the daughter's support in 1975. The court held that the action was barred under the state statute of limitations, which then required that paternity actions be commenced within six years of the child's birth or within two years of the putative father's last voluntary support contribution or written acknowledgment of paternity. Appellant's contention that the statute violated the Equal Protection Clause of the Fourteenth Amendment was rejected. The Pennsylvania Superior Court affirmed. </s> Held: </s> The judgment below is vacated, and the case is remanded for further consideration in light of Pennsylvania's intervening enactment of a new statute providing that a paternity action may be commenced at any time within 18 years of the child's birth. Appellee conceded that he was subject to the new statute and would be liable for child support from the date paternity was established, but he contended that he would not be liable for support payments dating back to when the petition was filed in 1980. If the Pennsylvania court were to interpret the new statute to require payments dating back to 1980, the constitutionality of the 6-year statute of limitations would be irrelevant. </s> 334 Pa. Super. 585, 483 A. 2d 892, vacated and remanded. </s> Esther L. Hornik argued the cause for appellant. With her on the brief were Angela L. Martinez and Donald J. Martin. </s> Joseph N. Onek argued the cause for appellee. On the brief was Neil H. Stein. * </s> [Footnote * Briefs of amici curiae urging reversal were filed for the Children's Defense Fund et al. by Constance Jean Chatwood, Jane Howard-Martin, Marian Wright Edelman, James D. Weill, and Judith L. Lichtman; and for the Neighborhood Legal Services Association by Daniel L. Haller and Eileen D. Yacknin. [475 U.S. 557, 558] </s> PER CURIAM. </s> On February 17, 1980, appellant Barbara Paulussen filed a paternity and child support petition in a Bucks County, Pennsylvania, court on behalf of her daughter, who was then seven years old. The petition alleged that the daughter had been born out of wedlock, that appellee George Herion was her natural father, and that he had ceased making contributions to her support in April 1975. Appellee offered as a defense the time bar of the Pennsylvania statute of limitations, which at the time required that paternity actions be commenced within six years of the child's birth or within two years of the putative father's last voluntary support contribution or written acknowledgment of paternity. 42 Pa. Cons. Stat. Ann., 6704(e) (Purdon 1982) (repealed). The defense was sustained against appellant's contention that the statute violated the Equal Protection Clause of the Fourteenth Amendment to the Federal Constitution. The Superior Court affirmed, 334 Pa. Super. 585, 483 A. 2d 892 (1985), and the Supreme Court of Pennsylvania denied discretionary review. Appellant sought appeal in this Court, and, on October 15, 1985, we noted probable jurisdiction. 474 U.S. 899 (1985). </s> On October 30, 1985, Pennsylvania enacted 1985 Pa. Laws, Act No. 66, to be codified as 23 Pa. Cons. Stat. Ann. 4343(b), which provides that a child born out of wedlock may commence a paternity action at any time within 18 years of birth. Appellee now concedes that he is subject to 4343(b) and that, upon a showing of paternity, he would be liable for child support payments from the date paternity was established. Brief for Appellee 5. He contends, however, that, even on such a showing, he would not be liable for payments dating back to the date the initial petition was filed in 1980. </s> Our examination of Pennsylvania law leaves us uncertain as to the legal consequences of the enactment of the new 18-year statute of limitations. If, however, Pennsylvania were [475 U.S. 557, 559] to interpret 4343(b) to require support payments dating back to the filing of the original petition, the constitutionality of the 6-year statute of limitations would be irrelevant. Because Pennsylvania should have an opportunity in the first instance to resolve this issue of state law, and because we are reluctant to address a federal constitutional question until it is clearly necessary to do so, we vacate the judgment below and remand for further consideration in light of the intervening change in state law. </s> It is so ordered. </s> [475 U.S. 557, 560]

United States Supreme Court ALYESKA PIPELINE CO. v. WILDERNESS SOCIETY(1975) No. 73-1977 Argued: January 22, 1975Decided: May 12, 1975 </s> Under the "American Rule" that attorneys' fees are not ordinarily recoverable by the prevailing litigant in federal litigation in the absence of statutory authorization, respondents, which had instituted litigation to prevent issuance of Government permits required for construction of the trans-Alaska oil pipeline, cannot recover attorneys' fees from petitioner based on the "private attorney general" approach erroneously approved by the Court of Appeals, since only Congress, not the courts, can authorize such an exception to the American rule. Pp. 247-271. </s> 161 U.S. App. D.C. 446, 495 F.2d 1026, reversed. </s> WHITE, J., delivered the opinion of the Court, in which BURGER, C. J., and STEWART, BLACKMUN, and REHNQUIST, JJ., joined. BRENNAN, J., post, p. 271, and MARSHALL, J., post, p. 272, filed dissenting opinions. DOUGLAS and POWELL, JJ., took no part in the consideration or decision of the case. </s> Robert E. Jordan III argued the cause for petitioner. With him on the brief were Paul F. Mickey, James H. Pipkin, Jr., and John D. Knodell, Jr. </s> Dennis J. Flannery argued the cause for respondents. With him on the brief were Joseph Onek, John F. Dienelt, and Thomas B. Stoel, Jr. * </s> [Footnote * Briefs of amici curiae urging affirmance were filed by June Resnick German, Haynes N. Johnson, and Nicholas A. Robinson for the Association of the Bar of the City of New York; by Armand Derfner, Albert E. Jenner, Jr., Nicholas deB. Katzenbach, Elliot L. Richardson, Bernard G. Segal, Whitney North Seymour, E. Barrett Prettyman, Jr., David S. Tatel, J. Harold Flannery, and Paul Dimond for the Lawyers' Committee for Civil Rights Under Law; by [421 U.S. 240, 241] Jack Greenberg, James M. Nabrit III, Eric Schnapper, and Charles Stephen Ralston for the NAACP Legal Defense and Educational Fund, Inc.; and by Henry Geller and Abraham S. Goldstein for the Center for Law in the Public Interest. [421 U.S. 240, 241] </s> MR. JUSTICE WHITE delivered the opinion of the Court. </s> This litigation was initiated by respondents Wilderness Society, Environmental Defense Fund, Inc., and Friends of the Earth in an attempt to prevent the issuance of permits by the Secretary of the Interior which were required for the construction of the trans-Alaska oil pipeline. The Court of Appeals awarded attorneys' fees to respondents against petitioner Alyeska Pipeline Service Co. based upon the court's equitable powers and the theory that respondents were entitled to fees because they were performing the services of a "private attorney general." Certiorari was granted, 419 U.S. 823 (1974), to determine whether this award of attorneys' fees was appropriate. We reverse. </s> I </s> A major oil field was discovered in the North Slope of Alaska in 1968. 1 In June 1969, the oil companies constituting the consortium owning Alyeska 2 submitted an [421 U.S. 240, 242] application to the Department of the Interior for rights-of-way for a pipeline that would transport oil from the North Slope across land in Alaska owned by the United States, 3 a major part of the transport system which would carry the oil to its ultimate markets in the lower 48 States. A special interdepartmental task force studied the proposal and reported to the President. Federal Task Force on Alaskan Oil Development: A Preliminary Report to the President (1969), in App. 78-89. An amended application was submitted in December 1969, which requested a 54-foot right-of-way, along with applications for "special land use permits" asking for additional space alongside the right-of-way and for the construction of a road along one segment of the pipeline. 4 </s> Respondents brought this suit in March 1970, and sought declaratory and injunctive relief against the Secretary of the Interior on the grounds that he intended to issue the right-of-way and special land-use permits in violation of 28 of the Mineral Leasing Act of 1920, 41 Stat. 449, as amended, 30 U.S.C. 185, 5 and without [421 U.S. 240, 243] compliance with the National Environmental Policy Act of 1969 (NEPA), 83 Stat. 852, 42 U.S.C. 4321 et seq. 6 On the basis of both the Mineral Leasing Act and the NEPA, the District Court granted a preliminary injunction against issuance of the right-of-way and permits. 325 F. Supp. 422 (DC 1970). </s> Subsequently the State of Alaska and petitioner Alyeska were allowed to intervene. 7 On March 20, 1972, the Interior Department released a six-volume Environmental Impact Statement and a three-volume Economic [421 U.S. 240, 244] and Security Analysis. 8 After a period of time set aside for public comment, the Secretary announced that the requested permits would be granted to Alyeska. App. 105-138. Both the Mineral Leasing Act and the NEPA issues were at that point fully briefed and argued before the District Court. That court then decided to dissolve the preliminary injunction, to deny the permanent injunction, and to dismiss the complaint. 9 </s> Upon appeal, the Court of Appeals for the District of Columbia Circuit reversed, basing its decision solely on the Mineral Leasing Act. 156 U.S. App. D.C. 121, 479 F.2d 842 (1973) (en banc). Finding that the NEPA issues were very complex and important, that deciding them was not necessary at that time since pipeline construction would be enjoined as a result of the violation of the Mineral Leasing Act, that they involved issues of fact still in dispute, and that it was desirable to expedite its decision as much as possible, the Court of Appeals declined to decide the merits of respondents' NEPA contentions which had been rejected by the District Court. 10 Certiorari was denied here. 411 U.S. 917 (1973). </s> Congress then enacted legislation which amended the Mineral Leasing Act to allow the granting of the permits sought by Alyeska 11 and declared that no further action [421 U.S. 240, 245] under the NEPA was necessary before construction of the pipeline could proceed. 12 </s> With the merits of the litigation effectively terminated by this legislation, the Court of Appeals turned to the questions involved in respondents' request for an award of attorneys' fees. 13 161 U.S. App. D.C. 446, 495 F.2d 1026 (1974) (en banc). Since there was no applicable statutory authorization for such an award, the court proceeded to consider whether the requested fee award fell within any of the exceptions to the general "American rule" that the prevailing party may not recover attorneys' fees as costs or otherwise. The exception for an award against a party who had acted in bad faith was inapposite, since the position taken by the federal and state parties and Alyeska "was manifestly reasonable and assumed in good faith . . . ." Id., at 449, 495 F.2d, at 1029. Application of the "common benefit" exception which spreads the cost of litigation to those persons benefiting from it would "stretch it totally outside its basic rationale . . . ." Ibid. 14 The Court of Appeals nevertheless held that respondents had acted to vindicate "important statutory rights of all citizens . . .," id., at 452, 495 F.2d, at 1032; had ensured that the governmental system functioned properly; and were entitled to attorneys' fees lest the great cost of litigation of this kind, particularly against well-financed defendants such as [421 U.S. 240, 246] Alyeska, deter private parties desiring to see the laws protecting the environment properly enforced. Title 28 U.S.C. 2412 15 was thought to bar taxing any attorneys' fees against the United States, and it was also deemed inappropriate to burden the State of Alaska with any part of the award. 16 But Alyeska, the Court of Appeals held, could fairly be required to pay one-half of the full award to which respondents were entitled for having performed the functions of a private attorney general. Observing that "[t]he fee should represent the reasonable value of the services rendered, taking into account all the surrounding circumstances, including, but not limited to, the time and labor required on the case, the benefit to the public, the skill demanded by the novelty or complexity of the issues, and the incentive factor," 161 U.S. App. D.C., at 456, 495 F.2d, at 1036, the Court of Appeals remanded the case to the District Court for assessment of the dollar amount of the award. 17 </s> [421 U.S. 240, 247] </s> II </s> In the United States, the prevailing litigant is ordinarily not entitled to collect a reasonable attorneys' fee from the loser. We are asked to fashion a far-reaching exception to this "American Rule"; but having considered its origin and development, we are convinced that it would be inappropriate for the Judiciary, without legislative guidance, to reallocate the burdens of litigation in the manner and to the extent urged by respondents and approved by the Court of Appeals. </s> At common law, costs were not allowed; but for centuries in England there has been statutory authorization to award costs, including attorneys' fees. Although the matter is in the discretion of the court, counsel fees are regularly allowed to the prevailing party. 18 </s> During the first years of the federal-court system, Congress provided through legislation that the federal courts were to follow the practice with respect to awarding [421 U.S. 240, 248] attorneys' fees of the courts of the States in which the federal courts were located, 19 with the exception of district courts under admiralty and maritime jurisdiction [421 U.S. 240, 249] which were to follow a specific fee schedule. 20 Those statutes, by 1800, had either expired or been repealed. </s> In 1796, this Court appears to have ruled that the Judiciary itself would not create a general rule, independent of any statute, allowing awards of attorneys' fees in federal courts. In Arcambel v. Wiseman, 3 Dall. 306, the inclusion of attorneys' fees as damages 21 was overturned on the ground that "[t]he general practice of the United States is in oposition [sic] to it; and even if that practice [421 U.S. 240, 250] were not strictly correct in principle, it is entitled to the respect of the court, till it is changed, or modified, by statute." This Court has consistently adhered to that early holding. See Day v. Woodworth, 13 How. 363 (1852); Oelrichs v. Spain, 15 Wall. 211 (1872); Flanders v. Tweed, 15 Wall. 450 (1873); Stewart v. Sonneborn, 98 U.S. 187 (1879); Fleischmann Distilling Corp. v. Maier Brewing Co., 386 U.S. 714, 717 -718 (1967); F. D. Rich Co., Inc. v. United States ex rel. Industrial Lumber Co., Inc., 417 U.S. 116, 126 -131 (1974). </s> The practice after 1799 and until 1853 continued as before, that is, with the federal courts referring to the state rules governing awards of counsel fees, although the express legislative authorization for that practice had expired. 22 By legislation in 1842, Congress did give this Court authority to prescribe the items and amounts of costs which could be taxed in federal courts, but the Court took no action under this statutory mandate. 23 </s> [421 U.S. 240, 251] See S. Law, The Jurisdiction and Powers of the United States Courts 271 n. 1 (1852). </s> In 1853, Congress undertook to standardize the costs allowable in federal litigation. In support of the proposed legislation, it was asserted that there was great diversity in practice among the courts and that losing litigants were being unfairly saddled with exorbitant fees for the victor's attorney. 24 The result was a far-reaching [421 U.S. 240, 252] Act specifying in detail the nature and amount of the taxable items of cost in the federal courts. One of its purposes was to limit allowances for attorneys' fees that were to be charged to the losing parties. Although the Act disclaimed any intention to limit the amount of fees that an attorney and his client might agree upon between themselves, counsel fees collectible from the losing party were expressly limited to the amounts stated in the Act: </s> "That in lieu of the compensation now allowed by law to attorneys, solicitors, and proctors in the United States courts, to United States district attorneys, clerks of the district and circuit courts, marshals, witnesses, jurors, commissioners, and printers, in the several States, the following and no other compensation shall be taxed and allowed. But this act shall not be construed to prohibit attorneys, solicitors, and proctors from charging to and receiving from their clients, other than the Government, [421 U.S. 240, 253] such reasonable compensation for their services, in addition to the taxable costs, as may be in accordance with general usage in their respective States, or may be agreed upon between the parties." Act of Feb. 26, 1853, 10 Stat. 161. </s> The Act then proceeds to list specific sums for the services of attorneys, solicitors, and proctors. 25 </s> The intention of the Act to control the attorneys' fees recoverable by the prevailing party from the loser was repeatedly enforced by this Court. In The Baltimore, 8 Wall. 377 (1869), a $500 allowance for counsel was set aside, the Court reviewing the history of costs in the United States courts and concluding: </s> "Fees and costs, allowed to the officers therein named, are now regulated by the act of the 26th of February, 1853, which provides, in its 1st section, that in lieu of the compensation now allowed by law to attorneys, solicitors, proctors, district attorneys, clerks, marshals, witnesses, jurors, commissioners, and printers, the following and no other compensation shall be allowed. </s> "Attorneys, solicitors, and proctors may charge their [421 U.S. 240, 254] clients reasonably for their services, in addition to the taxable costs, but nothing can be taxed as cost against the opposite party, as an incident to the judgment, for their services, except the costs and fees therein described and enumerated. They may tax a docket fee of twenty dollars on a final hearing in admiralty, if the libellant recovers fifty dollars, but if he recovers less than fifty dollars, the docket fee of the proctor shall be but ten dollars." Id., at 392 (footnotes omitted). </s> In Flanders v. Tweed, 15 Wall. 450 (1872), a counsel's fee of $6,000 was included by the jury in the damages award. The Court held the Act forbade such allowances: </s> "Fees and costs allowed to officers therein named are now regulated by the act of Congress passed for that purpose, which provides in its first section, that, in lieu of the compensation previously allowed by law to attorneys, solicitors, proctors, district attorneys, clerks, marshals, witnesses, jurors, commissioners, and printers, the following and no other compensation shall be allowed. Attorneys, solicitors, and proctors may charge their clients reasonably for their services, in addition to the taxable costs, but nothing can be taxed or recovered as cost against the opposite party, as an incident to the judgment, for their services, except the costs and fees therein described and enumerated. They may tax a docket fee of twenty dollars in a trial before a jury, but they are restricted to a charge of ten dollars in cases at law, where judgment is rendered without a jury." Id., at 452-453 (footnote omitted). </s> See also In re Paschal, 10 Wall. 483, 493-494 (1871). </s> Although, as will be seen, Congress has made specific provision for attorneys' fees under certain federal statutes, [421 U.S. 240, 255] it has not changed the general statutory rule that allowances for counsel fees are limited to the sums specified by the costs statute. The 1853 Act was carried forward in the Revised Statutes of 1874 26 and by the Judicial Code of 1911. 27 Its substance, without any apparent intent to change the controlling rules, was also included in the Revised Code of 1948 as 28 U.S.C. 1920 28 and 1923 (a). 29 Under 1920, a court may tax as costs the [421 U.S. 240, 256] various items specified, including the "docket fees" under 1923 (a). That section provides that "[a]ttorney's and proctor's docket fees in courts of the United States may [421 U.S. 240, 257] be taxed as costs as follows . . . ." Against this background, this Court understandably declared in 1967 that with the exception of the small amounts allowed by 1923, the rule "has long been that attorney's fees are not ordinarily recoverable . . . ." Fleischmann Distilling Corp., 386 U.S., at 717 . Other recent cases have also reaffirmed the general rule that, absent statute or enforceable contract, litigants pay their own attorneys' fees. See F. D. Rich Co., 417 U.S., at 128 -131; Hall v. Cole, 412 U.S. 1, 4 (1973). </s> To be sure, the fee statutes have been construed to allow, in limited circumstances, a reasonable attorneys' fee to the prevailing party in excess of the small sums permitted by 1923. In Trustees v. Greenough, 105 U.S. 527 (1882), the 1853 Act was read as not interfering with the historic power of equity to permit the trustee of a fund or property, or a party preserving or recovering a fund for the benefit of others in addition to himself, to recover his costs, including his attorneys' fees, from the fund or property itself or directly from the other parties enjoying the benefit. 30 That rule has been consistently [421 U.S. 240, 258] followed. Central Railroad & Banking Co. v. Pettus, 113 U.S. 116 (1885); Harrison v. Perea, 168 U.S. 311, 325 -326 (1897); United States v. Equitable Trust Co., 283 U.S. 738 (1931); Sprague v. Ticonic National Bank, 307 U.S. 161 (1939); Mills v. Electric Auto-Lite Co., 396 U.S. 375 (1970); Hall v. Cole, supra; cf. Hobbs v. McLean, 117 U.S. 567, 581 -582 (1886). See generally Dawson, Lawyers and Involuntary Clients: Attorney Fees From Funds, 87 Harv. L. Rev. 1597 (1974). Also, a court may assess attorneys' fees for the "willful disobedience of a court order . . . as part of the fine to be levied on the defendant[,] Toledo Scale Co. v. Computing Scale Co., 261 U.S. 399, 426 -428 (1923)," Fleischmann Distilling Corp. v. Maier Brewing Co., supra, at 718; or when the losing party has "acted in bad faith, [421 U.S. 240, 259] vexatiously, wantonly, or for oppressive reasons . . . ." F. D. Rich Co., 417 U.S., at 129 (citing Vaughan v. Atkinson, 369 U.S. 527 (1962); cf. Universal Oil Products Co. v. Root Refining Co., 328 U.S. 575, 580 (1946). These exceptions are unquestionably assertions of inherent power in the courts to allow attorneys' fees in particular situations, unless forbidden by Congress, but none of the exceptions is involved here. 31 The Court of [421 U.S. 240, 260] Appeals expressly disclaimed reliance on any of them. See supra, at 245. </s> Congress has not repudiated the judicially fashioned exceptions to the general rule against allowing substantial attorneys' fees; but neither has it retracted, repealed, or modified the limitations on taxable fees contained in the 1853 statute and its successors. 32 Nor has it extended any roving authority to the Judiciary to allow counsel fees as costs or otherwise whenever the courts might deem them warranted. What Congress has done, however, while fully recognizing and accepting the general rule, is to make specific and explicit provisions for the allowance of attorneys' fees under selected statutes granting or protecting various federal rights. 33 These statutory [421 U.S. 240, 261] allowances are now available in a variety of circumstances, but they also differ considerably among themselves. Under the antitrust laws, for instance, allowance of attorneys' fees to a plaintiff awarded treble damages is mandatory. 34 In patent litigation, in contrast, "[t]he court in exceptional cases may award reasonable attorney fees to the prevailing party." 35 U.S.C. 285 (emphasis added). Under Title II of the Civil Rights Act of 1964, 42 U.S.C. 2000a-3 (b), 35 the prevailing [421 U.S. 240, 262] party is entitled to attorneys' fees, at the discretion of the court, but we have held that Congress intended that the award should be made to the successful plaintiff absent exceptional circumstances. Newman v. Piggie Park Enterprises, Inc., 390 U.S. 400, 402 (1968). See also Northcross v. Board of Education of the Memphis City Schools, 412 U.S. 427 (1973). Under this scheme of things, it is apparent that the circumstances under which attorneys' fees are to be awarded and the range of discretion of the courts in making those awards are matters for Congress to determine. 36 </s> [421 U.S. 240, 263] </s> It is true that under some, if not most, of the statutes providing for the allowance of reasonable fees, Congress has opted to rely heavily on private enforcement to implement public policy and to allow counsel fees so as to encourage private litigation. Fee shifting in connection with treble-damages awards under the antitrust laws is a prime example; cf. Hawaii v. Standard Oil Co., 405 U.S. 251, 265 -266 (1972); and we have noted that Title II of the Civil Rights Act of 1964 was intended "not simply to penalize litigants who deliberately advance arguments they know to be untenable but, more broadly, to encourage individuals injured by racial discrimination to seek judicial relief under Title II." Newman, supra, at 402 (footnote omitted). But congressional utilization of the private-attorney-general concept can in no sense be construed as a grant of authority to the Judiciary to jettison the traditional rule against nonstatutory allowances to the prevailing party and to award attorneys' fees whenever the courts deem the public policy furthered by a particular statute important enough to warrant the award. </s> Congress itself presumably has the power and judgment to pick and choose among its statutes and to allow attorneys' fees under some, but not others. But it would be difficult, indeed, for the courts, without legislative [421 U.S. 240, 264] guidance, to consider some statutes important and others unimportant and to allow attorneys' fees only in connection with the former. If the statutory limitation of right-of-way widths involved in this case is a matter of the gravest importance, it would appear that a wide range of statutes would arguably satisfy the criterion of public importance and justify an award of attorneys' fees to the private litigant. And, if any statutory policy is deemed so important that its enforcement must be encouraged by awards of attorneys' fees, how could a court deny attorneys' fees to private litigants in actions under 42 U.S.C. 1983 seeking to vindicate constitutional rights? Moreover, should courts, if they were to embark on the course urged by respondents, opt for awards to the prevailing party, whether plaintiff or defendant, or only to the prevailing plaintiff? 37 Should awards be discretionary or mandatory? 38 Would there be a presumption operating for or against them in the ordinary case? See Newman, supra. 39 </s> [421 U.S. 240, 265] </s> As exemplified by this case itself, it is also evident that the rational application of the private-attorney-general rule would immediately collide with the express provision [421 U.S. 240, 266] of 28 U.S.C. 2412. 40 Except as otherwise provided by statute, that section permits costs to be taxed against the United States, "but not including the fees and expenses [421 U.S. 240, 267] of attorneys," in any civil action brought by or against the United States or any agency or official of the United States acting in an official capacity. If, as respondents argue, one of the main functions of a private attorney general is to call public officials to account and to insist that they enforce the law, it would follow in such cases that attorneys' fees should be awarded against the Government or the officials themselves. Indeed, that very claim was asserted in this case. 41 But 2412 on its face, and in light of its legislative history, generally bars such awards, 42 which, if allowable at all, must be expressly [421 U.S. 240, 268] provided for by statute, as, for example, under Title II of the Civil Rights Act of 1964, 42 U.S.C. 2000a-3 (b). 43 </s> [421 U.S. 240, 269] </s> We need labor the matter no further. It appears to us that the rule suggested here and adopted by the Court of Appeals would make major inroads on a policy matter that Congress has reserved for itself. Since the approach taken by Congress to this issue has been to carve out specific exceptions to a general rule that federal courts cannot award attorneys' fees beyond the limits of 28 U.S.C. 1923, those courts are not free to fashion drastic new rules with respect to the allowance of attorneys' fees to the prevailing party in federal litigation or to pick and choose among plaintiffs and the statutes under which they sue and to award fees in some cases but not in others, depending upon the courts' assessment of the importance of the public policies involved in particular cases. Nor should the federal courts purport to adopt on their own initiative a rule awarding attorneys' fees based on the private-attorney-general approach when such judicial rule will operate only against private parties and not against the Government. 44 </s> [421 U.S. 240, 270] </s> We do not purport to assess the merits or demerits of the "American Rule" with respect to the allowance of attorneys' fees. It has been criticized in recent years, 45 and courts have been urged to find exceptions to it. 46 </s> [421 U.S. 240, 271] It is also apparent from our national experience that the encouragement of private action to implement public policy has been viewed as desirable in a variety of circumstances. But the rule followed in our courts with respect to attorneys' fees has survived. It is deeply rooted in our history and in congressional policy; and it is not for us to invade the legislature's province by redistributing litigation costs in the manner suggested by respondents and followed by the Court of Appeals. 47 </s> The decision below must therefore be reversed. </s> So ordered. </s> MR. JUSTICE DOUGLAS and MR. JUSTICE POWELL took no part in the consideration or decision of this case. </s> Footnotes [Footnote 1 For a discussion and chronology of the events surrounding this litigation, see Dominick & Brody, The Alaska Pipeline: Wilderness Society v. Morton and the Trans-Alaska Pipeline Authorization Act, 23 Am. U. L. Rev. 337 (1973). </s> [Footnote 2 In 1968, Atlantic Richfield Co., Humble Oil & Refining Co., and British Petroleum Corp. formed the Trans-Alaska Pipeline System, and it was this entity which submitted the applications for the permits. Federal Task Force on Alaskan Oil Development: A Preliminary Report to the President (1969), in App. 80; Dominick & Brody, supra, n. 1, at 337-338, n. 3. In 1970, the Trans-Alaska Pipeline System was replaced by petitioner Alyeska. Alyeska's stock is owned by ARCO Pipeline Co., Sohio Pipeline Co., Humble Pipeline Co., Mobil Pipeline Co., Phillips Petroleum Co., Amerada Hess [421 U.S. 240, 242] Corp., and Union Oil Co. of California. See id., at 338 n. 3; App. 105. </s> [Footnote 3 The application requested a primary right-of-way of 54 feet, an additional parallel, adjacent right-of-way for construction purposes of 46 feet, and another right-of-way of 100 feet for a construction road between Prudhoe Bay on the North Slope to the town of Livengood, a distance slightly less than half the length of the proposed pipeline. See Wilderness Society v. Morton, 156 U.S. App. D.C. 121, 128, 479 F.2d 842, 849 (1973). </s> [Footnote 4 The amended application asked for a single 54-foot right-of-way, a special land-use permit for an additional 11 feet on one side and 35 feet on the other side of the right-of-way, and another special land-use permit for a space 200 feet in width between Prudhoe Bay and Livengood. Id., at 128-129, 479 F.2d, at 849-850; App. 89-98. </s> [Footnote 5 Title 30 U.S.C. 185 provided in pertinent part: "Rights-of-way through the public lands, including the forest reserves of the United States, may be granted by the Secretary of the [421 U.S. 240, 243] Interior for pipe-line purposes for the transportation of oil or natural gas to any applicant possessing the [prescribed] qualifications . . . to the extent of the ground occupied by the said pipe line and twenty-five feet on each side of the same under such regulations and conditions as to survey, location, application, and use as may be prescribed by the Secretary of the Interior and upon the express condition that such pipe lines shall be constructed, operated, and maintained as common carriers and shall accept, convey, transport, or purchase without discrimination, oil or natural gas produced from Government lands in the vicinity of the pipe line in such proportionate amounts as the Secretary of the Interior may, after a full hearing with due notice thereof to the interested parties and a proper finding of facts, determine to be reasonable: . . . Provided further, That no right-of-way shall hereafter be granted over said lands for the transportation of oil or natural gas except under and subject to the provisions, limitations, and conditions of this section. Failure to comply with the provisions of this section or the regulations and conditions prescribed by the Secretary of the Interior shall be ground for forfeiture of the grant by the United States district court for the district in which the property, or some part thereof, is located in an appropriate proceeding." </s> [Footnote 6 The Court of Appeals described the heart of respondents' NEPA contention to be that the Secretary did not adequately consider the alternative of a trans-Canada pipeline. 156 U.S. App. D.C., at 166-168, 479 F.2d, at 887-889. </s> [Footnote 7 The interventions occurred in September 1971, approximately 17 months after the District Court had granted the preliminary injunction preventing issuance of the right-of-way and permits by the Secretary. </s> [Footnote 8 The Department of the Interior had released a draft impact statement in January 1971. </s> [Footnote 9 The decision is not reported. See id., at 130, 479 F.2d, at 851. </s> [Footnote 10 At the same time, the Court of Appeals upheld the grant of certain rights-of-way to the State of Alaska. Id., at 158-163, 479 F.2d, at 879-884. It also considered a challenge to a special land-use permit issued by the Forest Supervisor to Alyeska's predecessor, but did not find the issue ripe for adjudication. Id., at 163-166, 479 F.2d, at 884-887. </s> [Footnote 11 Pub. L. 93-153, Tit. I, 101, 87 Stat. 576, 30 U.S.C. 185 (1970 ed., Supp. III). </s> [Footnote 12 Trans-Alaska Pipeline Authorization Act, Pub. L. 93-153, Tit. II, 87 Stat. 584, 43 U.S.C. 1651 et seq. (1970 ed., Supp. III). </s> [Footnote 13 Respondents' bill of costs includes a total of 4,455 hours of attorneys' time spent on the litigation. App. 209-219. </s> [Footnote 14 "[T]his litigation may well have provided substantial benefits to particular individuals and, indeed, to every citizen's interest in the proper functioning of our system of government. But imposing attorneys' fees on Alyeska will not operate to spread the costs of litigation proportionately among these beneficiaries . . . ." 161 U.S. App. D.C., at 449, 495 F.2d, at 1029. </s> [Footnote 15 See n. 40, infra. </s> [Footnote 16 "In the circumstances of this case it would be inappropriate to tax fees against appellee State of Alaska. The State voluntarily participated in this suit, in effect to present to the court a different version of the public interest implications of the trans-Alaska pipeline. Taxing attorneys' fees against Alaska would in our view undermine rather than further the goal of ensuring adequate spokesmen for public interests." 161 U.S. App. D.C., at 456 n. 8, 495 F.2d, at 1036 n. 8. </s> [Footnote 17 The Court of Appeals also directed that "[t]he fee award need not be limited . . . to the amount actually paid or owed by [respondents]. It may well be that counsel serve organizations like [respondents] for compensation below that obtainable in the market because they believe the organizations further a public interest. Litigation of this sort should not have to rely on the charity of counsel any more than it should rely on the charity of parties volunteering to serve as private attorneys general. The attorneys who worked on this case should be reimbursed the reasonable value of [421 U.S. 240, 247] their services, despite the absence of any obligation on the part of [respondents] to pay attorneys' fees." Id., at 457, 495 F.2d, at 1037. </s> [Footnote 18 "As early as 1278, the courts of England were authorized to award counsel fees to successful plaintiffs in litigation. Similarly, since 1607 English courts have been empowered to award counsel fees to defendants in all actions where such awards might be made to plaintiffs. Rules governing administration of these and related provisions have developed over the years. It is now customary in England, after litigation of substantive claims has terminated, to conduct separate hearings before special `taxing Masters' in order to determine the appropriateness and the size of an award of counsel fees. To prevent the ancillary proceedings from becoming unduly protracted and burdensome, fees which may be included in an award are usually prescribed, even including the amounts that may be recovered for letters drafted on behalf of a client." Fleischmann Distilling Corp. v. Maier Brewing Co., 386 U.S. 714, 717 (1967) (footnotes omitted). See generally Goodhart, Costs, 38 Yale L. J. 849 (1929); C. McCormick, Law of Damages 234-236 (1935). </s> [Footnote 19 The Federal Judiciary Act of Sept. 24, 1789, 1 Stat. 73, touched upon costs in 9, 11-12, 20-23, but as to counsel fees provided specifically only that the United States Attorney in each district "shall receive as a compensation for his services such fees as shall be taxed therefor in the respective courts before which the suits or prosecutions shall be." 35. Five days later, however, Congress enacted legislation regulating federal-court processes, which provided: "That until further provision shall be made, and except where by this act or other statutes of the United States is otherwise provided . . . rates of fees, except fees to judges, in the circuit and district courts, in suits at common law, shall be the same in each state respectively as are now used or allowed in the supreme courts of the same. And . . . [in causes of equity and of admiralty and maritime jurisdiction] the rates of fees [shall be] the same as are or were last allowed by the states respectively in the court exercising supreme jurisdiction in such causes." Act of Sept. 29, 1789, 2, 1 Stat. 93. That legislation was to be in effect only until the end of the next congressional session, 3, but it was extended twice. See Act of May 26, 1790, c. 13, 1 Stat. 123; Act of Feb. 18, 1791, c. 8, 1 Stat. 191. It was repealed, however, by legislation enacted on May 8, 1792, 8, 1 Stat. 278. Prior to the time of that repeal, other legislation had been passed providing for additional compensation for United States Attorneys to cover traveling expenses. Act of Mar. 3, 1791, c. 22, 1, 1 Stat. 216. That legislation was also repealed by the Act of May 8, 1792, supra. The latter enactment substituted a new provision for the compensation of United States Attorneys; they would be entitled to "such fees in each state respectively as are allowed in the supreme courts of the same . . ." plus certain traveling expenses, 3, 1 Stat. 277. That provision was repealed on February 28, 1799. 9, 1 Stat. 626. That same statute provided new, specific rates of compensation for United States Attorneys. See 4. See also 5. On March 1, 1793, Congress enacted a general provision governing the awarding of costs to prevailing parties in federal courts: "That there be allowed and taxed in the supreme, circuit and district courts of the United States, in favour of the parties obtaining judgments [421 U.S. 240, 249] therein, such compensation for their travel and attendance, and for attornies and counsellors' fees, except in the district courts in cases of admiralty and maritime jurisdiction, as are allowed in the supreme or superior courts of the respective states." 4, 1 Stat. 333. This provision was to be in force for one year and then to the end of the next session of Congress, 5, but it was continued in effect in 1795, Act of Feb. 25, 1795, c. 28, 1 Stat. 419, and again in 1796, Act of Mar. 31, 1796, 1 Stat. 451, for a period of two years and then until the end of the next session of Congress; at that point, it expired. After 1799 and until 1853, no other congressional legislation dealt with the awarding of attorneys' fees in federal courts except for the Act of 1842, n. 23, infra, which gave this Court authority to prescribe taxable attorneys' fees, and for legislation dealing with the compensation for United States Attorneys. See the Act of Mar. 3, 1841, 5 Stat. 427, and the Act of May 18, 1842, 5 Stat. 483. See the summary of the legislation dealing with costs throughout this period, in S. Law, The Jurisdiction and Powers of the United States Courts 255-282 (1852). </s> [Footnote 20 By the legislation of September 29, 1789, the federal courts were to follow the state practice with respect to rates of fees under admiralty and maritime jurisdiction. See n. 19, supra. The Act of Mar. 1, 1793, 1, 1 Stat. 332, established set fees for attorneys in the district courts in admiralty and maritime proceedings. As with 4 of that Act, n. 19, supra, this provision had expired by the end of the century. See The Baltimore, 8 Wall. 377, 390-392 (1869). </s> [Footnote 21 The Circuit Court had allowed $1,600 in counsel fees under its estimate of damages and $28.89 as costs. Record in Arcambel 56. </s> [Footnote 22 See 2 T. Street, Federal Equity Practice 1986, pp. 1188-1189 (1909); Law, supra, n. 19, at 279; Costs in Civil Cases, 30 F. Cas. 1058 (No. 18,284) (CCSDNY 1852). </s> [Footnote 23 "That, for the purpose of further diminishing the costs and expenses in suits and proceedings in the said courts, the Supreme Court shall have full power and authority, from time to time, to make and prescribe regulations to the said district and circuit courts, as to the taxation and payment of costs in all suits and proceedings therein; and to make and prescribe a table of the various items of costs which shall be taxable and allowed in all suits, to the parties, their attorneys, solicitors, and proctors, to the clerk of the court, to the marshal of the district, and his deputies, and other officers serving process, to witnesses, and to all other persons whose services are usually taxable in bills of costs. And the items so stated in the said table, and none others, shall be taxable or allowed in bills of costs; and they shall be fixed as low as they reasonably can be, with a due regard to the nature of the duties and services which shall be performed by the various officers and persons aforesaid, and shall in no case exceed the costs and expenses now authorized, where the [421 U.S. 240, 251] same are provided for by existing laws." Act of Aug. 23, 1842, 7, 5 Stat. 518. The brief legislative history of this section indicates that, as its own language states, its purpose was to reduce fee-bills in federal courts. Cong. Globe, 27th Cong., 2d Sess., 723 (1842) (remarks of Sen. Berrien). One of its opponents, Senator Buchanan, said the following: "If Congress conforms the fee-bills of the courts over which it has control, to the fee-bills of the State courts, that is all that can be expected of it . . . . But the great and main objection was, its transfer of the legislative power of Congress to the Supreme Court." Ibid. </s> [Footnote 24 See the remarks of Senator Bradbury, Cong. Globe App., 32d Cong., 2d Sess., 207 (1853): "There is now no uniform rule either for compensating the ministerial officers of the courts, or for the regulation of the costs in actions between private suitors. One system prevails in one district, and a totally different one in another; and in some cases it would be difficult to ascertain that any attention had been paid to any law whatever designed to regulate such proceedings. . . . It will hence be seen that the compensation of the officers, and the costs taxed in civil suits, is made to depend in a great degree on that allowed in the State courts. There are no two States where the allowance is the same. "When this system was adopted, it had the semblance of equality, which does not now exist. There were then but sixteen States, in all of which the laws prescribed certain taxable costs to attorneys for the prosecution and defense of suits. In several of the States which have since been added to the Union, no such cost is allowed; and in others the amount is inconsiderable. As the State fee bills are made so far the rule of compensation in the Federal courts, the Senate will [421 U.S. 240, 252] perceive that totally different systems of taxation prevail in the different districts. . . . It is not only the officers of the courts, but the suitors also, that are affected by the present unequal, extravagant, and often oppressive system. . . . . . "The abuses that have grown up in the taxation of attorneys' fees which the losing party has been compelled to pay in civil suits, have been a matter of serious complaint. The papers before the committee show that in some cases those costs have been swelled to an amount exceedingly oppressive to suitors, and altogether disproportionate to the magnitude and importance of the causes in which they are taxed, or the labor bestowed. . . . . . . . . "It is to correct the evils and remedy the defects of the present system, that the bill has been prepared and passed by the House of Representatives. It attempts to simplify the taxation of fees, by prescribing a limited number of definite items to be allowed. . . ." See also H. R. Rep. No. 50, 32d Cong., 1st Sess. (1852); 2 Street, supra, n. 22, 1987, p. 1189. </s> [Footnote 25 "Fees of Attorneys, Solicitors, and Proctors. In a trial before a jury, in civil and criminal causes, or before referees, or on a final hearing in equity or admiralty, a docket fee of twenty dollars: Provided, That in cases in admiralty and maritime jurisdiction, where the libellant shall recover less than fifty dollars, the docket fee of his proctor shall be but ten dollars. "In cases at law, where judgment is rendered without a jury, ten dollars, and five dollars where a cause is discontinued. "For scire facias and other proceedings on recognizances, five dollars. "For each deposition taken and admitted as evidence in the cause, two dollars and fifty cents. "A compensation of five dollars shall be allowed for the services rendered in cases removed from a district to a circuit court by writ of error or appeal. . . ." 10 Stat. 161-162. </s> [Footnote 26 "The following and no other compensation shall be taxed and allowed to attorneys, solicitors, and proctors in the courts of the United States, to district attorneys, clerks of the circuit and district courts, marshals, commissioners, witnesses, jurors, and printers in the several States and Territories, except in cases otherwise expressly provided by law. But nothing herein shall be construed to prohibit attorneys, solicitors, and proctors from charging to and receiving from their clients, other than the Government, such reasonable compensation for their services, in addition to the taxable costs, as may be in accordance with general usage in their respective States, or may be agreed upon between the parties." Rev. Stat. 823. For the schedule of fees, see 824. The schedule remained the same as the one in the 1853 Act, n. 25, supra. </s> [Footnote 27 Revised Stat. 823 and 824 were not repealed by the Judicial Code of 1911 and hence were to "remain in force with the same effect and to the same extent as if this Act had not been passed." 297, 36 Stat. 1169. When the Judicial Code was included under Title 28 of the United States Code in 1926, these sections appeared as 571 and 572 with but minor changes in wording, including the deletion from the latter section of the compensation for services rendered in a case which went to the circuit court on appeal or writ of error. </s> [Footnote 28 "A judge or clerk of any court of the United States may tax as costs the following: . . . . . "(5) Docket fees under section 1923 of this title." 28 U.S.C. 1920 (1946 ed., Supp. II). </s> [Footnote 29 "(a) Attorney's and proctor's docket fees in courts of the United States may be taxed as costs as follows: "$20 on trial or final hearing in civil, criminal or admiralty cases, [421 U.S. 240, 256] except that in cases of admiralty and maritime jurisdiction where the libellant recovers less than $50 the proctor's docket fee shall be $10; "$20 in admiralty appeals involving not over $1,000; "$50 in admiralty appeals involving not over $5,000; "$100 in admiralty appeals involving more than $5,000; "$5 on discontinuance of a civil action; "$5 on motion for judgment and other proceedings on recognizances; "$2.50 for each deposition admitted in evidence." 28 U.S.C. 1923 (a) (1946 ed., Supp. II). The 1948 Code does not contain the language used in the 1853 Act and carried on for nearly 100 years that the fees prescribed by the statute "and no other compensation shall be taxed and allowed," but nothing in the 1948 Code indicates a congressional intention to depart from that rule. The Reviser's Note to the new 1923 states only that the "[s]ection consolidates sections 571, 572, and 578 of title 28, U.S.C., 1940 ed." Section 571 was the provision limiting awards to the fees prescribed by 572. See n. 27, supra. Our conclusion that the 1948 Code did not change the longstanding rule limiting awards of attorneys' fees to the statutorily provided amounts is consistent with our established view that "the function of the Revisers of the 1948 Code was generally limited to that of consolidation and codification. Consequently, a well-established principle governing the interpretation of provisions altered in the 1948 revision is that `no change is to be presumed unless clearly expressed.'" Tidewater Oil Co. v. United States, 409 U.S. 151, 162 (1972) (footnote omitted). As MR. JUSTICE MARSHALL noted for the Court, id., at 162 n. 29, the Senate Report covering the new Code observed that "great care has been exercised to make no changes in the existing law which would not meet with substantially unanimous approval." S. Rep. No. 1559, 80th Cong., 2d Sess., 2 (1948). The Reviser's Note to 1920 explains the shift from the mandatory "shall be taxed" to the discretionary "may be taxed" as made "in view of Rule 54 (d) of the Federal Rules of Civil Procedure, providing for allowance of costs to the prevailing party as of course `unless the court otherwise directs.'" Note following 28 U.S.C. 1920 (1946 ed., Supp. II). </s> [Footnote 30 Mr. Justice Bradley, writing for the Court in Greenough, said the following of the 1853 Act: "The fee-bill is intended to regulate only those fees and costs which are strictly chargeable as between party and party, and not to regulate the fees of counsel and other expenses and charges as between solicitor and client, nor the power of a court of equity, in cases of administration of funds under its control, to make such allowance to the parties out of the fund as justice and equity may require. The fee-bill itself expressly provides that it shall not be construed to prohibit attorneys, solicitors, and proctors from charging to and receiving from their clients (other than the government) such reasonable compensation for their services, in addition to the taxable costs, as may be in accordance with general usage in their respective States, or may be agreed upon between the parties. Act of Feb. 26, 1853, c. 80, 10 Stat. 161; Rev. Stat., sect. 823. And the act contains nothing which can be fairly construed to deprive the Court of [421 U.S. 240, 258] Chancery of its long-established control over the costs and charges of the litigation, to be exercised as equity and justice may require, including proper allowances to those who have instituted proceedings for the benefit of a general fund." 105 U.S., at 535 -536. Sprague v. Ticonic National Bank, 307 U.S. 161, 165 n. 2 (1939), might be read as suggesting that the Court in Greenough said that a federal court could tax against the losing party "solicitor and client" costs in excess of the amounts prescribed by the 1853 Act. But any such suggestion is without support either in the opinion in Greenough, which was limited to a common-fund rationale, or in the express terms of the statute. Those costs were simply left unregulated by the federal statute; it did not permit taxing the "client-solicitor" costs against the client's adversary. See The Baltimore, 8 Wall. 377 (1869); Flanders v. Tweed, 15 Wall. 450 (1872); 1 R. Foster, Federal Practice 328-330 (1901); A. Conkling, The Organization, Jurisdiction and Practice of the Courts of the United States 456-457 (5th ed. 1870); A. Boyce, A Manual of the Practice in the Circuit Courts 72 (1869). Cf. United States v. One Package of Ready-Made Clothing, 27 F. Cas. 310, 312 (No. 15,950) (CCSDNY 1853). MR. JUSTICE MARSHALL'S reliance upon Sprague for the proposition that "client-solicitor" costs could be taxed against the client's opponent, see post, at 278-279, is thus misplaced and conflicts with any fair reading of Greenough, supra, and the 1853 Act. </s> [Footnote 31 A very different situation is presented when a federal court sits in a diversity case. "[I]n an ordinary diversity case where the state law does not run counter to a valid federal statute or rule of court, and usually it will not, state law denying the right to attorney's fees or giving a right thereto, which reflects a substantial policy of the state, should be followed." 6 J. Moore, Federal Practice § 54.77 2., pp. 1712-1713 (2d ed. 1974) (footnotes omitted). See also 2 S. Speiser, Attorneys' Fees 14:3, 14:4 (1973) (hereinafter Speiser); Annotation, Prevailing Party's Right to Recover Counsel Fees in Federal Courts, 900-901. Prior to the decision in Erie R. Co. v. Tompkins, 304 U.S. 64 (1938), this Court held that a state statute requiring an award of attorneys' fees should be applied in a case removed from the state courts to the federal courts: "[I]t is clear that it is the policy of the state to allow plaintiffs to recover an attorney's fee in certain cases, and it has made that policy effective by making the allowance of the fee mandatory on its courts in those cases. It would be at least anomalous if this policy could be thwarted and the right so plainly given destroyed by removal of the cause to the federal courts." People of Sioux County v. National Surety Co., 276 U.S. 238, 243 (1928). The limitations on the awards of attorneys' fees by federal courts deriving from the 1853 Act were found not to bar the award. Id., at 243-244. We see nothing after Erie requiring a departure from this result. See Hanna v. Plumer, 380 U.S. 460, 467 -468 (1965). The same would clearly hold for a judicially created rule, although the question of the proper rule to govern in awarding attorneys' fees in federal diversity cases in the absence of state statutory authorization loses much of its practical significance in light of the fact that most States follow the restrictive American rule. See 1 Speiser 12:3, 12:4. </s> [Footnote 32 See nn. 26-29, supra. </s> [Footnote 33 See Amendments to Freedom of Information Act, Pub. L. 93-502, 1 (b) (2), 88 Stat. 1561 (amending 5 U.S.C. 552 (a)); Packers and Stockyards Act, 42 Stat. 166, 7 U.S.C. 210 (f); Perishable Agricultural Commodities Act, 46 Stat. 535, 7 U.S.C. 499g (b); Bankruptcy Act, 11 U.S.C. 104 (a) (1), 641-644; Clayton Act, 4, 38 Stat. 731, 15 U.S.C. 15; Unfair Competition Act, 39 Stat. 798, 15 U.S.C. 72; Securities Act of 1933, 48 Stat. 82, as amended, 48 Stat. 907, 15 U.S.C. 77k (e); Trust Indenture Act, 53 Stat. 1176, 15 U.S.C. 77www (a); Securities Exchange Act of 1934, 48 Stat. 890, 897, as amended, 15 U.S.C. 78i (e), 78r (a); Truth in Lending Act, 82 Stat. 157, 15 U.S.C. 1640 (a); Motor Vehicle Information and Cost Savings Act, Tit. IV, 409 (a) (2), 86 Stat. 963, 15 U.S.C. 1989 (a) (2) (1970 ed., Supp. II); 17 U.S.C. 116 (copyrights); Organized Crime Control Act of 1970, 18 U.S.C. 1964 (c); Education Amendments of 1972, 718, 86 Stat. 369, 20 U.S.C. 1617 (1970 ed., Supp. II); Norris-LaGuardia Act, 7 (e), 47 Stat. 71, 29 U.S.C. 107 (e); Fair Labor Standards Act, 16 (b), 52 Stat. 1069, as amended, 29 U.S.C. 216 (b); Longshoremen's and Harbor Workers' Compensation Act, 28, 44 Stat. 1438, as amended, 86 Stat. 1259, 33 U.S.C. 928 (1970 ed., Supp. II); Federal Water Pollution Control Act, 505 (d), as added, 86 Stat. 888, 33 U.S.C. 1365 (d) (1970 ed., Supp. II); Marine Protection, Research, and Sanctuaries Act of 1972, 105 (g) (4), 33 U.S.C. 1415 (g) (4) (1970 ed., Supp. II); [421 U.S. 240, 261] 35 U.S.C. 285 (patent infringement); Servicemen's Readjustment Act, 38 U.S.C. 1822 (b); Clean Air Act, 304 (d), as added, 84 Stat. 1706, 42 U.S.C. 1857h-2 (d); Civil Rights Act of 1964, Tit. II, 204 (b), 78 Stat. 244, 42 U.S.C. 2000a-3 (b), and Tit. VII, 706 (k), 78 Stat. 261, 42 U.S.C. 2000e-5 (k); Fair Housing Act of 1968, 812 (c), 82 Stat. 88, 42 U.S.C. 3612 (c); Noise Control Act of 1972, 12 (d), 86 Stat. 1244, 42 U.S.C. 4911 (d) (1970 ed., Supp. II); Railway Labor Act, 3, 44 Stat. 578, as amended, 48 Stat. 1192, as amended, 45 U.S.C. 153 (p); The Merchant Marine Act of 1936, 810, 49 Stat. 2015, 46 U.S.C. 1227; Communications Act of 1934, 206, 48 Stat. 1072, 47 U.S.C. 206; Interstate Commerce Act, 8, 16 (2), 24 Stat. 382, 384, 49 U.S.C. 8, 16 (2), and 308 (b), as added, 54 Stat. 940, as amended, 49 U.S.C. 908 (b); Fed. Rules Civ. Proc. 37 (a) and (c). See generally 1 Speiser 12:61-12:71; Annotation, supra, n. 31, at 922-942. </s> [Footnote 34 "Any person who shall be injured in his business or property by reason of anything forbidden in the antitrust laws may sue therefor . . . and shall recover threefold the damages by him sustained, and the cost of suit, including a reasonable attorney's fee." 15 U.S.C. 15 (emphasis added). Other statutes which are mandatory in terms of awarding attorneys' fees include the Fair Labor Standards Act, 29 U.S.C. 216 (b); the Truth in Lending Act, 15 U.S.C. 1640 (a); and the Merchant Marine Act of 1936, 46 U.S.C. 1227. </s> [Footnote 35 "In any action commenced pursuant to this subchapter, the court, in its discretion, may allow the prevailing party, other than the United States, a reasonable attorney's fee as part of the costs, and the United States shall be liable for costs the same as a private person." Other statutory examples of discretion in awarding attorneys' fees [421 U.S. 240, 262] are the Securities Act of 1933, 15 U.S.C. 77k (e); the Trust Indenture Act, 15 U.S.C. 77www (a); the Securities Exchange Act of 1934, 15 U.S.C. 78i (e), 78r (a); the Civil Rights Act of 1964, Tit VII, 42 U.S.C. 2000e-5 (k); the Clean Air Act, 42 U.S.C. 1857h-2 (d); the Noise Control Act of 1972, 42 U.S.C. 4911 (d) (1970 ed., Supp. II). </s> [Footnote 36 Quite apart from the specific authorizations of fee shifting in particular statutes, Congress has recently confronted the question of the general availability of legal services to persons economically unable to retain a private attorney. See the Legal Services Corporation Act of 1974, Pub. L. 93-355, 88 Stat. 378, 42 U.S.C. 2996 et seq. (1970 ed., Supp. IV). Section 1006 (f), 42 U.S.C. 2996e (f) (1970 ed., Supp. IV), addresses one type of fee shifting: "If an action is commenced by the Corporation or by a recipient and a final order is entered in favor of the defendant and against the Corporation or a recipient's plaintiff, the court may, upon motion by the defendant and upon a finding by the court that the action was commenced or pursued for the sole purpose of harassment of the defendant or that the Corporation or a recipient's plaintiff maliciously abused legal process, enter an order (which shall be appealable before being made final) awarding reasonable costs and legal fees incurred by the defendant in defense of the action, except when in contravention of a State law, a rule of court, or a statute of general applicability. Any such costs and fees shall be directly paid by the Corporation." On the other hand, remarks made during the debates on this legislation indicate that there was no intent to restrict the plaintiff's [421 U.S. 240, 263] recovery of attorneys' fees in actions commenced by the Corporation or its recipient where under the circumstances other plaintiffs would be awarded such fees. 120 Cong. Rec. 15001 (1974) (Rep. Meeds); id., at 15008 (Rep. Steiger); id., at 24037 (Sen. Cranston); id., at 24052 (Sen. Mondale); id., at 24056 (Sen. Kennedy). Thus, if other plaintiffs might recover on the private-attorney-general theory, so might the Corporation. Congress itself, of course, has provided for counsel fees under various statutes on a private-attorney-general basis; and we find nothing in these remarks indicating any congressional approval of judicially created private-attorney-general fee awards. </s> [Footnote 37 Congress in its specific statutory authorizations of fee shifting has in some instances provided that either party could be given such an award depending upon the outcome of the litigation and the court's discretion, see, e. g., 35 U.S.C. 285 (patent infringement); Civil Rights Act of 1964, 42 U.S.C. 2000a-3 (b), 2000e-5 (k), while in others it has specified that only one of the litigants can be awarded fees. See, e. g., the antitrust laws, 15 U.S.C. 15; Fair Labor Standards Act, 29 U.S.C. 216 (b). </s> [Footnote 38 Congress has specifically provided in the statutes allowing awards of fees whether such awards are mandatory under particular conditions or whether the court's discretion governs. See nn. 34 and 35, supra. </s> [Footnote 39 MR. JUSTICE MARSHALL, post, at 284-285, after concluding that the federal courts have equitable power which can be used to create and implement a private-attorney-general rule, attempts to solve the problems of manageability which such a rule would necessarily raise. To do so, however, he emasculates the theory. Instead of a straightforward award of attorneys' fees to the winning plaintiff [421 U.S. 240, 265] who undertakes to enforce statutes embodying important public policies, as the Court of Appeals proposed, MR. JUSTICE MARSHALL would tax attorneys' fees in favor of the private attorney general only when the award could be said to impose the burden on those who benefit from the enforcement of the law. The theory that he would adopt is not the private-attorney-general rule, but rather an expanded version of the common-fund approach to the awarding of attorneys' fees. When Congress has provided for allowance of attorneys' fees for the private attorney general, it has imposed no such common-fund conditions upon the award. The dissenting opinion not only errs in finding authority in the courts to award attorneys' fees, without legislative guidance, to those plaintiffs the courts are willing to recognize as private attorneys general, but also disserves that basis for fee shifting by imposing a limiting condition characteristic of other justifications. That condition ill suits litigation in which the purported benefits accrue to the general public. In this Court's common-fund and common-benefit decisions, the classes of beneficiaries were small in number and easily identifiable. The benefits could be traced with some accuracy, and there was reason for confidence that the costs could indeed be shifted with some exactitude to those benefiting. In this case, however, sophisticated economic analysis would be required to gauge the extent to which the general public, the supposed beneficiary, as distinguished from selected elements of it, would bear the costs. The Court of Appeals, very familiar with the litigation and the parties after dealing with the merits of the suit, concluded that "imposing attorneys' fees on Alyeska will not operate to spread the costs of litigation proportionately among these beneficiaries. . . ." 161 U.S. App. D.C., at 449, 495 F.2d, at 1029. MR. JUSTICE MARSHALL would apparently hold that factual assessment clearly wrong. See post, at 288. If one accepts, as MR. JUSTICE MARSHALL appears to do, the limitations of 28 U.S.C. 2412, which in the absence of authority under other statutes forbids an award of attorneys' fees against the United States or any agency or official of the United States, see nn. 40 and 42, infra, it becomes extremely difficult to predict when his version of the private-attorney-general basis for allowing fees [421 U.S. 240, 266] would produce an award against a private party in litigation involving the enforcement of a federal statute such as that involved in this case - all in contrast to the typical result under those federal statutes which themselves provide for private actions and for an award of attorneys' fees to the successful private plaintiff as, for example, under the antitrust laws. There remains the private plaintiff whose suit to enforce federal or state law is pressed against defendants who include the State or one or more of its agencies or officers as, for instance, the typical suit under 42 U.S.C. 1983. Even here Eleventh Amendment hurdles must be overcome, see n. 44, infra, and if they are not, there may be few remaining defendants who would satisfy the dissenting opinion's description of the litigant who may be saddled with his opponent's attorneys' fees. We add that in the three-part test suggested by MR. JUSTICE MARSHALL, post, at 284-285, for administering a judicially created private-attorney-general rule, the only criterion which purports to enable a court to determine which statutes should be enforced by application of the rule is the first: "the important right being protected is one actually or necessarily shared by the general public or some class thereof . . . ." Absent some judicially manageable standard for gauging "importance," that criterion would apply to all substantive congressional legislation providing for rights and duties generally applicable, that is, to virtually all congressional output. That result would solve the problem of courts selectively applying the rule in accordance with their own particular substantive-law preferences and priorities, but its breadth requires more justification than MR. JUSTICE MARSHALL provides by citing this Court's common-fund and common-benefit cases. MR. JUSTICE MARSHALL'S application of his suggested rule to this case, however, demonstrates the problems raised by courts generally assaying the public benefits which particular litigation has produced. The conclusion of the dissenting opinion is that "[t]here is hardly room for doubt" that respondents' litigation has protected an "important right . . . actually or necessarily shared by the general public or some class thereof . . . ." Post, at 285. Whether that conclusion is correct or not, it would appear at the very least [421 U.S. 240, 267] that, as in any instance of conflicting public-policy views, there is room for doubt on each side. The opinions below are evidence of that fact. See 161 U.S. App. D.C., at 452-456, 495 F.2d, at 1032-1036 (majority opinion); id., at 459-461, 495 F.2d, at 1039-1041 (MacKinnon, J., dissenting); id., at 462-464, 495 F.2d, at 1042-1044 (Wilkey, J., dissenting). It is that unavoidable doubt which calls for specific authority from Congress before courts apply a private-attorney-general rule in awarding attorneys' fees. </s> [Footnote 40 "Except as otherwise specifically provided by statute, a judgment for costs, as enumerated in section 1920 of this title but not including the fees and expenses of attorneys may be awarded to the prevailing party in any civil action brought by or against the United States or any agency or official of the United States acting in his official capacity, in any court having jurisdiction of such action. A judgment for costs when taxed against the Government shall, in an amount established by statute or court rule or order, be limited to reimbursing in whole or in part the prevailing party for the costs incurred by him in the litigation. Payment of a judgment for costs shall be as provided in section 2414 and section 2517 of this title for the payment of judgments against the United States." </s> [Footnote 41 See supra, at 246. </s> [Footnote 42 The Act of Mar. 3, 1887, which provided for the bringing of suits against the United States, covered the awarding of costs against the Government in the following section: "If the Government of the United States shall put in issue the right of the plaintiff to recover the court may, in its discretion, allow costs to the prevailing party from the time of joining such issue. Such costs, however, shall include only what is actually incurred [421 U.S. 240, 268] for witnesses, and for summoning the same, and fees paid to the clerk of the court." 15, 24 Stat. 508. The same section was included in the Judicial Code of 1911. 152, 36 Stat. 1138. In 1946, the Federal Tort Claims Act provided: "Costs shall be allowed in all courts to the successful claimant to the same extent as if the United States were a private litigant, except that such costs shall not include attorneys' fees." 410 (a), 60 Stat. 844. The 1948 Code provided in 28 U.S.C. 2412 (a) (1946 ed., Supp. II) that "[t]he United States shall be liable for fees and costs only when such liability is expressly provided for by Act of Congress." The Reviser observed: "[Section 2412 (a)] is new. It follows the well-known common-law rule that a sovereign is not liable for costs unless specific provision for such liability is made by law." Noting that many statutes exempt the United States from liability for fees and costs, the Reviser concluded that "[a] uniform rule, embodied in this section, will make such specific exceptions unnecessary." In 1966, 2412 was amended to its present form. 80 Stat. 308. The Senate Report on the proposed bill stated that "[t]he costs referred to in the section do not include fees and expenses of attorneys." S. Rep. No. 1329, 89th Cong., 2d Sess., 3 (1966). See also H. R. Rep. No. 1535, 89th Cong., 2d Sess., 2, 3 (1966). The Attorney General, in transmitting the proposal for legislation which led to the amendment, said that "[t]he bill makes it clear that the fees and expenses of attorneys . . . may not be taxed against the United States." Id., at 4. See Pyramid Lake Paiute Tribe of Indians v. Morton, 163 U.S. App. D.C. 90, 499 F.2d 1095 (1974), cert. denied, 420 U.S. 962 (1975). Without departing from this pattern, the Federal Tort Claims Act of 1946 in addition limited the fees which courts could allow and which attorneys could charge their clients and provided that the fees were "to be paid out of but not in addition to the amount of judgment, award, or settlement recovered, to the attorneys representing the claimant." 422, 60 Stat. 846. See also 410 (a). Section 422 was maintained in the 1948 Code as 28 U.S.C. 2678 (1946 ed., Supp. II), and the percentage limitations were raised in 1966. 80 Stat. 307. </s> [Footnote 43 See n. 35, supra. See also Amendments to Freedom of Information [421 U.S. 240, 269] Act, Pub. L. 93-502, 1 (b) (2), 88 Stat. 1561 (amending 5 U.S.C. 552 (a)). </s> [Footnote 44 Although an award against the United States is foreclosed by 28 U.S.C. 2412 in the absence of other statutory authorization, an award against a state government would raise a question with respect to its permissibility under the Eleventh Amendment, a question on which the lower courts are divided. Compare Souza v. Travisono, 512 F.2d 1137 (CA1 1975); Class v. Norton, 505 F.2d 123 (CA2 1974); Jordan v. Fusari, 496 F.2d 646 (CA2 1974); Gates v. Collier, 489 F.2d 298 (CA5 1973), petition for rehearing en banc granted, 500 F.2d 1382 (CA5 1974); Brandenburger v. Thompson, 494 F.2d 885 (CA9 1974); Sims v. Amos, 340 F. Supp. 691 (MD Ala.), summarily aff'd, 409 U.S. 942 (1972), with Jordan v. Gilligan, 500 F.2d 701 (CA6 1974); Taylor v. Perini, 503 F.2d 899 (CA6 1974); Named Individual Members v. Texas Highway Dept., 496 F.2d 1017 (CA5 1974); Skehan v. Board of Trustees of Bloomsburg State College, 501 F.2d 31 (CA3 1974). In this case, the Court of Appeals did not rely upon the Eleventh Amendment in declining to award [421 U.S. 240, 270] fees against Alaska, see n. 16, supra, and therefore we have no occasion to address this question. </s> [Footnote 45 See, e. g., McLaughlin, The Recovery of Attorney's Fees: A New Method of Financing Legal Services, 40 Ford. L. Rev. 761 (1972); Ehrenzweig, Reimbursement of Counsel Fees and the Great Society, 54 Calif. L. Rev. 792 (1966); Stoebuck, Counsel Fees Included in Costs: A Logical Development, 38 U. Colo. L. Rev. 202 (1966); Kuenzel, The Attorney's Fee: Why Not a Cost of Litigation?, 49 Iowa L. Rev. 75 (1963); McCormick, Counsel Fees and Other Expenses of Litigation as an Element of Damages, 15 Minn. L. Rev. 619 (1931); Comment, Court Awarded Attorney's Fees and Equal Access to the Court, 122 U. Pa. L. Rev. 636, 648-655 (1974); Note, Attorney's Fees: Where Shall the Ultimate Burden Lie?, 20 Vand. L. Rev. 1216 (1967). See also 1 Speiser 12.8; Posner, An Economic Approach to Legal Procedure and Judicial Administration, 2 J. Legal Studies 399, 437-438 (1973). </s> [Footnote 46 In recent years, some lower federal courts, erroneously, we think, have employed the private-attorney-general approach to award attorneys' fees. See, e. g., Souza v. Travisono, supra; Hoitt v. Vitek, 495 F.2d 219 (CA1 1974); Knight v. Auciello, 453 F.2d 852 (CA1 1972); Cornist v. Richland Parish School Board, 495 F.2d 189 (CA5 1974); Fairley v. Patterson, 493 F.2d 598 (CA5 1974); Cooper v. Allen, 467 F.2d 836 (CA5 1972); Lee v. Southern Home Sites Corp., 444 F.2d 143 (CA5 1971); Taylor v. Perini, supra; Morales v. Haines, 486 F.2d 880 (CA7 1973); Donahue v. Staunton, 471 F.2d 475 (CA7 1972), cert. denied, 410 U.S. 955 (1973); Fowler v. Schwarzwalder, 498 F.2d 143 (CA8 1974); Brandenburger v. Thompson, supra; La Raza Unida v. Volpe, 57 F. R. D. 94 (ND Cal. 1972). The Court of Appeals for the Fourth Circuit has refused to adopt the private-attorney-general rule. Bradley v. School Board of the City of Richmond, 472 F.2d 318, 327-331 (1972), vacated on other grounds, 416 U.S. 696 (1974). Cf. Bridgeport Guardians, Inc. v. Members of Bridgeport Civil Service Comm'n, 497 F.2d 1113 (CA2 1974). This Court's summary affirmance of the decision in Sims v. Amos, supra, cannot be taken as an acceptance of a judicially created [421 U.S. 240, 271] private-attorney-general rule. The District Court in Sims indicated that there was an alternative ground available - the bad faith of the defendants - upon which to base the award of fees. 340 F. Supp., at 694. See also Edelman v. Jordan, 415 U.S. 651, 670 -671 (1974). </s> [Footnote 47 The Senate Subcommittee on Representation of Citizen Interests has recently conducted hearings on the general question of court awards of attorneys' fees to prevailing parties in litigation and attempted "to ascertain whether `fee-shifting' affords representation to otherwise unrepresented interests, whether some restriction or encouragement of the development is needed, and what place, if any, there is for legislation in this area." Hearings on Legal Fees before the Subcommittee on Representation of Citizen Interests of the Senate Committee on the Judiciary, 93d Cong., 1st Sess., pt. III, p. 788 (1973) (Sen. Tunney). As MR. JUSTICE MARSHALL said for the Court in F. D. Rich Co., Inc. v. United States ex rel. Industrial Lumber Co., 417 U.S. 116 (1974), with respect to fee shifting under the Miller Act, 49 Stat. 793, as amended, 40 U.S.C. 270a et seq., "Congress is aware of the issue." 417 U.S., at 131 (footnote omitted). As in that case, "arguments for a further departure from the American Rule . . . are properly addressed to Congress." Ibid. </s> MR. JUSTICE BRENNAN, dissenting. </s> I agree with MR. JUSTICE MARSHALL that federal equity courts have the power to award attorneys' fees [421 U.S. 240, 272] on a private-attorney-general rationale. Moreover, for the reasons stated by Judge Wright in the Court of Appeals, I would hold that this case was a proper one for the exercise of that power. As Judge Wright concluded: </s> "Acting as private attorneys general, not only have [respondents] ensured the proper functioning of our system of government, but they have advanced and protected in a very concrete manner substantial public interests. An award of fees would not have unjustly discouraged [petitioner] Alyeska from defending its case in court. And denying fees might well have deterred [respondents] from undertaking the heavy burden of this litigation." 161 U.S. App. D.C. 446, 456, 495 F.2d 1026, 1036. </s> MR. JUSTICE MARSHALL, dissenting. </s> In reversing the award of attorneys' fees to the respondent environmentalist groups, the Court today disavows the well-established power of federal equity courts to award attorneys' fees when the interests of justice so require. While under the traditional American Rule the courts ordinarily refrain from allowing attorneys' fees, we have recognized several judicial exceptions to that rule for classes of cases in which equity seemed to favor fee shifting. See Sprague v. Ticonic National Bank, 307 U.S. 161 (1939); Mills v. Electric Auto-Lite Co., 396 U.S. 375, 391 -392 (1970); Hall v. Cole, 412 U.S. 1, 5 , 9 (1973). By imposing an absolute bar on the use of the "private attorney general" rationale as a basis for awarding attorneys' fees, the Court today takes an extremely narrow view of the independent power of the courts in this area - a view that flies squarely in the face of our prior cases. </s> The Court relies primarily on the docketing-fees-and-court-costs [421 U.S. 240, 273] statute, 28 U.S.C. 1923, in concluding that the American Rule is grounded in statute and that the courts may not award counsel fees unless they determine that Congress so intended. The various exceptions to the rule against fee shifting that this Court has created in the past are explained as constructions of the fee statute. Ante, at 257. In addition, the Court notes that Congress has provided for attorneys' fees in a number of statutes, but made no such provision in others. It concludes from this selective treatment that where award of attorneys' fees is not expressly authorized, the courts should deny them as a matter of course. Finally, the Court suggests that the policy questions bearing on whether to grant attorneys' fees in a particular case are not ones that the Judiciary is well equipped to handle, and that fee shifting under the private-attorney-general rationale would quickly degenerate into an arbitrary and lawless process. Because the Court concludes that granting attorneys' fees to private attorneys general is beyond the equitable power of the federal courts, it does not reach the question whether an award would be proper against Alyeska in this case under the private-attorney-general rationale. </s> On my view of the case, both questions must be answered. I see no basis in precedent or policy for holding that the courts cannot award attorneys' fees where the interests of justice require recovery, simply because the claim does not fit comfortably within one of the previously sanctioned judicial exceptions to the American Rule. The Court has not in the past regarded the award of attorneys' fees as a matter reserved for the Legislature, and it has certainly not read the docketing-fees statute as a general bar to judicial fee shifting. The Court's concern with the difficulty of applying meaningful standards in awarding attorneys' fees to successful [421 U.S. 240, 274] "public benefit" litigants is a legitimate one, but in my view it overstates the novelty of the "private attorney general" theory. The guidelines developed in closely analogous statutory and nonstatutory attorneys' fee cases could readily be applied in cases such as the one at bar. I therefore disagree with the Court's flat rejection of the private-attorney-general rationale for fee shifting. Moreover, in my view the equities in this case support an award of attorneys' fees against Alyeska. Accordingly, I must respectfully dissent. </s> I </s> A </s> Contrary to the suggestion in the Court's opinion, our cases unequivocally establish that granting or withholding attorneys' fees is not strictly a matter of statutory construction, but has an independent basis in the equitable powers of the courts. In Sprague v. Ticonic National Bank, supra, the lower courts had denied a request for attorneys' fees from the proceeds of certain bond sales, which, because of petitioners' success in the litigation, would accrue to the benefit of a number of other similarly situated persons. This Court reversed, holding that the allowance of attorneys' fees and costs beyond those included in the ordinary taxable costs recognized by statute was within the traditional equity jurisdiction of the federal courts. The Court regarded the equitable foundation of the power to allow fees to be beyond serious question: </s> "Allowance of such costs in appropriate situations is part of the historic equity jurisdiction of the federal courts." 307 U.S., at 164 . "Plainly the foundation for the historic practice of granting reimbursement for the costs of litigation other than the conventional [statutory] taxable costs is part of [421 U.S. 240, 275] the original authority of the chancellor to do equity in a particular situation." Id., at 166. 1 </s> In more recent cases, we have reiterated the same theme: while as a general rule attorneys' fees are not to be awarded to the successful litigant, the courts as well as the Legislature may create exceptions to that rule. See Mills v. Electric Auto-Lite Co., 396 U.S., at 391 -392; Hall v. Cole, 412 U.S., at 5 . Under the judge-made exceptions, attorneys' fees have been assessed, without statutory authorization, for willful violation of a court order, Toledo Scale Co. v. Computing Scale Co., 261 U.S. 399, 426 -428 (1923); for bad faith or oppressive litigation practices, Vaughan v. Atkinson, 369 U.S. 527, 530 -531 (1962); and where the successful litigants have created a common fund for recovery or extended a substantial benefit to a class, Central Railroad & Banking Co. v. Pettus, 113 U.S. 116 (1885); Mills v. Electric Auto-Lite Co., supra. 2 While the Court today acknowledges the continued vitality of these exceptions, it turns its back on the theory underlying them, and on the generous construction given to the common-benefit exception in our recent cases. </s> In Mills, we found the absence of statutory authorization no barrier to extending the common-benefit theory to include nonmonetary benefits as a basis for awarding [421 U.S. 240, 276] fees in a stockholders' derivative suit. Discovering nothing in the applicable provisions of the Securities Exchange Act of 1934 to indicate that Congress intended "to circumscribe the courts' power to grant appropriate remedies," 396 U.S., at 391 , we concluded that the District Court was free to determine whether special circumstances would justify an award of attorneys' fees and litigation costs in excess of the statutory allotment. Because the petitioners' lawsuit presumably accrued to the benefit of the corporation and the other shareholders, and because permitting the others to benefit from the petitioners' efforts without contributing to the costs of the litigation would result in a form of unjust enrichment, the Court held that the petitioners should be given an attorneys' fee award assessed against the respondent corporation. </s> We acknowledged in Mills that the common-fund exception to the American Rule had undergone considerable expansion since its earliest applications in cases in which the court simply ordered contribution to the litigation costs from a common fund produced for the benefit of a number of nonparty beneficiaries. The doctrine could apply, the Court wrote, where there was no fund at all, id., at 392, but simply a benefit of some sort conferred on the class from which contribution is sought. Id., at 393-394. As long as the court has jurisdiction over an entity through which the contribution can be effected, it is the fairer course to relieve the plaintiff of exclusive responsibility for the burden. Finally, we noted that even where it is impossible to assign monetary value to the benefit conferred, "the stress placed by Congress on the importance of fair and informed corporate suffrage leads to the conclusion that, in vindicating the statutory policy, petitioners have rendered a substantial service to the corporation and its [421 U.S. 240, 277] shareholders." Id., at 396. The benefit that we discerned in Mills went beyond simple monetary relief: it included the benefit to the shareholders of having available to them "an important means of enforcement of the proxy statute." Ibid. </s> Only two years ago, in a member's suit against his union under the "free speech" provisions of the Labor-Management Reporting and Disclosure Act, we held that it was within the equitable power of the federal courts to grant attorneys' fees against the union, since the plaintiff had conferred a substantial benefit on all the members of the union by vindicating their free speech interests. Hall v. Cole, 412 U.S. 1 (1973). Because a court-ordered award of attorneys' fees in a suit under the free speech provision of the LMRDA promoted Congress' intention to afford meaningful protection for the rights of employees and the public generally, and because without provision of attorneys' fees an aggrieved union member would be unlikely to be able to finance the necessary litigation, id., at 13, the Court held that the allowance of counsel fees was "consistent with both the [LMRDA] and the historic equitable power of federal courts to grant such relief in the interests of justice." Id., at 14. </s> In my view, these cases simply cannot be squared with the majority's suggestion that the availability of attorneys' fees is entirely a matter of statutory authority. The cases plainly establish an independent basis for equity courts to grant attorneys' fees under several rather generous rubrics. The Court acknowledges as much when it says that we have independent authority to award fees in cases of bad faith or as a means of taxing costs to special beneficiaries. But I am at a loss to understand how it can also say that this independent judicial power succumbs to Procrustean statutory restrictions - indeed, to statutory silence - as soon as the far [421 U.S. 240, 278] from bright line between common benefit and public benefit is crossed. I can only conclude that the Court is willing to tolerate the "equitable" exceptions to its analysis, not because they can be squared with it, but because they are by now too well established to be casually dispensed with. </s> B </s> The tension between today's opinion and the less rigid treatment of attorneys' fees in the past is reflected particularly in the Court's analysis of the docketing-fees statute, 28 U.S.C. 1923, as a general statutory embodiment of the American Rule. While the Court has held in the past that Congress can restrict the availability of attorneys' fees under a particular statute either expressly or by implication, 3 see Fleischmann Distilling Corp. v. Maier Brewing Co., 386 U.S. 714 (1967), it has refused to construe 1923 as a plenary restraint on attorneys' fee awards. </s> Starting with the early common-fund cases, the Court has consistently read the fee-bill statute of 1853 narrowly when that Act has been interposed as a restriction on the Court's equitable powers to award attorneys' fees. In Trustees v. Greenough, 105 U.S. 527 (1881), the Court held that the statute imposed no bar to an award of attorneys' fees from the fund collected as a result of the plaintiff's efforts, since: </s> "[The fee bill statute addressed] only those fees [421 U.S. 240, 279] and costs which are strictly chargeable as between party and party, and [did not] regulate the fees of counsel and other expenses and charges as between solicitor and client . . . . And the act contains nothing which can be fairly construed to deprive the Court of Chancery of its long-established control over the costs and charges of the litigation, to be exercised as equity and justice may require . . . ." Id., at 535-536. </s> In Sprague, supra, the Court again applied this distinction in recognizing "the power of federal courts in equity suits to allow counsel fees and other expenses entailed by the litigation not included in the ordinary taxable costs recognized by statute." 307 U.S., at 164 . The Court there identified the costs "between party and party" as the sole target of the 1853 Act and its successors. The award of attorneys' fees beyond the limited ordinary taxable costs, the Court termed costs "as between solicitor and client"; it held that these expenses, which could be assessed to the extent that fairness to the other party would permit, were not subject to the restrictions of the fee statute. Id., at 166, and n. 2. Whether this award was collected out of a fund in the court or through an assessment against the losing party in the litigation was not deemed controlling. Id., at 166-167; Mills, 396 U.S., at 392 -394. </s> More recently, the Court gave its formal sanction to the line of lower court cases holding that the fee statute imposed no restriction on the equity court's power to include attorneys' fees in the plaintiff's award when the defendant has unjustifiably put the plaintiff to the expense of litigation in order to obtain a benefit to which the latter was plainly entitled. Vaughan v. Atkinson, 369 U.S. 527 (1962). Distinguishing The Baltimore, 8 Wall. 377 (1869), a case upon which the Court [421 U.S. 240, 280] today heavily relies, the Court in Vaughan noted that the question was not one of "costs" in the statutory sense, since the attorneys' fee award was legitimately included as a part of the primary relief to which the plaintiff was entitled, rather than an ancillary adjustment of litigation expenses. 4 </s> Finally, in Fleischmann Distilling Corp. v. Maier Brewing Co., 386 U.S. 714 (1967), the Court undertook a comprehensive review of the assessment of attorneys' fees in federal-court actions. While noting that nonstatutory exceptions to the American Rule had been sanctioned "when overriding considerations of justice seemed to compel such a result," id., at 718, the Court held that the meticulous provision of remedies available under the Lanham Act and the history of unsuccessful attempts to include an attorneys' fee provision in the Act precluded the Court's implying a right to attorneys' fees in trademark actions. The Court did not, however, purport to find a statutory basis for the American Rule, and in fact it treated 1923 as a "general exception" to the American Rule, not its statutory embodiment. 386 U.S., at 718 n. 11. </s> My Brother WHITE concedes that the language of the 1853 statute indicating that the awards provided therein were exclusive of any other compensation is no longer a part of the fee statute. But we are told that the fee statute should be read as if that language were still in the Act, [421 U.S. 240, 281] since there is no indication in the legislative history of the 1948 revision of the Judicial Code that the revisers intended to alter the meaning of 1923. Yet even if that language were still in the Act, I should think that the construction of the Act in the cases creating judicial exceptions to the American Rule would suffice to dispose of the Court's argument. Since that language is no longer a part of the fee statute, it seems even less reasonable to read the fee statute as an uncompromising bar to equitable fee awards. </s> Nor can any support fairly be drawn from Congress' failure to provide expressly for attorneys' fees in either the National Environmental Policy Act or the Mineral Leasing Act, while it has provided for fee awards under other statutes. Confronted with the more forceful argument that other sections of the same statute included express provisions for recovery of attorneys' fees, we twice held that specific-remedy provisions in some sections should not be interpreted as evidencing congressional intent to deny the courts the power to award counsel fees in actions brought under other sections of that Act that do not mention attorneys' fees. Hall v. Cole, 412 U.S., at 11 ; Mills v. Electric Auto-Lite Co., 396 U.S., at 390 -391. Indeed, the Mills Court interpreted congressional silence, not as a prohibition, but as authorization for the Court to decide the attorneys'-fees issue in the exercise of its coordinate, equitable power. Id., at 391. In rejecting the argument from congressional silence in Mills and Hall, the Court relied on the established rule that implied restrictions on the power to do equity are disfavored. Hecht Co. v. Bowles, 321 U.S. 321, 329 (1944). 5 The same principle [421 U.S. 240, 282] applies, a fortiori, to this case, where the implication must be drawn from the presence of attorneys' fees provisions in other, unrelated pieces of legislation. 6 </s> In sum, the Court's primary contention - that Congress enjoys hegemony over fee shifting because of the docketing-fee statute and the occasional express provisions for attorneys' fees - will not withstand even the most casual reading of the precedents. The Court's recognition of the several judge-made exceptions to the American rule demonstrates the inadequacy of its analysis. Whatever the Court's view of the wisdom of fee shifting in "public benefit" cases in general, I think that it is a serious misstep for it to abdicate equitable authority in this area in the name of statutory construction. </s> II </s> The statutory analysis aside, the Court points to the difficulties in formulating a "private attorney general" exception that will not swallow the American Rule. I do not find the problem as vexing as the majority does. In fact, the guidelines to the proper application of the [421 U.S. 240, 283] private-attorney-general rationale have been suggested in several of our recent cases, both under statutory attorneys' fee provisions and under the common-benefit exception. </s> In Newman v. Piggie Park Enterprises, Inc., 390 U.S. 400 (1968), we held that successful plaintiffs who sue under the discretionary-fee-award provision of Title II of the Civil Rights Act of 1964 are entitled to the recovery of fees "unless special circumstances would render such an award unjust." 390 U.S., at 402 . The Court reasoned that if Congress had intended to authorize fees only on the basis of bad faith, no new legislation would have been required in view of the long history of the bad-faith exception. Id., at 402 n. 4. The Court's decision in Newman stands on the necessity of fee shifting to permit meaningful private enforcement of protected rights with a significant public impact. The Court noted that Title II did not provide for a monetary award, but only equitable relief. Absent a fee-shifting provision, litigants would be required to suffer financial loss in order to vindicate a policy "that Congress considered of the highest priority." 390 U.S., at 402 . Accordingly, the Court read the attorneys'-fee provision in Title II generously, since if "successful plaintiffs were routinely forced to bear their own attorneys' fees, few aggrieved parties would be in a position to advance the public interest by invoking the injunctive powers of the federal courts." 390 U.S., at 402 . </s> Analyzing the attorneys'-fee provision in 718 of the Education Amendments Act of 1972, the Court in Bradley v. School Board of the City of Richmond, 416 U.S. 696, 718 (1974), made a similar point. There the school board, a publicly funded governmental entity, had been engaged in litigation with parents of school-children in the district. The Court observed that the [421 U.S. 240, 284] two parties had vastly disparate resources for litigation, and that the plaintiffs had "rendered substantial service both to the Board itself, by bringing it into compliance with its constitutional mandate, and to the community at large by securing for it the benefits assumed to flow from a nondiscriminatory educational system." Id., at 718. Although the analysis in Newman was directed at construing the statutory-fees provision and the analysis in Bradley went to the question of whether the fees provision should be applied to services rendered before its enactment, the arguments in those cases for reading the attorneys' fee provisions broadly is quite applicable to nonstatutory cases as well. </s> Indeed, we have already recognized several of the same factors in the recent common-benefit cases. In Mills, we emphasized the benefit to the class of shareholders of having a meaningful remedy for corporate misconduct through private enforcement of the proxy regulations. Since the beneficiaries could fairly be taxed for this benefit, we held that the fee award should be made available. Similarly, in Hall, we pointed to the imbalance between the litigating power of the union and one of its members: in order to ensure that the right in question could be enforced, we held that attorneys' fees should be provided in appropriate cases. Additionally, we noted that the enforcement of the rights in question would accrue to the special benefit of the other union members, which justified assessing the attorneys' fees against the treasury of the defendant union. </s> From these cases and others, it is possible to discern with some confidence the factors that should guide an equity court in determining whether an award of attorneys' fees is appropriate. 7 The reasonable cost of the [421 U.S. 240, 285] plaintiff's representation should be placed upon the defendant if (1) the important right being protected is one actually or necessarily shared by the general public or some class thereof; (2) the plaintiff's pecuniary interest in the outcome, if any, would not normally justify incurring the cost of counsel; and (3) shifting that cost to the defendant would effectively place it on a class that benefits from the litigation. </s> There is hardly room for doubt that the first of these criteria is met in the present case. Significant public benefits are derived from citizen litigation to vindicate expressions of congressional or constitutional policy. See Newman v. Piggie Park Enterprises, supra. As a result of this litigation, respondents forced Congress to revise the Mineral Leasing Act of 1920 rather than permit its continued evasion. See Pub. L. 93-153, 87 Stat. 576. The 1973 amendments impose more stringent safety and liability standards, and they require Alyeska to pay fair market value for the right-of-way and to bear the costs of applying for the permit and monitoring the right-of-way. </s> Although the NEPA issues were not actually decided, the lawsuit served as a catalyst to ensure a thorough analysis of the pipeline's environmental impact. Requiring [421 U.S. 240, 286] the Interior Department to comply with the NEPA and draft an impact statement satisfied the public's statutory right to have information about the environmental consequences of the project, 83 Stat. 853, 42 U.S.C. 4332 (C), and also forced delay in the construction until safeguards could be included as conditions to the new right-of-way grants. 8 </s> Petitioner contends that these "beneficial results . . . might have occurred" without this litigation. Brief for Petitioner 11, 36-42. But the record demonstrates that Alyeska was unwilling to observe and the Government unwilling to enforce congressional land-use policy. Private action was necessary to assure compliance with the Mineral Leasing Act; the new environmental, technological, and land-use safeguards written into the 1973 amendments to the Act are directly traceable to the respondents' success in this litigation. In like manner, continued action was needed to prod the Interior Department into filing an impact statement; prior to the litigation, the Department and Alyeska were prepared to proceed with the construction of the pipeline on a piece-meal basis without considering the overall risks to the environment and to the physical integrity of the pipeline. </s> The second criterion is equally well satisfied in this case. Respondents' willingness to undertake this litigation was largely altruistic. While they did, of course, stand to benefit from the additional protections they sought for the area potentially affected by the pipeline, see Sierra Club v. Morton, 405 U.S. 727 (1972), the direct benefit to these citizen organizations is truly dwarfed by the demands of litigation of this proportion. Extensive factual discovery, expert scientific analysis, and legal [421 U.S. 240, 287] research on a broad range of environmental, technological, and land-use issues were required. See Affidavit of Counsel (Re Bill of Costs), App. 213-219. The disparity between respondents' direct stake in the outcome and the resources required to pursue the case is exceeded only by the disparity between their resources and those of their opponents - the Federal Government and a consortium of giant oil companies. </s> Respondents' claim also fulfills the third criterion, for Alyeska is the proper party to bear and spread the cost of this litigation undertaken in the interest of the general public. The Department of the Interior, of course, bears legal responsibility for adopting a position later determined to be unlawful. And, since the class of beneficiaries from the outcome of this litigation is probably co-extensive with the class of United States citizens, the Government should in fairness bear the costs of respondents' representation. But, the Court of Appeals concluded that it could not impose attorneys' fees on the United States, because in its view the statute providing for assessment of costs against the Government, 28 U.S.C. 2412, permits the award of ordinary court costs, "but [does] not includ[e] the fees and expenses of attorneys." Since the respondents did not cross-petition on that point, we have no occasion to rule on the correctness of the court's construction of that statute. 9 </s> [421 U.S. 240, 288] </s> Before the Department and the courts, Alyeska advocated adoption of the position taken by Interior, playing a major role in all aspects of the case. 10 This litigation conferred direct and concrete economic benefits on Alyeska and its principals in affording protection of the physical integrity of the pipeline. If a court could be reasonably confident that the ultimate incidence of costs imposed upon an applicant for a public permit would indeed be on the general public, it would be equitable to shift those costs to the applicant. 11 In this connection, Alyeska, as a consortium of oil companies that do business in 49 States and account for some 20% of the national oil market, would indeed be able to redistribute the additional cost to the general public. In my view the ability to pass the cost forward to the consuming public warrants an award here. The decision to bypass Congress and avoid analysis of the environmental consequences of the pipeline was made in the first instance by Alyeska's principals and not the Secretary of the Interior. The award does not punish the consortium for these actions but recognizes that it is an effective substitute for the public beneficiaries who successfully challenged these actions. Since the Court of Appeals held Alyeska accountable for a fair share of the fees to ease the burden on the public-minded citizen litigators, I would affirm the judgment below. </s> [Footnote 1 See also Kansas City Southern R. Co. v. Guardian Trust Co., 281 U.S. 1, 9 (1930); Universal Oil Products Co. v. Root Refining Co., 328 U.S. 575, 580 (1946). </s> [Footnote 2 On several recent occasions we have recognized that these exceptions are well established in our equity jurisprudence. See F. D. Rich Co., Inc. v. United States ex rel. Industrial Lumber Co., 417 U.S. 116, 129 -130 (1974); Hall v. Cole, 412 U.S. 1, 5 (1973); Fleischmann Distilling Corp. v. Maier Brewing Co., 386 U.S. 714, 718 -719 (1967). See also Newman v. Piggie Park Enterprises, Inc., 390 U.S. 400, 402 n. 4 (1968); 6 J. Moore, Federal Practice 54.77 2., p. 1709 (2d ed. 1974). </s> [Footnote 3 In F. D. Rich Co., Inc. v. United States ex rel. Industrial Lumber Co., 417 U.S. 116 (1974), we held that attorneys' fees should not be granted as a matter of course under the provision of the Miller Act that granted claimants the right to "sums justly due." 49 Stat. 794, as amended, 40 U.S.C. 270b (a). To overturn the American Rule as a matter of statutory construction would be improper, we held, with no better evidence of congressional intent to provide for attorneys' fees, and in the context of everyday commercial litigation such as that under the Miller Act. 417 U.S., at 130 . </s> [Footnote 4 Although Vaughan was an admiralty case and therefore subject to the possibly narrow reading as a case evincing a special concern for plaintiff seamen as wards of the admiralty court, we have not given the case such a narrow construction. See Hall v. Cole, 412 U.S., at 5 ; F. D. Rich Co., Inc. v. United States ex rel. Industrial Lumber Co., 417 U.S., at 129 n. 17. Indeed, the Vaughan Court itself relied on Rolax v. Atlantic Coast Line R. Co., 186 F.2d 473 (CA4 1951), a nonadmiralty case in which the plaintiff was awarded attorneys' fees as an equitable matter because of the obduracy of the defendant in opposing the plaintiff's civil rights claim. </s> [Footnote 5 The words of the Hecht Court apply well to the case at hand: "The essence of equity jurisdiction has been the power of the Chancellor to do equity and to mould each decree to the necessities [421 U.S. 240, 282] of the particular case. Flexibility rather than rigidity has distinguished it. The qualities of mercy and practicality have made equity the instrument for nice adjustment and reconciliation between the public interest and private needs as well as between competing private claims. We do not believe that such a major departure from that long tradition as is here proposed should be lightly implied." 321 U.S., at 329 -330. </s> [Footnote 6 The Court makes the further point that 28 U.S.C. 2412 generally precludes a grant of attorneys' fees against the Federal Government and its officers. Even if this is true, I fail to see how it supports the view that the private-attorney-general rationale should be jettisoned altogether. There are many situations in which other entities, both private and public, are sued in public interest cases. If attorneys' fees can properly be imposed on those parties, I see no reason why the statutory immunity of the Federal Government should have any bearing on the matter. </s> [Footnote 7 These teachings have not been lost on the lower courts in which the elements of the private-attorney-general rationale have been [421 U.S. 240, 285] more fully explored. See e. g., Souza v. Travisono, 512 F.2d 1137 (CA1 1975); Hoitt v. Vitek, 495 F.2d 219 (CA1 1974); Knight v. Auciello, 453 F.2d 852 (CA1 1972); Cornist v. Richland Parish School Board, 495 F.2d 189 (CA5 1974); Fairley v. Patterson, 493 F.2d 598 (CA5 1974); Cooper v. Allen, 467 F.2d 836 (CA5 1972); Lee v. Southern Home Sites Corp., 444 F.2d 143 (CA5 1971); Taylor v. Perini, 503 F.2d 899 (CA6 1974); Morales v. Haines, 486 F.2d 880 (CA7 1973); Donahue v. Staunton, 471 F.2d 475 (CA7 1972), cert. denied, 410 U.S. 955 (1973); Fowler v. Schwarzwalder, 498 F.2d 143 (CA8 1974); Brandenburger v. Thompson, 494 F.2d 885 (CA9 1974); La Raza Unida v. Volpe, 57 F. R. D. 94 (ND Cal. 1972); Wyatt v. Stickney, 344 F. Supp. 387 (MD Ala. 1972); NAACP v. Allen, 340 F. Supp. 703 (MD Ala. 1972). </s> [Footnote 8 See S. Rep. No. 93-207, p. 18 (1973); H. R. Rep. No. 93-414, p. 14 (1973); Hearings on S. 970, S. 993, and S. 1565 before the Senate Committee on Interior and Insular Affairs, 93d Cong., 1st Sess., pt. 4, pp. 56, 127 (1973). </s> [Footnote 9 The statute, construed in light of the rule against implied restrictions on equity jurisdiction, may not foreclose attorneys' fee awards against the United States in all cases. Section 2412 states that the ordinary recoverable costs shall not include attorneys' fees; it may be read not to bar fee awards, over and above ordinary taxable costs, when equity demands. In any event, there are plainly circumstances under which 2412 would not bar attorneys' fee awards against the United States, see, e. g., Natural Resources Defense Council, Inc. v. Environmental Protection Agency, 484 F.2d 1331 (CA1 1973). </s> [Footnote 10 In requiring Alyeska to pay only half of the fee, the Court of Appeals correctly recognized that, absent the statutory bar, the Government would have been in an equal position to shift the costs to the public beneficiaries. </s> [Footnote 11 See Dawson, Lawyers and Involuntary Clients in Public Interest Litigation, 88 Harv. L. Rev. 849, 902-905 (1975). </s> [421 U.S. 240, 289]

United States Supreme Court BOKULICH v. JURY COMMISSION(1969) No. 1255 Argued: Decided: March 3, 1969 </s> Appellants had been arrested on charges of grand larceny. They sought an injunction to prevent the grand jury from considering the larceny charges on the ground that Negroes had been systematically excluded from the grand jury. The District Court found that the grand jury was illegally constituted but refused to prevent it from considering the criminal charges. Held: The District Court did not abuse its discretion in refusing to enjoin the grand jury proceedings. </s> 298 F. Supp. 181, affirmed. </s> Morton Stavis, Arthur Kinoy, William M. Kunstler, Donald A. Jelinek, and Alvin Bronstein for appellants. </s> MacDonald Gallion, Attorney General of Alabama, and Robert P. Bradley, Assistant Attorney General, for appellees. </s> PER CURIAM. </s> The motion of the appellants for leave to proceed in forma pauperis is granted. </s> Appellants, civil rights workers, were arrested on charges of grand larceny. Together with other persons who are not parties to this appeal, the appellants were plaintiffs in this suit before a three-judge court. The complaint charged that Negroes had been systematically excluded from the grand and petit juries in Greene County and that the all-white county jury commission was unconstitutionally constituted. It sought declaratory and injunctive relief against continued discrimination in the selection of juries, against statutes that [394 U.S. 97, 98] allegedly authorized the discrimination, and against the State Governor's practice of selecting only white jury commissioners for Greene County. The appellants sought also an injunction to prevent the grand jury of Greene County from considering the criminal charges against them. </s> The District Court held that Negroes had been systematically and purposely excluded from the jury rolls of Greene County, Alabama, and that this discriminatory exclusion violated the appellants' rights to equal protection and due process. It issued an injunction against discriminatory exclusion of Negroes from jury service in Greene County, and it ordered the appellees to take prompt action to compile a jury list on a nondiscriminatory basis. The court refused, however, to prevent the grand jury from considering the criminal charges against the appellants. This appeal presents only the issue whether the District Court erred in so ruling. 1 </s> We hold that the District Court did not abuse its discretion. The District Court was warranted in assuming that the constitutional defects of which the appellants complained might be promptly remedied by compliance with its order that juries be reconstituted on a nondiscriminatory basis. If they were not, and if the appellants were in fact indicted, the appellants could raise any objection to the composition of the jury as a defense to their prosecutions. In these circumstances the court could properly conclude that this was not one of "those exceptional cases which call for the interposition of a [394 U.S. 97, 99] court of equity to prevent irreparable injury which is clear and imminent." Douglas v. Jeannette, 319 U.S. 157, 163 (1943). 2 Accordingly, we affirm that part of the District Court's judgment that denied an injunction preventing the Greene County grand jury from considering criminal charges against the appellants. </s> Footnotes [Footnote 1 In No. 908 the plaintiffs in the court below other than the appellants in the present case appeal from the District Court's determinations that the challenged Alabama statutes are not unconstitutional and that the Greene County jury commission was not proved to have been illegally constituted. We have today noted probable jurisdiction of that appeal. 393 U.S. 1115 . </s> [Footnote 2 We do not reach the issue whether 28 U.S.C. 2283 would bar the injunction sought even if irreparable injury had been shown. Cf. Dombrowski v. Pfister, 380 U.S. 479, 484 , n. 2 (1965). </s> [394 U.S. 97, 100]

United States Supreme Court NOWAKOWSKI v. MARONEY(1967) No. 222 Argued: March 13, 1967Decided: April 10, 1967 </s> When a federal district judge grants a certificate of probable cause necessary to allow a state prisoner to appeal a denial of a writ of habeas corpus, the court of appeals must allow an indigent petitioner to appeal in forma pauperis and dispose of the case in accordance with its ordinary procedure. </s> Vacated and remanded. </s> Daniel J. O'Hern, by appointment of the Court, 385 U.S. 804 , argued the cause and filed a brief for petitioner. </s> William E. Pfadt argued the cause and filed a brief for respondent. </s> PER CURIAM. </s> The petitioner, a prisoner in the Pennsylvania penal system, sought a writ of habeas corpus from the United States District Court for the Western District of Pennsylvania. He alleged, among other things, that his appointed counsel in the state trial which resulted in his conviction had been ineffective, and that he had therefore been denied the aid and assistance of counsel guaranteed by the Constitution. Gideon v. Wainwright, 372 U.S. 335 . The District Court granted Nowakowski a hearing and appointed a lawyer to assist him. Following the hearing and " [v]iewing the record of the trial and the habeas corpus hearing as a whole" the court concluded that Pennsylvania " cannot be convicted of denying effective aid and assistance of counsel to the relator . . . ." However, the District Judge issued the certificate of probable cause necessary to allow a person in state custody to appeal a denial of federal habeas corpus. 28 U.S.C. 2253. [386 U.S. 542, 543] </s> The lawyers who assisted the petitioner at the habeas hearing were then allowed to withdraw by the District Court. Nowakowski subsequently petitioned the Court of Appeals for the Third Circuit to allow him to appeal in forma pauperis from the District Court's denial of relief. He also asked to be allowed to proceed in the Court of Appeals on written briefs and sought the appointment of counsel. That court denied the petition in the following order: </s> " Upon consideration of appellant's petition for leave to proceed in forma pauperis and to file handwritten briefs; and for appointment of counsel in the above-entitled case; </s> " It is ORDERED that the petition be and it hereby is denied." </s> Following the Third Circuit's denial of Nowakowski's petition for rehearing, he sought a writ of certiorari from this Court. It was granted, as was his motion to proceed in forma pauperis. 384 U.S. 984 . </s> We hold that the Court of Appeals erred in denying the petitioner the right to appeal after the District Judge had issued a 2253 certificate of probable cause. It is established law that a circuit judge or justice entertaining an application for a certificate should give " weighty consideration" to its prior denial by a district judge. Sullivan v. Heinze, 250 F.2d 427, 429; Sokol, Federal Habeas Corpus 17, at 94 (1965). Cf. In re Woods, 249 F.2d 614, 616. But when a district judge grants such a certificate, the court of appeals must grant an appeal in forma pauperis (assuming the requisite showing of poverty), and proceed to a disposition of the appeal in accord with its ordinary procedure. </s> The order of the Court of Appeals for the Third Circuit is therefore vacated and the case is remanded for further proceedings consistent with this opinion. </s> [386 U.S. 542, 544]

United States Supreme Court IMMIGRATION SERVICE v. ERRICO(1966) No. 54 Argued: October 20, 1966Decided: December 12, 1966 </s> [Footnote * Together with No. 91, Scott, aka Plummer v. Immigration and Naturalization Service, on certiorari to the United States Court of Appeals for the Second Circuit. </s> Section 241 (f) of the Immigration and Nationality Act, which exempts from deportation an alien who obtained a visa and entry to the United States by fraud and misrepresentation where the alien is the spouse, parent or child of an American citizen or of an alien lawfully admitted for permanent residence, and was "otherwise admissible at the time of entry," is construed, in the light of its humanitarian purpose of preventing the breaking up of families, to save from deportation such aliens who misrepresented their status for the purpose of evading quota restrictions. Pp. 217-225. </s> No. 54, 349 F.2d 541, affirmed; No. 91, 350 F.2d 279, reversed. </s> Solicitor General Marshall argued the cause for petitioner in No. 54 and for respondent in No. 91. With him on the briefs were Assistant Attorney General Vinson, Louis F. Claiborne, L. Paul Winings and Charles Gordon. </s> Frank Ierulli argued the cause for respondent in No. 54. With him on the brief was Edwin J. Peterson. </s> Julius C. Biervliet argued the cause for petitioner in No. 91. With him on the brief was Edward Q. Carr, Jr. </s> MR. CHIEF JUSTICE WARREN delivered the opinion of the Court. </s> We granted certiorari in these cases to resolve a conflict between the Second and Ninth Circuits on their interpretations of 241 (f) of the Immigration and [385 U.S. 214, 215] Nationality Act. 1 The issue is identical in both cases and, therefore, lends itself to a single opinion. </s> Section 241 (f) reads as follows: </s> "The provisions of this section relating to the deportation of aliens within the United States on the ground that they were excludable at the time of entry as aliens who have sought to procure, or have procured visas or other documentation, or entry into the United States by fraud or misrepresentation shall not apply to an alien otherwise admissible at the time of entry who is the spouse, parent, or a child of a United States citizen or of an alien lawfully admitted for permanent residence." </s> The issue is whether the statute saves from deportation an alien who misrepresents his status for the purpose of evading quota restrictions, if he has the necessary familial relationship to a United States citizen or lawful permanent resident. </s> Respondent Errico in No. 54, a native of Italy, falsely represented to the immigration authorities that he was a skilled mechanic with specialized experience in repairing foreign automobiles. On the basis of that misrepresentation he was granted first preference quota status under the statutory preference scheme then in effect, and entered the United States in 1959 with his wife. A child was born to the couple in 1960 and acquired United States citizenship at birth. In 1963 deportation proceedings were commenced against Errico on the ground that he was excludable at the time of entry as not "of the proper status under the quota specified in the immigrant visa." 2 </s> [385 U.S. 214, 216] Throughout the proceedings Errico insisted that he was saved from deportation by 241 (f). The special inquiry officer of the Immigration and Naturalization Service ruled that relief under 241 (f) was not available because Errico had not complied with quota requirements and, hence, was not "otherwise admissible at the time of entry." The Board of Immigration Appeals affirmed the deportation order but the Court of Appeals for the Ninth Circuit reversed, holding that the construction of the statute adopted by the Board would strip it of practically all meaning, since a material misrepresentation would presumably be given to conceal some factor that would bear on admissibility. 349 F.2d 541. We granted certiorari. 383 U.S. 941 . </s> Petitioner Scott in No. 91, a native of Jamaica, contracted a marriage with a United States citizen by proxy solely for the purpose of obtaining nonquota status for entry into the country. She has never lived with her husband and never intended to do so. After entering the United States in 1958, she gave birth to an illegitimate child, who became an American citizen at birth. When the fraud was discovered, deportation proceedings were begun, and a special inquiry officer of the Immigration and Naturalization Service found her deportable on the ground that she was not a nonquota immigrant as specified in her visa. 3 The Board of Immigration Appeals affirmed, and the Court of Appeals for the Second Circuit affirmed the Board. 350 F.2d 279. The court agreed with the Board of Immigration Appeals that a sham marriage contracted solely to circumvent the immigration laws would not confer nonquota status on an alien as the spouse of an American citizen. It also affirmed the ruling that Mrs. Scott was not entitled to relief under 241 (f) because she was not otherwise admissible [385 U.S. 214, 217] at the time of entry, since her country's quota was over-subscribed. We granted certiorari. 383 U.S. 941 . </s> At the outset it should be noted that even the Government agrees that 241 (f) cannot be applied with strict literalness. Literally, 241 (f) applies only when the alien is charged with entering in violation of 212 (a)(19) of the statute, which excludes from entry "[a]ny alien who . . . has procured a visa or other documentation . . . by fraud, or by willfully misrepresenting a material fact." 4 Under this interpretation, an alien who entered by fraud could be deported for having entered with a defective visa or for other documentary irregularities even if he would have been admissible if he had not committed the fraud. The Government concedes that such an interpretation would be inconsistent with the manifest purpose of the section, and the administrative authorities have consistently held that 241 (f) waives any deportation charge that results directly from the misrepresentation regardless of the section of the statute under which the charge was brought, provided that the alien was "otherwise admissible at the time of entry." 5 The Government's argument in both cases is that to be otherwise admissible at the time of entry the alien must show that he would have been admitted even if he had not lied, and that the aliens in these cases would not have been admitted because of the quota restrictions. It is the argument of the aliens that our adoption of the government thesis would negate the intention of Congress to apply fair humanitarian standards in granting relief from the consequences of their fraud to aliens who are close relatives of United States citizens, and that the statute would have practically no effect if construed as the Government argues, since it [385 U.S. 214, 218] requires a considerable stretch of the imagination to conceive of an alien making a material misrepresentation that did not conceal some factor that would make him inadmissible. </s> The sharp divergence of opinion among the circuit judges in these cases indicates that the meaning of the words "otherwise admissible" is not obvious. An interpretation of these words requires close attention to the language of 241 (f), to the language of its predecessor, 7 of the 1957 Act, 6 and to the legislative history of these provisions. </s> The legislative history begins with the enactment of the Displaced Persons Act of 1948, 62 Stat. 1009. This Act provided for the admission to the United States of thousands of war refugees, many from countries that had fallen behind the Iron Curtain. Some of these refugees misrepresented their nationality or homeland while in Europe to avoid being repatriated to a Communist country. In so doing, however, they fell afoul of 10 of the Act, which provided that persons making willful misrepresentations for the purpose of gaining admission "shall thereafter not be admissible into the United States." The plight of these refugees, who were excluded from the United States for misrepresentations that were generally felt to be justifiable, inspired recurring proposals for statutory reform. When the Act was revised and codified in 1952, the House Committee recommended adding a provision to save such refugees from deportation when they had misrepresented their nationality or homeland only to avoid repatriation and persecution. 7 The Conference Committee deleted the provision, but announced its sympathy with the refugees in the following terms: </s> "It is also the opinion of the conferees that the sections of the bill which provide for the exclusion [385 U.S. 214, 219] of aliens who obtained travel documents by fraud or by willfully misrepresenting a material fact, should not serve to exclude or to deport certain bona fide refugees who in fear of being forcibly repatriated to their former homelands misrepresented their place of birth when applying for a visa and such misrepresentation did not have as its basis the desire to evade the quota provisions of the law or an investigation in the place of their former residence. The conferees wish to emphasize that in applying fair humanitarian standards in the administrative adjudication of such cases, every effort is to be made to prevent the evasion of law by fraud and to protect the interest of the United States." H. R. Rep. No. 2096, 82d Cong., 2d Sess., p. 128 (1952). </s> The Immigration and Naturalization Service and the Attorney General did not construe the statute as the Conference Committee had recommended, believing that the explicit statutory language did not allow for an exemption for justifiable misrepresentations. Refugees who misrepresented their place of origin were always found to have concealed a material fact, since the misrepresentation hindered an investigation of their background. 8 </s> The misrepresentation section was not the only provision of the 1952 legislation that was widely thought to be unnecessarily harsh and restrictive, and in 1957 Congress passed legislation alleviating in many respects the stricter provisions of the earlier legislation. The purpose of the 1957 Act is perfectly clear from its terms, as well as from the relevant House and Senate Committee [385 U.S. 214, 220] Reports. 9 The most important provisions of the Act provide for special nonquota status for the adopted children or illegitimate children of immigrant parents, and for orphans who have been or are to be adopted by United States citizens. Other important provisions allow the Attorney General to waive certain grounds for exclusion or deportation, including affliction with tuberculosis or conviction of a crime involving moral turpitude, on behalf of aliens who are near relatives of United States citizens or of aliens lawfully admitted for permanent residence. The intent of the Act is plainly to grant exceptions to the rigorous provisions of the 1952 Act for the purpose of keeping family units together. Congress felt that, in many circumstances, it was more important to unite families and preserve family ties than it was to enforce strictly the quota limitations or even the many restrictive sections that are designed to keep undesirable or harmful aliens out of the country. 10 </s> In this context it is not surprising that Congress also granted relief to aliens facing exclusion or deportation [385 U.S. 214, 221] because they had gained entry through misrepresentation. Section 7 of the 1957 Act provided that: </s> "The provisions of section 241 of the Immigration and Nationality Act relating to the deportation of aliens within the United States on the ground that they were excludable at the time of entry as (1) aliens who have sought to procure, or have procured visas or other documentation, or entry into the United States by fraud or misrepresentation, or (2) aliens who were not of the nationality specified in their visas, shall not apply to an alien otherwise admissible at the time of entry who (A) is the spouse, parent, or a child of a United States citizen or of an alien lawfully admitted for permanent residence; or (B) was admitted to the United States between December 22, 1945, and November 1, 1954, both dates inclusive, and misrepresented his nationality, place of birth, identity, or residence in applying for a visa: Provided, That such alien described in clause (B) shall establish to the satisfaction of the Attorney General that the misrepresentation was predicated upon the alien's fear of persecution because of race, religion, or political opinion if repatriated to his former home or residence, and was not committed for the purpose of evading the quota restrictions of the immigration laws or an investigation of the alien at the place of his former home, or residence, or elsewhere. After the effective date of this Act, any alien who is the spouse, parent, or child of a United States citizen or of an alien lawfully admitted for permanent residence and who is excludable because (1) he seeks, has sought to procure, or has procured, a visa or other documentation, or entry into the United States, by fraud or misrepresentation, or (2) he admits the commission of [385 U.S. 214, 222] perjury in connection therewith, shall hereafter be granted a visa and admitted to the United States for permanent residence, if otherwise admissible, if the Attorney General in his discretion has consented to the alien's applying or reapplying for a visa and for admission to the United States." </s> This section waived deportation under certain circumstances for two classes of aliens who had entered by fraud or misrepresentation. First, an alien who was "the spouse, parent, or a child of a United States citizen . . ." was saved from deportation for his fraud if he was "otherwise admissible at the time of entry." Second, an alien who entered during the postwar period and misrepresented his nationality, place of birth, identity, or residence was saved from deportation if he was "otherwise admissible at the time of entry" and if he could </s> "establish to the satisfaction of the Attorney General that the misrepresentation was predicated upon the alien's fear of persecution because of race, religion, or political opinion if repatriated to his former home or residence, and was not committed for the purpose of evading the quota restrictions of the immigration laws or an investigation of the alien at the place of his former home, or residence, or elsewhere." </s> This language would be meaningless if an alien who committed fraud for the purpose of evading quota restrictions would be deportable as not "otherwise admissible at the time of entry." Congress must have felt that aliens who evaded quota restrictions by fraud would be "otherwise admissible at the time of entry" or it would not have found it necessary to provide further that, in the case of an alien not possessing a close familial relationship to a United States citizen or lawful permanent [385 U.S. 214, 223] resident, the fraud must not be for the purpose of evading quota restrictions. </s> This conclusion is reinforced by the fact that Congress further specified that the aliens who were not close relatives of United States citizens must establish that their fraud was not committed for the purpose of evading an investigation. Fraud for the purpose of evading an investigation, if forgiven by the statute, would clearly leave the alien "otherwise admissible" if there were no other disqualifying factor. Elementary principles of statutory construction lead to the conclusion that Congress meant to specify two specific types of fraud that would leave an alien "otherwise admissible" but that would nonetheless bar relief to those aliens who could not claim close relationship with a United States citizen or alien lawfully admitted for permanent residence. </s> The present 241 (f) is essentially a re-enactment of 7 of the 1957 Act. The legislative history leaves no doubt that no substantive change in the section was intended. 11 The provision dealing with aliens who had entered the United States between 1945 and 1954, and had misrepresented their nationality for fear of persecution or repatriation, was omitted because it had accomplished its purpose; the rest of the section was retained intact. 12 It could hardly be argued that Congress intended to change the construction of the statute by this codification. </s> The intent of 7 of the 1957 Act not to require that aliens who are close relatives of United States citizens have complied with quota restrictions to escape deportation for their fraud is clear from its language, and there is nothing in the legislative history to suggest that Congress had in mind a contrary result. The only specific [385 U.S. 214, 224] reference to the part of 7 that deals with close relatives of United States citizens or residents is in the House Committee Report, and it says only that most of the persons eligible for relief would be </s> "Mexican nationals, who, during the time when border-control operations suffered from regrettable laxity, were able to enter the United States, establish a family in this country, and were subsequently found to reside in the United States illegally." H. R. Rep. No. 1199, 85th Cong., 1st Sess., p. 11. </s> Without doubt most of the aliens who had obtained entry into the United States by illegal means were Mexicans, because it has always been far easier to avoid border restrictions when entering from Mexico than when entering from countries that do not have a common land border with the United States. There is nothing in the Committee Report to indicate that relief under the section was intended to be restricted to Mexicans, however. Neither does it follow that, because Mexicans are not subject to quota restrictions, therefore nationals of countries that do have a quota must be within the quota to obtain relief. </s> The construction of the statute that we adopt in these cases is further reinforced when the section is regarded in the context of the 1957 Act. The fundamental purpose of this legislation was to unite families. Refugees from Communist lands were also benefited, but the Act principally granted relief to persons who would be temporarily or permanently separated from their nearest relatives if the strict requirements of the Immigration and Nationality Act, including the national quotas, were not relaxed for them. It was wholly consistent with this purpose for Congress to provide that immigrants who gained admission by misrepresentation, perhaps many years ago, should not be deported because their countries' quotas were oversubscribed when they entered if the [385 U.S. 214, 225] effect of deportation would be to separate families composed in part of American citizens or lawful permanent residents. </s> Even if there were some doubt as to the correct construction of the statute, the doubt should be resolved in favor of the alien. As this Court has held, even where a punitive section is being construed: </s> "We resolve the doubts in favor of that construction because deportation is a drastic measure and at times the equivalent of banishment or exile, Delgadillo v. Carmichael, 332 U.S. 388 . It is the forfeiture for misconduct of a residence in this country. Such a forfeiture is a penalty. To construe this statutory provision less generously to the alien might find support in logic. But since the stakes are considerable for the individual, we will not assume that Congress meant to trench on his freedom beyond that which is required by the narrowest of several possible meanings of the words used." Fong Haw Tan v. Phelan, 333 U.S. 6, 10 . </s> See also Barber v. Gonzales, 347 U.S. 637, 642 -643. The 1957 Act was not a punitive statute, and 7 of that Act, now codified as 241 (f), in particular was designed to accomplish a humanitarian result. We conclude that to give meaning to the statute in the light of its humanitarian purpose of preventing the breaking up of families composed in part at least of American citizens, the conflict between the circuits must be resolved in favor of the aliens, and that the Errico decision must be affirmed and the Scott decision reversed. </s> It is so ordered. </s> Footnotes [Footnote 1 75 Stat. 655 (1961), 8 U.S.C. 1251 (f). </s> [Footnote 2 Section 211 (a) (4) of the Immigration and Nationality Act, 66 Stat. 181 (1952), later amended, 79 Stat. 917 (1965), 8 U.S.C. 1181 (a) (1964 ed., Supp. I). Aliens who were excludable at the time of entry under the law then existing are deportable under 241 (a)(1), 66 Stat. 204 (1952), as amended, 8 U.S.C. 1251 (a)(1). </s> [Footnote 3 Section 211 (a) (3), 66 Stat. 181 (1952), later amended, 79 Stat. 917 (1965), 8 U.S.C. 1181 (a) (1964 ed., Supp. I). </s> [Footnote 4 66 Stat. 183 (1952), as amended, 8 U.S.C. 1182 (a) (19). </s> [Footnote 5 See Matter of S - , 7 I. & N. Dec. 715 (1958); Matter of Y - , 8 I. & N. Dec. 143 (1959). </s> [Footnote 6 Pub. L. 85-316, 71 Stat. 639 (1957). </s> [Footnote 7 See H. R. Rep. No. 1365, 82d Cong., 2d Sess., p. 128 (1952). </s> [Footnote 8 See Matter of B - and P - , 2 I. & N. Dec. 638 (1947); H. R. Rep. No. 1199, 85th Cong., 1st Sess., p. 10 (1957). </s> [Footnote 9 "The legislative history of the Immigration and Nationality Act clearly indicates that the Congress intended to provide for a liberal treatment of children and was concerned with the problem of keeping families of United States citizens and immigrants united." H. R. Rep. No. 1199, 85th Cong., 1st Sess., p. 7 (1957). See also S. Rep. No. 1057, 85th Cong., 1st Sess. (1957). </s> [Footnote 10 It is in this context that the legislative history cited in the dissent should be understood. The remarks of Senator Eastland and Congressman Celler quoted in footnote 4 of the dissent in context do not refer to 7 of the Act but to the provisions of the bill providing for the adoption of alien orphans. Furthermore, Senator Eastland and Congressman Celler did not mean that no exceptions to the quota requirements were intended to be created, because the basic purpose of the bill was to relax the quota system for adopted children and for certain other classes of aliens deemed deserving of relief. They were reassuring their colleagues that no fundamental changes in the quota system were contemplated. </s> [Footnote 11 H. R. Rep. No. 1086, 87th Cong., 1st Sess., p. 37 (1961). See also 107 Cong. Rec. 19653-19654 (1961) (remarks of Senator Eastland). </s> [Footnote 12 H. R. Rep. No. 1086, 87th Cong., 1st Sess., p. 37 (1961). </s> MR. JUSTICE STEWART, with whom MR. JUSTICE HARLAN and MR. JUSTICE WHITE join, dissenting. </s> The facts in one of these cases (No. 91) vividly illustrate the effect of the Court's interpretation of 241 (f) [385 U.S. 214, 226] of the Immigration and Nationality Act. The petitioner, a resident of Jamaica, paid for a sham marriage with an American citizen. A ceremony was held, but the petitioner and her "husband" parted immediately and have not seen each other since. However, the pretended marriage served its purpose; the petitioner was admitted into this country as a nonquota immigrant upon her false representation that she was the wife of a United States citizen. After this fraudulent entry she managed to become the actual parent of a United States citizen by conceiving and bearing an illegitimate child here. </s> The Court holds that this unsavory series of events gives the petitioner an unqualified right under 241 (f) to remain in this country ahead of all the honest people waiting in Jamaica and elsewhere to gain lawful entry. 1 I can find no support in the statute for such an odd and inequitable result. </s> Section 241 (f) provides as follows: </s> "The provisions of this section relating to the deportation of aliens within the United States on the ground that they were excludable at the time of entry as aliens who have sought to procure, or have procured visas or other documentation, or entry into the United States by fraud or misrepresentation shall not apply to an alien otherwise admissible at the time of entry who is the spouse, parent, or a child of a United States citizen or of an alien lawfully admitted for permanent residence." </s> It seems clear to me, for two separate and independently sufficient reasons, that this statute does not operate to bar the deportation of the aliens in the cases now [385 U.S. 214, 227] before us. In the first place, 241 (f) has application only to the deportation provisions which are based upon fraudulent entry, and the aliens in these two cases were not ordered to be deported under those provisions. Secondly, even if it were generally applicable, 241 (f) does not cover the aliens involved in these two cases, because neither of them was "otherwise admissible" at the time of entry. </s> I. </s> Section 241 (f) by its terms neutralizes only those "provisions . . . relating to the deportation of aliens within the United States on the ground that they . . . sought to procure . . . entry into the United States by fraud or misrepresentation . . . ." Although the aliens in these two cases could have been deported under those "provisions," the deportation proceedings in both cases were in fact brought on grounds unrelated to their procurement of fraudulent visas. Both aliens were ordered to be deported, not because of their fraud, but because they were not properly within their countries' quotas. </s> The plain terms of 241 (f), therefore, do not even potentially apply to these aliens. 2 To hold that 241 (f) is relevant to these cases is tantamount to holding that [385 U.S. 214, 228] it is applicable to bar deportation based on any ground at all so long as the alien lied about that ground at the time of his unlawful entry. 3 I think nothing could be further from the statutory language or the congressional purpose. </s> II. </s> But even if 241 (f) were generally applicable, these aliens could not claim its benefits because they were not within their respective national immigration quotas and therefore were not "otherwise admissible" at the time they entered the United States. That is the clear import of the statutory qualification, if its words are to be taken at their face value. That, too, has been the uniform and consistent administrative construction of the statute. See Matter of D'O - , 8 I. & N. Dec. 215 (1958); Matter of Slade, 10 I. & N. Dec. 128 (1962). </s> To except quota requirements of admissibility from the statutory qualification of "otherwise admissible" would undercut the elaborate quota system which was for years at the heart of the immigration laws. Yet the legislative history of the predecessor of 241 (f), 7 of the 1957 Act, makes clear that the limited relief given by the statute was to have no effect at all on the quota system. 4 </s> [385 U.S. 214, 229] </s> Moreover, the consistent use of the same qualifying phrase, "otherwise admissible" in other sections of the Immigration and Nationality Act makes clear that, as a term of art, it includes quota admissibility. The term typically follows a definition of grounds for admissibility or for exceptions to deportation, to insure that all the other relevant requirements of the Act are imposed upon the alien. 5 </s> Thus the plain meaning of the "otherwise admissible" qualification, as well as legislative policy and legislative history, all indicate that the term serves the same basic function in 241 (f) as in other sections of the Act. Fraud is removed as a ground for deportation of those with the requisite family ties, and "otherwise admissible" insures the integrity of the remainder of the statutory scheme. 6 </s> [385 U.S. 214, 230] </s> The Court justifies its disregard of the plain meaning and consistent administrative construction of 241 (f) by resort to the spirit of humanitarianism which is said to have moved Congress to enact the statute. No doubt Congress in 1957 was concerned with giving relief to some aliens who had entered this country by illegal means and established families here. But the people who were to benefit from this genuine human concern were those from countries like Mexico, which had no quota restrictions, and those who had misrepresented their national origins in order to avoid repatriation to Iron Curtain countries. There is nothing to indicate that Congress enacted this legislation to allow wholesale evasion of the Immigration and Nationality Act or as a general reward for fraud. </s> I respectfully dissent. </s> [Footnote 1 When "Mrs. Scott" made her fraudulent entry in 1958, Jamaica had an annual quota of 100 immigrants and a waiting list of 21,759 hopeful applicants. The corresponding figures for Italy in 1959, the year of Mr. Errico's entry, were 5,666 and 162,612. </s> [Footnote 2 The Court states that the Government "concedes" and that "administrative authorities have consistently held that 241 (f) waives any deportation charge that results directly from the misrepresentation." Ante, at 217. But this concession and administrative practice fall far short of covering these cases. For here the grounds for deportation did not "[result] directly from the misrepresentation." They antedated and were the reason for the misrepresentation. The "administrative authorities" cited by the Court turned upon this distinction. In Matter of Y - , 8 I. & N. Dec. 143 (1959), for example, the Board of Immigration Appeals broadened 241 (f) enough to cover fraud-related administrative procedural defects in the alien's entry. It is this construction of 241 (f) which the Government concedes, not the Court's construction which broadens the statute to excuse all disqualifications for entry. </s> [Footnote 3 Thus, a Communist who had lied to the immigration authorities about his party membership at the time of entry could invoke 241 (f) and remain in this country, while one who had told the truth, but was admitted by virtue of an administrative error, could be deported. See 212 (a) (28), Immigration and Nationality Act. </s> [Footnote 4 Senator Eastland, Chairman of the Committee which sponsored the 1957 amendments to the Immigration Act, stated, "the bill does not modify the national origins quota provisions." 103 Cong. Rec. 15487 (Aug. 21, 1957). See also 103 Cong. Rec. 16300 (Aug. 28, 1957) (remarks of Congressman Celler), "[The bill] makes no changes - no changes whatsoever, in the controversial issue of the national origins quota system." </s> Pub. L. 89-236, 79 Stat. 911, made substantial changes in the quota system. But that statute, passed in 1965, hardly indicates a [385 U.S. 214, 229] congressional intent in 1957 or in 1961 (when the present statute was revised) to abandon quota requirements. </s> [Footnote 5 See, e. g., 211 (a) and (b); The War Brides Act, 59 Stat. 659. </s> [Footnote 6 Under 7 of the 1957 Act certain aliens had to establish both that they were "otherwise admissible" and that they had not lied to evade quota restrictions. The Court reasons from this that quota restrictions are not embodied in the "otherwise admissible" qualification. But this reasoning is inconsistent with the Court's conclusion concerning the general applicability of 241 (f), discussed in Part I of this dissent. </s> Section 7 of the earlier Act provided as follows: </s> "The provisions of section 241 of the Immigration and Nationality Act relating to the deportation of aliens within the United States on the ground that they were excludable at the time of entry as (1) aliens who have sought to procure, or have procured visas or other documentation, or entry into the United States by fraud or misrepresentation, or (2) aliens who were not of the nationality specified in their visas, shall not apply to an alien otherwise admissible at the time of entry who . . . ." (Emphasis supplied.) </s> If the present meaning of "otherwise admissible" is to be determined by the 1957 Act, so then must other parts of the statute be similarly determined. Section 241 (f) begins with words almost identical [385 U.S. 214, 230] to those quoted above. But the second ground of applicability - to "aliens who were not of the nationality specified in their visas" - is omitted. Thus, lies about nationality were not forgiven by the first part of the 1957 Act and are not, by the Court's reasoning, excused by 241 (f), the successor statute. And since there is nothing to distinguish lies about nationality that avoid quota restrictions from other lies with the same effect, the reasoning that leads to the Court's conclusion that the aliens were "otherwise admissible" leads also to the conclusion that 241 (f) is not applicable at all in these cases. </s> [385 U.S. 214, 231]

United States Supreme Court DAVENPORT ET AL. v. WASHINGTON EDUCATION ASSOCIATION(2007) No. 05-1589 Argued: January 10, 2007Decided: June 14, 2007 </s> The National Labor Relations Act permits States to regulate their labor relationships with public employees. Many States authorize public-sector unions to negotiate agency-shop agreements that entitle a union to levy fees on employees who are not union members but whom the union represents in collective bargaining. However, the First Amendment prohibits public-sector unions from using objecting nonmembers' fees for ideological purposes not germane to the union's collective-bargaining duties, Abood v. Detroit Bd. of Ed., 431 U.S. 209, 235-236, and such unions must therefore observe various procedural requirements to ensure that an objecting nonmember can keep his fees from being used for such purposes, Teachers v. Hudson, 475 U.S. 292, 304-310. Washington State allows public-sector unions to charge nonmembers an agency fee equivalent to membership dues and to have the employer collect that fee through payroll deductions. An initiative approved by state voters (hereinafter §760) requires a union to obtain the nonmembers' affirmative authorization before using their fees for election-related purposes. Respondent, a public-sector union, sent a "Hudson packet" to all nonmembers twice a year detailing their right to object to the use of fees for nonchargeable expenditures; respondent held any disputed fees in escrow until the Hudson process was complete. In separate lawsuits, petitioners alleged that respondent had failed to obtain the affirmative authorization required by §760 before spending nonmembers' agency fees for electoral purposes. In No. 05-1657, the trial court found a §760 violation and awarded the State monetary and injunctive relief. In No. 05-1589, another judge held that §760 provided a private right of action, certified a class of nonmembers, and stayed the proceedings pending interlocutory appeal. The State Supreme Court held that although a nonmember's failure to object after receiving the Hudson packet did not satisfy §760's affirmative-authorization requirement, that requirement violated the First Amendment. Held:It does not violate the First Amendment for a State to require its public-sector unions to receive affirmative authorization from a nonmember before spending that nonmember's agency fees for election-related purposes. Pp.5-13. (a)It is undeniably unusual for a government agency to give a private entity the power to tax government employees. The notion that §760's modest limitation upon that extraordinary benefit violates the First Amendment is counterintuitive, because it is undisputed that Washington could have restricted public-sector agency fees to the portion of union dues devoted to collective bargaining, or even eliminated them entirely. Washington's far less restrictive limitation on respondent's authorization to exact money from government employees is of no greater constitutional concern. P. 5. </s> (b)The State Supreme Court extended this Court's agency-fee cases well beyond their proper ambit in concluding that those cases, having balanced the constitutional rights of unions and nonmembers, required a nonmember to shoulder the burden of objecting before a union can be barred from spending his fees for purposes impermissible under Abood. The agency-fee cases did not balance constitutional rights in such a manner because unions have no constitutional entitlement to nonmember-employees' fees. The Court has never suggested that the First Amendment is implicated whenever governments limit a union's entitlement to agency fees above and beyond what Abood and Hudson require. The constitutional floor for unions' collection and spending of agency fees is not also a constitutional ceiling for state-imposed restrictions. Hudson's admonition that "'dissent is not to be presumed,'" 475 U.S., at 306, n.16, means only that it would be improper for a court to enjoin the expenditures of all nonmembers' agency fees when a narrower remedy could satisfy statutory or constitutional limitations. Pp.5-7. </s> (c)Contrary to respondent's argument, §760 is not unconstitutional under this Court's campaign-finance cases. For First Amendment purposes, it is immaterial that §760 restricts a union's use of funds only after they are within the union's possession. The fees are in the union's possession only because Washington and its union-contracting government agencies have compelled their employees to pay those fees. The campaign-finance cases deal instead with governmental restrictions on how a regulated entity may spend money that has come into its possession without such coercion. Pp.7-8. </s> (d) While content-based speech regulations are presumptively invalid, see, e.g., R.A.V. v. St. Paul, 505 U.S. 377, 382, strict scrutiny is unwarranted when the risk that the government may drive ideas or viewpoints from the marketplace is attenuated, such as when the government acts in a capacity other than as regulator. Thus, the government can make content-based distinctions when subsidizing speech, see, e.g., Regan v. Taxation With Representation of Wash., 461 U.S. 540, 548-550, and can exclude speakers based on reasonable, viewpoint-neutral subject-matter grounds when permitting speech on government property that is a nonpublic forum, see, e.g., Cornelius v. NAACP Legal Defense & Ed. Fund, Inc., 473 U.S. 788, 799-800, 806. The principle underlying those cases is applicable here. Washington voters did not impermissibly distort the marketplace of ideas when they placed a reasonable, viewpoint-neutral limitation on the State's authorization. They were seeking to protect the integrity of the election process, and their restriction was thus limited to the state-created harm that they sought to remedy. The First Amendment did not compel them to limit public-sector unions' extraordinary entitlement to nonmembers' agency fees more broadly than necessary to vindicate that concern. Pp.8-11. </s> (e) Section 760 is constitutional as applied to public-sector unions. There is no need in these cases to consider its application to private-sector unions. Pp.11-13. No. 05-1589 and No. 05-1657, 156 Wash. 2d 543, 130 P.3d 352, vacated and remanded. Scalia, J., delivered the opinion of the Court, Parts I and II-A and the second paragraph of footnote 2 of which were unanimous, and the remainder of which was joined by Stevens, Kennedy, Souter, Thomas, and Ginsburg, JJ. Breyer, J., filed an opinion concurring in part and concurring in the judgment, in which Roberts, C.J., and Alito, J., joined. </s> GARY DAVENPORT, etal., PETITIONERS </s> 05-1589v. </s> WASHINGTON EDUCATION ASSOCIATION </s> WASHINGTON, PETITIONER </s> 05-1657v. </s> WASHINGTON EDUCATION ASSOCIATION on writs of certiorari to the supreme court ofwashington [June 14, 2007] </s> Justice Scalia delivered the opinion of the Court. </s> The State of Washington prohibits labor unions from using the agency-shop fees of a nonmember for election-related purposes unless the nonmember affirmatively consents. We decide whether this restriction, as applied to public-sector labor unions, violates the First Amendment. I </s> The National Labor Relations Act leaves States free to regulate their labor relationships with their public employees. See 49 Stat. 450, as amended, 29 U.S.C. §152(2). The labor laws of many States authorize a union and a government employer to enter into what is commonly known as an agency-shop agreement. This arrangement entitles the union to levy a fee on employees who are not union members but who are nevertheless represented by the union in collective bargaining. See, e.g., Lehnert v. Ferris Faculty Assn., 500 U.S. 507, 511 (1991). The primary purpose of such arrangements is to prevent nonmembers from free-riding on the union's efforts, sharing the employment benefits obtained by the union's collective bargaining without sharing the costs incurred. See, e.g., Machinists v. Street, 367 U.S. 740, 760-764 (1961). However, agency-shop arrangements in the public sector raise First Amendment concerns because they force individuals to contribute money to unions as a condition of government employment. Thus, in Abood v. Detroit Bd. of Ed., 431 U.S. 209, 235-236 (1977), we held that public-sector unions are constitutionally prohibited from using the fees of objecting nonmembers for ideological purposes that are not germane to the union's collective-bargaining duties. And in Teachers v. Hudson, 475 U.S. 292, 302, 304-310 (1986), we set forth various procedural requirements that public-sector unions collecting agency fees must observe in order to ensure that an objecting nonmember can prevent the use of his fees for impermissible purposes. Neither Hudson nor any of our other cases, however, has held that the First Amendment mandates that a public-sector union obtain affirmative consent before spending a nonmember's agency fees for purposes not chargeable under Abood. The State of Washington has authorized public-sector unions to negotiate agency-shop agreements. Where such agreements are in effect, Washington law allows the union to charge nonmembers an agency fee equivalent to the full membership dues of the union and to have this fee collected by the employer through payroll deductions. See, e.g., Wash. Rev. Code §§41.56.122(1), 41.59.060(2), 41.59.100 (2006). However, §42.17.760 (hereinafter §760), which is a provision of the Fair Campaign Practices Act (a state initiative approved by the voters of Washington in 1992), restricts the union's ability to spend the agency fees that it collects. Section 760, as it stood when the decision under review was rendered, provided: "A labor organization may not use agency shop fees paid by an individual who is not a member of the organization to make contributions or expenditures to influence an election or to operate a political committee, unless affirmatively authorized by the individual."1 </s> Respondent, the exclusive bargaining agent for approximately 70,000 public educational employees, collected agency fees from nonmembers that it represented in collective bargaining. Consistent with its responsibilities under Abood and Hudson (or so we assume for purposes of these cases), respondent sent a "Hudson packet" to all nonmembers twice a year, notifying them of their right to object to paying fees for nonchargeable expenditures, and giving them three options: (1) pay full agency fees by not objecting within 30 days; (2) object to paying for nonchargeable expenses and receive a rebate as calculated by respondent; or (3) object to paying for nonchargeable expenses and receive a rebate as determined by an arbitrator. Respondent held in escrow any agency fees that were reasonably in dispute until the Hudson process was complete. </s> In 2001, respondent found itself in Washington state courts defending, in two separate lawsuits, its expenditures of nonmembers' agency fees. The first lawsuit was brought by the State of Washington, petitioner in No. 05-1657, and the second was brought as a putative class action by several nonmembers of the union, petitioners in No. 05-1589. Both suits claimed that respondent's use of agency fees was in violation of §760. Petitioners alleged that respondent had failed to obtain affirmative authorization from nonmembers before using their agency fees for the election-related purposes specified in §760. In No. 05-1657, after a trial on the merits, the trial court found that respondent had violated §760 and awarded the State both monetary and injunctive relief. In No. 05-1589, a different trial judge held that §760 provided a private right of action, certified the class, and stayed further proceedings pending interlocutory appeal. </s> After intermediate appellate court proceedings, a divided Supreme Court of Washington held that, although a nonmember's failure to object after receiving respondent's "Hudson packet" did not satisfy §760's affirmative-authorization requirement as a matter of state law, the statute's imposition of such a requirement violated the First Amendment of the Federal Constitution. See State ex rel. Washington State Public Disclosure Comm'n v. Washington Ed. Assn., 156 Wash. 2d 543, 553-571, 130 P.3d 352, 356-365 (2006) (en banc). The court reasoned that this Court's agency-fee jurisprudence established a balance between the First Amendment rights of unions and of nonmembers, and that §760 triggered heightened First Amendment scrutiny because it deviated from that balance by imposing on respondent the burden of confirming that a nonmember does not object to the expenditure of his agency fees for electoral purposes. The court also held that §760 interfered with respondent's expressive associational rights under Boy Scouts of America v. Dale, 530 U.S. 640 (2000). We granted certiorari. 548 U.S. ___ (2006). II </s> The public-sector agency-shop arrangement authorizes a union to levy fees on government employees who do not wish to join the union. Regardless of one's views as to the desirability of agency-shop agreements, see Abood, 431 U.S., at 225, n.20, it is undeniably unusual for a government agency to give a private entity the power, in essence, to tax government employees. As applied to agency-shop agreements with public-sector unions like respondent, §760 is simply a condition on the union's exercise of this extraordinary power, prohibiting expenditure of a nonmember's agency fees for election-related purposes unless the nonmember affirmatively consents. The notion that this modest limitation upon an extraordinary benefit violates the First Amendment is, to say the least, counterintuitive. Respondent concedes that Washington could have gone much further, restricting public-sector agency fees to the portion of union dues devoted to collective bargaining. See Brief for Respondent 46-47. Indeed, it is uncontested that it would be constitutional for Washington to eliminate agency fees entirely. See id., at 46 (citing Lincoln Fed. Union v. Northwestern Iron & Metal Co., 335 U.S. 525 (1949)). For the reasons that follow, we conclude that the far less restrictive limitation the voters of Washington placed on respondent's authorization to exact money from government employees is of no greater constitutional concern. A </s> The principal reason the Supreme Court of Washington concluded that §760 was unconstitutional was that it believed that our agency-fee cases, having balanced the constitutional rights of unions and of nonmembers, dictated that a nonmember must shoulder the burden of objecting before a union can be barred from spending his fees for purposes impermissible under Abood. See 156 Wash. 2d, at 557-563, 130 P.3d, at 358-360. The court reached this conclusion primarily because our cases have repeatedly invoked the following proposition: "'[D]issent is not to be presumed--it must affirmatively be made known to the union by the dissenting employee.'" Hudson, 475 U.S., at 306, n.16 (quoting Street, 367 U.S., at 774); see also Abood, supra, at 238. The court concluded that §760 triggered heightened First Amendment scrutiny because it deviated from this perceived constitutional balance by requiring unions to obtain affirmative consent. This interpretation of our agency-fee cases extends them well beyond their proper ambit. Those cases were not balancing constitutional rights in the manner respondent suggests, for the simple reason that unions have no constitutional entitlement to the fees of nonmember-employees. See Lincoln Fed. Union, supra, at 529-531. We have never suggested that the First Amendment is implicated whenever governments place limitations on a union's entitlement to agency fees above and beyond what Abood and Hudson require. To the contrary, we have described Hudson as "outlin[ing] a minimum set of procedures by which a [public-sector] union in an agency-shop relationship could meet its requirement under Abood." Keller v. State Bar of Cal., 496 U.S. 1, 17 (1990) (emphasis added). The mere fact that Washington required more than the Hudson minimum does not trigger First Amendment scrutiny. The constitutional floor for unions' collection and spending of agency fees is not also a constitutional ceiling for state-imposed restrictions. </s> The Supreme Court of Washington read far too much into our admonition that "dissent is not to be presumed." We meant only that it would be improper for a court to enjoin the expenditure of the agency fees of all employees, including those who had not objected, when the statutory or constitutional limitations established in those cases could be satisfied by a narrower remedy. See, e.g., Street, supra, at 768-770, 772-775 (discussing possible judicial remedies for violation of a federal statute that forbade unions from spending objecting employees' fees for political purposes); Abood, supra, at 235-236, 237-242 (discussing possible judicial remedies for a state statute that unconstitutionally authorized a public-sector union to spend objecting nonmembers' agency fees for ideological purposes not germane to collective bargaining); Hudson, supra, at 302, 304-310 (setting forth procedures necessary to prevent agency-shop arrangements from violating Abood). But, as the dissenting justices below correctly recognized, our repeated affirmation that courts have an obligation to interfere with a union's statutory entitlement no more than is necessary to vindicate the rights of nonmembers does not imply that legislatures (or voters) themselves cannot limit the scope of that entitlement. B </s> Respondent defends the judgment below on a ground quite different from the mistaken rationale adopted by the Supreme Court of Washington. Its argument begins with the premise that §760 is a limitation on how the union may spend "its" money, citing for that proposition the Washington Supreme Court's description of §760 as encumbering funds that are lawfully within a union's possession. Brief for Respondent 21; 156 Wash. 2d, at 568-569, 130 P.3d, at 363-364. Relying on that premise, respondent invokes First Nat. Bank of Boston v. Bellotti, 435 U.S. 765 (1978), Austin v. Michigan Chamber of Commerce, 494 U.S. 652 (1990), and related campaign-finance cases. It argues that, under the rigorous First Amendment scrutiny required by those cases, §760 is unconstitutional because it applies to ballot propositions and because it does not limit equivalent election-related expenditures by corporations. The Supreme Court of Washington's description of §760 notwithstanding, our campaign-finance cases are not on point. For purposes of the First Amendment, it is entirely immaterial that §760 restricts a union's use of funds only after those funds are already within the union's lawful possession under Washington law. What matters is that public-sector agency fees are in the union's possession only because Washington and its union-contracting government agencies have compelled their employees to pay those fees. The cases upon which respondent relies deal with governmental restrictions on how a regulated entity may spend money that has come into its possession without the assistance of governmental coercion of its employees. See, e.g., Bellotti, supra, at 767-768; Austin, supra, at 654-656. As applied to public-sector unions, §760 is not fairly described as a restriction on how the union can spend "its" money; it is a condition placed upon the union's extraordinary state entitlement to acquire and spend other people's money.2 </s> The question that must be asked, therefore, is whether §760 is a constitutional condition on the authorization that public-sector unions enjoy to charge government employees agency fees. Respondent essentially answers that the statute unconstitutionally draws distinctions based on the content of the union's speech, requiring affirmative consent only for election-related expenditures while permitting expenditures for the rest of the purposes not chargeable under Abood unless the nonmember objects. The contention that this amounts to unconstitutional content-based discrimination is off the mark. </s> It is true enough that content-based regulations of speech are presumptively invalid. See, e.g., R.A.V. v. St. Paul, 505 U.S. 377, 382 (1992) (citing cases). We have recognized, however, that "[t]he rationale of the general prohibition . . . is that content discrimination 'raises the specter that the Government may effectively drive certain ideas or viewpoints from the marketplace.'" Id., at 387 (quoting Simon & Schuster, Inc. v. Members of N. Y. State Crime Victims Bd., 502 U.S. 105, 116 (1991)). And we have identified numerous situations in which that risk is inconsequential, so that strict scrutiny is unwarranted. For example, speech that is obscene or defamatory can be constitutionally proscribed because the social interest in order and morality outweighs the negligible contribution of those categories of speech to the marketplace of ideas. See, e.g., R.A.V., 505 U.S., at 382-384. Similarly, content discrimination among various instances of a class of proscribable speech does not pose a threat to the marketplace of ideas when the selected subclass is chosen for the very reason that the entire class can be proscribed. See id., at 388 (confirming that governments may choose to ban only the most prurient obscenity). Of particular relevance here, our cases recognize that the risk that content-based distinctions will impermissibly interfere with the marketplace of ideas is sometimes attenuated when the government is acting in a capacity other than as regulator. Accordingly, it is well established that the government can make content-based distinctions when it subsidizes speech. See, e.g., Regan v. Taxation With Representation of Wash., 461 U.S. 540, 548-550 (1983). And it is also black-letter law that, when the government permits speech on government property that is a nonpublic forum, it can exclude speakers on the basis of their subject matter, so long as the distinctions drawn are viewpoint neutral and reasonable in light of the purpose served by the forum. See, e.g., Cornelius v. NAACP Legal Defense & Ed. Fund, Inc., 473 U.S. 788, 799-800, 806 (1985). The principle underlying our treatment of those situations is equally applicable to the narrow circumstances of these cases. We do not believe that the voters of Washington impermissibly distorted the marketplace of ideas when they placed a reasonable, viewpoint-neutral limitation on the State's general authorization allowing public-sector unions to acquire and spend the money of government employees. As the Supreme Court of Washington recognized, the voters of Washington sought to protect the integrity of the election process, see 156 Wash. 2d, at 563, 130 P.3d, at 361, which the voters evidently thought was being impaired by the infusion of money extracted from nonmembers of unions without their consent. The restriction on the state-bestowed entitlement was thus limited to the state-created harm that the voters sought to remedy. The voters did not have to enact an across-the-board limitation on the use of nonmembers' agency fees by public-sector unions in order to vindicate their more narrow concern with the integrity of the election process. We said in R.A.V. that, when totally proscribable speech is at issue, content-based regulation is permissible so long as "there is no realistic possibility that official suppression of ideas is afoot." 505 U.S., at 390. We think the same is true when, as here, an extraordinary and totally repealable authorization to coerce payment from government employees is at issue. Even if it be thought necessary that the content limitation be reasonable and viewpoint neutral, cf. Cornelius, supra, at 806, the statute satisfies that requirement. Quite obviously, no suppression of ideas is afoot, since the union remains as free as any other entity to participate in the electoral process with all available funds other than the state-coerced agency fees lacking affirmative permission. Cf. Regan, supra, at 549-550 (First Amendment does not require the government to enhance a person's ability to speak). In sum, given the unique context of public-sector agency-shop arrangements, the content-based nature of §760 does not violate the First Amendment. </s> We emphasize an important limitation upon our holding: we uphold §760 only as applied to public-sector unions such as respondent. Section 760 applies on its face to both public- and private-sector unions in Washington.3 Since private-sector unions collect agency fees through contractually required action taken by private employers rather than by government agencies, Washington's regulation of those private arrangements presents a somewhat different constitutional question.4 We need not answer that question today, however, because at no stage of this litigation has respondent made an overbreadth challenge. See generally Schaumburg v. Citizens for Better Environment, 444 U.S. 620, 633-634 (1980) (applying overbreadth doctrine).5 Instead, respondent has consistently argued simply that §760 is unconstitutional as applied to itself. The only purpose for which it has noted the statute's applicability to private-sector unions is to establish that the statute was meant to be a general limitation on electoral speech, and not just a condition on state agencies' authorization of compulsory agency fees. See Brief for Respondent 24, 48. That limited contention, however, is both unconvincing and immaterial. The purpose of the voters of Washington was undoubtedly the general one of protecting the integrity of elections by limiting electoral spending in certain ways. But §760, though applicable to all unions, served that purpose through very different means depending on the type of union involved: It conditioned public-sector unions' authorization to coerce fees from government employees at the same time that it regulated private-sector unions' collective-bargaining agreements. The constitutionality of the means chosen with respect to private-sector unions has no bearing on whether §760 is constitutional as applied to public-sector unions. *  *  * </s> We hold that it does not violate the First Amendment for a State to require that its public-sector unions receive affirmative authorization from a nonmember before spending that nonmember's agency fees for election-related purposes. We therefore vacate the judgment of the Supreme Court of Washington and remand the cases for further proceedings not inconsistent with this opinion. It is so ordered. </s> GARY DAVENPORT, etal., PETITIONERS </s> 05-1589v. </s> WASHINGTON EDUCATION ASSOCIATION </s> WASHINGTON, PETITIONER </s> 05-1657v. </s> WASHINGTON EDUCATION ASSOCIATION on writs of certiorari to the supreme court of washington [June 14, 2007] </s> Justice Breyer, with whom The Chief Justice and Justice Alito join, concurring in part and concurring in the judgment. </s> I agree with the Court that the Supreme Court of Washington's decision rested entirely on flawed interpretations of this Court's agency-fee cases and our decision in Boy Scouts of America v. Dale, 530 U.S. 640 (2000). I therefore concur in the Court's judgment, and I join Parts I and II-A and the second paragraph of n.2 of the Court's opinion. However, I do not join Part II-B, which addresses numerous arguments that respondent Washington Education Association raised for the first time in its briefs before this Court. See, e.g., State ex rel. Washington State Public Disclosure Comm'n v. Washington Ed. Assn., 156 Wash. 2d 543, 565, n.6, 130 P.3d 352, 362, n.6, (2006) (en banc) (noting that one of these arguments was neither raised nor addressed below). I would not address those arguments until the lower courts have been given the opportunity to address them. See, e.g., National Collegiate Athletic Assn. v. Smith, 525 U.S. 459, 469-470 (1999). </s> FOOTNOTESFootnote *Together with No. 05-1657, Washington v. Washington Education Association, also on certiorari to the same court. FOOTNOTESFootnote 1Washington has since amended §760 to codify a narrower interpretation of "use" of agency-shop fees than the interpretation adopted below by the state trial court that passed on that question. See Supp. Brief for Respondent 2-3. As respondent concedes, however, id., at 3, these cases are not moot. Because petitioners sought money damages for respondent's alleged violation of the prior version of §760, it still matters whether the Supreme Court of Washington was correct to hold that that version was inconsistent with the First Amendment. Our analysis of whether §760's affirmative-authorization requirement violates the constitutional rights of respondent is not affected by the amendment, which merely causes that requirement to be applicable less frequently than the state trial court thought. Footnote 2Respondent might have had a point if, as it suggests at times, the statute burdened its ability to spend the dues of its own members. But §760 restricts solely the "use [of] agency shop fees paid by an individual who is not a member." The only reason respondent's use of its members' dues was burdened is that respondent chose to commingle those dues with nonmembers' agency fees. See App. to Pet. for Cert. in No. 05-1657, pp. 99a, 105a-107a. Respondent's improvident accounting practices do not render §760 unconstitutional. We note as well that, given current technology, it will not likely be burdensome for any nonmember who wishes to do so to provide affirmative authorization for use of his fees for electoral expenditures. </s> For similar reasons, the Supreme Court of Washington's invocation of the union's expressive associational rights under Boy Scouts of America v. Dale, 530 U.S. 640 (2000), was quite misplaced, as respondent basically concedes by not relying upon the case. Section 760 does not compel respondent's acceptance of unwanted members or otherwise make union membership less attractive. See Rumsfeld v. Forum for Academic and Institutional Rights, Inc., 547 U.S. 47, 68-69 (2006). Footnote 3Under the National Labor Relations Act, it is generally not an unfair labor practice for private-sector employers to enter into agency-shop arrangements, see 29 U.S.C. §158(a)(3), but States retain the power under the Act to ban the execution or application of such agreements, see §164(b). Footnote 4We do not suggest that the answer must be different. We have previously construed the authorization of private-sector agency-shop arrangements in the National Labor Relations Act in a manner that is arguably content based. See Communications Workers v. Beck, 487 U.S. 735, 738, 762-763 (1988) (§158(a)(3) authorizes expenditure of private-sector agency fees over a nonmember's objection only in furtherance of the union's obligations as exclusive bargaining representative); Ellis v. Railway Clerks, 466 U.S. 435, 450-451 (1984) (expenditures on publications that report about a union's activities as exclusive bargaining representative can be charged to nonmembers over their objection). Footnote 5Nor is it clear that the "strong medicine" of the overbreadth doctrine is even available to challenge a statute such as §760. See Virginia v. Hicks, 539 U.S. 113, 118-120 (2003) (recognizing that the doctrine's benefits--eliminating the chilling effect that overbroad laws have on nonparties--must be weighed against its costs--blocking perfectly constitutional applications of a law). It may be argued that the only other targets of the statute's narrow prohibition, private-sector unions, are sufficiently capable of defending their own interests in court that they will not be significantly "chilled."

United States Supreme Court ARKANSAS BEST CORP. v. COMMISSIONER(1988) No. 86-751 Argued: December 9, 1987Decided: March 7, 1988 </s> Under 1221 of the Internal Revenue Code, the term "capital asset" means "property held by the taxpayer (whether or not connected with his trade or business), but does not include" five specified classes of property. Between 1968 and 1974, petitioner, a diversified holding company, acquired approximately 65% of a bank's stock. The bank was apparently prosperous until 1972, when federal examiners classified it as a problem bank. In 1975, petitioner sold the bulk of the stock at a loss, which it claimed as an ordinary-loss deduction on its federal income tax return for that year. The Commissioner of Internal Revenue disallowed the deduction, finding that the loss was a capital loss rather than an ordinary loss. The Tax Court, relying on cases interpreting Corn Products Refining Co. v. Commissioner, 350 U.S. 46 , held that, since the stock acquired through 1972 was purchased with a substantial investment purpose, it was a capital asset under 1221 and therefore gave rise to a capital loss when it was sold; however, the loss realized on the stock acquired after 1972 was subject to ordinary-loss treatment since that stock had been bought and held exclusively for the business purpose of protecting petitioner's reputation by fending off the bank's failure. The Court of Appeals reversed the latter determination, ruling that all of the stock sold in 1975 was subject to capital-loss treatment. </s> Held: </s> A taxpayer's motivation in purchasing an asset is irrelevant to the question whether it falls within the broad definition of "capital asset" in 1221. Petitioner's reading of Corn Products as authorizing ordinary-asset treatment for any asset acquired and held for business rather than investment purposes is too expansive. That reading finds no support in 1221's language, which does not mention a business-motive test, and is in direct conflict with 1221's broad definition of capital asset. Similarly, the contention that 1221's five listed exceptions are merely illustrative rather than exhaustive is refuted by the statute's "does not include" phrase, and by the legislative history and the applicable Treasury regulation. Moreover, petitioner's reading would make surplusage of three of the statutory exceptions, whose excluded classes of property would undoubtedly satisfy a business-motive test. Corn Products must instead be interpreted as standing for the narrow [485 U.S. 212, 213] proposition that "hedging" transactions that are an integral part of a business' inventory-purchase system fall within 1221's first exception for "property . . . which would properly be included in the [taxpayer's] inventory." Since petitioner, which is not a dealer in securities, has never suggested that its bank stock falls within the inventory exclusion, Corn Products has no application in the present context. Because petitioner's bank stock falls within 1221's broad definition of "capital asset" and is outside the classes of excluded property, the loss arising from its sale is a capital loss. Pp. 216-223. </s> 800 F.2d 215, affirmed. </s> MARSHALL, J., delivered the opinion of the Court, in which all other Members joined, except KENNEDY, J., who took no part in the consideration or decision of the case. </s> Vester T. Hughes, Jr., argued the cause for petitioner. With him on the briefs were David Bryant and Stephen D. Good. </s> Alan I. Horowitz argued the cause for respondent. With him on the brief were Solicitor General Fried, Acting Assistant Attorney General Durney, Deputy Solicitor General Lauber, and Michael L. Paup. * </s> [Footnote * Thomas Smidt II, Charles L. Saunders, Jr., and A. Jerry Busby filed a brief for Circle K. Corp. as amicus curiae urging reversal. </s> Briefs of amici curiae were filed for Kraft, Inc., by Don S. Harnack, James L. Malone III, Richard A. Hanson, and Thomas J. McHugh; and for the National Council of Farmer Cooperatives by Arthur E. Bryan, Jr., George W. Benson, and James S. Krzyminski. </s> JUSTICE MARSHALL delivered the opinion of the Court. </s> The issue presented in this case is whether capital stock held by petitioner Arkansas Best Corporation (Arkansas Best) is a "capital asset" as defined in 1221 of the Internal Revenue Code regardless of whether the stock was purchased and held for a business purpose or for an investment purpose. </s> I </s> Arkansas Best is a diversified holding company. In 1968 it acquired approximately 65% of the stock of the National [485 U.S. 212, 214] Bank of Commerce (Bank) in Dallas, Texas. Between 1969 and 1974, Arkansas Best more than tripled the number of shares it owned in the Bank, although its percentage interest in the Bank remained relatively stable. These acquisitions were prompted principally by the Bank's need for added capital. Until 1972, the Bank appeared to be prosperous and growing, and the added capital was necessary to accommodate this growth. As the Dallas real estate market declined, however, so too did the financial health of the Bank, which had a heavy concentration of loans in the local real estate industry. In 1972, federal examiners classified the Bank as a problem bank. The infusion of capital after 1972 was prompted by the loan portfolio problems of the bank. </s> Petitioner sold the bulk of its Bank stock on June 30, 1975, leaving it with only a 14.7% stake in the Bank. On its federal income tax return for 1975, petitioner claimed a deduction for an ordinary loss of $9,995,688 resulting from the sale of the stock. The Commissioner of Internal Revenue disallowed the deduction, finding that the loss from the sale of stock was a capital loss, rather than an ordinary loss, and that it therefore was subject to the capital loss limitations in the Internal Revenue Code. 1 </s> Arkansas Best challenged the Commissioner's determination in the United States Tax Court. The Tax Court, relying on cases interpreting Corn Products Refining Co. v. Commissioner, 350 U.S. 46 (1955), held that stock purchased with a substantial investment purpose is a capital asset which, when sold, gives rise to a capital gain or loss, whereas stock purchased and held for a business purpose, without any substantial investment motive, is an ordinary asset whose sale gives rise to ordinary gains or losses. See 83 T. C. 640, [485 U.S. 212, 215] 653-654 (1984). The court characterized Arkansas Best's acquisitions through 1972 as occurring during the Bank's "`growth' phase," and found that these acquisitions "were motivated primarily by investment purpose and only incidentally by some business purpose." Id., at 654. The stock acquired during this period therefore constituted a capital asset, which gave rise to a capital loss when sold in 1975. The court determined, however, that the acquisitions after 1972 occurred during the Bank's "`problem' phase," ibid., and, except for certain minor exceptions, "were made exclusively for business purposes and subsequently held for the same reasons." Id., at 656. These acquisitions, the court found, were designed to preserve petitioner's business reputation, because without the added capital the Bank probably would have failed. Id., at 656-657. The loss realized on the sale of this stock was thus held to be an ordinary loss. </s> The Court of Appeals for the Eighth Circuit reversed the Tax Court's determination that the loss realized on stock purchased after 1972 was subject to ordinary-loss treatment, holding that all of the Bank stock sold in 1975 was subject to capital-loss treatment. 800 F.2d 215 (1986). The court reasoned that the Bank stock clearly fell within the general definition of "capital asset" in Internal Revenue Code 1221, and that the stock did not fall within any of the specific statutory exceptions to this definition. The court concluded that Arkansas Best's purpose in acquiring and holding the stock was irrelevant to the determination whether the stock was a capital asset. We granted certiorari, 480 U.S. 930 , and now affirm. </s> II </s> Section 1221 of the Internal Revenue Code defines "capital asset" broadly as "property held by the taxpayer (whether or not connected with his trade or business)," and then excludes five specific classes of property from capital-asset [485 U.S. 212, 216] status. In the statute's present form, 2 the classes of property exempted from the broad definition are (1) "property of a kind which would properly be included in the inventory of the taxpayer"; (2) real property or other depreciable property used in the taxpayer's trade or business; (3) "a copyright, a literary, musical, or artistic composition," or similar property; (4) "accounts or notes receivable acquired in the ordinary course of trade or business for services rendered" or from the sale of inventory; and (5) publications of the Federal Government. Arkansas Best acknowledges that the Bank stock falls within the literal definition of "capital asset" in 1221, and is outside of the statutory exclusions. It asserts, however, that this determination does not end the inquiry. Petitioner argues that in Corn Products Refining Co. v. Commissioner, supra, this Court rejected a literal reading of 1221, and concluded that assets acquired and sold for ordinary business purposes rather than for investment purposes should be given ordinary-asset treatment. Petitioner's reading of Corn Products finds much support in the academic literature 3 and in the courts. 4 Unfortunately for petitioner, this broad reading finds no support in the language of 1221. [485 U.S. 212, 217] </s> In essence, petitioner argues that "property held by the taxpayer (whether or not connected with his trade or business)" does not include property that is acquired and held for a business purpose. In petitioner's view an asset's status as "property" thus turns on the motivation behind its acquisition. This motive test, however, is not only nowhere mentioned in 1221, but it is also in direct conflict with the parenthetical phrase "whether or not connected with his trade or business." The broad definition of the term "capital asset" explicitly makes irrelevant any consideration of the property's connection with the taxpayer's business, whereas petitioner's rule would make this factor dispositive. 5 </s> In a related argument, petitioner contends that the five exceptions listed in 1221 for certain kinds of property are illustrative, rather than exhaustive, and that courts are therefore free to fashion additional exceptions in order to further the general purposes of the capital-asset provisions. The language of the statute refutes petitioner's construction. Section 1221 provides that "capital asset" means "property held by the taxpayer[,] . . . but does not include" the five classes [485 U.S. 212, 218] of property listed as exceptions. We believe this locution signifies that the listed exceptions are exclusive. The body of 1221 establishes a general definition of the term "capital asset," and the phrase "does not include" takes out of that broad definition only the classes of property that are specifically mentioned. The legislative history of the capital-asset definition supports this interpretation, see H. R. Rep. No. 704, 73d Cong., 2d Sess., 31 (1934) ("[T]he definition includes all property, except as specifically excluded"); H. R. Rep. No. 1337, 83d Cong., 2d Sess., A273 (1954) ("[A] capital asset is property held by the taxpayer with certain exceptions"), as does the applicable Treasury regulation, see 26 CFR 1.1221-1(a) (1987) ("The term `capital assets' includes all classes of property not specifically excluded by section 1221"). </s> Petitioner's reading of the statute is also in tension with the exceptions listed in 1221. These exclusions would be largely superfluous if assets acquired primarily or exclusively for business purposes were not capital assets. Inventory, real or depreciable property used in the taxpayer's trade or business, and accounts or notes receivable acquired in the ordinary course of business, would undoubtedly satisfy such a business-motive test. Yet these exceptions were created by Congress in separate enactments spanning 30 years. 6 Without any express direction from Congress, we are unwilling to read 1221 in a manner that makes surplusage of these statutory exclusions. [485 U.S. 212, 219] </s> In the end, petitioner places all reliance on its reading of Corn Products Refining Co. v. Commissioner, 350 U.S. 46 (1955) - a reading we believe is too expansive. In Corn Products, the Court considered whether income arising from a taxpayer's dealings in corn futures was entitled to capital-gains treatment. The taxpayer was a company that converted corn into starches, sugars, and other products. After droughts in the 1930's caused sharp increases in corn prices, the company began a program of buying corn futures to assure itself an adequate supply of corn and protect against price increases. See id., at 48. The company "would take delivery on such contracts as it found necessary to its manufacturing operations and sell the remainder in early summer if no shortage was imminent. If shortages appeared, however, it sold futures only as it bought spot corn for grinding." Id., at 48-49. The Court characterized the company's dealing in corn futures as "hedging." Id., at 51. As explained by the Court of Appeals in Corn Products, "[h]edging is a method of dealing in commodity futures whereby a person or business protects itself against price fluctuations at the time of delivery of the product which it sells or buys." 215 F.2d 513, 515 (CA2 1954). In evaluating the company's claim that the sales of corn futures resulted in capital gains and losses, this Court stated: </s> "Nor can we find support for petitioner's contention that hedging is not within the exclusions of [ 1221]. Admittedly, petitioner's corn futures do not come within the literal language of the exclusions set out in that section. They were not stock in trade, actual inventory, property held for sale to customers or depreciable property used in a trade or business. But the capital-asset provision of [ 1221] must not be so broadly applied as to defeat rather than further the purpose of Congress. Congress intended that profits and losses arising from the everyday operation of a business be considered as ordinary income or loss rather than capital gain or loss. [485 U.S. 212, 220] . . . Since this section is an exception from the normal tax requirements of the Internal Revenue Code, the definition of a capital asset must be narrowly applied and its exclusions interpreted broadly." 350 U.S., at 51 -52 (citations omitted). </s> The Court went on to note that hedging transactions consistently had been considered to give rise to ordinary gains and losses, and then concluded that the corn futures were subject to ordinary-asset treatment. Id., at 52-53. </s> The Court in Corn Products proffered the oft-quoted rule of construction that the definition of "capital asset" must be narrowly applied and its exclusions interpreted broadly, but it did not state explicitly whether the holding was based on a narrow reading of the phrase "property held by the taxpayer," or on a broad reading of the inventory exclusion of 1221. In light of the stark language of 1221, however, we believe that Corn Products is properly interpreted as involving an application of 1221's inventory exception. Such a reading is consistent both with the Court's reasoning in that case and with 1221. The Court stated in Corn Products that the company's futures transactions were "an integral part of its business designed to protect its manufacturing operations against a price increase in its principal raw material and to assure a ready supply for future manufacturing requirements." 350 U.S., at 50 . The company bought, sold, and took delivery under the futures contracts as required by the company's manufacturing needs. As Professor Bittker notes, under these circumstances, the futures can "easily be viewed as surrogates for the raw material itself." 2B. Bittker, Federal Taxation of Income, Estates and Gifts § 51.10.3, p. 51-62 (1981). The Court of Appeals for the Second Circuit in Corn Products clearly took this approach. That court stated that when commodity futures are "utilized solely for the purpose of stabilizing inventory cost[,] . . . [they] cannot reasonably be separated from the inventory items," and concluded that "property used in hedging transactions [485 U.S. 212, 221] properly comes within the exclusions of [ 1221]." 215 F.2d, at 516. This Court indicated its acceptance of the Second Circuit's reasoning when it began the central paragraph of its opinion: "Nor can we find support for petitioner's contention that hedging is not within the exclusions of [ 1221]." 350 U.S., at 51 . In the following paragraph, the Court argued that the Treasury had consistently viewed such hedging transactions as a form of insurance to stabilize the cost of inventory, and cited a Treasury ruling which concluded that the value of a manufacturer's raw-material inventory should be adjusted to take into account hedging transactions in futures contracts. See id., at 52-53 (citing G. C. M. 17322, XV-2 Cum. Bull. 151 (1936)). This discussion, read in light of the Second Circuit's holding and the plain language of 1221, convinces us that although the corn futures were not "actual inventory," their use as an integral part of the taxpayer's inventory-purchase system led the Court to treat them as substitutes for the corn inventory such that they came within a broad reading of "property of a kind which would properly be included in the inventory of the taxpayer" in 1221. </s> Petitioner argues that by focusing attention on whether the asset was acquired and sold as an integral part of the taxpayer's everyday business operations, the Court in Corn Products intended to create a general exemption from capital-asset status for assets acquired for business purposes. We believe petitioner misunderstands the relevance of the Court's inquiry. A business connection, although irrelevant to the initial determination whether an item is a capital asset, is relevant in determining the applicability of certain of the statutory exceptions, including the inventory exception. The close connection between the futures transactions and the taxpayer's business in Corn Products was crucial to whether the corn futures could be considered surrogates for the stored inventory of raw corn. For if the futures dealings were not part of the company's inventory-purchase system, [485 U.S. 212, 222] and instead amounted simply to speculation in corn futures, they could not be considered substitutes for the company's corn inventory, and would fall outside even a broad reading of the inventory exclusion. We conclude that Corn Products is properly interpreted as standing for the narrow proposition that hedging transactions that are an integral part of a business' inventory-purchase system fall within the inventory exclusion of 1221. 7 Arkansas Best, which is not a dealer in securities, has never suggested that the Bank stock falls within the inventory exclusion. Corn Products thus has no application to this case. </s> It is also important to note that the business-motive test advocated by petitioner is subject to the same kind of abuse that the Court condemned in Corn Products. The Court explained in Corn Products that unless hedging transactions were subject to ordinary gain and loss treatment, taxpayers engaged in such transactions could "transmute ordinary income into capital gain at will." 350 U.S., at 53 -54. The hedger could garner capital-asset treatment by selling the future and purchasing the commodity on the spot market, or ordinary-asset treatment by taking delivery under the future contract. In a similar vein, if capital stock purchased and held for a business purpose is an ordinary asset, whereas the same stock purchased and held with an investment motive is a capital asset, a taxpayer such as Arkansas Best could have significant influence over whether the asset would receive capital or ordinary treatment. Because stock is most naturally [485 U.S. 212, 223] viewed as a capital asset, the Internal Revenue Service would be hard pressed to challenge a taxpayer's claim that stock was acquired as an investment, and that a gain arising from the sale of such stock was therefore a capital gain. Indeed, we are unaware of a single decision that has applied the business-motive test so as to require a taxpayer to report a gain from the sale of stock as an ordinary gain. If the same stock is sold at a loss, however, the taxpayer may be able to garner ordinary-loss treatment by emphasizing the business purpose behind the stock's acquisition. The potential for such abuse was evidenced in this case by the fact that as late as 1974, when Arkansas Best still hoped to sell the Bank stock at a profit, Arkansas Best apparently expected to report the gain as a capital gain. See 83 T. C., at 647-648. </s> III </s> We conclude that a taxpayer's motivation in purchasing an asset is irrelevant to the question whether the asset is "property held by a taxpayer (whether or not connected with his business)" and is thus within 1221's general definition of "capital asset." Because the capital stock held by petitioner falls within the broad definition of the term "capital asset" in 1221 and is outside the classes of property excluded from capital-asset status, the loss arising from the sale of the stock is a capital loss. Corn Products Refining Co. v. Commissioner, supra, which we interpret as involving a broad reading of the inventory exclusion of 1221, has no application in the present context. Accordingly, the judgment of the Court of Appeals is affirmed. </s> It is so ordered. </s> JUSTICE KENNEDY took no part in the consideration or decision of this case. </s> Footnotes [Footnote 1 Title 26 U.S.C. 1211(a) states that "[i]n the case of a corporation, losses from sales or exchanges of capital assets shall be allowed only to the extent of gains from such sales or exchanges." Section 1212(a) establishes rules governing carrybacks and carryovers of capital losses, permitting such losses to offset capital gains in certain earlier or later years. </s> [Footnote 2 In 1975, when petitioner sold its Bank stock, 1221 contained a different exception (5), which excluded certain federal and state debt obligations. See 26 U.S.C. 1221(5) (1970 ed.). That exception was repealed by the Economic Recovery Tax Act of 1981, Pub. L. 97-34, 505(a), 95 Stat. 331. The present exception (5) was added by the Tax Reform Act of 1976, Pub. L. 94-455, 2132(a), 90 Stat. 1925. These changes have no bearing on this case. </s> [Footnote 3 See, e. g., 2 B. Bittker, Federal Taxation of Income, Estates and Gifts § 51.10.3, p. 51-62 (1981); Chirelstein, Capital Gain and the Sale of a Business Opportunity: The Income Tax Treatment of Contract Termination Payments, 49 Minn. L. Rev. 1, 41 (1964); Troxell & Noall, Judicial Erosion of the Concept of Securities as Capital Assets, 19 Tax L. Rev. 185, 187 (1964); Note, The Corn Products Doctrine and Its Application to Partnership Interests, 79 Colum. L. Rev. 341, and n. 3 (1979). </s> [Footnote 4 See, e. g., Campbell Taggart, Inc. v. United States, 744 F.2d 442, 456-458 (CA5 1984); Steadman v. Commissioner, 424 F.2d 1, 5 (CA6), cert. denied, 400 U.S. 869 (1970); Booth Newspapers, Inc. v. United [485 U.S. 212, 217] States, 157 Ct. Cl. 886, 893-896, 303 F.2d 916, 920-921 (1962); W. W. Windle Co. v. Commissioner, 65 T. C. 694, 707-713 (1976). </s> [Footnote 5 Petitioner mistakenly relies on cases in which this Court, in narrowly applying the general definition of "capital asset," has "construed `capital asset' to exclude property representing income items or accretions to the value of a capital asset themselves properly attributable to income," even though these items are property in the broad sense of the word. United States v. Midland-Ross Corp., 381 U.S. 54, 57 (1965). See, e. g., Commissioner v. Gillette Motor Co., 364 U.S. 130 (1960) ("capital asset" does not include compensation awarded taxpayer that represented fair rental value of its facilities); Commissioner v. P. G. Lake, Inc., 356 U.S. 260 (1958) ("capital asset" does not include proceeds from sale of oil payment rights); Hort v. Commissioner, 313 U.S. 28 (1941) ("capital asset" does not include payment to lessor for cancellation of unexpired portion of a lease). This line of cases, based on the premise that 1221 "property" does not include claims or rights to ordinary income, has no application in the present context. Petitioner sold capital stock, not a claim to ordinary income. </s> [Footnote 6 The inventory exception was part of the original enactment of the capital-asset provision in 1924. See Revenue Act of 1924, ch. 234, 208(a)(8), 43 Stat. 263. Depreciable property used in a trade or business was excluded in 1938, see Revenue Act of 1938, ch. 289, 117(a)(1), 52 Stat. 500, and real property used in a trade or business was excluded in 1942, see Revenue Act of 1942, ch. 619, 151(a), 56 Stat. 846. The exception for accounts and notes receivable acquired in the ordinary course of trade or business was added in 1954. Internal Revenue Code of 1954, 1221(4), 68A Stat. 322. </s> [Footnote 7 Although congressional inaction is generally a poor measure of congressional intent, we are given some pause by the fact that over 25 years have passed since Corn Products Refining Co. v. Commissioner was initially interpreted as excluding assets acquired for business purposes from the definition of "capital asset," see Booth Newspapers, Inc. v. United States, 157 Ct. Cl. 886, 303 F.2d 916 (1962), without any sign of disfavor from Congress. We cannot ignore the unambiguous language of 1221, however, no matter how reticent Congress has been. If a broad exclusion from capital-asset status is to be created for assets acquired for business purposes, it must come from congressional action, not silence. </s> [485 U.S. 212, 224]

United States Supreme Court U. S. V. DICKINSON(1947) No. 77 Argued: December 13, 1946Decided: June 16, 1947 </s> [ U. S. v. Dickinson 331 U.S. 745 (1947) ] </s> [331 U.S. 745 , 746] </s> Mr. Ralph S. Boyd, of Washington, D.C., for petitioner. Mr. Ernest K. James, of Charleston, W. Va., for respondents. </s> Mr. Justice FRANKFURTER delivered the opinion of the Court. These are two suits brought under the Tucker Act, Judicial Code, 24( 20), 28 U.S.C. 41(20), 28 U.S.C.A. 41(20), to recover the value of property claimed to have been taken by the Government. The suits were consolidated for purposes of the trial and though they present minor differentiating factors they may here, as below, be disposed of by a single opinion. In order to imrpove the navigability of the Kanawha River, West Virginia, Congress authorized construction of the Winfield Dam, South Charleston. Act of August 30, 1935, 49 Stat. 1028, 1035, in connection with H.Doc.No.31, 73d Cong., 1st Sess., pp. 2-4. The water above the dam was to be impounded to create a deeper channel and to raise the river pool level in that area. Notice of the proposed pool elevation was given to abutting landowners on July 1, 1936, and the dam was completed and officially accepted by the United States on August 20, 1937. The river was to be raised by successive stages from 554.65 feet to 566 feet above sea level. That level was not reached until September 22, 1938. As a result </s> [331 U.S. 745 , 747] </s> of the raising of the river the land belonging to the respondents was permanently flooded. In addition, erosion attributable to the improvement damaged the land which formed the new bank of the pool. Respondents recovered judgment for the value of an easement taken by the United States to flood permanently land belonging to them. Damages were also awarded for the erosion, based on the cost of protective measures which the landowners might have taken to prevent the loss. In addition, the court found that the United States had also acquired an easement for intermittent flooding of part of the land belonging to the defendants, and allowed judgment for the value of such an easement. The Circuit Court of Appeals affirmed the District Court's judgment. 4 Cir., 152 F.2d 865. We granted certiorari, 328 U.S. 828 , because important questions were raised relevant to the determination of just compensation for the taking of private property by the Government. First. The principal attack by the United States against the judgments is that both actions were outlawed. The applicable statute of limitations is six years. The complaints were filed on April 1, 1943. The Government argues that the statute began to run on October 21, 1936, when the dam began to impound water. In any event, it maintains that the six years began to run not later than on May 30, 1937, when the dam was fully capable of operation, the water was raised above its former level, and the property of the respondents was patially sub merged for the first time. While on the latter view the time for taking had not run under the statute, Dickinson's claim would be barred because he acquired the land after that date. The Government could, of course, have taken appropriate proceedings, to condemn as early as it chose, both land and flowage easements. By such proceedings it could have fixed the time when the property was 'taken.' </s> [331 U.S. 745 , 748] </s> The Government chose not to do so. It left the taking to physical events, thereby putting on the owner the onus of determining the decisive moment in the process of acquisition by the United States when the fact of taking could no longer be in controversy. These suits against the Government are authorized by the Tucker Act either as claims 'founded upon the Constitution of the United States' or as arising upon implied contracts with the Government. (See the discussion of jurisdiction both in the opinion of the Court and in the concurring opinion in United States v. Lynah, 188 U.S. 445 , and in Temple v. United States, 248 U.S. 121 .) But whether the theory of these suits be that there was a taking under the Fifth Amendment, and that therefore the Tucker Act may be invoked because it is a claim founded upon the Constitution, or that there was an implied promise by the Government to pay for it, is immaterial. In either event, the claim traces back to the prohibition of the Fifth Amendment, 'nor shall private property be taken for public use, without just compensation.' The Constitution is 'intended to preserve practical and substantial rights, not to maintain theories.' Davis v. Mills, 194 U.S. 451, 457 , 695. One of the most theory-ridden of legal concepts is a 'cause of action.' This Court has recognized its 'shifting meanings' and the danger of determining rights based upon definitions of 'a cause of action' unrelated to the function which the concept serves in a particular situation. United States v. Memphis Cotton Oil Co., 288 U.S. 62, 67 et seq ., 280. Property is taken in the constitutional sense when inroads are made upon an owner's use of it to an extent that, as between private parties, a servitude has been acquired either by agreement or in course of time. The Fifth Amendment expresses a principle of fairness and not a technical rule of procedure enshrining old or new niceties regarding 'causes of action'- when they are born, whether they proliferate, and when they die. </s> [331 U.S. 745 , 749] </s> We are not now called upon to decide whether in a situation like this a landowner might be allowed to bring suit as soon as inundation threatens. Assuming that such an action would be sustained, it is not a good enough reason why he must sue then or have, from that moment, the statute of limitations run against him. If suit must be brought, lest he jeopardize his rights, as soon as his land is invaded, other contingencies would be running against him-for instance, the uncertainty of the damage and the risk of res judicata against recovering later for damage as yet uncertain. The source of the entire claim-the overflow due to rises in the level of the river-is not a single event; it is continuous. And as there is nothing in reason, so there is nothing in legal doctrine, to preclude the law from meeting such a process by postponing suit until the situation becomes stabilized. An owner of land flooded by the Government would not unnaturally postpone bringing a suit against the Government for the flooding until the consequences of inundation have so manifested themselves that a final account may be struck. When dealing with a problem which arises under such diverse circumstances procedural rigidities should be avoided. All that we are here holding is that when the Government chooses not to condemn land but to bring about a taking by a continuing process of physical events, the owner is not required to resort either to piecemeal or to premature litigation to asertain the just compensation for what is really 'taken.' Accordingly, we find that the taking which was the basis of these suits was not complete six years prior to April 1, 1943, nor at a time preceding Dickinson's ownership. In this conclusion we are fortified by the fact that the two lower courts reached the same conclusion on what is after all a practical matter and not a technical rule of law. </s> [331 U.S. 745 , 750] </s> Nothing heretofore ruled by the Court runs counter to what we have said. The Government finds comfort in Portsmouth Harbor Land & Hotel Co. v. United States, 260 U.S. 327 . But in that case the problem was whether by putting a gun battery into permanent position with a view to converting an area, for all practical purposes, into an artillery range, the Government inevitably took an easement in the land over which the guns were to be fired. The issue was not when a suit must be brought on a claim in respect to land taken by the United States, which is the issue before us, but whether there had been a taking at all. Second. The Government challenges the compensation awarded for damage to the land due to erosion. It regards this damage as consequential, to be borne without any right to compensation. Peabody v. United States, 231 U.S. 530, 539 , 160. Of course, payment need only be made for what is taken, but for all that the Government takes it must pay. When it takes property by flooding, it takes the land which it permanently floods as well as that which inevitably washes away as a result of that flooding. The mere fact that all the United States needs and physically appropriates is the land up to the new level of the river, does not determine what in nature it has taken. If the Government cannot take the acreage it wants without also washing away more, that more becomes part of the taking. This falls under a principle that in other aspects has frequently been recognized by this Court. It was thus put in Bauman v. Ross, 167 U.S. 548, 574 , 976: 'when part only of a parcel of land is taken for a highway, the value of that part is not the sole measure of the compensation or damages to be paid to the owner; but the incidental injury or benefit to the part not taken is also to be considered. When the part not taken is left in such shape or condition as to be in itself of less value than before, the owner is entitled to additional damages on that ac- </s> [331 U.S. 745 , 751] </s> count.' So, also, United States v. Welch, 217 U.S. 333, 28 L.R.A.,N.S., 385, 19 Ann.Cas. 680; United States v. Grizzard, 219 U.S. 180, 31 L.R.A.,N.S., 1135. Compare Sharp v. United States, 191 U.S. 341, 355 , 118; Campbell v. United States, 266 U.S. 368 . Congress has recognized that damage to the owner is assessed not only for the value of the part taken but also 'for any injury to the part not taken.' See 6 of the Act of July 18, 1918, 40 Stat. 911, 33 U.S.C. 595, 33 U. S.C.A. 595. If the resulting erosion which, as a practical matter, constituted part of the taking was in fact preventable by prudent measures, the cost of that prevention is a proper basis for determining the damage, as the courts below held. Third. At considerable expense, and with the consent of the War Department, Dickinson reclaimed most of his land which the Government originally took by flooding. The Government claims that this disentitled him to be paid for the original taking. The courts below properly rejected this defense. When the property was flooded the United States acquired the land and it became part of the river. By his reclamation, Dickinson appropriated part of what belonged to the United States. Whether the War Department could legally authorize Dickinson's reclamation or whether it was in fact a trespass however innocent, is not before us. But no use to which Dickinson could subsequently put the property by his reclamation eforts chan ged the fact that the land was taken when it was taken and an obligation to pay for it then arose. Fourth. Judgment was also allowed against the United States for taking an easement for intermittent flooding of land above the new permanent level, and a value for such easements was assessed. We find nothing in this record to justify our setting aside these concurrent findings by two courts. United States v. O'Donnell, 303 U.S. 501, 508 , 713; Allen v. Trust Co. of Georgia, 326 U.S. 630, 636 , 392. Judgments affirmed.

United States Supreme Court BEARD, SECRETARY, PENNSYLVANIA DEPARTMENT OF CORRECTIONS v. BANKS, individually and on behalf of all others similarly situated(2006) No. 04-1739 Argued: March 27, 2006Decided: June 28, 2006 </s> Pennsylvania houses its 40 most dangerous and recalcitrant inmates in a Long Term Segregation Unit (LTSU). Inmates begin in level 2, which has the most severe restrictions, but may graduate to the less restrictive level 1. Plaintiff-respondent Banks, a level 2 inmate, filed this federal-court action against defendant-petitioner, the Secretary of the Department of Corrections, alleging that a level 2 policy (Policy) forbidding inmates any access to newspapers, magazines, and photographs violates the First Amendment. During discovery, Banks deposed Deputy Prison Superintendent Dickson and the parties introduced prison policy manuals and related documents into the record. The Secretary then filed a summary judgment motion, along with a statement of undisputed facts and the deposition. Rather than filing an opposition to the motion, Banks filed a cross-motion for summary judgment, relying on the undisputed facts, including those in the deposition. Based on this record, the District Court granted the Secretary's motion and denied Banks'. Reversing the Secretary's summary judgment award, the Third Circuit held that the prison regulation could not be supported as a matter of law. Held:The judgment is reversed, and the case is remanded. 399 F. 3d 134, reversed and remanded. Justice Breyer, joined by The Chief Justice, Justice Kennedy, and Justice Souter, concluded that, based on the record before this Court, prison officials have set forth adequate legal support for the Policy, and Banks has failed to show specific facts that could warrant a determination in his favor. Pp. 5-13. </s> (a)Turner v. Safley, 482 U.S. 78, and Overton v. Bazzetta, 539 U.S. 126, contain the basic substantive legal standards covering this case. While imprisonment does not automatically deprive a prisoner of constitutional protections, Turner, 482 U.S., at 93, the Constitution sometimes permits greater restriction of such rights in a prison than it would allow elsewhere, id., at 84-85. As Overton, supra, at 132, pointed out, courts also owe "substantial deference to the professional judgment of prison administrators." Under Turner, restrictive prison regulations are permissible if they are "reasonably related to legitimate penological interests." 482 U.S., at 89. Because this case is here on the Secretary's summary judgment motion, the Court examines the record to determine whether he has demonstrated "the absence of a genuine issue of material fact" and his entitlement to judgment as a matter of law. See, e.g., Fed . Rule Civ. Proc. 56. If he has, the Court determines whether Banks has "by affidavits or as otherwise provided" in Rule 56, "set forth specific facts showing ... a genuine issue for trial," Rule 56(e). Inferences about disputed facts must be drawn in Banks' favor, but deference must be accorded prison authorities' views with respect to matters of professional judgment. Pp.5-6. </s> (b)The Secretary rested his motion primarily on the undisputed facts statement and Dickson's affidavit. The first of his justifications for the Policy--the need to motivate better behavior on the part of particularly difficult prisoners--sufficiently satisfies Turner's requirements. The statement and affidavit set forth a "'valid, rational connection '" between the Policy and "'legitimate penological interests,'" 482 U.S., at 89, 95. Dickson noted that prison authorities are limited in what they can and cannot deny or give a level 2 inmate, who has already been deprived of most privileges, and that the officials believe that the specified items are legitimate as incentives for inmate growth. The undisputed facts statement added that the Policy encourages progress and discourages backsliding by level 1 inmates. These statements point to evidence that the regulations serve the function identified. The articulated connections between newspapers and magazines, the deprivation of virtually the last privilege left to an inmate, and a significant incentive to improve behavior, are logical ones. Thus, this factor supports the Policy's "reasonableness." The second, third, and fourth Turner factors--whether there are "alternative means of exercising the right that remain open to prison inmates," id., at 90; the "impact" that accommodating "the asserted constitutional right [will] have on guards and other inmates, and on the allocation of prison resources," ibid.; and whether there are "ready alternatives" for furthering the governmental interest, ibid.--add little to the first factor's logical rationale here. That two of these three factors seem to favor the Policy therefore does not help the Secretary. The real task in this case is not balancing the Turner factors but determining whether the Secretary's summary judgment material shows not just a logical relation but a reasonable relation. Given the deference courts must show to prison officials' professional judgment, the material presented here is sufficient. Overton provides significant support for this conclusion. In both cases, the deprivations (family visits in Overton and access to newspapers, magazines, and photographs here) have an important constitutional dimension; prison officials have imposed the deprivation only upon those with serious prison-behavior problems; and those officials, relying on their professional judgment, reached an experience-based conclusion that the policies help to further legitimate prison objectives. Unless there is more, the Secretary's supporting material brings the Policy within Turner's scope. Pp.6-10. </s> (c)Although summary judgment rules gave Banks an opportunity to respond to these materials, he did not do so in the manner the rules provide. Instead, he filed a cross-motion for summary judgment, arguing that the Policy fell of its own weight. Neither the cases he cites nor the statistics he notes support his argument. In reaching a contrary conclusion, the Third Circuit placed too high an evidentiary burden on the Secretary and offered too little deference to the prison officials' judgment. Such deference does not make it impossible for those attacking prison policies to succeed. A prisoner may be able to marshal substantial evidence, for example through depositions, that a policy is not reasonable or that there is a genuine issue of material fact for trial. And, as Overton noted, if faced with a de facto permanent ban involving a severe restriction, this Court might reach a different conclusion. Pp.10-13. </s> Justice Thomas, joined by Justice Scalia, concluded that, using the framework set forth in Justice Thomas' concurrence in Overton v. Bazzetta, 539 U.S. 126, 138, Pennsylvania's prison regulations are permissible. That framework provides the least perilous approach for resolving challenges to prison regulations and is the approach most faithful to the Constitution. "Sentencing a criminal to a term of imprisonment may ... carry with it the implied delegation to prison officials to discipline and otherwise supervise the criminal while he is incarcerated." Id., at 140, n. A term of imprisonment in Pennsylvania includes such an implied delegation. Inmates are subject to Department of Corrections rules and disciplinary rulings, and the challenged regulations fall with the Department's discretion. This conclusion is supported by the plurality's Turner v. Safley, 482 U.S. 78, analysis. The "history of incarceration as punishment [also] supports the view that the sentenc[e] ... terminated" respondent's unfettered right to magazines, newspapers, and photographs. Overton, 539 U.S., at 142. While Pennsylvania "is free to alter its definition of incarceration to include the retention" of unfettered access to such materials, it appears that the Commonwealth instead sentenced respondent against the backdrop of its traditional conception of imprisonment, which affords no such privileges. Id., at 144-145. Pp.1-7. Breyer, J., announced the judgment of the Court and delivered an opinion, in which Roberts, C.J., and Kennedy and Souter, JJ., joined. Thomas, J., filed an opinion concurring in the judgment, in which Scalia, J., joined. Stevens, J., filed a dissenting opinion, in which Ginsburg, J., joined. Ginsburg, J., filed a dissenting opinion. Alito, J., took no part in the consideration or decision of the case. </s> JEFFREY A. BEARD, SECRETARY, PENNSYLVANIADEPARTMENT OF CORRECTIONS, PETITIONER v.RONALD BANKS, individually and on behalf ofall others similarly situated on writ of certiorari to the united states court of appeals for the third circuit [June 28, 2006] </s> Justice Breyer announced the judgment of the Court and delivered an opinion, in which The Chief Justice, Justice Kennedy, and Justice Souter join. </s> We here consider whether a Pennsylvania prison policy that "denies newspapers, magazines, and photographs" to a group of specially dangerous and recalcitrant inmates "violate[s] the First Amendment." Brief for Petitioner i; see Turner v. Safley, 482 U.S. 78, 89 (1987) (prison rules restricting a prisoner's constitutional rights must be "reasonably related to legitimate penological interests"). The case arises on a motion for summary judgment. While we do not deny the constitutional importance of the interests in question, we find, on the basis of the record now before us, that prison officials have set forth adequate legal support for the policy. And the plaintiff, a prisoner who attacks the policy, has failed to set forth "specific facts" that, in light of the deference that courts must show to the prison officials, could warrant a determination in his favor. Fed. Rule Civ. Proc. 56(e); Overton v. Bazzetta, 539 U.S. 126, 132 (2003) (need for "substantial deference to the professional judgment of prison administrators"). I A </s> The prison regulation at issue applies to certain prisoners housed in Pennsylvania's Long Term Segregation Unit. The LTSU is the most restrictive of the three special units that Pennsylvania maintains for difficult prisoners. The first such unit, the "Restricted Housing Unit," is designed for prisoners who are under disciplinary sanction or who are assigned to administrative segregation. App. 80. The second such unit, the "Special Management Unit," is intended for prisoners who "exhibit behavior that is continually disruptive, violent, dangerous or a threat to the orderly operation of their assigned facility." Ibid. The third such unit, the LTSU, is reserved for the Commonwealth's "most incorrigible, recalcitrant inmates." Id., at 25. LTSU inmates number about 40. Id., at 127. Most, but not all, have "flunked out" of the SMU program. Id., at 137. To qualify, they must have met one or more of the following conditions: failure to "complete" the SMU program; "assaultive behavior with the intent to cause death or serious bodily injury"; causing injury to other inmates or staff; "engaging in facility disturbance(s)"; belonging to an unauthorized organization or "Security Threat Group"; engaging in criminal activity that "threatens the community"; possessing while in prison "weapons" or "implements of escape"; or having a history of "serious" escape attempts, "exerting negative influence in facility activities," or being a "sexual predator." Id., at 85-86. The LTSU is divided into two levels. All inmates are initially assigned to the most restrictive level, level 2. After 90 days, depending upon an inmate's behavior, an individual may graduate to the less restrictive level 1, although in practice most do not. Id., at 131-132, 138. </s> The RHU, SMU, and LTSU all seriously restrict inmates' ordinary prison privileges. At all three units, residents are typically confined to cells for 23 hours a day, have limited access to the commissary or outside visitors, and (with the exception of some phases of the SMU) may not watch television or listen to the radio. Id., at 102; Brief for Petitioner 2-4. </s> Prisoners at level 2 of the LTSU face the most severe form of the restrictions listed above. They have no access to the commissary, they may have only one visitor per month (an immediate family member), and they are not allowed phone calls except in emergencies. App. 102. In addition they (unlike all other prisoners in the Commonwealth) are restricted in the manner at issue here: They have no access to newspapers, magazines, or personal photographs. Id., at 26. They are nonetheless permitted legal and personal correspondence, religious and legal materials, two library books, and writing paper. Id., at 35, 102, 169. If an inmate progresses to level 1, he enjoys somewhat less severe restrictions, including the right to receive one newspaper and five magazines. Id., at 26, 102. The ban on photographs is not lifted unless a prisoner progresses out of the LTSU altogether. Ibid. B </s> In 2001, plaintiff Ronald Banks, respondent here, then a prisoner confined to LTSU level 2, filed this federal-court action against Jeffrey Beard, the Secretary of the Pennsylvania Department of Corrections. See Rev. Stat. §1979, 42 U.S.C. §1983. Banks claimed that the level 2 Policy forbidding inmates all access to newspapers, magazines, and photographs bears no reasonable relation to any legitimate penological objective and consequently violates the First Amendment. App. 15; see also Turner, supra; Overton, supra. The Secretary, the defendant, petitioner here, filed an answer. The District Court certified a class composed of similar level 2 inmates, and the court assigned the case to a Magistrate who conducted discovery. Banks' counsel deposed a deputy superintendent at the prison, Joel Dickson. The parties introduced various prison policy manuals and related documents into the record. And at that point the Secretary filed a motion for summary judgment. He also filed a "Statement of Material Facts Not in Dispute," with a copy of the deputy superintendent's deposition attached as an appendix. See App. 25; Rule 56.1(C)(1) (WD Pa. 2006). </s> Banks (who was represented by counsel throughout) filed no opposition to the Secretary's motion, but instead filed a cross-motion for summary judgment. Neither that cross-motion nor any other of Banks' filings sought to place any significant fact in dispute, and Banks has never sought a trial to determine the validity of the Policy. Rather, Banks claimed in his cross-motion that the undisputed facts, including those in Dickson's deposition, entitled him to summary judgment. In this way, and by failing specifically to challenge the facts identified in the defendant's statement of undisputed facts, Banks is deemed to have admitted the validity of the facts contained in the Secretary's statement. See Rule 56.1(E). </s> On the basis of the record as described (the complaint, the answer, the statement of undisputed facts, other agreed-upon descriptions of the system, the Dickson deposition, and the motions for summary judgment), the Magistrate recommended that the District Court grant the Secretary's motion for summary judgment and deny that of Banks. App. to Brief in Opposition 130. The District Court accepted the Magistrate's recommendation. Id., at 131-132. </s> On appeal, a divided Third Circuit panel reversed the District Court's award of summary judgment to the Secretary. 399 F.3d 134 (2005). The majority of the panel held that the prison regulation "cannot be supported as a matter of law by the record in this case." Id., at 148; see also infra, at 14-15. The Secretary sought our review of the Appeals Court's judgment, and we granted his petition. 546 U.S. ___ (2005). II </s> Turner v. Safley, 482 U.S. 78 (1987), and Overton v. Bazzetta, 539 U.S 126 (2003), contain the basic substantive legal standards governing this case. This Court recognized in Turner that imprisonment does not automatically deprive a prisoner of certain important constitutional protections, including those of the First Amendment. Id., at 93; see also O'Lone v. Estate of Shabazz, 482 U.S. 342, 348 (1987). But at the same time the Constitution sometimes permits greater restriction of such rights in a prison than it would allow elsewhere. See, e.g., Turner, supra, at 84-85. As Overton (summarizing pre-Turner case law) pointed out, courts owe "substantial deference to the professional judgment of prison administrators." 539 U.S., at 132. And Turner reconciled these principles by holding that restrictive prison regulations are permissible if they are "'reasonably related' to legitimate penological interests," 482 U.S., at 87, and are not an "exaggerated response" to such objectives, ibid. Turner also sets forth four factors "relevant in determining the reasonableness of the regulation at issue." Id., at 89. First, is there a "'valid, rational connection' between the prison regulation and the legitimate governmental interest put forward to justify it"? Ibid. Second, are there "alternative means of exercising the right that remain open to prison inmates"? Id., at 90. Third, what "impact" will "accommodation of the asserted constitutional right ... have on guards and other inmates, and on the allocation of prison resources generally"? Ibid. And, fourth, are "ready alternatives" for furthering the governmental interest available? Ibid. </s> This case has arrived in this Court in the context of the Secretary's motion for summary judgment. Thus we must examine the record to see whether the Secretary, in depositions, answers to interrogatories, admissions, affidavits and the like, has demonstrated "the absence of a genuine issue of material fact" and his entitlement to judgment as a matter of law. See, e.g., Fed. Rule Civ. Proc. 56; Celotex Corp. v. Catrett, 477 U.S. 317 (1986). </s> If the Secretary has done so, then we must determine whether Banks, the plaintiff, who bears the burden of persuasion, Overton, supra, at 132, has "by affidavits or as otherwise provided" in Rule 56 (e.g. through depositions, etc.) "set forth specific facts showing that there is a genuine issue for trial." Rule 56(e) (emphasis added). If not, the law requires entry of judgment in the Secretary's favor. See Celotex Corp., supra, at 322 (Rule 56 "mandates the entry of summary judgment, after adequate time for discovery and upon motion, against a party who fails to make a showing sufficient to establish the existence of an element essential to that party's case, and on which that party will bear the burden of proof at trial"). </s> We recognize that at this stage we must draw "all justifiable inferences" in Banks' "favor." Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 255 (1986). In doing so, however, we must distinguish between evidence of disputed facts and disputed matters of professional judgment. In respect to the latter, our inferences must accord deference to the views of prison authorities. Overton, supra. Unless a prisoner can point to sufficient evidence regarding such issues of judgment to allow him to prevail on the merits, he cannot prevail at the summary judgment stage. III </s> The Secretary in his motion set forth several justifications for the prison's policy, including the need to motivate better behavior on the part of particularly difficult prisoners, the need to minimize the amount of property they control in their cells, and the need to assure prison safety, by, for example, diminishing the amount of material a prisoner might use to start a cell fire. We need go no further than the first justification, that of providing increased incentives for better prison behavior. Applying the well-established substantive and procedural standards set forth in Part II, we find, on the basis of the record before us, that the Secretary's justification is adequate. And that finding here warrants summary judgment in the Secretary's favor. A </s> The Secretary rested his motion for summary judgment primarily upon the statement of undisputed facts along with Deputy Prison Superintendent Dickson's affidavit. The statement of undisputed facts says that the LTSU's 40 inmates, about 0.01 percent of the total prison population, constitute the "'worst of the worst,'" those who "have proven by the history of their behavior in prison, the necessity of holding them in the rigorous regime of confinement" of the LTSU. App. 26. It then sets forth three "penological rationales" for the Policy, summarized from the Dickson deposition: (1) to "motivat[e]" better "behavior" on the part of these "particularly difficult prisoners," by providing them with an incentive to move to level 1, or out of the LTSU altogether, and to "discourage backsliding" on the part of level 1 inmates; </s> (2) to minimize the amount of property controlled by the prisoners, on the theory that the "less property these high maintenance, high supervision, obdurate troublemakers have, the easier it is for ... correctional officer[s] to detect concealed contraband [and] to provide security"; and </s> (3) to diminish the amount of material (in particular newspapers and magazines) that prisoners might use as weapons of attack in the form of "'spears'" or "'blow guns,'" or that they could employ "as tools to catapult feces at the guards without the necessity of soiling one's own hands," or use "as tinder for cell fires." Id., at 27. </s> As we have said we believe that the first rationale itself satisfies Turner's requirements. First, the statement and deposition set forth a "'valid, rational connection'" between the Policy and "'legitimate penological objectives.'" 482 U.S., at 89, 95. The deputy superintendent stated in his deposition that prison authorities are "very limited ... in what we can and cannot deny or give to [a level 2] inmate [who typically has already been deprived of almost all privileges, see supra, at 2-3], and these are some of the items that we feel are legitimate as incentives for inmate growth." App. 190. The statement of undisputed facts (relying on the deposition) added that the Policy "serves to encourage ... progress and discourage backsliding by the level 1 inmates." Id., at 27. </s> These statements point to evidence--namely, the views of the deputy superintendent--that the regulations do, in fact, serve the function identified. The articulated connections between newspapers and magazines, the deprivation of virtually the last privilege left to an inmate, anda significant incentive to improve behavior, arelogical ones. Thus, the first factor supports the Policy's "reasonableness." </s> As to the second factor, the statement and deposition make clear that, as long as the inmate remains at level 2, no "alternative means of exercising the right" remain open to him. Turner, supra, at 90. After 90 days the prisoner may be able to graduate to level 1 and thus regain his access to most of the lost rights. In the approximately 2 years after the LTSU opened, about 25 percent of those confined to level 2 did graduate to level 1 or out of the LTSU altogether. App. 138; Reply Brief for Petitioner 8. But these circumstances simply limit, they do not eliminate, the fact that there is no alternative. The absence of any alternative thus provides "some evidence that the regulations [a]re unreasonable," but is not "conclusive" of the reasonableness of the Policy. Overton, 539 U.S., at 135. </s> As to the third factor, the statement and deposition indicate that, were prison authorities to seek to "accommodat[e] . . . the asserted constitutional right," the resulting "impact" would be negative. That circumstance is also inherent in the nature of the Policy: If the Policy (in the authorities' view) helps to produce better behavior, then its absence (in the authorities' view) will help to produce worse behavior, e.g., "backsliding" (and thus the expenditure of more "resources" at level 2). Turner, 482 U.S., at 90. Similarly, as to the fourth factor, neither the statement nor the deposition describes, points to, or calls to mind any "alternative method of accommodating the claimant's constitutional complaint ... that fully accommodates the prisoner's rights at de minimis cost to valid penological interests." Id., at 90-91. </s> In fact, the second, third, and fourth factors, being in a sense logically related to the Policy itself, here add little, one way or another, to the first factor's basic logical rationale. See post, at 6 (opinion of Stevens, J.) (noting that "deprivation theory does not map easily onto several of the Turner factors"), cf. post, at 5-6 (opinion of Thomas, J.) (similar). The fact that two of these latter three factors seem to support the Policy does not, therefore, count in the Secretary's favor. The real task in this case is not balancing these factors, but rather determining whether the Secretary shows more than simply a logical relation, thatis, whether he shows a reasonable relation. We believe the material presented here by the prison officials is sufficient to demonstrate that the Policy is a reasonable one. </s> Overton provides significant support for this conclusion. In Overton we upheld a prison's "severe" restriction on the family visitation privileges of prisoners with repeat substance abuse violations. 539 U.S., at 134. Despite the importance of the rights there at issue, we held that withholding such privileges "is a proper and even necessary management technique to induce compliance with the rules of inmate behavior, especially for high-security prisoners who have few other privileges to lose." Ibid. </s> The Policy and circumstances here are not identical, but we have not found differences that are significant. In both cases, the deprivations at issue (all visits with close family members; all access to newspapers, magazines, and photos) have an important constitutional dimension. In both cases, prison officials have imposed the deprivation at issue only upon those with serious prison-behavior problems (here the 40 most intractable inmates in the Commonwealth). In both cases, prison officials, relying on their professional judgment, reached an experience-based conclusion that the policies help to further legitimate prison objectives. </s> The upshot is that, if we consider the Secretary's supporting materials, i.e., the statement and deposition), by themselves, they provide sufficient justification for the Policy. That is to say, unless there is more, they bring the Policy within Turner's legitimating scope. B </s> Although summary judgment rules provided Banks with an opportunity to respond to the Secretary's materials, he did not offer any fact-based or expert-based refutation in the manner the rules provide. Fed. Rule Civ. Proc. 56(e)(requiring plaintiff through, e.g., affidavits, etc., to "set forth specific facts showing that there is a genuine issue for trial" (emphasis added)). Instead, Banks filed his own cross-motion for summary judgment in which he claimed that the Policy fell of its own weight, i.e., that the Policy was "unreasonable as a matter of law." Plaintiffs' Brief in Support of Motion for Summary Judgment in C.A. 01-1956 (WD Pa.), p. 13 (hereinafter Plaintiffs' Brief). In particular, Banks argued (and continues to argue) that the Policy lacks any significant incentive effect given the history of incorrigibility of the inmates concerned and the overall deprivations associated with the LTSU, Brief for Respondent 22; Plaintiffs' Brief 13. He points in support to certain court opinions that he believes reflect expert views that favor his position. Abdul Wali v. Coughlin, 754 F.2d 1015, 1034 (CA2 1985); Bieregu v. Reno, 59 F.3d 1445, 1449 (CA3 1995); Knecht v. Collins, 903 F. Supp. 1193, 1200 (SD Ohio 1995), aff'd in part, rev'd in part, vacated in part, 187 F.3d 636 (CA6 1999). And he adds that only about one-quarter of level 2 inmates graduate out of that environment. The cases to which Banks refers, however, simply point out that, in the view of some courts, increased contact with the world generally favors rehabilitation. See Abdul Wali, supra, at 1034; Bieregu, supra, at 1449; Knecht, supra, at 1200. That circumstance, as written about in court opinions, cannot provide sufficient support, particularly as these courts were not considering contexts such as this one, where prison officials are dealing with especially difficult prisoners. Neither can Banks find the necessary assistance in the fact that only one-quarter or so of the level 2 population graduates to level 1 or out of the LTSU. Given the incorrigibility of level 2 inmates--which petitioner himself admits--there is nothing to indicate that a 25 percent graduation rate is low, rather than, as the Secretary suggests, acceptably high. </s> We recognize that the Court of Appeals reached a contrary conclusion. But in doing so, it placed too high an evidentiary burden upon the Secretary. In respect to behavior-modification incentives, for example, the court wrote that the "District Court did not examine ... whether the ban was implemented in a way that could modify behavior, or inquire into whether the [Department of Corrections'] deprivation theory of behavior modification had any basis in real human psychology, or had proven effective with LTSU inmates." 399 F.3d, at 142. And, the court phrased the relevant conclusions in terms that placed a high summary judgment evidentiary burden upon the Secretary, i.e., the moving party. See, e.g., id., at 141 ("[W]e cannot say that the [defendant] has shown how the regulations in this case serve [an incentive-related] purpose"). The court's statements and conclusions here also offer too little deference to the judgment of prison officials about such matters. The court, for example, offered no apparent deference to the deputy prison superintendent's professional judgment that the Policy deprived "particularly difficult" inmates of a last remaining privilege and that doing so created a significant behavioral incentive. </s> Contrary to Justice Ginsburg's suggestion, post, at 2-4, we do not suggest that the deference owed prison authorities makes it impossible for prisoners or others attacking a prison policy like the present one ever to succeed or to survive summary judgment. After all, the constitutional interest here is an important one. Turner requires prison authorities to show more than a formalistic logical connection between a regulation and a penological objective. A prisoner may be able to marshal substantial evidence that, given the importance of the interest, the Policy is not a reasonable one. Cf. 482 U.S., at 97-99 (striking down prison policy prohibiting prisoner marriages). And with or without the assistance that public interest law firms or clinics may provide, it is not inconceivable that a plaintiff's counsel, through rigorous questioning of officials by means of depositions, could demonstrate genuine issues of fact for trial. Finally, as in Overton, we agree that "the restriction here is severe," and "if faced with evidence that [it were] a de facto permanent ban . . . we might well reach a different conclusion in a challenge to a particular application of the regulation." 539 U.S., at 134. That is not, however, the case before us. </s> Here prison authorities responded adequately through their statement and deposition to the allegations in the complaint. And the plaintiff failed to point to "'specific facts'" in the record that could "lead a rational trier of fact to find" in his favor. Matsushita Elec. Industrial Co. v. Zenith Radio Corp., 475 U.S. 574, 587 (1986) (quoting Fed. Rule Civ. Proc. 56(e)). </s> The judgment of the Court of Appeals for the Third Circuit is reversed, and the case is remanded for further proceedings. It is so ordered. Justice Alito took no part in the consideration or decision of this case. </s> JEFFREY A. BEARD, SECRETARY, PENNSYLVANIADEPARTMENT OF CORRECTIONS, PETITIONER v.RONALD BANKS, individually and on behalf ofall others similarly situated on writ of certiorari to the united states court of appeals for the third circuit [June 28, 2006] </s> Justice Thomas, with whom Justice Scalia joins, concurring in the judgment. </s> Judicial scrutiny of prison regulations is an endeavor fraught with peril. Just last Term, this Court invalidated California's policy of racially segregating prisoners in its reception centers, notwithstanding that State's warning that its policy was necessary to prevent prison violence. See Johnson v. California, 543 U.S. 499 (2005). California subsequently experienced several instances of severe race-based prison violence, including a riot that resulted in 2 fatalities and more than 100 injuries, and significant fighting along racial lines between newly arrived inmates, the very inmates that were subject to the policy invalidated by the Court in Johnson. See Winton & Bernstein, More Violence Erupts at Pitchess; Black and Latino inmates clash at the north county jail, leaving 13 injured, Los Angeles Times, Mar. 1, 2006, Metro Desk, p. B1. This powerful reminder of the grave dangers inherent in prison administration confirms my view that the framework I set forth in Overton v. Bazzetta, 539 U.S. 126, 138 (2003) (opinion concurring in judgment), is the least perilous approach for resolving challenges to prison regulations, as well as the approach that is most faithful to the Constitution. Accordingly, I concur only in the judgment of the Court. I </s> Both the plurality and the dissent evaluate the regulations challenged in this case pursuant to the approach set forth in Turner v. Safley, 482 U.S. 78 (1987), which permits prison regulations that "imping[e] on inmates' constitutional rights" if the regulations are "reasonably related to legitimate penological interests." Id., at 89. But as I explained in Overton, Turner and its progeny "rest on the unstated (and erroneous) presumption that the Constitution contains an implicit definition of incarceration." Overton, 539 U.S., at 139 (opinion concurring in judgment). Because the Constitution contains no such definition, "States are free to define and redefine all types of punishment, including imprisonment, to encompass various types of deprivations--provided only that those deprivations are consistent with the Eighth Amendment." Ibid. (emphasis in original). Respondent has not challenged Pennsylvania's prison policy as a violation of the Eighth Amendment, and thus the sole inquiry in this case is whether respondent's sentence deprived him of the rights he now seeks to exercise. Id., at 140. "Whether a sentence encompasses the extinction of a constitutional right enjoyed by free persons turns on state law, for it is a State's prerogative to determine how it will punish violations of its law." Ibid.1 Although the question of whether Pennsylvania intended to confer upon respondent and other inmates a right to have unfettered access to newspapers, magazines, and photographs is thus "ultimately for the State itself to answer," in the absence of a resolution of that question by the Pennsylvania Supreme Court, we must resolve it in the instant case. Id., at 141. Fortunately, the answer is straightforward. </s> In Overton, I explained: "[s]entencing a criminal to a term of imprisonment may, under state law, carry with it the implied delegation to prison officials to discipline and otherwise supervise the criminal while he is incarcerated. Thus, restrictions imposed by prison officials may also be a part of the sentence, provided that those officials are not acting ultra vires with respect to the discretion given them, by implication, in the sentence." Id., at 140, n. * </s> A term of imprisonment in Pennsylvania includes suchan implied delegation. Pennsylvania inmates are subject to the rules and disciplinary measures set forth bythe Pennsylvania Department of Corrections. See, e.g., Bulletin Inmate Discipline, Policy No. DC-ADM 801(2004), http://www.cor.state.pa.us/standards/lib/standards/DC-ADM_801_Inmate_Discipline.pdf (as visited June 12, 2006, and available in Clerk of Court's case file). And no one disputes that the regulations challenged in the instant litigation fall within the discretion given to the Department of Corrections. As in Overton, the conclusion that these regulations are included in the prison sentence is strongly supported by the plurality's Turner analysis. A prison policy that has a "valid rational connection [to] the ... legitimate penological objectives" of improving prison security and discouraging inmate misbehavior, ante, at 8 (internal quotation marks omitted), "that [is] designed to avoid adverse impacts on guards, inmates, or prison resources, [and] that cannot be replaced by 'ready alternatives,' [is] presumptively included within a sentence of imprisonment." Overton, 539 U.S., at 141-142 (Thomas,J., concurring in judgment). </s> The "history of incarceration as punishment [also] supports the view that the sentenc[e] imposed on responden[t] terminated" his unfettered right to magazines, newspapers, and photographs. Id., at 142. As I explained in Overton, imprisonment as punishment "became standardized in the period between 1780 and 1865," id., at 143 (citing McGowen, The Well-Ordered Prison: England, 1780-1865, in The Oxford History of the Prison: The Practice of Punishment in Western Society 79 (N. Morris & D. Rothman eds. 1995)), and was distinguished by the prisoner's isolation from the outside world. 539 U.S., at 143. Indeed, both the Pennsylvania and Auburn prison models, which formed the basis for prison systems throughout the Nation in the early 1800's, imposed this isolation specifically by denying prisoners access to reading materials and contact with their families. Rothman, Perfecting the Prison: United States, 1789-1865, in The Oxford History of the Prison 117; see also id., at 118 (explaining that in the Pennsylvania system, inmates were "given nothing to read except the Bible and were prevented from corresponding with friends and family"); S. Christianson, With Liberty for Some: 500 Years of Imprisonment in America 145 (1998) (explaining that in Sing Sing, the standard bearer for the Auburn model, no reading materials of any kind, except the Bible, were allowed inside). Even as the advent of prison libraries increased prisoners' access to reading materials, that access was universally "subject to some form of censorship," such that "inmates of correctional institutions are denied access to books which are freely available to the rest of the community." G. Bramley, Outreach: Library Services for the Institutionalized, the Elderly, and the Physically Handicapped 91, 93 (1978). </s> Although Pennsylvania "is free to alter its definition of incarceration to include the retention" of unfettered access to magazines, newspapers, and photographs, it appears that the Commonwealth instead sentenced respondent against the backdrop of its traditional conception of imprisonment, which affords no such privileges. Overton, supra, at 144-145 (Thomas, J., concurring in judgment). Accordingly, respondent's challenge to Pennsylvania's prison regulations must fail. II </s> This case reveals the shortcomings of the Turner framework, at least insofar as that framework is applied to prison regulations that seek to modify inmate behavior through privilege deprivation. In applying the first Turner factor, the plurality correctly observes that Pennsylvania's policy of depriving its most incorrigible inmates of their last few remaining privileges bears a "valid rational connection" to the "legitimate penological objectiv[e]" of "encourag[ing] progress and discourag[ing] backsliding" of inmate compliance with prison rules. Ante, at 8, 9 (internal quotation marks omitted). Indeed, this Court has previously determined that "[w]ithdrawing ... privileges is a proper and even necessary management technique to induce compliance with the rules of inmate behavior, especially for high-security prisoners." Overton, supra, at 134.2 Although policies, such as Pennsylvania's, that seek to promote compliance with prison rules by withdrawing various privileges may always satisfy Turner's first factor, they necessarily fail its second factor. Such policies, by design, do not provide an "alternative means" for inmates to exercise the rights they have been deprived. 482 U.S., at 90. The "legitimate penological objectiv[e]" of encouraging compliance with prison rules by depriving misbehaving inmates of various privileges simply cannot be accomplished if prison officials are required to provide prisoners with an alternative and equivalent set of privileges. Thus, the plurality's observation that respondent's privileges may be restored in response to continued, improved behavior, is simply irrelevant to the second factor of Turner, which asks only "whether ... alternative means of exercising the right ... remain open to prison inmates." Ibid. The answer in the context of privilege deprivation policies is always no, thus demonstrating the difficulty of analyzing such policies under the Turner framework. </s> The third and fourth Turner factors are likewise poorly suited to determining the validity of inmate privilege deprivation policies. When the "valid penological objectiv[e]" of a prison policy is encouraging compliance with prison rules, it makes little sense to inquire into "the impact accommodation of the asserted constitutional right will have on guards and other inmates, and on the allocation of prison resources generally," or into the availability of "ready alternatives." Ibid. At best, such inquiries merely collapse the third and fourth factors into the first, because accommodating the exercise of the deprived right will undermine the incentive effects of the prison policy and because the unavailability of "ready alternatives" is typically (as in this case) one of the underlying rationales for the adoption of inmate privilege deprivation policies. *  *  * Because the prison regulations at issue today are permissible under the approach I explained in Overton, I concur in the judgment of the Court. </s> JEFFREY A. BEARD, SECRETARY, PENNSYLVANIADEPARTMENT OF CORRECTIONS, PETITIONER v.RONALD BANKS, individually and on behalf ofall others similarly situated on writ of certiorari to the united states court of appeals for the third circuit [June 28, 2006] </s> Justice Stevens, with whom Justice Ginsburg joins, dissenting. </s> By ratifying the Fourteenth Amendment, our society has made an unmistakable commitment to apply the rule of law in an evenhanded manner to all persons, even those who flagrantly violate their social and legal obligations. Thus, it is well settled that even the "'worst of the worst'" prisoners retain constitutional protection, specifically including their First Amendment rights. See, e.g., O'Lone v. Estate of Shabazz, 482 U.S. 342, 348 (1987). When a prison regulation impinges upon First Amendment freedoms, it is invalid unless "it is reasonably related to legitimate penological interests." Turner v. Safley, 482 U.S. 78, 89 (1987). Under this standard, a prison regulation cannot withstand constitutional scrutiny if "the logical connection between the regulation and the asserted goal is so remote as to render the policy arbitrary or irrational," id., at 89-90, or if the regulation represents an "exaggerated response" to legitimate penological objectives, id., at 98. </s> In this case, Pennsylvania prison officials have promulgated a rule that prohibits inmates in Long Term Segregation Unit, level 2 (LTSU-2), which is the most restrictive condition of confinement statewide, from possessing any secular, nonlegal newspaper, newsletter, or magazine during the indefinite duration of their solitary confinement. A prisoner in LTSU-2 may not even receive an individual article clipped from such a news publication unless the article relates to him or his family. In addition, under the challenged rule, any personal photograph, including those of spouses, children, deceased parents, or inspirational mentors, will be treated as contraband and confiscated. See App. 176. </s> It is indisputable that this prohibition on the possession of newspapers and photographs infringes upon respondent's First Amendment rights. "[T]he State may not, consistently with the spirit of the First Amendment, contract the spectrum of available knowledge. The right of freedom of speech and press includes not only the right to utter or print, but the right to distribute, the right to receive, the right to read and freedom of inquiry, freedom of thought ...." Griswold v. Connecticut, 381 U.S. 479, 482 (1965) (citation omitted). See also Kaplan v. California, 413 U.S. 115, 119-120 (1973) (explaining that photographs, like printed materials, are protected by the First Amendment). Plainly, the rule at issue in this case strikes at the core of the First Amendment rights to receive, to read, and to think. </s> Petitioner does not dispute that the prohibition at issue infringes upon rights protected by the First Amendment. Instead, petitioner posits two penological interests, which, in his view, are sufficient to justify the challenged rule notwithstanding these constitutional infringements: prison security and inmate rehabilitation. Although these interests are certainly valid, petitioner has failed to establish, as a matter of law, that the challenged rule is reasonably related to these interests. Accordingly, the Court of Appeals properly denied petitioner's motion for summary judgment, and this Court errs by intervening to prevent a trial. </s> Turning first to the security rationale, which the plurality does not discuss, the Court of Appeals persuasively explained why, in light of the amount of materials LTSU-2 inmates may possess in their cells, petitioner has failed to demonstrate that the prohibition on newspapers, magazines, and photographs is likely to have any marginal effect on security. "[E]ach [LTSU-2] inmate is given a jumpsuit, a blanket, two bedsheets, a pillow case, a roll of toilet paper, a copy of a prison handbook, ten sheets of writing paper, several envelopes, carbon paper, three pairs of socks, three undershorts and three undershirts, and may at any point also have religious newspapers, legal periodicals, a prison library book, Bibles, and a lunch tray with a plate and a cup. Many of these items are flammable, could be used [to start fires, catapult feces, or to create other dangers] as effectively as a newspaper, magazine or photograph, and have been so used by [LTSU-2] inmates." 399 F.3d 134, 143 (2005) (case below). </s> In fact, the amount of potentially dangerous material to which LTSU-2 inmates are seeking access is quite small in comparison to the amount of material that they already possess in their cells. As the Court of Appeals emphasized, LTSU-2 inmates "are not requesting unlimited access to innumerable periodicals," rather, they are seeking "the ability to have one newspaper or magazine and some small number of photographs in their cells at one time." 399 F.3d, at 144 (emphasis added). In light of the quantity of materials that LTSU-2 inmates are entitled to have in their cell, it does not follow, as a matter of logic, that preventing inmates from possessing a single copy of a secular, nonlegal newspaper, newsletter, or magazine will have any measurable effect on the likelihood that inmates will start fires, hide contraband, or engage in other dangerous actions. See, e.g., Mann v. Smith, 796 F.2d 79, 81 (CA5 1986) (Higginbotham, J.) (invalidating a county jail's ban on newspapers and magazines because, "[i]n view of the jail's policy of allowing inmates to possess other material that was flammable and capable of being used to interfere with the plumbing," the rule was "too underinclusive" to be constitutional).1 </s> Moreover, there is no record evidence in this case to support a contrary conclusion. Deputy Superintendent Joel Dickson, whose deposition is a major part of the sparse record before us, did not identify any dangerous behavior that would be more likely to occur if LTSU-2 inmates obtained the limited access to periodicals that they are seeking. He did, however, make clear that inmates could engage in any of the behaviors that worried prison officials without using banned materials: "Q. Wouldn't it be fair to say that if an inmate wants to start a fire, he could start a fire using writing paper in combination with a blanket or in combination with clothing or linen, bedding materials? He could do that; couldn't he? </s> "A. Yes. </s> "Q. If he wants to throw feces, he could use a cup for that; true? </s> "A. Yes. </s> "Q. Or if he wants to throw urine, he can use his cup to throw the urine? </s> "A. Yes." App. 196-197.2 </s> The security-based justification for the ban on personal photographs is even weaker. There is not a single statement in Superintendent Dickson's deposition suggesting that prisoners have used, or would be likely to use, photographic paper to start fires or hurl excrement. Cf. id., at 196 (stating that paper products are generally used to start fires). </s> Perhaps, at trial, petitioner could introduce additional evidence supporting his view that the challenged regulation is in fact reasonably likely to enhance security or that respondent's request for limited access to newspapers and photographs would, for some as yet undisclosed reason, require an unduly burdensome expenditure of resources on the part of prison officials. However, the above discussion makes clear that, at the very least, "reasonable minds could differ as to the import of the evidence" introduced thus far concerning the relationship between the challenged regulation and petitioner's posited security interest, Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 250 (1986). Accordingly, petitioner's valid interest in security is not sufficient to warrant judgment as a matter of law. See id., at 250-251. </s> The second rationale posited by petitioner in support of the prohibitions on newspapers, newsletters, magazines, and photographs is rehabilitation. According to petitioner, the ban "provides the [l]evel 2 inmates with the prospect of earning a privilege through compliance with orders and remission of various negative behaviors and serves to encourage the progress and discourage backsliding by the level 1 inmates." App. 27. In the plurality's view, in light of the present record, this rationale is sufficient to warrant a reversal of the judgment below. </s> Rehabilitation is undoubtedly a legitimate penological interest. However, the particular theory of rehabilitation at issue in this case presents a special set of concerns for courts considering whether a prison regulation is consistent with the First Amendment. Specifically, petitioner advances a deprivation theory of rehabilitation: Any deprivation of something a prisoner desires gives him an added incentive to improve his behavior. This justification has no limiting principle; if sufficient, it would provide a "rational basis" for any regulation that deprives a prisoner of a constitutional right so long as there is at least a theoretical possibility that the prisoner can regain the right at some future time by modifying his behavior. See Kimberlin v. United States Dept. of Justice, 318 F.3d 228, 240 (CADC 2003) (per curiam) (Tatel, J., concurring in part and dissenting in part) (noting that "regulations that deprive prisoners of their constitutional rights will always be rationally related to the goal of making prison more miserable"). Indeed, the more important the constitutional right at stake (at least from the prisoners' perspective), the stronger the justification for depriving prisoners of that right. The plurality admits as much: "If the policy (in the authorities' view) helps to produce better behavior, then its absence (in the authorities' view) will help to produce worse behavior...." Ante, at 9. </s> Not surprisingly, as Justice Thomas recognizes, see ante, at 5-6, this deprivation theory does not map easily onto several of the Turner factors, which are premised on prison officials presenting a secondary effects type rationale in support of a challenged regulation. For instance, under the deprivation theory of rehabilitation, there could never be a "ready alternative" for furthering the government interest, because the government interest is tied directly to depriving the prisoner of the constitutional right at issue. </s> Indeed, the strong form of the deprivation theory of rehabilitation would mean that the prison rule we invalidated in Turner would have survived constitutional scrutiny if the State had simply posited an interest in rehabilitating prisoners through deprivation. In Turner, we held that a Missouri regulation that forbade inmates from marrying except with the permission of the prison superintendent was facially unconstitutional. See 482 U.S. 78, inmates had been threatened with the loss of parole for attempting to exercise their marriage rights). </s> In sum, rehabilitation is a valid penological interest, and deprivation is undoubtedly one valid tool in promoting rehabilitation. Nonetheless, to ensure that Turner continues to impose meaningful limits on the promulgation of rules that infringe upon inmates' constitutional rights, see Thornburgh v. Abbott, 490 U.S. 401, 414 (1989) (stating that Turner's reasonableness standard "is not toothless"), courts must be especially cautious in evaluating the constitutionality of prison regulations that are supposedly justified primarily on that basis. When, as here, a reasonable factfinder could conclude that challenged deprivations have a tenuous logical connection to rehabilitation, or are exaggerated responses to a prison's legitimate interest in rehabilitation, prison officials are not entitled to judgment as a matter of law. </s> Petitioner argues that, because the various deprivations in the levels of disciplinary confinement short of LTSU-2 are also severe, prison officials have no choice but to deprive inmates of core constitutional rights in LTSU-2 in order to make LTSU-2 more unattractive than other types of segregation. The fact that most States and the Federal Government run their prisons without resorting to the type of ban at issue in this case, see Brief for American Civil Liberties Union etal. as Amici Curiae 21,3 casts serious doubt upon the need for the challenged constitutional deprivations. </s> In any event, if we consider the severity of the other conditions of confinement in LTSU-2, it becomes obvious that inmates have a powerful motivation to escape those conditions irrespective of the ban on newspapers, magazines, and personal photographs. Inmates in LTSU-2 face 23 hours a day in solitary confinement, are allowed only one visitor per month, may not make phone calls except in cases of emergency, lack any access to radio or television, may not use the prison commissary, are not permitted General Educational Development (GED) or special education study, and may not receive compensation under the inmate compensation system if they work as a unit janitor. Although conditions in LTSU-1 are also harsh, in several respects unrelated to the challenged regulation, they are far more appealing than the conditions in LTSU-2. LTSU-1 inmates may have two visitors and may make one phone call per month; they have access to the commissary; they are permitted in-cell GED or special education study; they are permitted a wider range of counseling services; and they are eligible to obtain compensation under the inmate compensation system. See App. 43, 102; 399 F.3d, at 148 (case below). The logical conclusion from this is that, even if LTSU-2 prisoners were not deprived of access to newspapers and personal photographs, they would still have a strong incentive to gain promotion to LTSU-1. </s> In addition, prisoners in LTSU-1 do not regain access to personal photographs, which means that the ban on photographs cannot be justified by petitioner's "'hope'" that inmates will respond to the constitutional deprivations in LTSU-2 by improving their behavior so they may graduate into LTSU-1, 399 F.3d, at 142 (quoting petitioner's counsel). Prisoners who "graduate" out of the LTSU-1 and back into the general prison population do regain their right to possess personal photographs, but they also regain so many additional privileges--from ending their solitary confinement to regaining access to television and radio--that it strains credulity to believe that that the possibility of regaining the right to possess personal photographs if they eventually return to the general prison population would have any marginal effect on the actions of prisoners in LTSU-2. </s> In sum, the logical connection between the ban on newspapers and (especially) the ban on personal photographs, on one hand, and the rehabilitation interests posited by petitioner, on the other, is at best highly questionable. Moreover, petitioner did not introduce evidence that his proposed theory of behavior modification has any basis in human psychology, or that the challenged rule has in fact had any rehabilitative effect on LTSU-2 inmates. Ibid.4 Accordingly, at least based on the present state of the record, a reasonable factfinder could conclude that prisoners would have a sufficiently powerful incentive to graduate out of LTSU-2 even absent the challenged rule, such that the rule is not likely to have any appreciable behavior modification effect. </s> The temporal character of LTSU-2 status further undermines petitioner's argument that the ban on newspapers and photographs at issue in this case is reasonably related to a legitimate penological interest. All LTSU inmates must spend 90 days in LTSU-2 status. After that, they receive a review every 30 days to determine if they should be promoted to LTSU-1. That determination is made at the discretion of prison administrators, and is not linked to any specific infraction or compliance. Petitioner acknowledges that "[a]n inmate in the LTSU can remain on Level 2 status indefinitely." App. 26. Indeed, as of August 2002, which is the most recent date for which there is record evidence, roughly three-quarters of inmates placed in LTSU-2 had remained in that status since the inception of the LTSU program over two years earlier. See id., at 138. See also ante, at 9 (plurality opinion). In short, as the Court of Appeals explained: "[T]he LTSU Level 2 is a unique kind of segregation with characteristics of both disciplinary and administrative segregation. Inmates come to LTSU because of 'unacceptable behaviors' in other institutions, but they have not all been adjudicated by a hearing officer to have violated the [Department of Corrections'] rules. The LTSU is not a place where inmates are sent for a discrete period of punishment, pursuant to a specific infraction, but is a place for 'Long Term' segregation of the most incorrigible and difficult prisoners for as long as they fall under that umbrella." 399 F.3d, at 141 (citation omitted). </s> The indefinite nature of LTSU-2 confinement, and the fact that as of August 2002 a significant majority of inmates confined at LTSU-2 had remained there since the inception of the program over two years earlier, suggest that the prohibition on newspapers, magazines, and personal photographs is an exaggerated response to the prison's legitimate interest in rehabilitation. It would be a different case if prison officials had promulgated a regulation that deprived LTSU-2 inmates of certain First Amendment rights for a short period of time in response to specific disciplinary infractions. The indefinite deprivations at issue here, however, obviously impose a much greater burden on inmates' ability to exercise their constitutional rights. Absent evidence that these indefinite deprivations will be more effective in achieving rehabilitation than shorter periods of deprivation, a reasonable factfinder could conclude that the challenged regulation "sweeps much more broadly than can be explained by [prison officials'] penological objectives," Turner, 482 U.S., at 98, and is hence an exaggerated response to petitioner's legitimate interest in rehabilitation. </s> In short, as with regard to the current state of the record concerning the connection between the challenged regulation and its effect on prison security, the record is insufficient to conclude, as a matter of law, that petitioner has established a reasonable relationship between his valid interest in inmate rehabilitation and the prohibition on newspapers, magazines, and personal photographs in LTSU-2. *  *  * </s> What is perhaps most troubling about the prison regulation at issue in this case is that the rule comes perilously close to a state-sponsored effort at mind control. The State may not " 'invad[e] the sphere of intellect and spirit which it is the purpose of the First Amendment of our Constitution to reserve from all official control.' " Wooley v. Maynard, 430 U.S. 705, 715 (1977) (quoting West Virginia Bd. of Ed. v. Barnette, 319 U.S. 624, 642 (1943)). In this case, the complete prohibition on secular, nonlegal newspapers, newsletters, and magazines prevents prisoners from "receiv[ing] suitable access to social, political, esthetic, moral, and other ideas," which are central to the development and preservation of individual identity, and are clearly protected by the First Amendment, Red Lion Broadcasting Co. v. FCC, 395 U.S. 367, 390 (1969). Similarly, the ban on personal photographs, for at least some inmates, interferes with the capacity to remember loved ones, which is undoubtedly a core part of a person's "sphere of intellect and spirit." Moreover, it is difficult to imagine a context in which these First Amendment infringements could be more severe; LTSU-2 inmates are in solitary confinement for 23 hours a day with no access to radio or television, are not permitted to make phone calls except in cases of emergency, and may only have one visitor per month. They are essentially isolated from any meaningful contact with the outside world. The severity of the constitutional deprivations at issue in this case should give us serious pause before concluding, as a matter of law, that the challenged regulation is consistent with the sovereign's duty to treat prisoners in accordance with "the ethical tradition that accords respect to the dignity and worth of every individual." Overton v. Bazzetta, 539 U.S. 126, 138 (2003) (Stevens, J., joined by Souter, Ginsburg, and Breyer, JJ., concurring) (citation and internal quotation marks omitted).5 Because I believe a full trial is necessary before forming a definitive judgment on the whether the challenged regulation is reasonably related to petitioner's valid interests in security and rehabilitation, I respectfully dissent. </s> JEFFREY A. BEARD, SECRETARY, PENNSYLVANIADEPARTMENT OF CORRECTIONS, PETITIONER v.RONALD BANKS, individually and on behalf ofall others similarly situated on writ of certiorari to the united states court of appeals for the third circuit [June 28, 2006] </s> Justice Ginsburg, dissenting. </s> Justice Stevens comprehensively explains why the justifications advanced by the Secretary of Pennsylvania's Department of Corrections (Secretary) do not warrant pretrial dismissal of Ronald Banks's complaint alleging arbitrary deprivation of access to the news of the day. Ante, p.1. Joining Justice Stevens' dissenting opinion in full, I direct this separate writing to the plurality's apparent misapprehension of the office of summaryjudgment. </s> As the plurality recognizes, ante, at 6, there is more to the summary judgment standard than the absence of any genuine issue of material fact; the moving party must also show that he is "entitled to a judgment as a matter of law." Fed. Rule Civ. Proc. 56(c); Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 249-255 (1986); id., at 250-251 (summary judgment is unwarranted "[i]f reasonable minds could differ as to the import of the evidence"). Here, the Secretary cannot instantly prevail if, based on the facts so far shown and with due deference to the judgment of prison authorities, a rational trier could conclude that the challenged regulation is not "reasonably related to legitimate penological interests." Turner v. Safley, 482 U.S. 78, 89 (1987). </s> The showing made by the Secretary in support of summary judgment is slim, the kind that could be made to justify virtually any prison regulation that does not involve physical abuse. The Secretary relies on his own statement of undisputed facts and the deposition of the prison's Deputy Superintendent. The deposition states that "obviously we are attempting to do the best we can to modify the inmate's behavior so that eventually he can become a more productive citizen . ... We're very limited ... in what we can and cannot deny or give to an inmate, and [newspapers and photographs] are some of the items that we feel are legitimate as incentives for inmate growth." App. 189, 190. The Secretary's statement of undisputed facts similarly asserts that the regulation "serves to encourage ... progress and discourage backsliding." Id., at 27. </s> These statements, the plurality holds, are sufficient to show that the challenged regulation is reasonably related to inmate rehabilitation. Ante, at 8. But prison officials "'cannot avoid court scrutiny by reflexive, rote assertions.'" Shimer v. Washington, 100 F.3d 506, 510 (CA7 1996) (quoting Williams v. Lane, 851 F.2d 867, 886 (CA7 1988) (Flaum, J., concurring in result)). See also Turner, 482 U.S., at 98 (noting lack of evidence offered by prison officials to support a ban on inmate marriages); Murphy v. Missouri Dept. of Corrections, 372 F.3d 979, 986 (CA8 2004) (applying Turner and concluding that the Corrections Department's "documented reason for censoring [a magazine] is too conclusory to support [summary] judgment in its favor"); Jacklovich v. Simmons, 392 F.3d 420, 428-434 (CA10 2004). "'[T]raditional deference does not mean that courts [are to] abdicat[e] their duty to protect those constitutional rights that a prisoner retains.'" 399 F.3d 134, 140 (CA3 2005) (quoting Fortner v. Thomas, 983 F.2d 1024, 1029 (CA11 1993)). </s> The plurality correctly recognizes that it "must draw 'all justifiable inferences' in Banks'[s] 'favor.'" Ante, at 6 (quoting Liberty Lobby, 530 U.S. 133, 150-151 (2000). </s> As I see it, on the limited record thus far made and without the benefit of trial, "the logical connection between the [no news journals] regulation and the asserted goal" could be found by a reasonable trier to be "so remote as to render the policy arbitrary or irrational." Turner, 482 U.S., at 89-90. The regulation denies The Christian Science Monitor to inmates housed in level 2 of the prison's long-term segregation unit but allows them The Jewish Daily Forward, based on the determination of a prison official that the latter qualifies as a religious publication and the former does not. App. 179-180; 399 F.3d, at 147. Prisoners are allowed to read Harlequin romance novels, but not to learn about the war in Iraq or Hurricane Katrina. The first justification cited by prison officials for impinging on inmates' First Amendment rights in this way is too tenuous to be plausible. See ante, at 3-5 (Stevens, J., dissenting) (discussing security rationale); 399 F.3d, at 142-144 (same). The second could be recited, routinely, to immunize all manner of prison regulations from review for rationality. See ante, at 5-12 (Stevens, J., dissenting) (discussing deprivation/"rehabilitation" rationale); 399 F.3d, at 140-142 (same). </s> Turner came to us after a full trial, and the Court's opinion in that case relied heavily on testimony elicited at trial in evaluating the reasonableness of the regulations at issue. 539 U.S. 126, 133 (2003). But in this case, the defender of the regulation invites summary judgment. All inferences are to be drawn in favor of the prisoner opposing the regulation, and the question is not which side has the better argument, but whether the Secretary has shown he is entitled to a judgment as a matter of law. By elevating the summary judgment opponent's burden to a height prisoners lacking nimble counsel cannot reach, the plurality effectively tells prison officials they will succeed in cases of this order, and swiftly, while barely trying. It suffices for them to say, in our professional judgment the restriction is warranted. The asserted right to read, see ante, at 1-2 (Stevens, J., dissenting), is indeed an "important one," see ante, at 12 (plurality opinion of Breyer, J.). Even in highest security custody, a constitutional interest of that order merits more than peremptory treatment. *  *  * For the reasons stated by Justice Stevens and in this opinion, I would affirm the Third Circuit's judgment reversing the award of summary judgment to the Secretary. </s> FOOTNOTESFootnote 1As in Overton, respondent has not asked this Court to abstain from resolving his constitutional challenge under Railroad Comm'n of Tex. v. Pullman Co., 312 U.S. 496 (1941) (holding that federal courts should ordinarily abstain where the resolution of a federal constitutional issue may be rendered irrelevant by the determination of a predicate state-law question), and the issue of Pullman abstention was not considered below. As a result, respondent has "submitted to the sort of guesswork about the meaning of prison sentences that is the hallmark of the Turner inquiry." Overton, 539 U.S., at 141 (Thomas, J., concurring in judgment). Footnote 2In my view, this legal conclusion, combined with the deference tothe judgment of prison officials required under Turner, see ante, at 8-15, would entitle prison officials to summary judgment against challenges to their inmate prison deprivation policies in virtually every case. In this context, it is highly unlikely a prisoner could establish that the "connection between the regulation and the asserted goal is arbitrary or irrational." Shaw v. Murphy, 532 U.S. 223, 229 (2001) (internal quotation marks omitted). FOOTNOTESFootnote 1Even less apparent is the security risk that would be posed by respondent's alternative suggestion, which is that LTSU-2 inmates be able to access news periodicals in the LTSU mini-law library, where inmates are already permitted to go to view legal materials during 2-hour blocs of time pursuant to a first-come, first-serve roster of requests. See 399 F.3d 134, 147 (2005) (case below). Footnote 2See also App. 194 ("I would say there's any number of ways [LTSU-2 inmates hurl feces]. Oftentimes it's with the cups that they're given for their drinks, things like that, any type of container; or . . . a piece of paper or whatever wrapped up that they can use to give a little leverage and fling the materials."). Footnote 3This is presumably the type of evidence the plurality suggests that respondent should have presented through an affidavit or deposition in response to petitioner's motion for summary judgment. See Jacklovich v. Simmons, 392 F.3d 420, 428-429 (CA10 2004) (noting that plaintiffs challenging a prison regulation that limited access to publications had introduced such evidence and concluding that prison officials were not entitled to summary judgment). Footnote 4I emphasize the lack of evidentiary support for petitioner's position because I believe that, in light of the record currently before the Court, the logical connection between petitioner's stated interest in rehabilitation and the prohibition on newspapers and photographs is exceedingly tenuous. When the logical connection between prison officials' stated interests and the restrictions on prisoners' constitutional rights is not self-evident, we have considered whether prison officials proffered any evidence that their regulations served the values they identified. See, e.g., Turner v. Safley, 482 U.S. 78, 98 (1987) (discussing lack of evidence in the record to support a ban on marriage as related to prison officials' stated objectives). Footnote 5In contrast to this case, the constitutional right at issue in Overton involved freedom of association, which, "as our cases have established ... is among the rights least compatible with incarceration." Overton v. Bazzetta, 539 U.S. 126, 131 (2003).

United States Supreme Court RENNE v. GEARY(1991) No. 90-769 Argued: April 23, 1990Decided: June 17, 1991 </s> Article II, 6(b) of the California Constitution prohibits political parties and party central committees from endorsing, supporting, or opposing candidates for nonpartisan offices such as county and city offices. Based on 6(b), it is the policy of petitioners - the City and County of San Francisco, its Board of Supervisors, and certain local officials - to delete any reference to party endorsements from candidates' statements included in the voter pamphlets that petitioners print and distribute. Respondents - among whom are 10 registered voters in the city and county, including members of the local Republican and Democratic Central Committees - filed suit seeking, inter alia, a declaration that 6(b) violates the First and Fourteenth Amendments and an injunction preventing petitioners from editing candidate statements to delete references to party endorsements. The District Court entered summary judgment for respondents, declaring 6(b) unconstitutional and enjoining its enforcement, and the Court of Appeals affirmed. </s> Held: </s> The question whether 6(b) violates the First Amendment is not justiciable in this case, since respondents have not demonstrated a live controversy ripe for resolution by the federal courts. Pp. 316-324. </s> (a) Although respondents have standing to claim that 6(b) has been applied in an unconstitutional manner to bar their own speech, the allegations in their complaint and affidavits raise serious questions about their standing to assert other claims. In their capacity as voters, they only allege injury flowing from 6(b)'s application to prevent speech by candidates in the voter pamphlets. There is reason to doubt that that injury can be redressed by a declaration of 6(b)'s invalidity or an injunction against its enforcement, since a separate California statute, the constitutionality of which was not litigated in this case, might well be construed to prevent candidates from mentioning party endorsements in voter pamphlets, even in the absence of 6(b). Moreover, apart from the possibility of an overbreadth claim, discussed infra, (c) the standing of respondent committee members to litigate based on injuries to their respective committees' rights is unsettled. See Bender v. Williamsport Area School Dist., 475 U.S. 534, 543 -545. Nor is it clear, putting aside redressability concerns, that the committee [501 U.S. 312, 313] members have third-party standing to assert the rights of candidates, since no obvious barrier exists preventing candidates from asserting their own rights. See Powers v. Ohio, 499 U.S. 400 . Pp. 318-320. </s> (b) Respondents' allegations fail to demonstrate a live dispute involving the actual or threatened application of 6(b) to bar particular speech. Their generalized claim that petitioners deleted party endorsements from candidate statements in past elections does not do so, since, so far as can be discerned from the record, those disputes had become moot by the time respondents filed suit. Similarly, an allegation that the Democratic Committee has not endorsed candidates "[i]n elections since 1986" for fear of the consequences of violating 6(b) will not support a federal court action absent a contention that 6(b) prevented a particular endorsement, and that the controversy had not become moot prior to the litigation. Nor can a ripe controversy be found in the fact that the Republican Committee endorsed candidates for nonpartisan elections in 1987, the year this suit was filed, since nothing in the record suggests that petitioners took any action to enforce 6(b) as a result of those endorsements, or that there was any desire or attempt to include the endorsements in the candidates' statements. Allegations that respondents desire to endorse candidates in future elections also present no ripe controversy, absent a factual record of an actual or imminent application of 6(b) sufficient to present the constitutional issues in clean-cut and concrete form. Indeed, the record contains no evidence of a credible threat that 6(b) will be enforced other than against candidates in the context of voter pamphlets. In these circumstances, postponing adjudication until a more concrete controversy arises will not impose a substantial hardship on respondents, and will permit the state courts further opportunity to construe 6(b), perhaps, in the process, materially altering the questions to be decided. Pp. 320-323. </s> (c) Even if respondents' complaint may be read to assert a facial overbreadth challenge, the better course might have been to address in the first instance the constitutionality of 6(b) as applied in the context of voter pamphlets. See, e.g., Board of Trustees, of State University of N.Y. v. Fox, 492 U.S. 469, 484 -485. If the as-applied challenge had been resolved first, the justiciability problems determining the disposition of this case might well have concluded the litigation at an earlier stage. Pp. 323-324. </s> 911 F.2d 280 (CA9 1990). Vacated and remanded. </s> KENNEDY, J., delivered the opinion of the Court, in which REHNQUIST, C.J., and STEVENS, O'CONNOR, and SOUTER, JJ., joined, and in all but Part II-B of which SCALIA, J., joined. STEVENS, J., filed a concurring [501 U.S. 312, 314] opinion, post, p. 325. WHITE, J., filed a dissenting opinion. MARSHALL, J., filed a dissenting opinion, in which BLACKMUN, J., joined, post, p. 334. </s> Dennis Aftergut argued the cause for petitioners. With him on the briefs were Louise H. Renne, pro se, and Thomas J. Owen. </s> Arlo Hale Smith argued the cause and filed a brief for respondents. </s> Cedric C. Chao argued the cause for the California Democratic Party et al. as amici curiae urging affirmance. * </s> [Footnote * Jerome B. Falk, Jr., and Steven L. Mayer filed a brief for the California Judges Association as amicus curiae urging reversal. </s> Karl Olson, Steven R. Shapiro, and Alan L. Schlosser filed a brief for the American Civil Liberties Union et al. as amici curiae urging affirmance. </s> JUSTICE KENNEDY delivered the opinion of the Court.Fn </s> Petitioners seek review of a decision of the United States Court of Appeals for the Ninth Circuit holding that Article II, 6(b) of the California Constitution violates the First and Fourteenth Amendments to the Constitution of the United States. Section 6(b) reads: "No political party or party central committee may endorse, support, or oppose a candidate for nonpartisan office." Its companion provision, 6(a), provides that "[a]ll judicial, school, county, and city offices shall be nonpartisan." </s> I </s> In view of our determination that the case is nonjusticiable, the identity of the parties has crucial relevance. Petitioners are the City and County of San Francisco, its Board of Supervisors, and certain local officials. The individual respondents are 10 registered voters residing in the City and County of San Francisco. They include the chairman and three members of the San Francisco Republican County Central Committee and one member of the San Francisco Democratic County Central Committee. Election Action, an association [501 U.S. 312, 315] of voters, is also a respondent, but it asserts no interest in relation to the issues before us different from that of the individual voters. Hence, we need not consider it further. </s> Respondents filed this suit in the United States District Court for the Northern District of California. Their third cause of action challenged 6(b) and petitioners' acknowledged policy, based on that provision, of deleting any references to a party endorsement from the candidate statements included in voter pamphlets. As we understand it, petitioners print the pamphlets and pay the postage required to mail them to voters. The voter pamphlets contain statements prepared by candidates for office and arguments submitted by interested persons concerning other measures on the ballot. The complaint sought a declaration that Article II, 6 is unconstitutional, and an injunction preventing petitioners from editing candidate statements to delete references to party endorsements. </s> The District Court granted summary judgment for respondents on their third cause of action, declaring 6(b) unconstitutional and enjoining petitioners from enforcing it. 708 F.Supp. 278 (1988). The court entered judgment on this claim pursuant to Federal Rule of Civil Procedure 54(b), and petitioners appealed. A Ninth Circuit panel reversed, 880 F.2d 1062 (1989), but the en banc Court of Appeals affirmed the District Court's decision, 911 F.2d 280 (CA9 1990) (en banc). </s> We granted certiorari, 498 U.S. 1046 (1991), to determine whether 6(b) violates the First Amendment. At oral argument, doubts arose concerning the justiciability of that issue in the case before us. Having examined the complaint and the record, we hold that respondents have not demonstrated a live controversy ripe for resolution by the federal courts. As a consequence of our finding of nonjusticiability, we vacate the Ninth Circuit's judgment and remand with instructions to dismiss respondents' third cause of action. [501 U.S. 312, 316] </s> II </s> Concerns of justiciability go to the power of the federal courts to entertain disputes, and to the wisdom of their doing so. We presume that federal courts lack jurisdiction "unless `the contrary appears affirmatively from the record.'" Bender v. Williamsport Area School Dist., 475 U.S. 534, 546 (1986), quoting King Bridge Co. v. Otoe County, 120 U.S. 225, 226 (1887). "`It is the responsibility of the complainant clearly to allege facts demonstrating that he is a proper party to invoke judicial resolution of the dispute and the exercise of the court's remedial powers.'" Bender, supra, at 546, n. 8, quoting Warth v. Seldin, 422 U.S. 490, 517 -518 (1975). </s> A </s> Proper resolution of the justiciability issues presented here requires examination of the pleadings and record to determine the nature of the dispute and the interests of the parties in having it resolved in this judicial proceeding. According to the complaint, the respondent committee members "desire to endorse, support, and oppose candidates for city and county office through their county central committees, and to publicize such endorsements by having said endorsements printed in candidate's statements published in the voter's pamphlet." App. 4, § 36. All respondents "desire to read endorsements of candidates for city and county office as part of candidate's statements printed in the San Francisco voter's pamphlet." Id., at 5, § 37. </s> The complaint alleges that, in the past, certain of these petitioners "have deleted all references in candidate's statements for City and County offices to endorsements by political party central committees or officers or members of such committees," and that they will continue such deletions in the future unless restrained by court order. § 38. Respondents believe an actual controversy exists because they contend 6 and any other law relied upon to refuse to print the endorsements are unconstitutional in that they "abridge [respondents'] [501 U.S. 312, 317] rights to free speech and association," while petitioners dispute these contentions. § 39. The third cause of action concludes with general assertions that respondents have been harmed by the past and threatened deletion of endorsements from candidate statements, and that, because of those deletions, they have suffered and will suffer irreparable injury to their rights of free speech and association. Id., at 5-6, §§ 40-41. </s> An affidavit submitted by the Chairman of the Republican Committee in connection with respondents' motion for summary judgment illuminates and supplements the allegations of the complaint. It indicates the committee has a policy of endorsing candidates for nonpartisan offices: </s> "In 1987, the Republican Committee endorsed Arlo Smith for District Attorney, Michael Hennessey for Sheriff, and John Molinari for Mayor, despite objections from some that such endorsements are prohibited by California Constitution Article [II], Section 6. It is the plan and intention of the Republican Committee to endorse candidates for nonpartisan offices in as many future elections as possible. The Republican Committee would like to have such endorsements publicized by endorsed candidates in their candidate's statements in the San Francisco voter's pamphlet, and to encourage endorsed candidates to so publish their endorsements by the Republican Committee. </s> "In the future, I and other Republican Committee members . . . would like to use our titles as Republican County Committeemen in endorsements we make of local candidates which are printed in the San Francisco voter's pamphlet. We cannot do so as [petitioner] Jay Patterson has a policy of deleting the word "Republican" from all such endorsements." Id., 15-16. </s> An affidavit submitted by a Democratic committeeman states that, "[i]n elections since 1986, the Democratic Committee [501 U.S. 312, 318] has declined to endorse candidates or nonpartisan office solely out of concern that committee members may be criminally or civilly prosecuted for violation of the endorsement ban contained in" 6. Id., at 12. It also provides two examples of elections in which the word "Democratic" had been deleted from candidate statements. One involved an endorsement by a committee member of one of these respondents, then a candidate for local office, and in another, the respondent committee member wished to mention that position in his own candidate statement. Ibid. Those elections occurred prior to the adoption of 6(b), but at least one, and perhaps both, were held at a time when a California appellate court had found a ban on party endorsements implicit in the state constitutional provision designating which offices are nonpartisan, now 6(a). See Unger v. Superior Court of Marin County, 102 Cal.App. 3d 681, 162 Cal.Rptr. 611 (1980), overruled by Unger v. Superior Court, 37 Cal.3d 612, 209 Cal.Rptr. 474, 692 P.2d 238 (1984). </s> B </s> Respondents' allegations indicate that, relevant to this suit, petitioners interpret 6(b) to apply to three different categories of speakers. First, as suggested by the language of the provision, it applies to party central committees. Second, petitioners' reliance on 6(b) to edit candidate statements demonstrates that they believe the provision applies as well to the speech of candidates for nonpartisan office, at least in the forum provided by the voter pamphlets. Third, petitioners have interpreted 6(b) to apply to members and officers of party central committees, as shown by their policy of deleting references to endorsements by these individuals from candidate statements. The first of these interpretations flows from the plain language of 6(b), while the second and third require inferences from the text. </s> As an initial matter, serious questions arise concerning the standing of respondents to defend the rights of speakers [501 U.S. 312, 319] in any of these categories except to the extent that certain respondents in the third category may assert their own rights. In their capacity as voters, respondents only allege injury flowing from application of 6(b) to prevent speech by candidates in the voter pamphlets. We have at times permitted First Amendment claims by those who did not themselves intend to engage in speech, but instead wanted to challenge a restriction on speech they desired to hear. See, e.g., Virginia Pharmacy Board v. Virginia Citizens Consumer Council, Inc., 425 U.S. 748 (1976). There is reason to doubt, however, that the injury alleged by these voters can be redressed by a declaration of 6(b)'s invalidity or an injunction against its enforcement. See ASARCO Inc. v. Kadish, 490 U.S. 605, 615 -616 (1989) (opinion of KENNEDY, J., joined by REHNQUIST, C.J., and STEVENS and SCALIA, JJ.) (party seeking to invoke authority of federal courts must show injury "likely to be redressed by the requested relief"); Allen v. Wright, 468 U.S. 737, 751 (1984) ("relief from the injury must be `likely' to follow from a favorable decision"); Simon v. Eastern Ky. Welfare Rights Org., 426 U.S. 26, 38 , (1976). A separate California statute, the constitutionality of which was not litigated in this case, provides that a candidate's statement "shall not include the party affiliation of the candidate, nor membership or activity in partisan political organizations." Cal.Elec.Code Ann. 10012 (West 1977 and Supp. 1991). This statute might be construed to prevent candidates from mentioning party endorsements in voter pamphlets, even in the absence of 6(b). Overlapping enactments can be designed to further differing state interests, and invalidation of one may not impugn the validity of another. </s> The respondent committee members allege injury to their rights, either through their committees or as individual committee members, to endorse candidates for nonpartisan offices, and also allege injury from the inability of candidates to include those endorsements in voter pamphlets. Respondents, [501 U.S. 312, 320] of course, have standing to claim that 6(b) has been applied in an unconstitutional manner to bar their own speech. Apart, though, from the possibility of an overbreadth challenge, an alternative we discuss below, the standing of the committee members to litigate based on injuries to the rights of their respective committees is unsettled. See Bender v. Williamsport Area School Dist., 475 U.S., at 543 -545 (school board member, as member of a "collegial body," could not take appeal board as a whole declined to take). It may be that rights the committee members can exercise only in conjunction with the other members of the committee must be defended by the committee itself. Nor is it clear, putting aside our concerns about redressability, that the committee members have third-party standing to assert the rights of candidates, since no obvious barrier exists that would prevent a candidate from asserting his or her own rights. See Powers v. Ohio, 499 U.S. 400, 414 -415 (1991). </s> C </s> Justiciability concerns not only the standing of litigants to assert particular claims, but also the appropriate timing of judicial intervention. See Regional Rail Reorganization Act Cases, 419 U.S. 102, 136 -148 (1974). Respondents have failed to demonstrate a live dispute involving the actual or threatened application of 6(b) to bar particular speech. Respondents' generalized claim that petitioners have deleted party endorsements from candidate statements in past elections does not demonstrate a live controversy. So far as we can discern from the record, those disputes had become moot by the time respondents filed suit. While the mootness exception for disputes capable of repetition yet evading review has been applied in the election context, see Moore v. Ogilvie, 394 U.S. 814, 816 (1969), that doctrine will not revive a dispute which became moot before the action commenced. "Past exposure to illegal conduct does not, in itself, show a present case or controversy regarding injunctive relief [501 U.S. 312, 321] . . . if unaccompanied by any continuing, present adverse effects." O'Shea v. Littleton, 414 U.S. 488, 495 -496 (1974); see Los Angeles v. Lyons, 461 U.S. 95 (1983). </s> The allegation that the Democratic Committee has not endorsed candidates "[i]n elections since 1986" for fear of the consequences of violating 6, App. 12, provides insufficient indication of a controversy continuing at the time this litigation began or arising thereafter. The affidavit provides no indication whom the Democratic Committee wished to endorse, for which office, or in what election. Absent a contention that 6(b) prevented a particular endorsement, and that the controversy had not become moot prior to the litigation, this allegation will not support an action in federal court. </s> Nor can a ripe controversy be found in the fact that the Republican Committee endorsed candidates for nonpartisan elections in 1987, the year this suit was filed. Whether or not all of those endorsements involved elections pending at the time this action commenced, a point on which the affidavit is not clear, we have no reason to believe that 6(b) had any impact on the conduct of those involved. The committee made these endorsements "despite objections from some that such endorsements are prohibited" by the provision at issue. App. 15. Nothing in the record suggests that any action was taken to enforce 6(b) as a result of those endorsements. We know of no adverse consequences suffered by the Republican Committee or its members due to the apparent violation of 6(b). We also have no indication that any of the three endorsed candidates desired or attempted to include the party's endorsement in a candidate statement. </s> We also discern no ripe controversy in the allegations that respondents desire to endorse candidates in future elections, either as individual committee members or through their committees. Respondents do not allege an intention to endorse any particular candidate, nor that a candidate wants to include a party's or committee member's endorsement in a candidate statement. We possess no factual record of an actual [501 U.S. 312, 322] or imminent application of 6(b) sufficient to present the constitutional issues in "clean-cut and concrete form." Rescue Army v. Municipal Court of Los Angeles, 331 U.S. 549, 584 (1947); see Socialist Labor Party v. Gilligan, 406 U.S. 583 (1972); Public Affairs Associates Inc. v. Rickover, 369 U.S. 111 (1962) (per curiam); Alabama State Federation of Labor v. McAdory, 325 U.S. 450 (1945). We do not know the nature of the endorsement, how it would be publicized, or the precise language petitioners might delete from the voter pamphlet. To the extent respondents allege that a committee or a committee member wishes to "support" or "oppose" a candidate other than through endorsements, they do not specify what form that support or opposition would take. </s> The record also contains no evidence of a credible threat that 6(b) will be enforced, other than against candidates in the context of voter pamphlets. The only instances disclosed by the record in which parties endorsed specific candidates did not, so far as we can tell, result in petitioners taking any enforcement action. While the record indicates that the Democratic Committee feared prosecution of its members if it endorsed a candidate, we find no explanation of what criminal provision that conduct might be held to violate. Petitioners' counsel indicated at oral argument that 6(b) carries no criminal penalties, and may only be enforced by injunction. Nothing in the record suggests that petitioners have threatened to seek an injunction against county committees or their members if they violate 6(b). </s> While petitioners have threatened not to allow candidates to include endorsements by county committees or their members in the voter pamphlets prepared by the government, we do not believe deferring adjudication will impose a substantial hardship on these respondents. In all probability, respondents can learn which candidates have been endorsed by particular parties or committee members through other means. If respondents or their committees do desire to make a particular endorsement in the future, and a candidate wishes to [501 U.S. 312, 323] include the endorsement in a voter pamphlet, the constitutionality of petitioners' refusal to publish the endorsement can be litigated in the context of a concrete dispute. </s> Postponing consideration of the questions presented until a more concrete controversy arises also has the advantage of permitting the state courts further opportunity to construe 6(b), and perhaps, in the process, to "materially alter the question to be decided." Babbitt v. Farm Workers, 442 U.S. 289, 306 (1979); see also Webster v. Reproductive Health Services, 492 U.S. 490, 506 (1989) (plurality opinion). It is not clear from the language of the provision, for instance, that it applies to individual members of county committees. This apparent construction of the provision by petitioners, which may give respondents standing in this case, could be held invalid by the state courts. State courts also may provide further definition to 6(b)'s operative language, "endorse, support, or oppose." "Determination of the scope and constitutionality of legislation in advance of its immediate adverse effect in the context of a concrete case involves too remote and abstract an inquiry for the proper exercise of the judicial function." Longshoremen's Union v. Boyd, 347 U.S. 222, 224 (1954). </s> D </s> We conclude with a word about the propriety of resolving the facial constitutionality of 6(b) without first addressing its application to a particular set of facts. In some First Amendment contexts, we have permitted litigants injured by a particular application of a statute to assert a facial overbreadth challenge, one seeking invalidation of the statute because its application in other situations would be unconstitutional. See Broadrick v. Oklahoma, 413 U.S. 601 (1973). We have some doubt that respondents' complaint should be construed to assert a facial challenge to 6(b). Beyond question, the gravamen of the complaint is petitioners' application of 6(b) to delete party endorsements from candidate statements in voter pamphlets. While the complaint seeks a declaration [501 U.S. 312, 324] of 6(b)'s unconstitutionality, the only injunctive relief it requests relates to the editing of candidate statements. References to other applications of 6(b) are, at best, conclusory. </s> But even if one may read the complaint to assert a facial challenge, the better course might have been to address in the first instance the constitutionality of 6(b) as applied in the context of voter pamphlets. "It is not the usual judicial practice, . . . nor do we consider it generally desirable, to proceed to an overbreadth issue unnecessarily - that is, before it is determined that the statute would be valid as applied. Such a course would convert use of the overbreadth doctrine from a necessary means of vindicating the plaintiff's right not to be bound by a statute that is unconstitutional into a means of mounting gratuitous wholesale attacks upon state and federal laws." Board of Trustees, of State University of N.Y. v. Fox, 492 U.S. 469, 484 -485 (1989); see also Brockett v. Spokane Arcades, Inc., 472 U.S. 491, 503 -504 (1985). If the as-applied challenge had been resolved first in this case, the problems of justiciability that determine our disposition might well have concluded the litigation at an earlier stage. </s> III </s> The free speech issues argued in the briefs filed here have fundamental and far-reaching import. For that very reason, we cannot decide the case based upon the amorphous and ill-defined factual record presented to us. Rules of justiciability serve to make the judicial process a principled one. Were we to depart from those rules, our disposition of the case would lack the clarity and force which ought to inform the exercise of judicial authority. </s> The judgment is vacated and the case remanded with instructions to dismiss respondents' third cause of action without prejudice. </s> It is so ordered. </s> Fn [501 U.S. 312, 314] JUSTICE SCALIA joins all but Part II-B of this opinion. [501 U.S. 312, 325] </s> JUSTICE STEVENS, concurring. </s> The dissenting opinions in this case illustrate why the Court should decline review of the merits of the case in its present posture. JUSTICE MARSHALL concludes that Article II, 6(b) of the California Constitution is invalid on its face because it is overbroad. JUSTICE WHITE, on the other hand, concludes that respondents' complaint may not be construed as including a facial overbreadth challenge, and that 6(b) is valid insofar as it is applied to petitioners' policy of refusing to include endorsements in candidates' campaign mailings. </s> Given the very real possibility that the outcome of this litigation depends entirely on whether the complaint should be construed as making a facial challenge or an as-applied challenge - for it is apparent that JUSTICE WHITE and JUSTICE MARSHALL may both be interpreting the merits of their respective First Amendment questions correctly - and given the difficulty of determining whether respondents' complaint against petitioners' policy of deleting party endorsements from candidates' statements may fairly be construed as including a facial overbreadth challenge, the Court is surely wise in refusing to address the merits on the present record. </s> Two other prudential concerns weigh against deciding the merits of this case. First, I am not sure that respondents' challenge to petitioners' policy of deleting party endorsements is ripe for review. If such a challenge had been brought by a political party or a party central committee, and if the complaint had alleged that these organizations wanted to endorse, support, or oppose a candidate for nonpartisan office, but were inhibited from doing so because of the constitutional provision, the case would unquestionably be ripe. Cf. Eu v. San Francisco County Democratic Central Committee, 489 U.S. 214 (1989). Because I do not believe an individual member of a party or committee may sue on behalf of such an organization, see Bender v. Williamsport Area School District, 475 U.S. 534, 544 (1986), however, no such plaintiff presenting a ripe controversy is before us. Alternatively, if this action [501 U.S. 312, 326] had been brought by a candidate who had been endorsed by a political party and who sought to include that endorsement in his or her candidate's statement, we would also be confronted with a ripe controversy. </s> Unlike such scenarios, however, the respondents in this case are voters. They claim, based on petitioners' representations, that 6(b) of the State Constitution forms the basis for petitioners' policy of deleting party endorsements from candidates' mailed statements. But there are at least two hurdles that these respondents must overcome before their claim would be ripe for judicial review. First, they must prove that political parties would endorse certain candidates if 6(b) were repealed or invalidated. See Virginia Pharmacy Board v. Virginia Citizens Consumer Council, Inc., 425 U.S. 748, 756 , and n. 14, (1976) (allowing listeners of potential speech to bring an anticipatory challenge where the parties stipulate that "a speaker exists"). Arguably, respondents have met this hurdle by offering several affidavits of members of party central committees stating that the committees plan to endorse candidates for nonpartisan office and to seek to have those endorsements publicized. See, e.g., App. 15. Second, respondents must prove that specific candidates for nonpartisan office would seek to mention the party endorsements in their statements if petitioners' policy of deleting such endorsements were declared invalid (moreover, to prove injury to their interest as informed voters, respondents would perhaps also have to allege that they would not otherwise know about the endorsements if the endorsements are not included in mailed candidates' statements). This latter hurdle has not, in my opinion, been met by respondents in such a way as to ensure that we are confronted by a definite and ripe controversy. </s> Moreover, I am troubled by the redressability issues inherent in this case. Respondents' complaint has challenged 6(b) of the State Constitution, but it has not challenged the validity of 10012 of the California Elections Code. That section [501 U.S. 312, 327] plainly prohibits the inclusion of the party affiliation of candidates in nonpartisan elections, and unquestionably would provide an adequate basis for petitioners' challenged policy even if the constitutional prohibition against endorsements were invalidated. Even if we were to strike down 6(b) as overbroad, then, it is unclear whether respondents' alleged injury would be redressed. </s> These three unsettled issues - involving whether a facial overbreadth challenge may be construed to have been made, whether respondents' challenge is ripe, and whether their injury is redressable - coalesce to convince me that review of the merits of respondents' challenge is best left for another day and another complaint. No substantial hardship would accrue from a dismissal of respondents' action without prejudice, and the courts would benefit from a more precise articulation of a current and definite controversy. I therefore join the Court's opinion and judgment ordering the lower courts to dismiss the action without prejudice. </s> JUSTICE WHITE, dissenting. </s> The majority's concerns about the justiciability of this case, even though ultimately misplaced, are understandable, in light of the failure by the courts below to analyze the precise nature of the constitutional challenge that is presented here. Those concerns, however, should not prevent us from independently examining the record and deciding the issues that are properly presented. In doing so, I conclude that the only constitutional challenge that is properly before us is to the action by the San Francisco Registrar of Voters in deleting references in official voter pamphlets to political party endorsements, a challenge that is fully justiciable. Because the registrar's action does not violate the First Amendment, I would reverse the judgment of the Court of Appeals. I therefore dissent from the majority's disposition of this case. [501 U.S. 312, 328] </s> I </s> The courts below erred in treating respondents' challenge in this case as a facial challenge to the constitutionality of Article II, 6(b) of the California Constitution. Respondents' complaint reveals that they challenged only the application of 6(b) by San Francisco's Registrar of Voters in refusing to print in voter pamphlets references to endorsements by political parties. * </s> After listing the defendants, the complaint sets forth the background for its three causes of action: </s> "In connection with each municipal election, the City and County mails a voters pamphlet to all registered voters. Said pamphlet contains ballot arguments for and against City and County measures, and statements of qualifications of candidates for City and County offices. Defendant PATTERSON [the Registrar of Voters] is responsible for preparing and publishing said voters pamphlet." App. 3, § 10. </s> The first cause of action then challenges the Registrar's deletion of portions of proposed ballot arguments submitted for inclusion in the voter pamphlets. 2 Record, Complaint §§ 11-20. The second cause of action challenges the registrar's charge of a fee for ballot arguments. Id., §§ 21-30. </s> The third cause of action is the one that is at issue in this case. That cause of action, like the two before it, concerns [501 U.S. 312, 329] actions by the Registrar with regard to the voter pamphlets. Specifically, respondents alleged: </s> "In the past, defendants PATTERSON and CITY AND COUNTY OF SAN FRANCISCO have deleted all references in candidate's statements for City and County offices to endorsements by political party central committees or officers or members of such committees. Unless restrained from doing so by order of this court, defendants threaten to continue to delete or exclude all references in candidate's statements to endorsement of candidates by political party central committees, or officers or members of such central committees." App. 5, § 38. </s> Respondents also stated that they "desire to read endorsements of candidates for city and county office as part of candidate's statements printed in the San Francisco voter's pamphlet." § 37. Finally, the only injunctive relief sought based on the third cause of action relates to the deletion of endorsements from the voter pamphlets. Id., at 6, § 6. </s> In entering summary judgment in favor of respondents on the third cause of action, the District Court described respondents' claim as follows: "Plaintiffs claim - and defendants admit - that defendants refuse to permit political party and political party central committee endorsements of candidates for such offices to be printed in the San Francisco voter's pamphlet on account of said state constitutional provision." 708 F.Supp. 278, 279 (ND Cal. 1988). Similarly, both the original Ninth Circuit panel and the en banc panel stated: </s> "The basis of [respondents'] complaint as it relates to this appeal was the refusal of [petitioners], the City and County of San Francisco and the San Francisco Registrar of Voters, to permit official political party and party central committee endorsements of candidates for nonpartisan office to be printed in the San Francisco Voter Pamphlet in connection with elections scheduled for June [501 U.S. 312, 330] 2 and November 3, 1987. [Petitioners] based their refusal to print party endorsements on the language of article II, 6(b)." 880 F.2d 1062, 1063 (CA9 1989); 911 F.2d 280, 282 (CA9 1990). </s> As the above discussion reveals, and as the majority recognizes, see ante, at 323-324, it is far from clear that a facial challenge to the constitutionality of 6(b) was presented in this case. Both the District Court and the en banc Court of Appeals nevertheless invalidated 6(b) on its face, without analyzing the nature of respondents' claim. In doing so, they violated two important rules of judicial restraint applicable to the resolution of constitutional issues - "`one, never to anticipate a question of constitutional law in advance of the necessity of deciding it; the other, never to formulate a rule of constitutional law broader than is required by the precise facts to which it is to be applied.'" United States v. Raines, 362 U.S. 17, 21 (1960), quoting Liverpool, New York & Philadelphia S.S. Co. v. Commissioners of Emigration, 113 U.S. 33, 39 (1885). See also 911 F.2d, at 304-305 (Rymer, J., dissenting) (arguing that 6(b) should not be invalidated on this record). </s> II </s> I have no doubt that the narrow issue presented in this case is justiciable. As the majority recognizes, ante, at 319, respondents in their capacity as registered voters are alleging that 6(b), as applied by the Registrar to the voter pamphlets, interferes with their right to receive information concerning party endorsements. Such a claim finds support in our decisions, which have long held that the First Amendment protects the right to receive information and ideas, and that this right is sufficient to confer standing to challenge restrictions on speech. See, e.g., Virginia Pharmacy Board v. Virginia Citizens Consumer Council, Inc., 425 U.S. 748, 756 -757 (1976); Kleindienst v. Mandel, 408 U.S. 753, 762 (1972); Red Lion Broadcasting Co. v. FCC, [501 U.S. 312, 331] 395 U.S. 367, 390 (1969); Stanley v. Georgia, 394 U.S. 557, 564 (1969). </s> The majority nevertheless speculates that there is no standing here, because a provision in the California Elections Code "might be construed to prevent candidates from mentioning party endorsements in voter pamphlets, even in the absence of 6(b)." Ante, at 319. That makes no sense. A constitutional challenge to a law is not barred merely because other laws might also mandate the allegedly unconstitutional action. If so, it would mean that the States or the Federal Government could insulate unconstitutional laws from attack simply by making them redundant. </s> The majority's confusion on this issue is illustrated by its reliance on ASARCO Inc. v. Kadish, 490 U.S. 605, 615 -616 (1989). There, the plaintiffs challenged the validity of a state statute governing mineral leases, basing their standing on the claim that the statute deprived school trust funds of millions of dollars, and thereby resulted in higher taxes. Id., at 614. Four Members of this Court noted that, even if the statute were struck down, it was far from clear that the plaintiffs would enjoy any tax relief: "If respondents prevailed and increased revenues from state leases were available, maybe taxes would be reduced, or maybe the State would reduce support from other sources, so that the money available for schools would be unchanged." Ibid. </s> The difference between ASARCO and the present case is obvious. In ASARCO, the State could, by other actions, legally preclude the relief sought by the plaintiffs. By contrast, in this case, if petitioners' refusal to allow references to party endorsements in voter pamphlets is unconstitutional when based on 6(b), it probably is also unconstitutional if based on some other state law, such as California's Elections Code. The injury alleged by respondents, therefore, "is likely to be redressed by a favorable decision." Simon v. Eastern Ky. Welfare Rights Org., 426 U.S. 26, 38 (1976). [501 U.S. 312, 332] </s> The majority's concerns about the ripeness of respondents' challenge, see ante, at 320-323, also are not sufficient to preclude our review. Although I agree with the majority that the possible applications of 6(b) to speech by political parties and their members is not properly before us, here respondents have alleged, and petitioners have admitted, that San Francisco's Registrar of Voters has deleted references to political party endorsements from candidate statements printed in official voter pamphlets, and that he threatens to continue to do so in the future. See App. 5, 1138; id., at 9, XIV. Indeed, the majority admits that the record contains "evidence of a credible threat that 6(b) will be enforced . . . against candidates in the context of voter pamphlets." Ante, at 322. The Registrar's past conduct makes his threat "sufficiently real and immediate to show an existing controversy." O'Shea v. Littleton, 414 U.S. 488, 496 (1974). See, e.g., Blum v. Yaretsky, 457 U.S. 991, 1000 -1001 (1982) (allowing nursing home residents to sue to prevent threatened transfers); Steffel v. Thompson, 415 U.S. 452, 459 (1974) (allowing action for declaratory relief based on threats of enforcement of anti-handbilling statute). It is well settled that "`[o]ne does not have to await the consummation of threatened injury to obtain preventive relief.'" Babbitt v. Farm Workers, 442 U.S. 289, 298 (1979), quoting Pennsylvania v. West Virginia, 262 U.S. 553, 593 (1923). This is particularly true in the election context, where we often have allowed preenforcement challenges to restrictions on speech. See, e.g., Eu v. San Francisco County Democratic Central Committee, 489 U.S. 214 (1989); Tashjian v. Republican Party of Connecticut, 479 U.S. 208 , (1986); Buckley v. Valeo, 424 U.S. 1 , (1976). </s> I therefore dissent from the judgment ordering dismissal for want of justiciability. </s> III </s> Although the Court does not discuss the merits, I shall briefly outline my view that the state constitutional provision [501 U.S. 312, 333] at issue in this case is constitutional as applied to the exclusion of party endorsements from the official voter pamphlets. California has decided that its "[j]udicial, school, county, and city offices shall be nonpartisan." Cal. Const., Art. II, 6(a). I am confident that this provision is valid, at least in so far as it authorizes the State not to identify on the official ballot candidates for nonpartisan offices as the candidates of political parties. The interests proffered as supporting California's nonpartisan provision - promotion of the impartial administration of government, prevention of corruption, and the avoidance of the appearance of bias - are interests that we have already held are sufficiently important to justify restrictions on partisan political activities. See Civil Service Commission v. Letter Carriers, 413 U.S. 548, 565 (1973). These interests are also similar to the interests supporting limitations on ballot access and voting eligibility that have been upheld by this Court. See American Party of Texas v. White, 415 U.S. 767, 786 (1974); Storer v. Brown, 415 U.S. 724, 736 (1974); Rosario v. Rockefeller, 410 U.S. 752, 761 (1973); Jenness v. Fortson, 403 U.S. 431, 442 (1971). </s> If the State may exclude party designations from the ballot, it surely may exclude party endorsements from candidate statements contained in the official voter pamphlet prepared by the government and distributed to prospective voters. It is settled that "the First Amendment does not guarantee access to property simply because it is owned or controlled by the government." United States Postal Service v. Council of Greenburgh Civic Assns., 453 U.S. 114, 129 (1981). The voter information pamphlet obviously is not a traditional public forum, and its use may be limited to its intended purpose, which is to inform voters about nonpartisan elections. See Perry Ed. Assn. v. Perry Local Educators' Assn., 460 U.S. 37, 46 , n. 7 (1983). Refusing to permit references in candidate statements to party endorsements is therefore plainly constitutional. [501 U.S. 312, 334] </s> Accordingly, I would reverse the judgment of the Court of Appeals. </s> [Footnote * Pursuant to both local and state law, the San Francisco Registrar of Voters prepares, publishes, and distributes to voters an information pamphlet for nonpartisan municipal elections. The pamphlet contains personal statements by candidates for nonpartisan offices, the text of each ballot measure submitted to the voters, digests of the measures, and arguments for and against the measures. See Geary v. Renne, 914 F.2d 1249, 1251 (CA9 1990). The pamphlet is subsidized by the city, "with mailing and distribution costs borne by the city and the authors of ballot arguments charged a minimal sum to defray printing costs." Patterson v. Board of Supervisors of City and County of San Francisco, 202 Cal.App. 3d 22, 30, 248 Cal.Rptr. 253, 259 (1988). </s> JUSTICE MARSHALL, with whom JUSTICE BLACKMUN joins, dissenting. </s> Article II, 6(b) of the California Constitution provides that "[n]o political party or party central committee may endorse, support, or oppose a candidate for nonpartisan office." In a form of action extremely familiar to the federal courts, see, e.g., Buckley v. Valeo, 424 U.S. 1 (1976); Eu v. San Francisco County Democratic Central Committee, 489 U.S. 214 (1989); Tashjian v. Republican Party of Connecticut, 479 U.S. 208 (1986), respondents brought a preenforcement challenge to 6(b), seeking a declaration that 6(b) violates the First Amendment and an injunction against its application to candidate statements published in official "voter pamphlets." We granted certiorari in this case, 498 U.S. 1046 (1991), to review the decision of the Ninth Circuit, sitting en banc, that 6(b) violates the First Amendment. </s> The majority vacates the judgment below and remands the case with instructions to dismiss. It does so not because it disagrees with the merits of respondents' constitutional claim; indeed, the majority never reaches the merits. Rather, the majority finds a threshold defect in the "justiciability" of this case that did not occur to any of the courts below or to any party in more than three years of prior proceedings. Federal courts, of course, are free to find, on their own motion, defects in jurisdiction at any stage in a suit. But the majority's conclusion that respondents have failed to demonstrate a "live controversy ripe for resolution by the federal courts," ante, at 315, is simply not supported by the record of this case or by the teachings of our precedents. Because I cannot accept either the views expressed in, or the result reached by, the majority's opinion, and because I would affirm the decision of the Ninth Circuit on the merits, I dissent. [501 U.S. 312, 335] </s> I </s> I consider first the question of justiciability. Respondents are 10 registered California voters, including a chairman and certain individual members of the local Democratic and Republican Party central committees. 1 Respondents' complaint alleges that petitioner municipal officials relied upon 6(b) to adopt a policy of deleting "all references . . . to [party] endorsement[s]" from candidate statements submitted for inclusion in official "voter pamphlets," and that petitioners have announced their intention to make such redactions in future elections. App. 5, § 38. The existence of the redaction policy is expressly admitted by petitioners in their answer. See id., at 9, § XIV. Respondents maintain that this policy frustrates the "desire [of respondent committee members] . . . to publicize [party] endorsements" and the "desire [of all respondents] to read endorsements" in the voter pamphlets. Id., at 4-5, §§ 36-37. The complaint prays for a declaration that 6(b) violates the First Amendment and for an injunction against petitioners' continued enforcement of 6(b) by means of the redaction policy. Id., at 6, §§ 3, 6. </s> I would have thought it quite obvious that these allegations demonstrate a justiciable controversy. In cases in precisely the same posture as this one, we have repeatedly entertained preenforcement challenges to laws restricting election-related speech. See, e.g., Buckley v. Valeo, supra, at 12; Eu v. San Francisco Democratic Central Committee, supra; see also Tashjian v. Republican Party of Connecticut, supra. Indeed, standing and ripeness arguments nearly identical to those canvassed by the majority today were expressly considered and rejected by the Ninth [501 U.S. 312, 336] Circuit in Eu, see San Francisco County Democratic Central Committee v. Eu, 826 F.2d 814, 821-824 (1987), which no doubt explains why the lower courts and the parties did not even bother to return to these issues in this case. </s> Essentially ignoring the wealth of relevant case law, the majority proceeds as if the justiciability questions presented by this case - questions of standing and ripeness - were novel and unresolved. On the issue of standing, the majority purports to find "serious questions" concerning respondents' entitlement to challenge 6(b). Ante, at 318. Since mere "questions" about standing cannot sustain the dismissal of a suit, one wonders why the majority offers dicta of this kind. As it turns out, the majority uses this opportunity to espouse a novel basis for denying a party standing; the proferred theory is both illogical and unsupported by any precedent. As for ripeness, which the majority finds to be the dispositive jurisdictional defect, today's decision erroneously concludes that there is no "live dispute involving the actual or threatened application of 6(b) to bar particular speech." Ante, at 320. I am persuaded by neither the majority's "doubt" whether respondents have standing, ante, at 319, nor the majority's certainty that this case is unripe. </s> A </s> In order to demonstrate standing, "[a] plaintiff must allege personal injury fairly traceable to the defendant's allegedly unlawful conduct and likely to be redressed by the requested relief." Allen v. Wright, 468 U.S. 737, 751 (1984). In my view, "careful . . . examination of [the] complain[t]," id., at 752, makes it clear that these requirements are met in this case. All of the individual respondents are registered voters in California. See App. 2, § 1. Moreover, all allege that petitioners' redaction policy has injured them in that capacity by restricting election-related speech that respondents wish to consume. See id., at 5, §§ 37-38. As the majority acknowledges, see ante at 319, our cases recognize that "listeners" [501 U.S. 312, 337] suffer a cognizable First Amendment injury when the State restricts speech for which they were the intended audience. See, e.g., Virginia Pharmacy Board v. Virginia Citizen Consumer Council, Inc., 425 U.S. 748, 756 -757 (1976); see also San Francisco County Democratic Central Committee v. Eu, supra, (applying "listener" standing in election law setting), aff'd, 489 U.S. 214 (1989). Nor can there be any doubt that the injury that respondents allege as listeners of election speech is "fairly traceable" to petitioners' redaction policy. Finally, this injury would, in my view, be redressed by the relief requested by respondents, for an injunction against the redaction policy would prevent petitioners from continuing to block respondents' access to committee endorsements in voter pamphlets. </s> The majority's "doubt" about respondents' entitlement to proceed on a listener standing theory 2 relates wholly to redressability. The majority notes that a provision in the California Elections Code bars inclusion of a candidate's party affiliation in the statement submitted for publication in a voter pamphlet. See Cal.Elec.Code Ann. 10012 (West 1977 and Supp. 1991). The majority speculates that, if respondents succeed in invalidating 6(b), petitioners might henceforth rely on 10012 as a basis for continuing their policy of deleting endorsements. See ante, at 319. Articulating a novel theory of standing, the majority reasons that the registrar's possible reliance upon 10012 to implement the same policy currently justified by reference to 6(b) would defeat the redressability of respondents' listener injury. [501 U.S. 312, 338] </s> In my view, this theory is not only foreign to our case law. 3 but is also clearly wrong. If the existence of overlapping laws could defeat redressability, legislatures would simply pass "backup" laws for all potentially unconstitutional measures. Thereafter, whenever an aggrieved party brought suit challenging the State's infringement of his constitutional rights under color of one law, the State could advert to the existence of the previously unrelied-upon backup law as an alternative basis for continuing its unconstitutional policy, thereby defeating the aggrieved party's standing. </s> I cannot believe that Article III contemplates such an absurd result. Obviously, if respondents succeed on the merits of their constitutional challenge to 6(b), the immediate effect will be to permit candidates to include endorsements in the voter pamphlet. This is so because no other law (and no other interpretation of a law that petitioners have formally announced) purports to bar inclusion of such endorsements. Perhaps, as the majority speculates, see ante, at 319, petitioners will subsequently attempt to reinstate their redaction policy under some legal authority other than 6(b). But whether or not they ultimately do so has no consequence here. Just as a plaintiff cannot satisfy the redressability component of standing by showing that there is only a possibility that a defendant will respond to a court judgment by ameliorating the plaintiff's injury, see Simon v. Eastern Ky. Welfare Rights Org., 426 U.S. 26, 43 (1976), so a defendant cannot defeat the plaintiff's standing to seek a favorable judgment simply by alleging a possibility that the defendant may [501 U.S. 312, 339] subsequently act to undermine that judgment's ameliorating effect. </s> B </s> Under our precedents, the question whether a preenforcement challenge to a law is ripe "is decided on a case-by-case basis, by considering 1. the likelihood that the complainant will disobey the law, 2. the certainty that such disobedience will take a particular form, 3. any present injury occasioned by the threat of [enforcement], and 4. the likelihood that [enforcement efforts] will actually ensue." Regional Rail Reorganization Act Cases, 419 U.S. 102, 143 , n. 29 (1974). Like the preenforcement challenges in Buckley v. Valeo, 424 U.S. 1 (1976); Eu v. San Francisco County Democratic Central Committee, 489 U.S. 214 (1989); and Tashjian v. Republican Party of Connecticut, 479 U.S. 208 (1986), this case easily satisfies these requirements. </s> The record clearly demonstrates the likelihood of both future disobedience of 6(b) and future enforcement of that provision by way of petitioners' redaction policy. As even the majority acknowledges, see ante, at 321, some respondent central committee members have expressed an intention to continue endorsement of candidates for nonpartisan offices. Indeed, the chairman of one committee, in addition to identifying the specific candidates that the committee has endorsed in past elections, states in an affidavit that it is the committee's "plan and intention . . . to endorse candidates for nonpartisan offices in as many future elections as possible." App. 15. Likewise, as the majority acknowledges, see ante, at 322, petitioners expressly admit in their answer to the complaint that they intend to enforce 6(b) by deleting all references to party endorsements from candidate statements submitted for inclusion in official voter pamphlets. See App. 9, § XIV. Of course, petitioners will have occasion to enforce 6(b) in this manner only if candidates seek to include such endorsements in their statements. Respondents allege and petitioners concede, however, that candidates have [501 U.S. 312, 340] sought to advert to such endorsements in their statements in the past, and that petitioners have always deleted them from the voter pamphlets. Id., at 5, § 38; id., at 9, § XIV. When combined with the clearly expressed intentions of the parties, these allegations of "past wrongs" furnish sufficient evidence of "a real and immediate threat of repeated injury." O'Shea v. Littleton, 414 U.S. 488, 496 (1974). </s> It is also clear that respondents have alleged sufficient "present injury occasioned by the threat of [future enforcement]." Regional Rail Reorganization Act Cases, supra, at 143, n. 29. Obviously, the reason that parties bring preenforcement challenges to laws that restrict election-related speech is to avoid the risk that a court will be unable to dispose of a post-enforcement challenge quickly enough for the challenging parties to participate in a scheduled election. Buckley v. Valeo, supra. Our mootness jurisprudence responds to this dilemma by applying the capable-of-repetition-yet-evading-review doctrine to preserve the justiciability of an election law challenge even after the election at issue has taken place. See, e.g., Anderson v. Celebrezze, 460 U.S. 780, 784 , n. 3 (1983); First National Bank of Boston v. Bellotti, 435 U.S. 765, 774 -775 (1978); Storer v. Brown, 415 U.S. 724, 737 , n. 8 (1974); Moore v. Ogilvie, 394 U.S. 814, 816 (1969). But insofar as the purpose of entertaining a case in that mootness posture is not to remedy past wrongs, but rather to "simplif[y] future challenges, [and] thus increas[e] the likelihood that timely filed cases can be adjudicated before an election is held," Storer v. Brown, supra, at 737, n. 8 (emphasis added), it would be quite anomalous if ripeness doctrine were less solicitous of the interests of a party who brings a preenforcement challenge. </s> For this reason, it is surely irrelevant that the record does not demonstrate an "imminent application of 6(b)." Ante, at 322. So long as the plaintiff credibly alleges that he plans to disobey an election law and that government officials plan to enforce it against him, he should not be forced to defer [501 U.S. 312, 341] initiation of suit until the election is so "imminent" that it may come and go before his challenge is adjudicated. See Regional Rail Reorganization Act Cases, supra, at 143 ("`One does not have to await the consummation of threatened injury to obtain preventive relief,'" quoting Pennsylvania v. West Virginia, 262 U.S. 553, 593 (1923)). Indeed, in Buckley v. Valeo, supra, we held a preenforcement challenge to be justiciable even though the case was filed in the District Court nearly two years before the next scheduled national election. See id., at 11-12. Similarly, nothing in Eu v. San Francisco Democratic Central Committee, supra, and Tashjian v. Republican Party of Connecticut, supra, suggests that elections were "imminent" when those cases were filed. </s> Most of the majority's concerns about the ripeness of this dispute arise from the majority's uncertainty as to the "particular form" of future violations of 6(b). See Regional Rail Reorganization Act Cases, supra, at 143, n. 29. The majority notes, for example, that "[r]espondents do not allege an intention to endorse any particular candidate." Ante, at 321. Similarly, the majority objects that "[w]e do not know the nature of the endorsement [that the parties will next make], how it would be publicized, or the precise language petitioners might delete from the voter pamphlet." Ante, at 322. </s> In my view, these uncertainties do not detract in the slightest from the ripeness of this case. The form of future disobedience can only matter in ripeness analysis to the extent that it bears on the merits of a plaintiff's preenforcement challenge. The majority never bothers to explain how the identity of the endorsed candidates, the "nature" of the endorsement, the mode of publicity (outside of candidate statements submitted for inclusion in voter pamphlets), or the precise language that petitioners might delete from the pamphlets affects the merits of respondents' challenge. Indeed, it is quite apparent that none of these questions is relevant. [501 U.S. 312, 342] In Eu v. San Francisco Democratic Central Committee, 489 U.S. 214 (1989), we struck down a similar California provision that barred party endorsements in primary elections for partisan offices. See id., at 222-229. Nothing in our analysis turned on the identity of the candidates to be endorsed, the nature or precise language of the endorsements, or the mode of publicizing the endorsements. Similarly, here we can dispose of respondents' challenge to 6(b) knowing simply that party central committees will continue to make endorsements of candidates for nonpartisan offices, and that petitioners will continue to redact those endorsements from the voter pamphlets. 4 </s> II </s> Because I conclude that the controversy before us is justiciable, I would reach the merits of respondents' challenge. In my view, it is clear that 6(b) violates the First Amendment. [501 U.S. 312, 343] </s> A </s> At the outset, it is necessary to be more precise about the nature of respondents' challenge. In effect, respondents' complaint states two possible First Amendment theories. The first is that 6(b), as that provision has been applied to delete endorsements from voter pamphlets, violates the First Amendment. See App. 4-5, §§ 36-39(a). The second is that 6(b), on its face violates the First Amendment because it "purports to outlaw actions by county central committees . . . to endorse, support or oppose candidates for city or county offices." Id., at 4, § 35. This second theory can be understood as an overbreadth challenge: that is, a claim that, regardless of whether 6(b) violates the First Amendment in its peripheral effect of excluding references to party endorsements from candidates' statements, 6(b) is unconstitutional in its primary effect of barring parties and party committees from making endorsements. See Secretary of State of Md. v. Joseph H. Munson Co., 467 U.S. 947, 965 -966 (1984) (party who suffers unwanted but constitutionally permissible effect of a law may nonetheless succeed in voiding that law by showing that "there is no core of easily identifiable and constitutionally proscribable conduct that the [provision] prohibits"). 5 </s> [501 U.S. 312, 344] </s> As the majority notes, it is this Court's "usual . . . practice . . . [not] to proceed to an overbreadth issue . . . before it is determined that the statute would be valid as applied." Board of Trustees, State Univ. of N.Y. v. Fox, 492 U.S. 469, 484 -485 (1989). This is so because [501 U.S. 312, 345] </s> "the overbreadth question is ordinarily more difficult to resolve than the as-applied, since it requires determination whether the statute's overreach is substantial . . . "judged in relation to the statute's plainly legitimate sweep," . . . and therefore requires consideration of many more applications than those immediately before the court." Id., at 485 (emphasis in original), quoting Broadrick v. Oklahoma, 413 U.S. 601, 615 (1973). </s> Nonetheless, the rule that a court should consider as-applied challenges before overbreadth challenges is not absolute. See, e.g., Board of Airport Comm'rs of Los Angeles v. Jews for Jesus, Inc., 482 U.S. 569, 573 -574 (1987) (considering overbreadth challenge first); Houston v. Hill, 482 U.S. 451, 458 -467 (1987) (same). Rather, the rule represents one prudential consideration among many in determining the order in which to evaluate particular constitutional challenges. </s> In my opinion, competing prudential factors clearly support considering respondents' overbreadth challenge first in this case. Unlike the situation in Fox, the as-applied challenge here is actually more difficult to resolve than is the overbreadth challenge. Insofar as they attack petitioners' redaction policy as unconstitutional, respondents must be understood to argue that they have a right to receive particular messages by means of official voter pamphlets or a right to communicate their own messages by that means. Either way, this argument would require us to determine the "public forum" status of the voter pamphlets, cf. Perry Education Assn. v. Perry Local Educators' Assn., 460 U.S. 37, 48 (1983), an issue on which the law is unsettled, see generally L. Tribe, American Constitutional Law 12-24, p. 987 (2d ed. 1988) (noting "blurriness . . . of the categories within the public forum classification"). By contrast, respondents' overbreadth challenge is easily assessed. In the first place, the application of 6(b) to party speech that "endorse[s], support[s], or oppose[s] a[ny] candidate for nonpartisan office" clearly is "substantial" when compared with 6(b)'s only alleged "legitimate" application, namely, the redaction of voter [501 U.S. 312, 346] pamphlets. Moreover, the constitutional doctrine relevant to 6(b)'s restriction of party speech is well settled. See Eu v. San Francisco Democratic Central Committee, 489 U.S. 214 (1989). Rather than undertaking to determine what sort of "public forum" voter pamphlets might constitute - a finding that could have broad ramifications, see, e.g., Patterson v. Board of Supervisors of City and County of San Francisco, 202 Cal.App. 3d 22, 248 Cal.Rptr. 253 (1988) (suit challenging constitutionality of 3796 and 6026 of California Elections Code, authorizing deletions from arguments about ballot propositions in the voter pamphlet) - a court should, if possible, resolve this constitutional challenge by well-settled doctrine.) See, e.g., Webster v. Reproductive Health Services, 492 U.S. 490, 525 -526 (1989) (O'CONNOR, J., concurring in part and concurring in judgment). </s> In addition, both the District Court and the Court of Appeals disposed of respondents' challenge on overbreadth grounds, and that is the only theory briefed by the parties in this Court. Because the as-applied component of respondents' challenge has not been fully aired in these proceedings, resolving the case on that basis presents a significant risk of error. For these reasons, I turn to respondents' overbreadth challenge, which I find to be dispositive of this case. 6 </s> [501 U.S. 312, 347] </s> B </s> Conceived of as an overbreadth challenge, respondents' First Amendment attack upon 6(b) closely resembles the issue presented in Eu v. San Francisco Democratic Central Committee, supra. As I have noted, Eu struck down on First Amendment grounds a California law that prohibited the party central committees from "`endors[ing], support[ing], or oppos[ing]'" any candidate in primary elections for partisan offices. Id. 489 U.S., at 217 . We concluded in Eu that this "ban directly affect[ed] speech which `is at the core of our electoral process and of the First Amendment freedoms.'" Id., at 222-223, quoting William v. Rhodes, 393 U.S. 23, 32 (1968). We also determined that this prohibition was unsupported by any legitimate compelling state interest. The State defended the endorsement ban on the ground that it was necessary to prevent voter "confusion and undue [party] influence." See 489 U.S., at 228 . Properly understood, this claim amounted to no more than the proposition that the State could protect voters from being exposed to information on which they might rationally rely, a "`highly paternalistic'" function to which the State could not legitimately lay claim. Id., at 223, quoting Virginia State Bd. of Pharmacy v. Virginia Citizens Consumer Council, Inc., 425 U.S., at 770 ; see 489 U.S., at 228 -229. </s> In my view, this case is directly controlled by Eu. As in Eu, there can be no question here that the endorsements that 6(b) purports to make unlawful constitute core political speech. And, as in Eu, this prohibition is unsupported by any legitimate compelling state interest. Petitioners assert that 6(b) advances a compelling state interest because it assures that "local government and judges in California are . . . controlled by the people, [rather than] by those who run political parties." Brief for Petitioners 7. The only kind of "control" that 6(b) seeks to prohibit, however, is that which "those who run political parties" are able to exert over voters through issuing party endorsements. In effect, then, [501 U.S. 312, 348] petitioners are arguing that the State has an interest in protecting "the people" from their own susceptibility to being influenced by political speech. This is the very sort of paternalism that we deemed illegitimate in Eu. </s> Drawing on our decision in Austin v. Michigan Chamber of Commerce, 494 U.S. 652 (1990), petitioners try to repackage the State's concern to protect voters from themselves as an interest in avoiding "corruption" of the electoral process. The law that was at issue in Austin barred corporations from making political expenditures from their corporate treasuries in favor of, or in opposition to, political candidates. We upheld the constitutionality of that law, finding that a State could legitimately prohibit "the corrosive and distorting effects of immense aggregations of wealth that are accumulated with the help of the corporate form and that have little or no correlation to the public's support for the corporation's political ideas." Id., at 660. Petitioners argue that California similarly should be able to prohibit political parties from using their special place in the political process to exercise a disruptive effect upon the election of nonpartisan office holders. </s> Petitioners' reliance on Austin is unavailing. The political activity that 6(b) limits in this case is not the expenditure of money to further a viewpoint, but merely the announcement of that viewpoint in the form of an endorsement. It is difficult to imagine how a political party's announcement of its view about a candidate could exert an influence on voters that has "little or no correlation to the public's support for the [party's] political ideas." Ibid. On the contrary, whatever influence a party wields in expressing its views results directly from the trust that it has acquired among voters. </s> Thus, whereas the Austin Court worried that corporations might dominate elections with capital they had only accumulated by dint of "`economically motivated decisions of investors and customers,'" id., at 659, the party endorsements in this case represent an expenditure of political capital accumulated [501 U.S. 312, 349] through past voter support. And, whereas the special benefits conferred by state law in Austin "enhance[d]" the corporations' "ability to attract capital," ibid., the benefits California confers upon parties - e.g., permitting taxpayers to make voluntary contributions to parties on their tax returns - should have little effect on the parties' acquisition of political capital. In sum, the prospect that voters might be persuaded by party endorsements is not a corruption of the democratic political process; it is the democratic political process. </s> In the final analysis, 6(b) and the arguments that petitioners advance in support of it reflect an ambivalence about the democratic process itself. The possibility that judges and other elective nonpartisan office holders will fall under the influence of political parties is inherent in an electoral system in which voters look to others, including parties, for information relevant to exercise of the franchise. Of course, it is always an option for the State to end the influence of the parties by making these offices appointive, rather than elective, positions. But the greater power to dispense with elections altogether does not include the lesser power to conduct elections under conditions of state-imposed voter ignorance. If the State chooses to tap the energy and the legitimizing power of the democratic process, it must accord the participants in that process - voters, candidates, and parties - the First Amendment rights that attach to their roles. </s> Because 6(b) clearly fails to meet this standard, and because I believe that the lower courts properly determined that they were in a position to reach this conclusion now, I would affirm the judgment of the Ninth Circuit. Consequently, I dissent. </s> Footnotes [Footnote 1 In addition, there is one organization respondent, Election Action, which is committed to placing certain referenda matters on the ballot in California. As the majority notes, see ante, at 314-315, Election Action asserts no stake in this litigation independent of the individual voters who constitute its membership. </s> [Footnote 2 Because all respondents clearly have standing as potential receivers of protected speech, it is unnecessary to resolve whether certain respondents also have standing, in their capacity as committee members, to contest deletion from voter pamphlets of the committee's endorsement. Were this the only available basis for respondents' standing, it would be necessary to determine whether individual committee members may challenge infringement of the right to publicize an endorsement that is issued by the committee as a whole. As the majority points out, this matter is "unsettled." Ante, at 320. </s> [Footnote 3 In support of its novel approach to standing, the majority cites no cases in which an injury was deemed unredressable because the challenged government conduct might have been - but was not - justified with reference to some law other than the one upon which the government officials relied. Indeed, the only precedents that the majority cites, ante, at 320, are decisions imposing the general requirement that injuries be redressable. Stated at that level of generality, the principle is uncontrovertible - but it is also of no help to the majority here. </s> [Footnote 4 The majority cites a series of decisions to support its view that we do not know enough about the expressive activity restricted by 6(b) to evaluate its constitutionality. Ante, at 322. The Court's reasoning in the cited precedents, however, only confirms the deficiencies in the majority's analysis here. For example, in Rescue Army v. Municipal Court of Los Angeles, 331 U.S. 549, 576 -580 (1947), the Court found the dispute unripe for adjudication because it was unsure which criminal statutes would be applied to the petitioner or which other code sections were incorporated by reference in those statutes; in Socialist Labor Party v. Gilligan, 406 U.S. 583, 586 (1972), the Court found "no allegation of injury that the party has suffered or will suffer because of the existence of the [law challenged]" (emphasis added); and in Public Affairs Associates, Inc. v. Rickover, 369 U.S. 111, 113 (1962), involving a public official's disputed authorship rights in his speeches, the Court found the record "woefully lacking" because it omitted details - such as whether the official used government facilities and personnel to prepare his speeches - that bore directly upon the legal issue. Unlike the situation in these precedents, the respondents in this case have clearly identified the law that will be enforced to their detriment, the injury that will flow from that enforcement, and the relevant facts surrounding such enforcement. </s> [Footnote 5 The majority expresses "doubt that respondents' complaint should be construed to assert a facial challenge to 6(b)" because the complaint prays for an injunction only against petitioners' redaction policy and because "[r]eferences to other applications of 6(b) [in the complaint] are at best conclusory." Ante, at 323-324. JUSTICE WHITE's dissenting opinion expresses a similar view. Ante, at 328, 330. But neither the majority nor JUSTICE WHITE explains why a party raising an overbreadth challenge must seek to enjoin applications of an invalid law other than the application that is injuring him. Moreover, to require a broader request for injunctive relief here would be both unfair and unnecessary. Although respondents know which officials should be enjoined in order to halt the redaction of voter pamphlets, respondents cannot know who will next enforce 6(b) against party central committees that seek to endorse nonpartisan candidates. See, e.g., Unger v. Superior Court, 37 Cal.3d 612, 209 Cal.Rptr. 474, 692 P.2d 238 [501 U.S. 312, 344] (1984) (injunction sought by two registered voters against party's announcement of opposition to justices at confirmation election); Unger v. Superior Court, 102 Cal.App. 3d 68;, 162 Cal.Rptr. 611 (1980), cert. denied, 449 U.S. 1131 (1981) (injunction against party endorsement sought by rival candidate who was not endorsed). Should respondents obtain the declaratory relief that they seek, any future attempts to enforce 6(b) against a political party could easily be defeated by invoking that declaratory judgment. In sum, respondents' request for a declaratory judgment that 6(b) is unconstitutional furnishes ample basis for inferring that their complaint includes a facial challenge to 6(b). </s> The insistence by the majority and by JUSTICE WHITE that a party expressly style his claim in his complaint as a challenge based on overbreadth is also inconsistent with the liberal "notice pleading" philosophy that informs the Federal Rules of Civil Procedure. See Conley v. Gibson, 355 U.S. 41, 47 -48 (1957); see generally Fitzgerald v. Codex Corp., 882 F.2d 586, 589 (CA1 1989) ("[U]nder Fed.R.Civ.P. 8, it is not necessary that a legal theory be pleaded in the complaint if plaintiff sets forth `sufficient factual allegations to state a claim showing that he is entitled to relief' under some [tenable] legal theory" (emphasis in original)). I am particularly perplexed by JUSTICE WHITE's determination that "[t]he courts below erred in treating respondents' challenge in this case as a facial challenge." Ante, at 328 (emphasis added). At every stage of this litigation, beginning with respondents' summary judgment motion, the parties have framed the constitutional question exclusively in terms of 6(b)'s application to party endorsements, precisely the overbreadth argument that JUSTICE WHITE declines to reach. See Points and Authorities in Support of Summary Judgment in No. C-87 1724 AJZ (ND Cal.), pp. 22-26; Memorandum of Points of Authorities in Opposition to Summary Judgment in No. C-87-4724 AJZ (ND Cal.), pp. 20-41; Brief of Appellant in No. 88-2875 (CA9), pp. 7-18; Brief of Appellees in No. 88-2875 (CA9), pp. 5-36. In such circumstances, I do not understand what authority this Court would have for reversing the decision below, sua sponte, simply because the lower courts upheld a theory of relief not expressly relied upon in the complaint. See generally 5 C. Wright and A. Miller, Federal Practice and Procedure 1219, p. 190 (2d ed. 1990) (text of Federal Rules "makes it very plain that the theory of the pleadings mentality has no place under federal practice"). </s> [Footnote 6 It is, of course, no impediment to proceeding on an overbreadth theory that petitioners' redaction policy supplies the ripe controversy in this case. The thrust of an overbreadth challenge is that a party is entitled "not to be bound by a [provision] that is unconstitutional." Board of Trustees, State Univ. of N.Y. v. Fox, 492 U.S. 469, 485 (1989). Thus, a preenforcement overbreadth challenge is ripe so long as the party can show that state actors will foreseeably apply a facially invalid law in a way that determines his rights. He need not show, in addition, that state actors are about to apply the law to third parties in the precise manner that renders the law facially invalid. As I have shown, respondents demonstrate a ripe dispute by credibly alleging that petitioners will apply 6(b) in a manner that determines respondents' right to receive election-related speech in official voter pamphlets. </s> [501 U.S. 312, 350]

United States Supreme Court NORFOLK SOUTHERN RAILWAY CO. v. SHANKLIN, individually and as next friend of SHANKLIN(2000) No. 99-312 Argued: March 1, 2000Decided: April 17, 2000 </s> The Federal Railroad Safety Act of 1970 (FRSA) authorizes the Secretary of Transportation to promulgate regulations and issue orders for railroad safety, and it requires the Secretary to maintain a coordinated effort to solve railroad grade crossing problems. The FRSA also has an express pre-emption provision. One regulation promulgated by the Secretary, through the Federal Highway Administration (FHWA), addresses the adequacy of warning devices installed under the Federal Railway-Highway Crossings Program (Crossings Program). That program provides funds to States for the construction of such devices pursuant to the Highway Safety Act of 1973. According to the regulation, adequate warning devices installed using federal funds, where any of several conditions are present, are automatic gates and flashing lights. 23 CFR §646.214(b)(3). For crossings where those conditions are not present, a State's decision about what devices to install is subject to FHWA approval. §646.214(b)(4). Respondent's husband was killed when petitioner's train hit his vehicle at a crossing with advance warning signs and reflectorized crossbucks that the Tennessee Department of Transportation (TDOT) had installed using federal funds under the Crossings Program. The signs were installed and fully compliant with applicable federal standards. Respondent brought a diversity wrongful death action in federal court, alleging that petitioner was negligent in, among other things, failing to maintain adequate warning devices at the crossing. The District Court denied petitioner's summary judgment motion, holding that the FRSA did not pre-empt respondent's inadequate warning device claim. After a trial, the jury awarded respondent damages on this and other negligence issues. The Sixth Circuit affirmed. </s> Held: The FRSA, in conjunction with §§646.214(b)(3) and (4), pre-empts state tort claims concerning a railroad's failure to maintain adequate warning devices at crossings where federal funds have participated in the devices' installation. In CSX Transp., Inc. v. Easterwood, 507 U.S. 658, 670, this Court held that, because §§646.214(b)(3) and (4) "establish requirements as to the installation of particular warning devices," "when they are applicable, state tort law is pre-empted." Thus, the sole question here is whether they "are applicable" to all warning devices actually installed with federal funds. Easterwood answers this question as well, because it held that the requirements in (b)(3) and (4) are mandatory for all such devices. Id., at 666. They establish a standard of adequacy that determines the type of warning device to be installed when federal funds participate in the crossing improvement project. Once the FHWA has approved and funded the improvement and the devices are installed and operating, the regulation displaces state and private decisionmaking authority with a federal-law requirement. Importantly, this is precisely the interpretation of §§646.214(b)(3) and (4) that the FHWA endorsed in Easterwood. The Government's position here--that (b)(3) and (4) only apply where the warning devices have been selected based on diagnostic studies and particularized analyses of a crossing's conditions--is not entitled to deference, because it contradicts the regulation's plain text as well as the FHWA's own previous construction that the Court adopted as authoritative in Easterwood. Respondent's argument that pre-emption does not apply here because this crossing presented several (b)(3) factors, and because the TDOT did not install pavement markings required by the FHWA's Manual on Uniform Traffic Control Devices, misconceives how pre-emption operates under these circumstances. If they are applicable, §§696.214(b)(3) and (4) establish a federal standard for adequacy that displaces state tort law addressing the same subject. Whether the State should have originally installed different or additional devices, or whether conditions at the crossing have since changed such that different devices would be appropriate, is immaterial. Nothing prevents a State from revisiting the adequacy of devices installed using federal funds, or from installing more protective devices at such crossings with their own funds or additional FHWA funding, but the State cannot hold the railroad responsible for the adequacy of those devices. Pp. 6-14. </s> 173 F.3d 386, reversed and remanded. </s> O'Connor, J., delivered the opinion of the Court, in which Rehnquist, C.J., and Scalia, Kennedy, Souter, Thomas, and Breyer, JJ., joined. Breyer, J., filed a concurring opinion. Ginsburg, J., filed a dissenting opinion, in which Stevens, J., joined. </s> NORFOLK SOUTHERN RAILWAY COMPANY, PETITIONER v. DEDRA SHANKLIN, individually, and as next friend of jessie guy shanklin </s> on writ of certiorari to the united states court of appeals for the sixth circuit </s> [April 17, 2000] </s> Justice O'Connor delivered the opinion of the Court. </s> This case involves an action for damages against a railroad due to its alleged failure to maintain adequate warning devices at a grade crossing in western Tennessee. After her husband was killed in a crossing accident, respondent brought suit against petitioner, the operator of the train involved in the collision. Respondent claimed that the warning signs posted at the crossing, which had been installed using federal funds, were insufficient to warn motorists of the danger posed by passing trains. The specific issue we must decide is whether the Federal Railroad Safety Act of 1970, 84 Stat. 971, as amended, 49 U.S.C. §20101 et seq., in conjunction with the Federal Highway Administration's regulation addressing the adequacy of warning devices installed with federal funds, pre-empts state tort actions such as respondent's. We hold that it does. </s> I </s> A </s> In 1970, Congress enacted the Federal Railroad Safety Act (FRSA) "to promote safety in every area of railroad operations and reduce railroad-related accidents and incidents." 49 U.S.C. §20101. The FRSA grants the Secretary of Transportation the authority to "prescribe regulations and issue orders for every area of railroad safety," §20103(a), and directs the Secretary to "maintain a coordinated effort to develop and carry out solutions to the railroad grade crossing problem," §20134(a). The FRSA also contains an express pre-emption provision, which states: </s> "Laws, regulations, and orders related to railroad safety shall be nationally uniform to the extent practicable. A State may adopt or continue in force a law, regulation, or order related to railroad safety until the Secretary of Transportation prescribes a regulation or issues an order covering the subject matter of the State requirement." §20106. </s> Although the pre-emption provision contains an exception, see ibid., it is inapplicable here. </s> Three years after passing the FRSA, Congress enacted the Highway Safety Act of 1973, §203, 87 Stat. 283, which, among other things, created the Federal Railway-Highway Crossings Program (Crossings Program), see 23 U.S.C. §130. That program makes funds available to States for the "cost of construction of projects for the elimination of hazards of railway-highway crossings." §130(a). To participate in the Crossings Program, all States must "conduct and systematically maintain a survey of all highways to identify those railroad crossings which may require separation, relocation, or protective devices, and establish and implement a schedule of projects for this purpose." §130(d). That schedule must, "[a]t a minimum, ... provide signs for all railway-highway crossings." Ibid. </s> The Secretary, through the Federal Highway Administration (FHWA), has promulgated several regulations implementing the Crossings Program. One of those regulations, 23 CFR §646.214(b) (1999), addresses the design of grade crossing improvements. More specifically, §§646.214(b)(3) and (4) address the adequacy of warning devices installed under the program.*1 According to §646.214(b)(3), "[a]dequte warning devices ... on any project where Federal-aid funds participate in the installation of the devices are to include automatic gates with flashing light signals" if any of several conditions are present. Those conditions include (A) "[m]ultiple main line railroad tracks," (B) multiple tracks in the vicinity such that one train might "obscure the movement of another train approaching the crossing," (C) high speed trains combined with limited sight distances, (D) a "combination of high speeds and moderately high volumes of highway and railroad traffic," (E) the use of the crossing by "substantial numbers of schoolbuses or trucks carrying hazardous materials," or (F) when a "diagnostic team recommends them." §646.214(b)(3)(i). Subsection (b)(4) states that "[f]or crossings where the requirements of §646.214(b)(3) are not applicable, the type of warning device to be installed, whether the determination is made by a State regulatory agency, State highway agency, and/or the railroad, is subject to the approval of FHWA." Thus, at crossings where any of the conditions listed in (b)(3) exist, adequate warning devices, if installed using federal funds, are automatic gates and flashing lights. And where the (b)(3) conditions are not present, the decision of what devices to install is subject to FHWAapproval. </s> B </s> Shortly after 5 a.m. on October 3, 1993, Eddie Shanklin drove his truck eastward on Oakwood Church Road in Gibson County, Tennessee. App. to Pet. for Cert. 28a. As Shanklin crossed the railroad tracks that intersect the road, he was struck and killed by a train operated by petitioner. Ibid. At the time of the accident, the Oakwood Church Road crossing was equipped with advance warning signs and reflectorized crossbucks, id., at 34a, the familiar black-and-white, X-shaped signs that read "RAILROAD CROSSING," see U.S. Dept. of Transportation, Federal Highway Administration, Manual on Uniform Traffic Control Devices §8B-2 (1988) (MUTCD). The Tennessee Department of Transportation (TDOT) had installed the signs in 1987 with federal funds received under the Crossings Program. App. to Pet. for Cert. 3a. The TDOT had requested the funds as part of a project to install such signs at 196 grade crossings in 11 Tennessee counties. See App. 128-131. That request contained information about each crossing covered by the project, including the presence or absence of several of the factors listed in §646.214(b)(3). See id., at 134. The FHWA approved the project, App. to Pet. for Cert. 34a, and federal funds accounted for 99% of the cost of installing the signs at the crossings, see App. 133. It is undisputed that the signs at the Oakwood Church Road crossing were installed and fully compliant with the federal standards for such devices at the time of the accident. </s> Following the accident, Mr. Shanklin's widow, respondent Dedra Shanklin, brought this diversity wrongful death action against petitioner in the United States District Court for the Western District of Tennessee. Id., at 29-34. Respondent's claims were based on Tennessee statutory and common law. Id., at 31-33. She alleged that petitioner had been negligent in several respects, including by failing to maintain adequate warning devices at the crossing. Ibid. Petitioner moved for summary judgment on the ground that the FRSA pre-empted respondent's suit. App. to Pet. for Cert. 28a. The District Court held that respondent's allegation that the signs installed at the crossing were inadequate was not pre-empted. Id., at 29a-37a. Respondent thus presented her inadequate warning device claim and three other allegations of negligence to a jury, which found that petitioner and Mr. Shanklin had both been negligent. App. 47. The jury assigned 70% responsibility to petitioner and 30% to Mr. Shanklin, and it assessed damages of $615,379. Ibid. The District Court accordingly entered judgment of $430,765.30 for respondent. Id., at 48. </s> The Court of Appeals for the Sixth Circuit affirmed, holding that the FRSA did not pre-empt respondent's claim that the devices at the crossing were inadequate. See 173 F.3d 386 (1999). It reasoned that federal funding alone is insufficient to trigger pre-emption of state tort actions under the FRSA and §§646.214(b)(3) and (4). Id., at 394. Instead, the railroad must establish that §646.214(b)(3) or (4) was "applied" to the crossing at issue, meaning that the FHWA affirmatively approved the particular devices installed at the crossing as adequate for safety. Id., at 397. The court concluded that, because the TDOT had installed the signs for the purpose of providing "minimum protection" at the Oakwood Church Road crossing, there had been no such individualized determination of adequacy. </s> We granted certiorari, 528 U.S. __ (1999), to resolve a conflict among the Courts of Appeals as to whether the FRSA, by virtue of 23 CFR §§646.214(b)(3) and (4) (1999), pre-empts state tort claims concerning a railroad's failure to maintain adequate warning devices at crossings where federal funds have participated in the installation of the devices. Compare Ingram v. CSX Transp., Inc., 146 F.3d 858 (CA11 1998) (holding that federal funding of crossing improvement triggers pre-emption under FRSA); Armijo v. Atchison, Topeka & SantaFe R. Co., 87 F.3d 1188 (CA10 1996) (same); Elrod v. Burlington Northern R.Co., 68 F.3d 241 (CA8 1995) (same); Hester v. CSX Transp., Inc., 61 F.3d 382 (CA5 1995) (same), cert. denied, 516 U.S. 1093 (1996), with 173 F.3d 386 (CA6 1999) (case below); Shots v. CSX Transp., Inc., 38 F.3d 304 (CA7 1994) (no pre-emption until representative of Federal Government has determined that devices installed are adequate for safety). </s> II </s> We previously addressed the pre-emptive effect of the FHWA's regulations implementing the Crossings Program in CSX Transp., Inc. v. Easterwood, 507 U.S. 658 (1993). In that case, we explained that the language of the FRSA's pre-emption provision dictates that, to pre-empt state law, the federal regulation must "cover" the same subject matter, and not merely "`touch upon' or `relate to' that subject matter." Id., at 664; see also 49 U.S.C. §20106. Thus, "pre-emption will lie only if the federal regulations substantially subsume the subject matter of the relevant state law." Easterwood, supra, at 664. Applying this standard, we concluded that the regulations contained in 23 CFR pt. 924 (1999), which "establish the general terms of the bargain between the Federal and State Governments" for the Crossings Program, are not pre-emptive. 507 U.S., at 667. We also held that §646.214(b)(1), which requires that all traffic control devices installed under the program comply with the MUTCD, does not pre-empt state tort actions. Id., at 668-670. The Manual "provides a description of, rather than a prescription for, the allocation of responsibility for grade crossing safety between Federal and State Governments and between States and railroads," and hence "disavows any claim to cover the subject matter of that body of law." Id., at 669-670. </s> With respect to §§646.214(b)(3) and (4), however, we reached a different conclusion. Because those regulations "establish requirements as to the installation of particular warning devices," we held that "when they are applicable, state tort law is pre-empted." Id., at 670. Unlike the other regulations, "§§646.214(b)(3) and (4) displace state and private decisionmaking authority by establishing a federal-law requirement that certain protective devices be installed or federal approval obtained." Ibid. As a result, those regulations "effectively set the terms under which railroads are to participate in the improvement of crossings." Ibid. </s> In Easterwood itself, we ultimately concluded that the plaintiff's state tort claim was not pre-empted. Ibid. As here, the plaintiff brought a wrongful death action alleging that the railroad had not maintained adequate warning devices at a particular grade crossing. Id., at 661. We held that §§646.214(b)(3) and (4) were not applicable because the warning devices for which federal funds had been obtained were never actually installed at the crossing where the accident occurred. Id., at 671-673. Nonetheless, we made clear that, when they do apply, §§646.214(b)(3) and (4) "cover the subject matter of state law which, like the tort law on which respondent relies, seeks to impose an independent duty on a railroad to identify and/or repair dangerous crossings." Id., at 671. The sole question in this case, then, is whether §§646.214(b)(3) and (4) "are applicable" to all warning devices actually installed with federal funds. </s> We believe that Easterwood answers this question as well. As an original matter, one could plausibly read §§646.214(b)(3) and (4) as being purely definitional, establishing a standard for the adequacy of federally funded warning devices but not requiring that all such devices meet that standard. Easterwood rejected this approach, however, and held that the requirements spelled out in (b)(3) and (4) are mandatory for all warning devices installed with federal funds. "[F]or projects that involve grade crossings ... in which `Federal-aid funds participate in the installation of the [warning] devices,' regulations specify warning devices that must be installed." Id., at 666 (emphasis added). Once it is accepted that the regulations are not merely definitional, their scope is plain: they apply to "any project where Federal-aid funds participate in the installation of the devices." 23 CFR §646.214(b)(3)(i) (1999). </s> Sections 646.214(b)(3) and (4) therefore establish a standard of adequacy that "determine[s] the devices to be installed" when federal funds participate in the crossing improvement project. Easterwood, 507 U.S., at 671. If a crossing presents those conditions listed in (b)(3), the State must install automatic gates and flashing lights; if the (b)(3) factors are absent, (b)(4) dictates that the decision as to what devices to install is subject to FHWA approval. See id., at 670-671. In either case, §646.214(b)(3) or (4) "is applicable" and determines the type of warning device that is "adequate" under federal law. As a result, once the FHWA has funded the crossing improvement and the warning devices are actually installed and operating, the regulation "displace[s] state and private decisionmaking authority by establishing a federal-law requirement that certain protective devices be installed or federal approval obtained." Id., at 670. </s> Importantly, this is precisely the interpretation of §§646.214(b)(3) and (4) that the FHWA endorsed in Easterwood. Appearing as amicus curiae, the Government explained that §646.214(b) "establishes substantive standards for what constitutes adequate safety devices on grade crossing improvement projects financed with federal funds." Brief for United States as Amicus Curiae in CSX Transp., Inc. v. Easterwood, O.T. 1992, Nos. 91-790 and 91-1206, p. 23. As a result, §§646.214(b)(3) and (4) "cover the subject matter of adequate safety devices at crossings that have been improved with the use of federal funds." Ibid. More specifically, the Government stated that §646.214(b) </s> "requires gate arms in certain circumstances, and requires FHWA approval of the safety devices in all other circumstances. Thus, the warning devices in place at a crossing improved with the use of federal funds have, by definition, been specifically found to be adequate under a regulation issued by the Secretary. Any state rule that more or different crossing devices were necessary at a federally funded crossing is therefore preempted." Id., at 24. </s> Thus, Easterwood adopted the FHWA's own understanding of the application of §§646.214(b)(3) and (4), a regulation that the agency had been administering for 17 years. </s> Respondent and the Government now argue that §§646.214(b)(3) and (4) are more limited in scope and only apply where the warning devices have been selected based on diagnostic studies and particularized analyses of the conditions at the crossing. See Brief for Respondent 16, 24; Brief for United States as Amicus Curiae 22 (hereinafter Brief for United States). They contend that the Crossings Program actually comprises two distinct programs--the "minimum protection" program and the "priority" or "hazard" program. See Brief for Respondent 1-7; Brief for United States 15-21. Under the "minimum protection" program, they argue, States obtain federal funds merely to equip crossings with advance warning signs and reflectorized crossbucks, the bare minimum required by the MUTCD, without any judgment as to whether the signs are adequate. See Brief for Respondent 5-7, 30-36; Brief for United States 15-21. Under the "priority" or "hazard" program, in contrast, diagnostic teams conduct individualized assessments of particular crossings, and state or FHWA officials make specific judgments about the adequacy of the warning devices using the criteria set out in §646.214(b)(3). See Brief for Respondent 5-7, 34-35; Brief for United States 18-21. They therefore contend that (b)(3) and (4) only apply to devices installed under the "priority" or "hazard" program, when a diagnostic team has actually applied the decisional process mandated by (b)(3). See Brief for Respondent 16; Brief for United States 18-25. Only then has the regulation prescribed a federal standard for the adequacy of the warning devices that displaces state law covering thesame subject. </s> This construction, however, contradicts the regulation's plain text. Sections 646.214(b)(3) and (4) make no distinction between devices installed for "minimum protection" and those installed under a so-called "priority" or "hazard" program. Nor does their applicability depend on any individualized determination of adequacy by a diagnostic team or an FHWA official. Rather, as the FHWA itself explained in its Easterwood brief, §§646.214(b)(3) and (4) have a "comprehensive scope." Brief for United States in CSX Transp., Inc. v. Easterwood, O.T. 1992, Nos. 91-790 and 91-1206, at 12. Section 646.214(b)(3) states that its requirements apply to "any project where Federal-aid funds participate in the installation of the devices." 23 CFR §646.214(b)(3)(i) (1999) (emphasis added). And §646.214(b)(4) applies to all federally funded crossings that do not meet the criteria specified in (b)(3). Either way, the federal standard for adequacy applies to the crossing improvement and "substantially subsume[s] the subject matter of the relevant state law." Easterwood, 507 U.S., at 664. </s> Thus, contrary to the Government's position here, §§646.214(b)(3) and (4) "specify warning devices that must be installed" as a part of all federally funded crossing improvements. Id., at 666. Although generally "an agency's construction of its own regulations is entitled to substantial deference," Pauley v. BethEnergy Mines, Inc., 501 U.S. 680, 698 (1991), no such deference is appropriate here. Not only is the FHWA's interpretation inconsistent with the text of §§646.214(b)(3) and (4), see Robertson v. Methow Valley Citizens Council, 490 U.S. 332, 359 (1989), but it also contradicts the agency's own previous construction that this Court adopted as authoritative in Easterwood, cf. Maislin Industries, U. S., Inc. v. Primary Steel, Inc., 497 U.S. 116, 131 (1990) ("Once we have determined a statute's clear meaning, we adhere to that determination under the doctrine of stare decisis, and we judge an agency's later interpretation of the statute against our prior determination of the statute's meaning"). </s> The dissent contends that, under our holding, state law is pre-empted even though "[n]o authority, federal or state, has found that the signs in place" are "adequate to protect safety." Post, at 1 (opinion of Ginsburg, J.). This presupposes that States have not fulfilled their obligation to comply with §§646.214(b)(3) and (4). Those subsections establish a standard for adequacy that States are required to follow in determining what devices to install when federal funds are used. The dissent also argues that Easterwood did not hold that federal funding of the devices is "sufficient" to effect pre-emption, and that "any statement as to the automatic preemptive effect of federal funding should have remained open for reconsideration in a later case." Post, at 2. But Easterwood did not, in fact, leave this question open. Instead, at the behest of the FHWA, the Court clearly stated that §§646.214(b)(3) and (4) pre-empt state tort claims concerning the adequacy of all warning devices installed with the participation of federal funds. </s> Respondent also argues that pre-emption does not lie in this particular case because the Oakwood Church Road crossing presented several of the factors listed in §646.214(b)(3), and because the TDOT did not install pavement markings as required by the MUTCD. See Brief for Respondent 20-22, 36; Brief in Opposition 6-8. This misconceives how pre-emption operates under these circumstances. When the FHWA approves a crossing improvement project and the State installs the warning devices using federal funds, §§646.214(b)(3) and (4) establish a federal standard for the adequacy of those devices that displaces state tort law addressing the same subject. At that point, the regulation dictates "the devices to be installed and the means by which railroads are to participate in their selection." Easterwood, supra, at 671. It is this displacement of state law concerning the devices' adequacy, and not the State's or the FHWA's adherence to the standard set out in §§646.214(b)(3) and (4) or to the requirements of the MUTCD, that pre-empts state tort actions. Whether the State should have originally installed different or additional devices, or whether conditions at the crossing have since changed such that automatic gates and flashing lights would be appropriate, is immaterial to the pre-emption question. </s> It should be noted that nothing prevents a State from revisiting the adequacy of devices installed using federal funds. States are free to install more protective devices at such crossings with their own funds or with additional funding from the FHWA. What States cannot do--once they have installed federally funded devices at a particular crossing--is hold the railroad responsible for the adequacy of those devices. The dissent objects that this bestows on railroads a "double windfall": the Federal Government pays for the installation of the devices, and the railroad is simultaneously absolved of state tort liability. Post, at 2. But the same is true of the result urged by respondent and the Government. Respondent and the Government acknowledge that §§646.214(b)(3) and (4) can pre-empt state tort law, but they argue that pre-emption only occurs when the State has installed the devices pursuant to a diagnostic team's analysis of the crossing in question. Under this reading, railroads would receive the same "double windfall"--federal funding of the devices and pre-emption of state tort law--so long as a diagnostic team has evaluated the crossing. The supposed conferral of a "windfall" on the railroads therefore casts no doubt on our construction of the regulation. </s> Sections 646.214(b)(3) and (4) "cover the subject matter" of the adequacy of warning devices installed with the participation of federal funds. As a result, the FRSA pre-empts respondent's state tort claim that the advance warning signs and reflectorized crossbucks installed at the Oakwood Church Road crossing were inadequate. Because the TDOT used federal funds for the signs' installation, §§646.214(b)(3) and (4) governed the selection and installation of the devices. And because the TDOT determined that warning devices other than automatic gates and flashing lights were appropriate, its decision was subject to the approval of the FHWA. See 23 CFR §646.214(b)(4) (1999). Once the FHWA approved the project and the signs were installed using federal funds, the federal standard for adequacy displaced Tennessee statutory and common law addressing the same subject, thereby pre-empting respondent's claim. </s> The judgment of the Court of Appeals for the Sixth Circuit is reversed, and the case is remanded for further proceedings consistent with this opinion. </s> It is so ordered. </s> NORFOLK SOUTHERN RAILWAY COMPANY, PETITIONER v. DEDRA SHANKLIN, individually, and as next friend of jessie guy shanklin </s> on writ of certiorari to the united states court of appeals for the sixth circuit </s> [April 17, 2000] </s> Justice Breyer, concurring. </s> I agree with Justice Ginsburg that "common sense and sound policy" suggest that federal minimum safety standards should not pre-empt a state tort action claiming that in the particular circumstance a railroad's warning device remains inadequate. Post, at 2 (dissenting opinion). But the Federal Government has the legal power to do more. And, as the majority points out, ante, at 8-12, the specific Federal Highway Administration regulations at issue here do, in fact, do more--when read in light of CSX Transp., Inc. v. Easterwood, 507 U.S. 658 (1993), which faithfully replicates the Government's own earlier interpretation. So read, they say that once federal funds are requested and spent to install warning devices at a grade crossing, the regulations' standards of adequacy apply across the board and pre-empt state law seeking to impose an independent duty on a railroad with respect to the adequacy of warning devices installed. Id., at 671; ante, at 12. I see no need here to reconsider the relevant language in this Court's earlier opinion because the Government itself can easily avoid the pre-emption that it previously sought. It can simply change the relevant regulations, for example, by specifying that federal money is sometimes used for "minimum," not "adequate," programs, which minimum programs lack pre-emptive force. The agency remains free to amend its regulations to achieve the commonsense result that the Government itself now seeks. With that understanding, I join the majority's opinion. </s> NORFOLK SOUTHERN RAILWAY COMPANY, PETITIONER v. DEDRA SHANKLIN, individually, and as next friend of jessie guy shanklin </s> on writ of certiorari to the united states court of appeals for the sixth circuit </s> [April 17, 2000] </s> Justice Ginsburg, with whom Justice Stevens joins, dissenting. </s> A fatal accident occurred on October 3, 1993, at a railroad crossing in Gibson County, Tennessee. The crossing was equipped not with automatic gates or flashing lights, but only with basic warning signs installed with federal funds provided under the Federal Rail-Highway Crossings Program. See 23 U.S.C. §130. This federal program aimed to ensure that States would, "[a]t a minimum, . . . provide signs for all railway-highway crossings." §130d. No authority, federal or state, has found that the signs in place at the scene of the Gibson County accident were adequate to protect safety, as distinguished from being a bare minimum. Nevertheless, the Court today holds that wholesale federal funding of improvements at 196 crossings throughout 11 west Tennessee counties preempts all state regulation of safety devices at each individual crossing. As a result, respondent Dedra Shanklin cannot recover under state tort law for the railroad's failure to install adequate devices. And the State of Tennessee, because it used federal money to provide at least minimum protection, is stopped from requiring the installation of adequate devices at any of the funded crossings. </s> The upshot of the Court's decision is that state negligence law is displaced with no substantive federal standard of conduct to fill the void. That outcome defies common sense and sound policy. Federal regulations already provide that railroads shall not be required to pay any share of the cost of federally financed grade crossing improvements. 23 CFR §646.210(b)(1) (1999). Today the railroads have achieved a double windfall: the Federal Government foots the bill for installing safety devices; and that same federal expenditure spares the railroads from tort liability, even for the inadequacy of devices designed only to secure the "minimum" protection Congress envisioned for all crossings. See 23 U.S.C. §130d. Counsel for petitioner Norfolk Southern Railway correctly conceded at oral argument that the relevant statutes do not compel releasing the railroads when the devices installed, though meeting federal standards for "minimum" protection, see ante, at 5, fail to provide adequate protection. The road is open for the Secretary of Transportation to enact regulations clarifying that point. See ante, at 2 (Breyer, J., concurring). </s> As persuasively explained by the Court of Appeals for the Seventh Circuit in Shots v. CSX Transp., Inc., 38 F.3d 304 (1994) (Posner, C.J.), and reiterated by the Court of Appeals for the Sixth Circuit in the instant case, 173 F.3d 386 (1999), our prior decision in CSX Transp., Inc. v. Easterwood, 507 U.S. 658 (1993), does not necessitate the ouster of state law the Court now commands. Easterwood, in which the tort claimant prevailed, dispositively held only that federal funding was necessary to trigger preemption, not that it was sufficient by itself to do so. Because federal funds did not in fact subsidize the crossing at issue in that case, id., at 671-673, any statement as to the automatic preemptive effect of federal funding should have remained open for reconsideration in a later case where federal funds did participate. I do not read the admittedly unclear language of 23 CFR §§646.214(b)(3) and (4) to dictate that Federal Highway Administration authorization of federal funding to install devices is tantamount to approval of each of those devices as adequate to protect safety at every crossing so funded. And I do not think a previous administration's argument to that effect as amicus curiae in Easterwood estops the Government from taking a different view now. I agree with the sound reasoning in Shots and would affirm the Court of Appeals' judgment. </s> FOOTNOTES Footnote 1 </s> * Sections 646.214(b)(3) and (4) provide in full: </s> "(3)(i) Adequate warning devices, under §646.214(b)(2) or on any project where Federal-aid funds participate in the installation of the devices are to include automatic gates with flashing light signals when one or more of the following conditions exist: </s> "(A) Multiple main line railroad tracks. </s> "(B) Multiple tracks at or in the vicinity of the crossing which may be occupied by a train or locomotive so as to obscure the movement of another train approaching the crossing. </s> "(C) High Speed train operation combined with limited sight distance at either single or multiple track crossings. </s> "(D) A combination of high speeds and moderately high volumes of highway and railroad traffic. </s> "(E) Either a high volume of vehicular traffic, high number of train movements, substantial numbers of schoolbuses or trucks carrying hazardous materials, unusually restricted sight distance, continuing accident occurrences, or any combination of these conditions. </s> "(F) A diagnostic team recommends them. </s> "(ii) In individual cases where a diagnostic team justifies that gates are not appropriate, FHWA may find that the above requirements are not applicable. </s> "(4) For crossings where the requirements of §646.214(b)(3) are not applicable, the type of warning device to be installed, whether the determination is made by a State regulatory agency, State highway agency, and/or the railroad, is subject to the approval of FHWA."

United States Supreme Court CLAYTON v. AUTOMOBILE WORKERS(1981) No. 80-5049 Argued: March 4, 1981Decided: May 26, 1981 </s> After being discharged for violation of his employer's plant rule prohibiting defined misbehavior, an employee, pursuant to the grievance and arbitration procedure mandated by the collective-bargaining agreement between the employer and respondent union, asked his union representative to file a grievance on his behalf on the ground that his dismissal was not for just cause. The union pursued the grievance through the third step of the grievance procedure and requested arbitration, but it then withdrew the request. The union constitution required union members aggrieved by any action of the union to exhaust the internal union appeals procedures before seeking redress from a court. The employee, however, instead of filing an appeal from the union's decision not to seek arbitration of his grievance, filed an action in Federal District Court under 301 (a) of the Labor Management Relations Act, alleging that the union had breached its duty of fair representation and that the employer had breached the collective-bargaining agreement by discharging him without just cause. He sought reinstatement from the employer and monetary relief from both the employer and the union. The District Court sustained the union and the employer's affirmative defense that the employee had failed to exhaust the internal union appeals procedures, and accordingly dismissed the suit against both the union and the employer. The Court of Appeals affirmed the dismissal of the suit against the union but reversed the dismissal against the employer. The court held that the employee's failure to exhaust was fatal to his claim against the union because by filing an internal appeal he might have received money damages, the relief he sought in his 301 suit against the union. But the court held that the employee's failure to exhaust did not bar his suit against the employer because the internal appeals procedures [451 U.S. 679, 680] could not result in either reinstatement of his job, the relief sought from the employer under 301 (a), or reactivation of his grievance. </s> Held: </s> Where the internal union appeals procedures could not reactivate the employee's grievance or grant him the complete relief he sought under 301 (a), he should not have been required to exhaust such procedures prior to bringing suit against the union and the employer under 301 (a). Pp. 685-696. </s> (a) Because internal union appeals procedures, in contrast to contractual grievance and arbitration procedures negotiated by the parties to a collective-bargaining agreement, are created by the union constitution and are designed to settle disputes between an employee and his union arising under the constitution, the policies encouraging private resolution of grievances arising out of the collective-bargaining process are not directly applicable to the issue whether to require exhaustion of internal union procedures. Republic Steel Corp. v. Maddox, 379 U.S. 650 , distinguished. Such policies are furthered by an exhaustion requirement only where the internal procedures can either grant the aggrieved employee full relief or reactivate his grievance. Pp. 685-689. </s> (b) If the internal procedures are inadequate to effect the relief sought by the employee, his failure to exhaust should be excused and he should be permitted to pursue his claim for breach of the duty of fair representation and breach of the collective-bargaining agreement in court under 301. Here, although it appears that some monetary relief could be obtained through the internal procedures, it also appears that the union could neither reinstate the employee in his job nor reactivate his grievance because of certain time restrictions in the collective-bargaining agreement for obtaining arbitration of a grievance. These restrictions on the relief available through the internal procedures rendered such procedures inadequate. The policy underlying 301 to effect a relatively rapid disposition of labor disputes would be undermined by an exhaustion requirement unless the internal procedures are capable of either reactivating the employee's grievance or of redressing it. Pp. 689-693. </s> (c) Although the argument that exhaustion of internal procedures should be required might have force if the employee's 301 suit is only against the union and the internal procedures are adequate to grant the relief sought against the union, the defense should not be available where, as here, the employee sued both the union and the employer. If a trial court required exhaustion of the internal procedures with respect to the suit against the union but not against the employer, it would be faced with the undesirable alternatives of either staying the suit against the employer pending such exhaustion, thus [451 U.S. 679, 681] violating national labor policy, or of permitting the suit against the employer to proceed and tolling the statute of limitations against the union pending exhaustion, with the possible result that the court would find itself with two separate 301 suits based on the same facts proceeding at different paces in its courtroom. Pp. 694-695. </s> 623 F.2d 563, affirmed in part, reversed in part, and remanded. </s> BRENNAN, J., delivered the opinion of the Court, in which WHITE, MARSHALL, BLACKMUN, and STEVENS, JJ., joined. POWELL, J., filed a dissenting opinion, in which BURGER, C. J., joined, post, p. 696. REHNQUIST, J., filed a dissenting opinion, in which BURGER, C. J., and STEWART and POWELL, JJ., joined, post, p. 698. </s> [Footnote * Together with No. 80-54, ITT Gilfillan, a Division of International Telephone & Telegraph Corp. v. Clayton, also on certiorari to the same court. </s> Everett F. Meiners argued the cause and filed a brief for petitioner in No. 80-54. John T. McTernan, by appointment of the Court, 449 U.S. 1008 , argued the cause for petitioner in No. 80-5049 and respondent in No. 80-54. With him on the briefs was Elizabeth B. Spector. </s> M. Jay Whitman argued the cause for respondents in No. 80-5049. With him on the brief were John A. Fillion and Lawrence Rosenzweig.Fn </s> Fn [451 U.S. 679, 681] Briefs of amici curiae were filed by J. Albert Woll, Laurence Gold, and Marsha Berzon for the American Federation of Labor and Congress of Industrial Organizations; by James C. Paras, Bruce A. Nelson, Thomas E. Wilson, and Stephen A. Bokat for the Chamber of Commerce of the United States; and by Wesley J. Fastiff and Kathleen M. Kelly for Safeway Stores, Inc., et al. </s> JUSTICE BRENNAN delivered the opinion of the Court. </s> An employee seeking a remedy for an alleged breach of the collective-bargaining agreement between his union and employer must attempt to exhaust any exclusive grievance and arbitration procedures established by that agreement before he may maintain a suit against his union or employer under 301 (a) of the Labor Management Relations Act, 1947, 61 Stat. 156, 29 U.S.C. 185 (a). Republic Steel Corp. v. Maddox, 379 U.S. 650, 652 -653 (1965); see Hines v. Anchor Motor Freight, Inc., 424 U.S. 554, 563 (1976); Vaca v. Sipes, [451 U.S. 679, 682] 386 U.S. 171, 184 (1967). The question presented by these cases is whether, and in what circumstances, an employee alleging that his union breached its duty of fair representation in processing his grievance, and that his employer breached the collective-bargaining agreement, must also attempt to exhaust the internal union appeals procedures established by his union's constitution before he may maintain his suit under 301. </s> I </s> After eight years in the employ of ITT Gilfillan, Clifford E. Clayton, a member of the United Automobile, Aerospace, and Agricultural Implement Workers of America (UAW) and a shop steward of its Local 509, was dismissed for violating a plant rule prohibiting defined misbehavior. Pursuant to the mandatory grievance and arbitration procedure established by the collective-bargaining agreement between ITT and Local 509, Clayton asked his union representative to file a grievance on his behalf on the ground that his dismissal was not for just cause. The union investigated Clayton's charges, pursued his grievance through the third step of the grievance procedure, and made a timely request for arbitration. 1 It then withdrew the request, choosing not to proceed to arbitration. Clayton was notified of the union's decision after the time for requesting arbitration had expired. 2 </s> The UAW requires every union member "who feels aggrieved by any action, decision, or penalty imposed upon [451 U.S. 679, 683] him" by the union to exhaust internal union appeals procedures before seeking redress from a "civil court or governmental agency." UAW Constitution, Art. 33, 12. These procedures, established by Arts. 32 and 33 of the UAW Constitution and incorporated into Art. IV of Local 509's bylaws, direct the employee first to seek relief from the membership of his local. Art. 33, 3. If not satisfied with the result obtained there, the employee may further appeal to the International Executive Board of the UAW, and eventually to either the Constitutional Convention Appeals Committee or to a Public Review Board composed of "impartial persons of good public repute" who are not members or employees of the union. Arts. 32, 33, 3-11. </s> Clayton did not file a timely internal appeal from his local's decision not to seek arbitration of his grievance. 3 Instead, six months after the union's withdrawal of its request for arbitration, Clayton filed this action under 301 (a) of the Labor Management Relations Act, 1947, 29 U.S.C. 185 (a), in the District Court for the Central District of California. He alleged that the union had breached its duty of fair representation by arbitrarily refusing to pursue his grievance past the third step of the grievance procedure, and that the employer had breached the collective-bargaining agreement by discharging him without just cause. 4 </s> Both the union and the employer pleaded as an affirmative defense Clayton's failure to exhaust the internal union appeals procedures. App. 12, 18. The District Court sustained this defense, finding that Clayton had failed to exhaust the [451 U.S. 679, 684] internal appeals procedures; that those procedures were adequate as a matter of law; that Clayton had been advised of their existence; and that his failure to exhaust could not be excused as futile. Record 397-404. Accordingly, the court dismissed Clayton's suit against both the union and the employer. </s> The United States Court of Appeals for the Ninth Circuit affirmed the dismissal of Clayton's suit against the union and reversed the dismissal of his suit against the employer. 623 F.2d 563 (1980). Focusing on the adequacy of the relief available under the internal union appeals procedures the Court of Appeals held that Clayton's failure to exhaust was fatal to his claim against the union, because by filing an internal appeal Clayton might have received money damages, the relief he sought in his 301 suit against the union. Id., at 566. However, the Court held that Clayton's failure to exhaust did not bar his suit against the employer, because the internal appeals procedures could not result in either reinstatement of his job, which was the relief Clayton sought from the employer under 301, or in reactivation of his grievance. Id., at 569-570. </s> In No. 80-5049, Clayton argues that his 301 claim against the UAW and Local 509 should be allowed to proceed despite his failure to exhaust internal union procedures. In No. 80-54, ITT Gilfillan argues that if Clayton's failure to exhaust bars his suit against the union, it must also bar his suit against the employer. </s> The Courts of Appeals are divided over whether an employee should be required to exhaust internal union appeals procedures before bringing suit against a union or employer under 301. Some hold that the employee's failure to exhaust internal union procedures may not be asserted as a defense by an employer. 5 Others permit the defense to be [451 U.S. 679, 685] asserted by an employer if the internal appeals procedures could result in reactivation of the grievance. 6 With respect to a union, some courts hold that the employee's failure to exhaust is excused if union officials would be so hostile to an employee that he could not hope to obtain a fair hearing. 7 Others would also excuse the employee's failure to exhaust if the substantive relief available through the internal procedures would be less than that available in his 301 action. 8 </s> We granted certiorari to resolve the conflict. 449 U.S. 950 (1980). We reverse the dismissal of Clayton's suit against the union and affirm the reversal of the dismissal of his suit against the employer. We hold that where an internal union appeals procedure cannot result in reactivation of the employee's grievance or an award of the complete relief sought in his 301 suit, exhaustion will not be required with respect to either the suit against the employer or the suit against the union. </s> II </s> In Republic Steel Corp. v. Maddox, 379 U.S. 650 (1965), we were asked to decide whether an employee alleging a violation [451 U.S. 679, 686] of the collective-bargaining agreement between his union and employer must attempt to exhaust exclusive contractual grievance and arbitration procedures before bringing suit under 301 (a). 9 In deciding that issue we looked to principles of federal common law. See Textile Workers v. Lincoln Mills, 353 U.S. 448, 457 (1957). Two considerations influenced our decision to require exhaustion. First, Congress had "expressly approved contract grievance procedures as a preferred method for settling disputes and stabilizing the 'common law' of the plant." 379 U.S., at 653 . 10 Second, a contrary rule, allowing an employee to bring suit under 301 without attempting to exhaust the contractual grievance procedures, would "deprive employer and union of the ability to establish a uniform and exclusive method for orderly settlement of employee grievances." Ibid. 11 The [451 U.S. 679, 687] rule established by Republic Steel was thus intended to protect the integrity of the collective-bargaining process and to further that aspect of national labor policy that encourages private rather than judicial resolution of disputes arising over the interpretation and application of collective-bargaining agreements. See Hines v. Anchor Motor Freight, Inc., 424 U.S., at 567 , 570-571. </s> The contractual procedures we required the employee to exhaust in Republic Steel are significantly different from the procedures at issue here. In these cases, the Court is asked to require exhaustion of internal union procedures. These procedures are wholly a creation of the UAW Constitution. They were not bargained for by the employer and union and are nowhere mentioned in the collective-bargaining agreement that Clayton seeks to have judicially enforced. 12 Nonetheless, Clayton's employer and union contend that exhaustion of the UAW procedures, like exhaustion of the contractual grievance and arbitration procedures, will further national labor policy and should be required as a matter of federal common law. Their argument, in brief, is that an exhaustion requirement will enable unions to regulate their internal affairs without undue judicial interference and that it will also promote the broader goal of encouraging private resolution of disputes arising out of a collective-bargaining agreement. </s> We do not agree that the policy of forestalling judicial interference with internal union affairs is applicable to these [451 U.S. 679, 688] cases. 13 This policy has been strictly limited to disputes arising over internal union matters such as those involving the interpretation and application of a union constitution. As we stated in NLRB v. Marine Workers, 391 U.S. 418 (1968), the policy of deferring judicial consideration of internal union matters does not extend to issues "in the public domain and beyond the internal affairs of the union." Id., at 426, n. 8. 14 Here, Clayton's dispute against his union is based upon an alleged breach of the union's duty of fair representation. This allegation raises issues rooted in statutory policies extending far beyond internal union interests. [451 U.S. 679, 689] See United Parcel Service, Inc. v. Mitchell, ante, at 66, and n. 2 (STEWART, J., concurring); Hines v. Anchor Motor Freight, Inc., supra, at 562; Vaca v. Sipes, 386 U.S., at 182 ; Humphrey v. Moore, 375 U.S. 335 (1964). </s> Our analysis, then, focuses on that aspect of national labor policy that encourages private rather than judicial resolution of disputes arising over collective-bargaining agreements. Concededly, a requirement that aggrieved employees exhaust internal remedies might lead to nonjudicial resolution of some contractual grievances. For example, an employee who exhausts internal union procedures might decide not to pursue his 301 action in court, either because the union offered him a favorable settlement, or because it demonstrated that his underlying contractual claim was without merit. However, we decline to impose a universal exhaustion requirement lest employees with meritorious 301 claims be forced to exhaust themselves and their resources by submitting their claims to potentially lengthy internal union procedures that may not be adequate to redress their underlying grievances. </s> As we stated in NLRB v. Marine Workers, supra, at 426, and n. 8, courts have discretion to decide whether to require exhaustion of internal union procedures. In exercising this discretion, at least three factors should be relevant: first, whether union officials are so hostile to the employee that he could not hope to obtain a fair hearing on his claim; second, whether the internal union appeals procedures would be inadequate either to reactivate the employee's grievance or to award him the full relief he seeks under 301; and third, whether exhaustion of internal procedures would unreasonably delay the employee's opportunity to obtain a judicial hearing on the merits of his claim. If any of these factors are found to exist, the court may properly excuse the employee's failure to exhaust. </s> Clayton has not challenged the finding of the lower courts that the UAW internal appeals procedures are fair and reasonable. He concedes that he could have received an impartial [451 U.S. 679, 690] hearing on his claim had he exhausted the internal union procedures. See Glover v. St. Louis-San Francisco R. Co., 393 U.S. 324, 330 -331 (1969). Accordingly, our inquiry turns to the second factor, whether the relief available through the union's internal appeals procedures is adequate. </s> In his suit under 301, Clayton seeks reinstatement from his employer and monetary relief from both his employer and his union. 15 Although, the UAW Constitution does not indicate on its face what relief is available through the internal union appeals procedures, 16 the parties have stipulated that the Public Review Board can award backpay in an appropriate case, Tr. 35-36, and the two decisions of the Public Review Board reprinted in the joint appendix both resulted in awards of backpay. App. 89-109. It is clear, then, that at least some monetary relief may be obtained through the internal appeals procedures. 17 </s> [451 U.S. 679, 691] </s> It is equally clear that the union can neither reinstate Clayton in his job, see n. 15, supra, nor reactivate his grievance. Article IX of the collective-bargaining agreement between Local 509 and ITT Gilfillan provides that the union may obtain arbitration of a grievance only if it gives "notice . . . to the Company in writing within fifteen (15) working days after the date of the Company's decision at Step 3 of the Grievance Procedure." By the time Clayton learned of his union's decision not to pursue the grievance to arbitration, this 15-day time limit had expired. See n. 2, supra. Accordingly, the union could not have demanded arbitration even if the internal appeal had shown Clayton's claim to be meritorious. The union was bound by its earlier decision not to pursue Clayton's grievance past the third stage of the grievance and arbitration procedure. 18 For the reasons that follow, we conclude that these restrictions on the relief available [451 U.S. 679, 692] through the internal UAW procedures render those procedures inadequate. 19 </s> Where internal union appeals procedures can result in either complete relief to an aggrieved employee or reactivation of his grievance, exhaustion would advance the national labor policy of encouraging private resolution of contractual labor disputes. In such cases, the internal union procedures are capable of fully resolving meritorious claims short of the judicial forum. Thus, if the employee received the full relief he requested through internal procedures, his 301 action would become moot, and he would not be entitled to a judicial hearing. Similarly, if the employee obtained reactivation of his grievance through internal union procedures, the policies underlying Republic Steel would come into play, 20 and the employee would be required to submit his claim to the collectively bargained dispute-resolution procedures. 21 In either case, exhaustion of internal remedies could result in final resolution of the employee's contractual grievance through private rather than judicial avenues. [451 U.S. 679, 693] </s> By contrast, where an aggrieved employee cannot obtain either the substantive relief he seeks or reactivation of his grievance, national labor policy would not be served by requiring exhaustion of internal remedies. In such cases, exhaustion would be a useless gesture: it would delay judicial consideration of the employee's 301 action, but would not eliminate it. 22 The employee would still be required to pursue judicial means to obtain the relief he seeks under 301. Moreover, exhaustion would not lead to significant savings in judicial resources, because regardless of the outcome of the internal appeal, the employee would be required to prove de novo in his 301 suit that the union breached its duty of fair representation and that the employer breached the collective-bargaining agreement. 23 As we recently stated, one of the important federal policies underlying 301 is the "`relatively rapid disposition of labor disputes.'" United Parcel Service, Inc. v. Mitchell, ante, at 63, quoting Auto Workers v. Hoosier Cardinal Corp., 383 U.S. 696, 707 (1966). This policy is undermined by an exhaustion requirement unless the internal procedures are capable of either reactivating the employee's grievance or of redressing it. 24 </s> [451 U.S. 679, 694] </s> In reliance upon the Court of Appeals' opinion in these cases, the UAW contends that even if exhaustion is not required with respect to the employer, it should be required with respect [451 U.S. 679, 695] to the union, because the relief Clayton seeks against the union in his 301 suit is available through internal union procedures. But cf. n. 17, supra. We disagree. While this argument might have force where the employee has chosen to bring his 301 suit only against the union, the defense should not be available where, as here, the employee has filed suit against both the union and the employer. A trial court requiring exhaustion with respect to the suit against the union, but not with respect to the suit against the employer, would be faced with two undesirable alternatives. If it stayed the action against the employer pending resolution of the internal appeals procedures, it would effectively be requiring exhaustion with respect to the suit against the employer, a result we have held would violate national labor policy. Yet if it permitted the action against the employer to proceed, and tolled the running of the statute of limitation in the suit against the union until the internal procedures had been exhausted, it could very well find itself with two separate 301 suits, based on the same facts, proceeding at different paces in its courtroom. As we suggested in Vaca v. Sipes, 386 U.S., at 197 , this is a result that should be avoided if possible. The preferable approach is for the court to permit the employee's 301 action to proceed against both defendants, despite the employee's failure to exhaust, unless the internal union procedures can reactivate the grievance or grant the relief that would be available in the employee's 301 suit against both defendants. </s> III </s> In contrast to contractual grievance and arbitration procedures, which are negotiated by the parties to a collective-bargaining agreement and are generally designed to provide [451 U.S. 679, 696] an exclusive method for resolving disputes arising under that agreement, internal union appeals procedures are created by the union constitution and are designed to settle disputes between an employee and his union that arise under that constitution. Because of this distinction, the policies underlying Republic Steel, encouraging private resolution of grievances arising out of the collective-bargaining process, are not directly applicable to the issue whether to require exhaustion of internal union procedures. </s> We conclude that the policies underlying Republic Steel are furthered by an exhaustion requirement only where the internal union appeals procedures can either grant the aggrieved employee full relief or reactivate his grievance. For only in those circumstances is there a reasonable possibility that the employee's claim will be privately resolved. If the internal procedures are not adequate to effect that relief, the employee should not be required to expend time and resources seeking a necessarily incomplete resolution of his claim prior to pursuing judicial relief. If the internal procedures are inadequate, the employee's failure to exhaust should be excused, and he should be permitted to pursue his claim for breach of the duty of fair representation and breach of the collective-bargaining agreement in court under 301. </s> In this case, the internal union appeals panels cannot reactivate Clayton's grievance and cannot grant Clayton the reinstatement relief he seeks under 301. We therefore hold that Clayton should not have been required to exhaust internal union appeals procedures prior to bringing suit against his union and employer under 301. </s> Affirmed in part, reversed in part, and remanded. </s> Footnotes [Footnote 1 The collective-bargaining agreement between Local 509 and ITT Gilfillan establishes a four-step grievance procedure, with binding arbitration as the fourth step. Article IX of the agreement provides that if the union wishes to request arbitration, it must do so within 15 working days after completion of the third step of the grievance procedure. App. 31-36. </s> [Footnote 2 Clayton was notified of the union's decision by a letter written by the International Representative responsible for servicing Local 509. Id., at 78-79. Neither the union nor the employer contests Clayton's allegation that he received this letter more than 15 working days after completion of the third step of the grievance procedure. See id., at 7; Tr. 88-99. </s> [Footnote 3 Under Art. 33, 3, of the UAW Constitution, Clayton had 30 days from the date the union withdrew its request for arbitration to initiate the internal union appeals procedures. </s> [Footnote 4 To prevail in an action under 301 against either the employer or the union, an employee must ordinarily establish both that the union breached its duty of fair representation and that the employer breached the collective-bargaining agreement. Hines v. Anchor Motor Freight, Inc., 424 U.S. 554, 570 -571 (1976). </s> [Footnote 5 See, e. g., Johnson v. General Motors, 641 F.2d 1075, 1083 (CA2 1981); Geddes v. Chrysler Corp., 608 F.2d 261, 264 (CA6 1979); Petersen v. [451 U.S. 679, 685] Rath Packing Co., 461 F.2d 312, 315 (CA8 1972); Retana v. Apartment, Motel, Hotel and Elevator Operators Union, 453 F.2d 1018, 1027, n. 16 (CA9 1972). </s> [Footnote 6 See, e. g., Varra v. Dillon Companies, Inc., 615 F.2d 1315, 1317-1318 (CA10 1980); Baldini v. Local Union No. 1095, 581 F.2d 145, 150 (CA7 1978); Winter v. Local Union No. 639, 186 U.S. App. D.C. 315, 319-320, 569 F.2d 146, 150-151 (1977); Harrison v. Chrysler Corp., 558 F.2d 1273, 1278 (CA7 1977). </s> [Footnote 7 See, e. g., Fizer v. Safeway Stores, Inc., 586 F.2d 182, 183-184 (CA10 1978); Winter v. Local Union No. 639, supra, at 318, 569 F.2d, at 149; Imel v. Zohn Mfg. Co., 481 F.2d 181, 184 (CA10 1973), cert. denied, 415 U.S. 915 (1974). </s> [Footnote 8 See, e. g., Tinsley v. United Parcel Service, Inc., 635 F.2d 1288, 1290 (CA7 1980); Geddes v. Chrysler Corp., supra, at 264; Baldini v. Local Union No. 1095, supra, at 149; Buzzard v. Local Lodge 1040, 480 F.2d 35, 41 (CA9 1973). These cases compare the relief available through internal procedures with the relief available against the union under 301. </s> [Footnote 9 Section 301 (a) of the Labor Management Relations Act, 1947, 61 Stat. 156, 29 U.S.C. 185 (a), provides: </s> "Suits for violation of contracts between an employer and a labor organization representing employees in an industry affecting commerce . . . may be brought in any district court of the United States having jurisdiction of the parties, without respect to the amount in controversy or without regard to the citizenship of the parties." </s> [Footnote 10 Section 203 (d) of the Labor Management Relations Act, 61 Stat. 153, 29 U.S.C. 173 (d), provides that "[f]inal adjustment by a method agreed upon by the parties is declared to be the desirable method for settlement of grievance disputes arising over the application or interpretation of an existing collective-bargaining agreement." </s> [Footnote 11 We also noted that exhaustion would serve the interests of both the union and the employer: </s> "[It] complements the union's status as exclusive bargaining representative by permitting [the union] to participate actively in the continuing administration of the contract. In addition, conscientious handling of grievance claims will enhance the union's prestige with employees. Employer interests, for their part, are served by limiting the choice of remedies available to aggrieved employees." 379 U.S., at 653 . </s> Moreover, exhaustion would not adversely affect the employee: </s> "[I]t cannot be said, in the normal situation, that contract grievance procedures are inadequate to protect the interests of an aggrieved employee [451 U.S. 679, 687] until the employee has attempted to implement the procedures and found them so." Ibid. </s> We concluded that since an employee bringing a 301 claim is asserting rights created by a collective-bargaining agreement, he should also be required to pursue the dispute-resolution procedures created by that agreement. See Hines v. Anchor Motor Freight, Inc., 424 U.S., at 562 -563; Vaca v. Sipes, 386 U.S. 171, 184 (1967). </s> [Footnote 12 Indeed, the parties concede that Clayton has exhausted the grievance and arbitration procedures that were expressly created by the collective-bargaining agreement. </s> [Footnote 13 This policy has its statutory roots in 101 (a) (4) of the Landrum-Griffin Act, 73 Stat. 522, 29 U.S.C. 411 (a) (4), which is part of the subchapter of that Act entitled "Bill of Rights of Members of Labor Organizations." Section 101 (a) (4) provides: </s> "No labor organization shall limit the right of any member thereof to institute an action in any court, . . . Provided, That any such member may be required to exhaust reasonable hearing procedures (but not to exceed a four-month lapse of time) within such organization, before instituting legal . . . proceedings against such organizations or any officer thereof . . . ." </s> [Footnote 14 In NLRB v. Marine Workers, we held that respondent union could not discipline one of its members for failing to exhaust internal appeals procedures before filing an unfair labor practice charge with the National Labor Relations Board, because the unfair labor practices charge was "in the public domain and beyond the internal affairs of the union." 391 U.S., at 425 . "A proceeding by the [NLRB] is not to adjudicate private rights but to effectuate a public policy," and "[a]ny coercion used to discourage, retard, or defeat . . . access [to those proceedings] is beyond the legitimate interests of a labor organization." Id., at 424. Moreover, "[t]here cannot be any justification to make the public processes wait until the union member exhausts internal procedures plainly inadequate to deal with all phases of the complex problem concerning employer, union, and employee member. If the member becomes exhausted, instead of the remedies, the issues of public policy are never reached and an airing of the grievance never had." Id., at 425. See also 105 Cong. Rec. 17899 (1959) (remarks of Sen. Kennedy) ( 101 (a) (4) not intended "to eliminate existing grievance procedures established by union constitutions for redress of alleged violations of their internal governing laws"). </s> [Footnote 15 App. 8-9. Reinstatement is available only from the employer, because the union has no power to order reinstatement under the collective-bargaining agreement. Damages, however, can be assessed against both the employer and the union. As we stated in Vaca v. Sipes, 386 U.S., at 197 -198, an employee who establishes that the union breached its duty of fair representation in processing his grievance, and that the employer breached the collective-bargaining agreement, may be entitled to an award of damages "apportion[ed] . . . between the employer and the union according to the damage caused by the fault of each. Thus, damages attributable solely to the employer's breach of contract should not be charged to the union, but increases if any in those damages caused by the union's refusal to process the grievance should not be charged to the employer." </s> [Footnote 16 The UAW Constitution states only that the Constitution Convention Appeals Committee has "the authority to consider and decide all appeals submitted to it," Art. 33, 8, and that the Public Review Board has the "authority and duty to make final and binding decisions on all cases appealed to it," Art. 32, 3 (b), and to "dispose of all facets of the appeal." Art. 33, 11. </s> [Footnote 17 The record does not indicate whether this monetary relief includes backpay only, or whether it also may include prospective monetary relief [451 U.S. 679, 691] and incidental or punitive damages, relief that Clayton is apparently seeking in his 301 action. See App. 9. </s> [Footnote 18 The parties stipulated at trial that once Local 509 withdrew its request for arbitration, that "was the end of the road so far as remedies under the contract were concerned." Tr. 109; see also id., at 260, 268. That stipulation is consistent with the collective-bargaining agreement. Although Art. VIII, 5, which establishes time limits for processing grievances, states that "[t]he time limits contained herein may be extended by mutual agreement in writing by the parties concerned," there is no comparable waiver provision in Art. IX, which establishes the 15-day time limit for requesting arbitration. See also Tinsley v. United Parcel Service, Inc., 635 F.2d, at 1292; Baldini v. Local Union No. 1095, 581 F.2d, at 150; Harrison v. Chrysler Corp., 558 F.2d., at 1279. </s> Although most collective-bargaining agreements contain similarly strict time limits for seeking arbitration of grievances, there are some exceptions. The UAW informs us that "[s]ome employers and unions have, through collective bargaining, agreed to allow the reinstatement of withdrawn grievances where a union tribunal reverses the union's initial decision. This is true, for example, in the current UAW contracts with the major automobile and agricultural implement manufacturers." Brief for Respondents in No. 80-5049, p. 18, n. 40. In such cases, the relief available through the union's internal appeal procedures would presumably be adequate. </s> [Footnote 19 Accordingly, we need not discuss the third factor, whether exhaustion of the union's otherwise adequate internal appeals procedures would unreasonably delay the employee's opportunity to obtain a judicial hearing on the merits of his claim. </s> [Footnote 20 Allowing a defendant in a 301 action to demand exhaustion of internal union procedures when those procedures could lead to reactivation of a stalled grievance is wholly consistent with Republic Steel Corp. v. Maddox, 379 U.S. 650 (1965). In Republic Steel, we held that an employer may rely on a provision in a collective-bargaining agreement requiring its employees to submit all contractual grievances to arbitration prior to bringing suit under 301. If a provision in the collective-bargaining agreement also permits reactivation of a grievance after an internal union appeal, an employer or union should also be able to rely on that provision and thus defend the 301 suit on the ground that the employee failed to exhaust internal union procedures. </s> [Footnote 21 In addition, by reactivating the grievance, the union might be able to rectify the very wrong of which the employee complains - a breach of the duty of fair representation caused by the union's refusal to seek arbitration - and the employee would then be unable to satisfy the precondition to a 301 suit against the employer. </s> [Footnote 22 Of course exhaustion might deplete the employee's energy and resources to the point where he chooses not to pursue his 301 claim in court, but that result is surely inconsistent with federal policy. </s> [Footnote 23 Even if the union admitted during the internal appeals procedures that it had breached its duty of fair representation, an admission the UAW has apparently made only once in the 20 years preceding 1977, see Klein, Enforcement of the Right to Fair Representation: Alternative Forums, The Duty of Fair Representation 103 (1977), the employee would still not be saved the time and expense of proving that breach in his 301 suit. While a union's admission that it breached its duty of fair representation is certainly evidence a court can consider, an employer defending a 301 suit would still be entitled to prove that no such breach had occurred. See Vaca v. Sipes, 386 U.S., at 186 -187. </s> [Footnote 24 We are also not persuaded by the Court of Appeals' assumption that exhaustion would narrow and focus the issues for ultimate judicial determination. The Court of Appeals stated: </s> "The UAW's liability (if any) for breach of its duty of fair representation [451 U.S. 679, 694] would depend on the reasons for the union's withdrawal of the arbitration request. There is little in the record to indicate why the local official changed his mind and withdrew the arbitration request. But the missing motive is precisely the sort of information that an appellate body within the union would have elicited, compiling a record that would greatly assist the court now." 623 F.2d, at 566 (emphasis added). </s> There are three reasons why we are not persuaded by this analysis. First, the record does indicate why the union withdrew its request for arbitration of Clayton's grievance. The letter from Local 509's International Representative to Clayton, informing him that the union had withdrawn its request for arbitration, listed five reasons in support of the union's decision. See n. 2, supra. Second, since the UAW Constitution does not on its face require any of the decisionmaking panels of the union to explain the reasons underlying their disposition of an employee's internal union appeal, there is no guarantee that exhaustion will result in a useful interpretation of union rules. Third, in many cases the union tribunal is not permitted to consider certain allegations the employee could assert under 301. In these cases, for example, Clayton alleges that the union "acted arbitrarily . . . and discriminatorily" in refusing to seek arbitration of his grievance. App. 6 (emphasis added). The UAW Constitution, however, states that the Public Review Board can only consider allegations that the employee's grievance "was improperly handled [by the union] because of fraud, discrimination, or collusion with management." Art. 33, 8 (b) (emphasis added). This standard offers the aggrieved employee less protection than the "arbitrary, discriminatory, or in bad faith" standard for breach of the duty of fair representation that we developed in Vaca v. Sipes, supra, at 190. As the General Counsel to the Public Review Board has stated: </s> "The UAW acknowledges that it has a duty of fair representation to its members. Moreover, it acknowledges that its members may assert a claim for a breach of the duty of fair representation within the system of internal remedies. It does not concede to its members, however, that arbitrary, perfunctory, or negligent conduct amounts to a breach of the duty of fair representation, nor does it permit them even to assert this type of claim before the PRB, since the standard of review is jurisdictional. That is, unless the requisite claim is made (fraud, discrimination, or collusion) the board may not entertain it." Klein, supra, at 99. </s> See also Johnson v. General Motors, 641 F.2d, at 1081. Of course, [451 U.S. 679, 695] if an allegation cannot be considered by the Public Review Board, no record helpful to a court will be made with respect to that issue. In sum, we conclude that the prospect that exhaustion would create a record helpful to a court in a subsequent 301 action is too speculative to be given much weight. </s> JUSTICE POWELL, with whom THE CHIEF JUSTICE joins, dissenting. </s> I join JUSTICE REHNQUIST'S dissent, and write briefly to [451 U.S. 679, 697] emphasize a rationale - suggested by an amicus curiae * - that is consistent both with national labor policy and the relevant precedents. </s> In briefest summary, I would hold that in the circumstances of this case no issue concerning the breach of the union's statutory duty of fair representation properly can be said to arise at all. The union has not made a final determination whether to pursue arbitration on Clayton's behalf. Clayton should not be able to claim a breach of duty by the union until the union has had a full opportunity to make this determination. No such opportunity exists until Clayton exhausts the procedures available for resolving that question. Thus, as Clayton cannot claim a breach of duty by the union, he cannot bring a breach of contract suit under 301 against his employer. </s> In my view, the asserted distinction in a tripartite case such as this one between contractual and internal union remedies, ante, at 687, is immaterial. The situation presented in this case is well within the doctrine underlying Republic Steel Corp. v. Maddox, 379 U.S. 650 (1965), that employees must pursue all procedures established for determining whether a union will go forward with a grievance. Employees must pursue available procedures even if the collective-bargaining agreement contains time limits that appear on their face to bar revival of the grievance. As the Court noted in John Wiley & Sons v. Livingston, 376 U.S. 543, 556 -557 (1964), "[q]uestions concerning the procedural prerequisites to arbitration do not arise in a vacuum; they develop in the context of an actual dispute about the rights of the parties to the contract or those covered by it." Therefore, "it best accords with the usual purposes of an arbitration clause and with the policy behind federal labor law to regard procedural disagreements not as separate disputes but as aspects of the [451 U.S. 679, 698] dispute which called the grievance procedures into play." Id., at 559. Thus, the question whether such time limits should be waived in a particular case is itself an arbitrable matter. </s> [Footnote * Brief for the American Federation of Labor and Congress of Industrial Organizations as Amicus Curiae 3-4, 5-14. </s> JUSTICE REHNQUIST, with whom THE CHIEF JUSTICE, JUSTICE STEWART, and JUSTICE POWELL join, dissenting. </s> The Court of Appeals for the Ninth Circuit held that the defense of exhaustion of internal union remedies was available to the union defendant in this 301 action but not to the employer defendant. The result of this ruling was to put the employer in the unenviable position of having to defend the manner in which the union represented one of its employees (Clayton) during a grievance procedure. The Court's opinion today rights what I view as the principal error in the decision below by requiring the actions against the employer and union to proceed simultaneously. Ante, at 695. The Court reaches this conclusion by holding that in this particular case the exhaustion defense should not be available to either the union or employer. I, however, view differently than does the Court the benefits to be obtained from requiring exhaustion in these cases, and would require Clayton to exhaust his intraunion remedies before proceeding against either his union or employer. </s> The Court does not require exhaustion of internal union remedies in this case because it finds the remedies cannot provide Clayton with all the substantive relief he seeks (i. e., money damages and reinstatement) or with reactivation of his grievance. Ante, at 693. The Court, however, concedes that where the internal remedies can provide such relief, the exhaustion defense should be available to the employer and union alike. Ante, at 692, and n. 20. Presumably, this would require exhaustion in a 301 case where the only relief sought was money damages and money damages were obtainable through the internal union procedures. In such a case, the employee would be able to obtain all "the substantive relief he seeks." Ante, at 693. [451 U.S. 679, 699] </s> The Court creates a three-prong test for determining when a district court should exercise its discretion and require exhaustion of intraunion remedies. Ante, at 689. Admittedly, a district court when exercising this discretion should carefully consider the first criterion referred to by the Court - whether union officials are so hostile to the employee that he could not obtain a fair hearing on his claim. Ibid. However, there is no question that this criterion does not come into play in this case. Ibid. </s> The second prong of the Court's test is "whether the internal union appeals procedures would be inadequate either to reactivate the employee's grievance or to award him the full relief he seeks under 301 . . . ." Ibid. Exhaustion is not required in this case, the Court says, because the UAW's internal union appeals procedures cannot provide Clayton with reinstatement or reactivation of his grievance. </s> However, no prior case of this Court has held that exhaustion should not be required unless the internal union remedies can provide all the substantive relief requested or reactivation of the grievance. The principal difficulty with the Court's opinion lies in its framing of this second criterion which reflects much too narrow a view of the purposes of the exhaustion defense and the benefits which will likely result from requiring exhaustion in a case where a union has established a means for reviewing the manner in which it has represented an employee during a grievance. It is worth noting that neither NLRB v. Marine Workers, 391 U.S. 418 (1968), on which the Court so heavily relies, nor any other case of this Court, supports the language used by the Court in the second prong of its test. In fact, Marine Workers simply states exhaustion should not be required "when the administrative remedies are inadequate." Id., at 426, n. 8. Our focus therefore should be on the adequacies of the union remedies when viewed in the context of the underlying purpose of the exhaustion defense - which is to encourage private rather than judicial resolution of disputes. [451 U.S. 679, 700] </s> The exhaustion of intraunion remedies, even where those remedies cannot provide reinstatement or reactivation of a grievance, does promote private resolution of labor disputes. Resort to the intraunion appeals procedures provides the union with its first opportunity to focus on the issue of fair representation - as opposed to the alleged breach of the collective-bargaining agreement. Resort to the union appeals procedures gives the union an opportunity to satisfy the employee that its decision not to pursue a grievance was correct. If successful on this score, litigation is averted. Where a union determines through its appeals procedures that it mishandled an employee's grievance, litigation may also be averted because at that point both the union and the employer have a strong incentive to pursue private resolution of the grievance. Even where a collective-bargaining agreement does not provide for reactivation of a grievance, it is reasonable to assume that many employers, when confronted with both a determination by a union that it had breached its duty of fair representation and the immediate prospect of an employee commencing litigation, would seriously consider voluntarily reactivating the grievance procedure to avoid the additional burden and costs of litigation. Should litigation nonetheless occur, exhaustion may well have narrowed the factual and legal issues to be decided and thus result in a savings of judicial resources. A fact that should also not be discounted is that the conscientious handling by a union of an employee's intraunion appeal cannot help but enhance the union's prestige with its members. Cf. Republic Steel Corp. v. Maddox, 379 U.S. 650, 653 (1965). Exhaustion promotes union democracy and self-government as well as the broader policy of noninterference with internal union affairs. A union's incentive to maintain internal procedures which provide substantial procedural protection and which can afford significant substantive relief will be greatly undermined if an employee can simply bypass the procedures at will. </s> The error in the Court's analysis results in part from its [451 U.S. 679, 701] apparent belief that intraunion remedies must provide a complete substitute for either the courts or the contract grievance procedure in order to be deemed "adequate." The purpose of intraunion remedies, however, is quite different. These remedies are provided to facilitate or encourage the private resolution of disputes, not to be a complete substitute for the courts. Intraunion remedies can serve this purpose so long as they have the capacity to address whether the union wrongfully handled the grievance. Obviously, if a union appeals procedure cannot address this question, exhaustion should not be required. </s> An additional question which is also of great importance is whether a union should ever be found to have breached its duty of fair representation when a union member shuns an appeals procedure which is both mandated by the union constitution and established for the purpose of allowing the union to satisfy its duty of fair representation. It seems to me not at all unreasonable to say that a union should have the right to require its members to give it the first opportunity to correct its own mistakes. Responsible union self-government demands a fair opportunity to function. This is especially true in a situation such as here where exhaustion of the union remedies could eliminate the need to litigate altogether. Congress has recognized the importance of these values in 101 (a) (4) of the Labor-Management Reporting and Disclosure Act of 1959, 73 Stat. 522, 29 U.S.C. 411 (a) (4). This section provides in part: </s> "No labor organization shall limit the right of any member thereof to institute an action in any court, or any proceeding before any administrative agency . . . . Provided, That any such member may be required to exhaust reasonable hearing procedures (but not to exceed a four-month lapse of time) within such organization, before instituting legal or administrative proceedings against such organizations or any officer thereof . . . ." [451 U.S. 679, 702] </s> In 101 (a) (4), Congress has restricted the power of unions to limit the rights of their members to resort to the courts. At the same time, however, Congress gave the judiciary the discretion to require union members to exhaust hearing procedures. As this Court explained in Marine Workers, the language in 101 (a) (4) is </s> "a statement of policy that the public tribunals whose aid is invoked may in their discretion stay their hands for four months, while the aggrieved person seeks relief within the union. We read it, in other words, as installing in this labor field a regime comparable to that which prevails in other areas of law before the federal courts, which often stay their hands while a litigant seeks administrative relief before the appropriate agency." 391 U.S., at 426 . </s> Section 101 (a) (4) reflects what I believe to be the reasonable compromise Congress reached when trying to balance two somewhat competing interests - furtherance of the national labor policy in favor of private resolution of disputes on the one hand and the desire not to unduly burden or "exhaust" and individual employee with time-consuming procedures on the other. It is fair to say that 101 (a) (4) represents Congress' judgment that limiting access to the courts for at least four months is not an unreasonable price to pay in exchange for the previously mentioned benefits exhaustion may provide. </s> The language of 101 (a) (4) also goes a long way to satisfy the third prong of the test set forth by the Court today. Exhaustion of internal union procedures should not be required where such would unreasonably delay an employee's opportunity to obtain a judicial hearing on the merits of his claim. Ante, at 689. Intraunion procedures which take years to complete serve no worthwhile purpose in the overall scheme of promoting the prompt and private resolution of claims. But a requirement that an employee not be permitted [451 U.S. 679, 703] to go to court without first having pursued an intraunion appeal for at least four months does substantially further this national labor policy without placing any unfair burden on an employee. As such, I think all interested parties would be well served by a requirement that employees exhaust their intraunion procedures for this limited period of time prescribed by Congress. </s> [451 U.S. 679, 704]

United States Supreme Court LICHTER V. U. S.(1948) No. 105 Argued: Decided: June 14, 1948 </s> Rehearing Denied Oct. 11, 1948.[ Lichter v. U. S. 334 U.S. 742 (1948) ] </s> [334 U.S. 742, 744] Mr. Paul W. Steer, of Cincinnati, Ohio, for petitioners Lichter and others. Mr. Leo R. Friedman, of San Francisco, Cal., for petitioners Pownall and others. Mr. Edward C. Park, of Boston, Mass., for petitioner Alexander Wool Combing Co. Mr. Philip B. Perlman, Sol. Gen., of Washington, D.C., for respondent. [334 U.S. 742, 745] </s> Mr. Justice BURTON delivered the opinion of the Court. The Renegotiation Act,1 in time of crisis, presented to this nation a new legislative solution of a major phase [334 U.S. 742, 746] of the problem of national defense against world-wide aggression. Through its contribution to our production program it sought to enable us to take the leading part in winning World War II on an unprecedented scale of total global warfare without abandoning our traditional faith in and reliance upon private enterprise and individual initiative devoted to the public welfare. In each of the three cases before us the principal issue is the constitutionality, on its face, of the Renegotiation Act insofar as it is authority for the recovery of the excessive profits sought to be recovered by the United States from the respective petitioners. In each case the secondary issue is whether the failure of the respective petitioners to petition the Tax Court for a redetermination of the amount, if any, of their excessive profits excludes from consideration here the coverage of the Act, the amount of the profits and other comparable issues which could have been presented to the Tax Court. In each of these cases the District Court has held that the Act was constitutional and that, by failure to petition the Tax Court for their redetermination, the existing orders have become final as claimed by the Government. Each Circuit Court of Appeals has affirmed, unanimously, the judgment appealed to it. We agree with the courts below. In each of these cases the United States obtained a judgment for a sum alleged to be owed to it pursuant to a determination of excessive profits under the Renegotiation Act. The determinations of excessive profits in the respective cases were made by the Under Secretary of War or by the War Contracts Price Adjustment Broad after the Revenue Act of 1943 had been approved, February 25, 1944. That Act contained, in its Title VII, the so-called Second Renegotiation Act which included provisions for the filing with the Tax Court of petitions for the redeterminations of excess profits. None of these petitioners, however, filed such a petition with the Tax [334 U.S. 742, 747] Court. On the other hand, the respective petitioners have relied upon their claims that, as a matter of law, the Renegotiation Act is unconstitutional on its face insofar as it purports to authorize the judgments which have been taken against the respective petitioners. The petitioners contend also that their failures to file petitions with the Tax Court have not foreclosed their respective rights to contest here the coverage of the Act, the amount of the excess profits found against them and other comparable issues which they might have presented to the Tax Court. No. 105 (The Lichter Case). In May, 1945, the United States filed its complaint in the District Court of the United States for the Southern District of Ohio against the petitioners, Jacob Lichter and Jennie L. Lichter, engaged in the construction business in Cincinnati, Ohio, under the name of the Southern Fireproofing Company, a copartnership. The complaint was founded upon the determination by the Under Secretary of War, dated October 20, 1944, that $ 70,000 of the profits realized by petitioners during the calendar year 1942 from nine subcontracts, executed in 1942 for a total price of $710, 244.16, were, under the Renegotiation Act, excessive profits. The complaint showed that the petitioners were entitled to a tax credit of $42, 980.61 against such excessive profits. It alleged, moreover, that the petitioners had not, within the required period, petitioned the Tax Court for a redetermination of the order in question and had not paid or otherwise eliminated the amount of $27,019.39 thus due to the United States. The petitioners admitted that the Under Secretary had made the determination as alleged; that if his order were valid the petitioners were entitled to the tax credit specified; and that they had not paid the sum demane d nor had they filed a petition with the Tax Court for a rede- [334 U.S. 742, 748] termination of the excessive profits, if any. They put in issue, on specifically stated grounds, the constitutionality of the Renegotiation Act insofar as it might be authority for the recovery of the profits sought to be recovered, and they put in issue the applicability to them of any requirement that they seek in the Tax Court a redetermination of the profits which they had been ordered to repay to the United States. They alleged also that: of the nine subcontracts which were made the basis of renegotiation, all were executed during the calendar year 1942; four were executed before April 28, 1942, the date of the original Renegotiation Act; none contained clauses permitting or requiring their renegotiation; only two of them were for amounts in excess of $100,000 each; these two were among those which had been executed before April 28, 1942; and no excessive profits had been in fact earned by the petitioners during 1942. Finally they alleged that the several contracts referred to were subcontracts entered into under prime contracts which had been awarded by a department of the Government as the result of competitive bidding for the construction of buildings and facilities and the subcontracts themselves had been obtained by petitioners after further competitive bidding. For these and other reasons stated in the answer the contracts were claimed to be exempt from renegotiation. The United States moved for judgment on the pleadings and, in the alternative, for summary judgment. Affidavits were filed in support of those motions. These included particularly the comprehensive affidavits of Robert P. Patterson, then Under Secretary of War, and of H. Struve Hensel, then Assistant Secretary of the Navy. These affidavits set forth the general background of the Renegotiation Act and the basis for claiming that the renegotiation of war contracts was necessary in order to sustain this nation's share of the burden of winning World War II. Counterparts of these two affidavits were [334 U.S. 742, 749] filed in each of the other cases before us. The petitioners, on the other hand, moved to dismiss the complaint on the grounds that it failed to state a claim upon which relief could be granted and that the profits in question were exempt from the Act. The District Court made findings of fact substantially as stated in the complaint and admitted in the answer. It concluded that there was no genuine issue as to any material fact and that the United States was entitled to judgment as a matter of law for $27,019.39, with interest at six percent per annum from November 6, 1944. 68 F.Supp. 19. The Circuit Court of Appeals for the Sixth Circuit affirmed the judgment. It held expressly that the Renegotiation Act was valid on its face and that the petitioners by reason of their failure to petition the Tax Court for a redetermination of the amount of the excessive profits, if any, were barred from making their other attacks on the Secretary's determination of such excessive profits. 160 F.2d 329. Because of the basic significance of the constitutional questions involved we granted certiorari. 331 U.S. 802 . No. 74 (The Pownall Case). In September, 1945, the United States filed its complaint in the District Court of the United States for the Southern District of California against the petitioners, A. V. Pownall, Grace M. Pownall, and Henes-Morgan Machinery Company, Limited, a California corporation, all three doing business in Los Angeles, California, as copartners under the name of General Products Company. The record indicates that they were there engaged in the production of precision parts, machinery and tools for use by war contractors. The complaint was founded upon a determination made by the Under Secretary of War, on behalf of the War Contracts Price Adjustment Board, dated December 27, 1944, to the effect that $628,373.14 of [334 U.S. 742, 750] the profits realized by petitioners dui ng the calendar year 1943 on their contracts and subcontracts, subject to renegotiation pursuant to the Renegotiation Act, were excessive profits. The complaint showed that the petitioners were entitled to a tax credit of $514,663.95 against such profits. It alleged, moreover, that the petitioners had not, within the required period, petitioned the Tax Court for a redetermination of the order in question and had not paid the sum of $113,709.19 thus claimed by the United States. The petitioners admitted that the Under Secretary had made the determination as alleged; that the Board had adopted his order; that the appropriate tax credit was as alleged; that no petition for redetermination had been filed with the Tax Court; that the time for filing had expired; and that no payment of the amount claimed had been made. The petitioners alleged, however, that the Renegotiation Act was invalid on its face on numerous specifically stated constitutional grounds; that the Under Secretary's order was invalid in that it was based on undisclosed data and contained no findings; and that no single contract under consideration exceeded in amount the sum of $99,000. The United States moved for judgment on the pleadings and, in the alternative, for summary judgment. The petitioners did the same. Under the stipulations of the parties there were no disputed issues of fact and the only questions left for decision were those as to the constitutional validity of the Act and as to its interpretation if found to be valid. The District Court denied the motions of both parties. However, ruling on the merits of the cause thus before it, it found the facts to be substantially as alleged in the complaint and as stipulated. It held the Act to be valid on its face and held the unappealed determination of excessive profits to be final. It rendered judgment for the United States for $121,043.39, evidently repre- [334 U.S. 742, 751] senting $113,709.19, with interest at six percent per annum from March 13, 1945. 65 F.Supp. 147, and see findings of fact, conclusions of law and judgment of the court. The Circuit Court of Appeals for the Ninth Circuit affirmed the judgment. It followed its earlier decision in Spaulding v. Douglas Aircraft Co., 154 F.2d 419, in upholding the constitutionality of the Act and expressly holding that the petitioners, by not having petitioned the Tax Court for relief, had failed to exhaust their administrative remedies. Accordingly, it held that the District Court was without jurisdiction to consider the petitioners' contentions as to the coverage of the Act. 159 F.2d 73. We granted certiorari. 331 U.S. 802 . No. 95 (The Alexander Case). In August, 1945, the United States filed its complaint in the District Court of the United States for the District of Massachusetts against the petitioner, Alexander Wool Combing Company, a Massachusetts corporation doing business at Lowell, Massachusetts, and there engaged in the business of scouring wool and combing it into tops and noils for commissions paid to it by the owners of the wool. The complaint was founded upon two determinations by the Under Secretary of War, both dated September 6, 1944. One determined that $22,500 of the profits realized by the petitioner during its fiscal year ended June 30, 1942, and the other that $45,000 of the profits realized by the petitioner during its fiscal year ended June 30, 1943, under its contracts and subcontracts which were alleged to be subject to the provisions of the Renegotiation Act, were excessive. The complaint showed that the petitioner was entitled to a tax credit of $15,020.80 against such excessive profits for the fiscal year ended June 30, 1942, and of $36,596.42 against those for the fiscal year ended June 30, 1943. The complaint alleged, moreover, that the petitioner had not, within the [334 U.S. 742, 752] required periods, petitioned the Tax Court for a redetermination of either of the orders in question; that the respective periods for filing such petitions had expr ed; and that the petitioner had not paid, or otherwise eliminated, the amount of $15,882.78 thus due to the United States. The petitioner admitted the factual allegations of the complaint but denied that any amount was owing to the United States. It claimed that the determinations made by the Under Secretary were void because made without due process of law and were unenforcible as to the petitioner because, as applied to it, they were unconstitutional for several specifically stated reasons. The United States moved for judgment on the pleadings or, in the alternative, for summary judgment. In support of these motions the above- mentioned affidavits of Robert P. Patterson, Under Secretary of War, and of H. Struve Hensel, Assistant Secretary of the Navy, and several others were filed. Evidence both oral and in affidavit form was submitted in opposition. The District Court stated in its opinion, 66 F.Supp. 389, 391, that the petitioner 'had no direct contracts with any department or agency of the United States. It combed wool for different private companies. It knew that some of the wool it combed for the companies was destined for use in government contracts, but it was and is ignorant as to the destination of other wool.' That court, nevertheless, rendered judgment in favor of the United States, for $15,882.78, with interest at six percent per annum from September 6, 1944. It held that the war powers of Congress were sufficient to enable it to authorize the recapture of excessive profits such as these; that the standard of 'excessive profits' was sufficient to satisfy the constitutional limitations on the power of Congress to delegate authority; that any defects in the departmental proceedings were immaterial in view of the opportunity afforded the petitioner for a trial de novo and [334 U.S. 742, 753] for a redetermination of excessive profits, if any, in the Tax Court; and that petitioner's defenses on the ground of lack of coverage or of retroactivity of the application of the Renegotiation Act to the petitioner were lost to it by its failure to seek relief from the Tax Court. The Circuit Court of Appeals for the First Circuit said, per curiam: 'We think the court below adequately covered all the issues in this case and we affirm its judgment upon the grounds and for the reasons set forth in its opinion * * *.' 160 F.2d 103.2 We granted certiorari. 331 U.S. 802 . The Background. We have two main issues before us: (1) the constitutionality of the Renegotiation Act on its face and (2) the finality of the determination of the excessive profits made under it in the absence of a petition filed with the Tax Court within the required time, seeking a redetermination of those profits. In the Lichter case we have issues as to profits made in the calendar year 1942, in the Pownall case as to profits made in the calendar year 1943, and in the Alexander case as to certain profits made in the fiscal year ended June 30, 1942, and as to other profits made in the fiscal year ended June 30, 1943. In each case we uphold the constitutionality of the Act as providing the necessary authorization for the judgments rendered. We also accept the finality given by the courts below to the administrative determinations made of the excessive profits, although the statutory situ- [334 U.S. 742, 754] ation as a basis for the finality of such determinations is not precisely the same in each case. By reason of the finality thus attached to the determinationsm ade as to excessive profits in these cases, we do not pass upon the issues attempted to be raised here as to the coverage of the Act, the amount of the profits, or other matters which the petitioners might have presented to the Tax Court but did not. In procedure which affects property rights as directly and substantially as that authorized by the Renegotiation Act, the governmental action authorized, although resting on valid constitutional grounds, is capable of gross abuse. The very finality of the administrative determinations here upheld emphasizes the seriousness of the injustices which can result from the abuse of the large powers vested in the administrative officials. We do not minimize the seriousness of complaints which thus may be cut off without relief in the name of the necessities of war and for the sake of the defense of the nation when its survival is at stake. We re-emphasize that, under these conditions, there is great need both for adequate channels of procedural due process and for careful conformity to those channels. In total war it is necessary that a civilian make sacrifices of his property and profits with at least the same fortitude as that with which a drafted soldier makes his traditional sacrifices of comfort, security and life itself. Within procedure thus authorized by the Constitution, the Congress and the Administration, and here affirmed, resulting injustices can and should be carefully examined and as far as possible relieved. In war both the raising and the support of the armed forces are essential. Both require mobilization and control under the authority of Congress. Both are entitled also to such postwar relief as may be authorized by Congress. The Renegotiation Act was developed as a major wartime policy of Congress comparable to that of the Selective Training and Service Act, 50 U.S.C.A.Appendix, 301 et seq. The authority of Congress to authorize [334 U.S. 742, 755] each of them sprang from its war powers. Each was a part of a national policy adopted in time of crisis in the conduct of total global warfare by a nation dedicated to the preservation, practice and development of the maximum measure of individual freedom consistent with the unity of effort essential to success. With the advent of such warfare, mobilized property in the form of equipment and supplies became as essential as mobilized manpower. Mobilization of effort extended not only to the uniformed armed services but to the entire population. Both Acts were a form of mobilization. The language of the Constitution authorizing such measures is broad rather than restrictive. It says 'The Congress shall have Power * * * To raise and support Armies, but no Appropriation of Money to that Use shall be for a longer Term than two Years; * * *.' Art. I, 8, Cl. 12.3 This places emphasis upon the supporting as well [334 U.S. 742, 756] as upon the raising of armies. The power of Congress as to both is inescapably express, not merely implied. The conscription of manpower is a more vital interference with the life, liberty and property of the individual than is the conscription of his property or his profits or any substitute for such conscription of them. For his hazardous, full-time service in the armed forces a soldier is paid whatever the Government deems to be a fair but modest compensation. Comparatively speaking, the manufacturer of war goods undergoes no such hazard to his personal safety as does a front-line soldier and yet the Renegotiation Act gives him far better assurance of a reasonable return for his wartime services than the Selective Service Act and all its related legislation give to the men in the armed forces. The constitutionality of the conscription of manpower for military service is beyond question. The constitutional power of Congress to support the armed forces with equipment and supplies is no less clear and sweeping. 4 It is valid, a fortiori. [334 U.S. 742, 757] In view of this power 'To raise and support Armies, * * *' and the power granted in the same Article of the Constitution 'To make all Laws which shall [334 U.S. 742, 758] be necessary and proper for carrying into Execution the foregoing Powers , * * *' the only question remaining is whether the Renegotiation Act was a law 'necessary and proper for carrying into Execution' the war powers of Congress and especially its power to support armies. It is impossible here to picture adequately all that might have been 'necessary and proper' in 1942-1944 to meet the unprecedented responsibility facing Congress in this field. We do, however, catch a glimpse of it in authoritative, contemporaneous descriptions of the situation. Accordingly, we have set forth in the margin excerpts from the message of the President to the Congress upon the State of the Union, January 6, 1942,5 from a [334 U.S. 742, 759] report of the Special Committee of the Senate Investigating the National Defense Program under the chairman- [334 U.S. 742, 760] ship of Senator Harry S. Truman, of Missouri, March 30, 1943, 6 and from the affidavit of Robert P. Patterson, Un- [334 U.S. 742, 761] </s> [334 U.S. 742, 762] </s> der Secretary of War, dated August 3, 1945,7 in the form filed in each of the three cases before us. [334 U.S. 742, 763] The above-mentioned excerpts describe a demand for production of war supplies in proportions previously un- [334 U.S. 742, 764] imagined. They call for production in a volume never before approximated and at an undreamed of speed. [334 U.S. 742, 765] The results amply demonstrated the infinite value of that production in winning the war. It proved to be a sine qua non condition of the survival of the nation. Not only was it 'necessary and proper' for Congress to provide for such production in the successful conduct of the war, but it was well within the outer limits of the constitutional discretion of Congress and the President to do so under the terms of the Renegotiation Act. Accordingly, the question before us as to the constitutionality of the Renegotiation Act is not that of the power of the government to renegotiate and recapture war profits. The only questions are whether the particular method of renegotiation and the administrative procedure prescribed conformed to the constitutional limitations under which Congress was permitted to exercise its basic powers. Our first question relates to the method of adjusting net compensation for war services through the compulsory 'renegotiation' of profits under existing contracts between private parties, including recourse to unilateral orders for payments into the Treasury of the United States of such portions of those profits as were determined by the administrative officials of that Government to be 'excessive profits.' There were added the limitations that the contracts were for war goods in time of war, the ultimate payment for which was, in any event, to come from the Government and that, at the time of this impingement of the Renegotiation Act upon them, the contracts must not have been completed to the extent that final payments had been made on them. One approach to the question of the constitutional power of Congress over the profits on these contracts is to recognize that Congress, in time of war, unquestionably has the fundamental power, previously discussed, to conscript men and to requisition the properties necessary and proper to enabl it to raise and support its Armies. Congress furthermore has a primary obligation to bring [334 U.S. 742, 766] about whatever production of war equipment and supplies shall be necessary to win a war. Given this mission, Congress then had to choose between possible alternatives for its performance. In the light of the compelling necessity for the immediate production of vast quantities of war goods, the first alternative, all too clearly evident to the world, was that which Congress did not choose, namely, that of mobilizing the productive capacity of the nation into a governmental unit on the totalitarian model. This would have meant the conscription of property and of workmen. It would have meant the raising of supplies for the Armies in much the same manner as that in which Congress raised the manpower for such Armies. Already the nation had some units of production of military supplies in the form of arsenals, navy yards, and in the increasing number of governmentally owned, if not operated, war material plants. The production of the atomic bombs was one example of a war industry owned and operated exclusively by the Government. Faced with this ironical alternative of converting the nation in effect into a totalitarian state in order to preserve itself from totalitarian domination, that alternative was steadfastly rejected. The plan for Renegotiation of Profits which was chosen in its place by Congress appears in its true light as the very symbol of a free people united in reaching unequalled productive capacity and yet retaining the maximum of individual freedom consistent with a general mobilization of effort. Somewhat crude in its initial statutory simplicity, the Renegotiation Act developed rapidly as the demand for war production increased beyond precedent. First approved April 28, 1942, less than five months after our declaration of war, the Act was adjusted and strengthened in its effectiveness and fairness by the numerous amendments made to it. 8 The nation previously had expe- [334 U.S. 742, 767] rienced different, but fundamentally comparable, federal regulation of civilian liberty and property in proportion to the increasing demands of modern warfare. 9 </s> The demands for war equipment and supplies were so great in volume, were for such new types of products, were subject to so many changes in specifications and were subject to such pressing demands for delivery that accurate advance estimates of cost were out of the question. Laying aside as undesirable the complete governmental ownership and operation of the production of war goods of all kinds, many alternative solutions were attempted. Often these called for capital expenditures by the Gov- [334 U.S. 742, 768] ernment in building new plant facilities. Adhering, however, to the policy of private operation of these facilities Congress and the Administration sought to promote a policy of wide distribution of prime contracts and subcontracts, even to comparatively high cost marginal producers of unfamiliar products. Congress sought to do everything possible to retain and encourage individual intiative in the world-wide race for the largest and quickest production of the best equipment and supplies. It clung to its faith in private enterprise. The problem was to find a fair means of compensation for the services rendered and the goods purchased. Contracts were awarded by negotiation wherever competitive bidding no longer was practicable. Contracts were let at cost-plus-a-fixed fee. Escalator clauses were insterted. Price ceilings were established. A flat percentage limit on the profits in certain lines of production was tried. Excess profits taxes were imposed. Appeals were made for voluntary refunds of excessive profits. However, experience with these alternatives convinced the Government that contracts at fixed initial prices still provided the best incentive to production. 10 </s> [334 U.S. 742, 769] On February 16, 1942, this Court in United States v. Bethlehem Steel Corp., 315 U.S. 289 , pointed to the possibility of legislative relief. It said, 315 U.S. page 309. 'The problem of war profits is not new. In this country, every war we have engaged in has provided opportunities for profiteering and they have been too often scandalously seized. See Hearings before the House Committee on Military Affairs on H.R. 3 n d H.R. 5293, 74th Cong., 1st Sess., 590-598. To meet this recurrent evil, Congress has at times taken various measures. It has authorized price fixing. It has placed a fixed limit on profits, or has recaptured high profits through taxation. It has expressly reserved for the government the right to cancel contracts after they have been made. Pursuant to Congressional authority, the government has requisitioned existing production facilities or itself built and operated new ones to provide needed war materials. It may be that one or some or all of these measures should be utilized more comprehensively, or that still other measures must be devised. But if the Executive is in need of additional laws by which to protect the nation against war profiteering, the Constitution has given to Congress, not to this Court, the power to make them.' </s> Finally the compulsory renegotiation of contracts was authorized. The procedure outlined in the Original Renegotiation Act, April 28, 1942, was rapidly perfected. As it developed it required advance consents to such renegotiation to be written into the respective contracts [334 U.S. 742, 770] and subcontracts for war goods prior to their award and finally it made express provision for a redetermination of the excessive profits, in a proceeding de novo before the Tax Court, wherever a war goods contractor or subcontractor was aggrieved by the administrative order. Throughout these developments extended congressional and public consideration was given to the issues presented. 11 </s> The plan proved itself readily adaptable to the needs of the time. It called for initial contract estimates based upon the best available information at the time of enter- [334 U.S. 742, 771] ing into the contracts. Production proceeded at once on the basis of those estimates. Many factors were incapable of exact advance determination. The final net compensation, however, resulted from a renegotiation made after both parties had had the benefit of actual experience under the contract. This determination of the allowable profit was guided by many relevant factors. A list of commonly relevant factors was presented in an early administrative directive. Later such a list was enacted into the statute. Each administrative determination was made subject to a redetermination in a proceeding de novo in the Tax Court provided a timely petition for it was filed by the aggrieved contractor or subcontractor. The Act always has been limited in duration to a period during and shortly following the war. In most instances the Act has resulted in a disposition of cases [334 U.S. 742, 772] by agreements reached between the parties. 12 The controversies which have survived to this day are, in large measure, not those dealing with the constitutionality of the general effect of the plan or even with the finality of redetermination under the prescribed administrative procedure, but are those arising out of an alleged abuse of discretion in its administration. The Renegotiation Act. While there have been six legislative steps13 in the development of the Renegotiation Act, the portions of it that are especially material here consist of certain [334 U.S. 742, 773] language in the so-called Original Renegotiation Act contained in 403 of the Sixth Supplemental Defense Appropriations Act, approved April 28, 1942; 14 in the amendments made by the Revenue Act of 1942, October 21, 1942;15 and its further amendment and substantial expansion by 701(b) of the Revenue Act of 1943, February 25, 1944.16 In that form it is sometimes called the Second Renegotiation Act, but the entire 403, both in its original and amended forms may be properly cited as the 'Reneo tiation Act.' 17 In the proceedings leading up to the enactment of the Original Renogiation Act, an alternative in the form of a rigid limitation of profits was rejected in favor of the more flexible definition embodied in the term 'excessive profits.'18 The War Department Directive of August 10, 1942, entitled 'Principles, Policy and Procedure to be Followed in Renegotiation' promptly stated the factors to be stressed in determining excessive profits. This directive was introduced in the hearings held by the Finance Committee of the Senate in September19 and thus was before the Senate at the time of the passage of the above-mentioned Reve- [334 U.S. 742, 774] nue Act of 1942, October 21, 1942, which made important amendments in the Renegotiation Act. The 'Joint Statement by the War, Navy, and Treasury Departments and the Maritime Commission-Purposes, Principles, Policies, and Interpretations' dealing with the Renegotiation Act was issued March 31, 1943. This was considered at the Hearings before the House Committee on Naval Affairs, 78th Cong., 1st Sess., Vol. 2, pp. 469, et seq., 1025-1039, especially 1028-1029 (1943). Finally the above-mentioned Revenue Act of 1943, 58 Stat. 21, on February 25, 1944, largely incorporated these views in 403(a)(4)(A),20 thus indicating congressional approval of this administrative practice and further assuring continuity of it during the balance of the life of the Act. Delegation of Authority Under the Renegotiation Act. The petitioners contend that the Renegotiation Act unconstitutionally attempted to delegate legislative power to administrative officials. The United States does not contest the right of the courts to decide the issues as to the validity of the Act on its face in the present cases, each of which was instituted after the petitioners' respective rights to a Tax Court redetermination had been forfeited. We find no reason for not reaching here the constitutionality of the Act. Cf. Aircraft & Diesel Corp. v. Hirsch, 331 U.S. 752 ; Wade v. Stimson, 331 U.S. 793 ; Macauley v. Waterman S.S. Corp ., 327 U.S. 540 ; Yakus v. United States, 321 U.S. 414 . The constitutional argument is based upon the claim that the delegation of authority contained in the Act carried with it too slight a definition of legislative policy and standards. Accordingly, it is contended that the resulting determination of excessive profits which were [334 U.S. 742, 775] claimed by the United States amounted to an unconstitutional exercise of legislative power by an administrative official instead of a mere exercise of administrative discretion under valid legislative authority. We hold that the authorization was constitutional. Certainly as spelled out in 403(a)(4)(A)21 of the Second Renegotiated Act with respect to fiscal years ending after June 30, 1943, there can be no objection on this ground. This question, therefore, relates to the delegation of at hority as made by the Act before the effective date of the Second Renegotiation Act. The argument on this question is limited to the Lichter and Alexander cases, inasmuch as the excessive profits determined to exist in the Pownall case were so found by the War contracts Price Adjustment Board under the Second Renegotiation Act. The Original Renegotiation Act,22 approved April 28, 1942, provided in 403(b), (c), (d) and (e) for the renegotiation of all contracts and subcontracts thereafter made and also of all contracts and subcontracts theretofore made by the War Department, the Navy Department or the Maritime Commission, whether or not such contracts or subcontracts contained a renegotiation or recapture clause, provided the final payment pursuant thereto had not been made prior to April 28, 1942. The renegotiation was to be done by the Secretary of the Department concerned. For this purpose the Chairman of the Maritime Commission was included in the term 'Secretary.' The services of the Bureau of Internal Revenue were made available upon the request of each Secretary, subject to the consent of the Secretary of the Treasury, for the purposes of making examinations and determinations with [334 U.S. 742, 776] respect to profits under the Section. The Secretary of each Department was authorized and directed whenever in his opinion excessive profits had been realized or were likely to re realized from any contract with such Department or from any subcontract thereunder, to require the contractor or subcontractor to renegotiate the contract price. In case any amount of the contract price was found as a result of such renegotiation to represent 'excessive profits' which had been paid to the contractor or subcontractor, the Secretary was authorized to recover them. There was no express definition of the term 'excessive profits' in the Original Renegotiation Act. However, in its 403(b),23 there was relevant statement in connection with the renegotiation clauses required to be inserted in future contracts and subcontracts for an amount in excess of $100,000 each. The Secretary was required to insert in such contracts, thereafter made by his Department, 'a provision for the renegotiation of the contract price at a period or periods when, in the judgment of the Secretary, the profits can be determined with reasonable certainty; * * *.' Contractors were also to be required to insert a like provision in their subcontracts. This statement indicated a relationship between current 'excessive profits' and those which later might be determined with 'reasonable certainty.' Also, in 403(d)24 it was provided that, in renegotiating a contract price or determining excessive profits, the Secretaries of the respective Departments should not make allowances 'for any salaries, bonuses, or other compensation paid by a contractor to its officers or employees in excess of a reasonable amount, * * *.' nor 'for any excessive reserves set up by the contractor or for any costs [334 U.S. 742, 777] incurred by the contractor which are excessive and unreasonable.' The amendments made to this Section by the Revenue Act of 1942,25 approved October 21, 1942, were made effective as of April 28, 1942. At the time they were approved, Congress had knowledge of the War Department Directive of August 10, 1942,26 which had been put into effect stressing certain factors which the Secretary emphasized in determining excessive profits. While Congress then made several amendments to 403, those amendments did not alter the effect of such directive in this particular. Among the amendments that were then added there was the following purported definition of 'excessive profits': 'The term 'excessive profits' means any amount of a contract or subcontract price which is found as a result of renegotiation to represent excessive profits.' In the light of the exit ing administrative practices this at least expressed a congressional satisfaction with the existing specificity of the Act. The amendment made to 403(c)(3)27 required the recognition of exclusions and deductions of the character afforded by certain provisions of the Internal Revenue Code. The amendment to 403(c)(5)28 provided also that the Secretaries, by joint regulation, might prescribe the form and detail in which certain data might be filed by contractors and subcontractors bearing upon their profits under their contracts. This material concerned 'statements of actual costs of production' and 'other financial statements for [334 U.S. 742, 778] any prior fiscal year or years.' Under some circumstances, in the absence of a notice from the Secretary and in the absence of the commencement of renegotiations, it was provided that 'the contractor or subcontractor shall not thereafter be required to renegotiate to eliminate excessive profits realized from any such contract or subcontract during such fiscal year or years and any liabilities of the contractor or subcontractor for excessive profits realized during such period shall be thereby discharged.' A new subsection (i)29 was added containing new exceptions and exemptions from the Act. The 'Joint Statement by the War, Navy, and Treasury Department and the Maritime Commission-Purposes, Principles, Policies, and Interpretations' issued March 31, 1943,30 similarly contributed definiteness to the current administrative practice. It is in the light of these statutory provisions and administrative practices that we must determine whether the Renegotiation Act made an unconstitutional delegation of legislative power. On the basis of (a) the nature of the particular constitutional powers being employed, (b) the current administrative practices later incorporated into the Act and (c) the adequacy of the statutory term 'excessive profits' as used in this context, we hold that the authority granted was a lawful delegation of administrative authority and not an unconstitutional delegation of legislative power. A constitutional power implies a power of delegation of authority under it sufficient to effect its purposes.-This power is especially significant in connection [334 U.S. 742, 779] with constitutional war powers under which the exercise of broad discretion as to methods to be employed may be essential to an effective use of its war powers by Congress. The degree to which Congress must specify its policies and standards in order that the administrative authority granted may not be an unconstitutional delegation of its own legislative power is not capable of precise definition. In peace or in war it is essential that the Constitution be scrupulously obeyed,31 and particularly that the respective branches of the Government keep within the powers assigned to each by the Constitution. On the other hand, it is of the highest importance that the fundamental purposes of the Constitution be kept in mind and given effect in order that, through the Constitution, the people of the United States may in time of war as in peace bring to the support of those purposes the full force of their [334 U.S. 742, 780] united action. In time of crisis nothing could be more tragic and less expressive of the intent of the people than so to construe their Constitution that by its own terms it would substantially hinder rather than help them ind efending their national safety. In an address by Honorable Charles E. Hughes, of New York, on 'War Powers Under The Constitution,' September 5, 1917, 42 A.B.A.Rep. 232, 238- 239, 247-248, he said: 'The power to wage war is the power to wage war successfully. The framers of the constitution were under no illusions as to war. They had emerged from a long struggle which had taught them the weakness of a mere confederation, and they had no hope that they could hold what they had won save as they established a Union which could fight with the strength of one people under one government entrusted with the common defence. In equipping the National Government with the needed authority in war, they tolerated no limitations inconsistent with that object, as they realized that the very existence of the Nation might be at stake and that every resource of the people must be at command. * * * </s> 'The extraordinary circumstances of war may bring particular business ( es) and enterprises clearly into the category of those which are affected with a public interest and which demand immediate and thorough-going public regulation. The production and distribution of foodstuffs, articles of prime necessity, those which have direct relation to military efficiency, those which are absolutely required for the support of the people during the stress of conflict, are plainly of this sort. Reasonable regulations to safeguard the resources upon which we depend for military success must be regarded as being within the powers con- [334 U.S. 742, 781] fided to Congress to enable it to prosecute a successful war. </s> 'In the words of the Supreme Court: 'It is also settled beyond dispute that the Constitution is not self-destructive. In other words, that the power which it confers on the one hand it does not immediately take away on the other. * * *'32 This was said in relation to the taxing power. Having been granted in express terms, the Court held it had not been taken away by the due process clause of the Fifth Amendment. As the Supreme Court put it in another case: 'the Constitution does not conflict with itself by conferring upon the one hand a taxing power and taking the same power away on the other by the limitations of the due process clause." 33 </s> 'Similarly, it may be said that the power has been expres ly given to Congress to prosecute war, and to pass all laws which shall be necessary and proper for carrying that power into execution. That power explicitly conferred and absolutely essential to the safety of the Nation is not destroyed or impaired by any later provision of the constitution or by any one of the amendments. These may all be construed so as to avoid making the constitution self-destructive, so as to preserve the rights of the citizen from unwarrantable attack, while assuring beyond all hazard the common defence and the perpetuity of our liberties. These rest upon the preservation of the nation. </s> 'It has been said that the constitution marches. That is, there are constantly new applications of unchanged powers, and it is ascertained that in novel and complex situations, the old grants contain, in [334 U.S. 742, 782] their general words and true significance, needed and adequate authority. So, also, we have a fighting constitution. We cannot at this time fail to appreciate the wisdom of the fathers, as under this charter, one hundred and thirty years old-the constitution of Washington-the people of the United States fight with the power of unity,-as we fight for the freedom of our children and that hereafter the sword of autocrats may never threaten the world.' </s> The war powers of Congress and the President are only those which are to be derived from the Constitution but, in the light of the language just quoted, the primary implication of a war power is that it shall be an effective power to wage the war successfully. Thus, while the constitutional structure and controls of our Government are our guides equally in war and in peace, they must be read with the realistic purposes of the entire instrument fully in mind. 34 </s> In 1942, in the early stages of total global warfare, the exercise of a war power such as the power 'To raise and support Armies, * * *' and 'To provide and maintain a Navy; * * *,' called for the production by us of war goods in unprecedented volume with the utmost speed, combined with flexibility of control over the product and with a high degree of initiative on the part of the producers. Faced with the need to exercise that power, the question was whether it was beyond the constitutional power of Congress to delegate to the high officials named therein the discretion contained in the Original Renegotiation Act of April 28, 1942, and the amendments of October [334 U.S. 742, 783] 21, 1942. We believe that the administrative authority there granted was well within the constitutional war powers then being put to their predestined uses. (b) The administrative practices developed under the Renegotiation Act demonstrated the definitive adequacy of the term 'excessive profits' as used in the Act.-The administrative practices currently developed under the Act in interpreting the term 'excessive profits' appear to have come well within the scope of the congressional policy. We have referred above to the War Department Directive of August 10, 1942,35 and to the Joint Departmental Statement of March 31, 1943,36 both of which were placed before appropriate Congressional Committees. These clearly stated practices are evidence of a current correct understanding of the congressional intent. This appears from the fact that the congressional action of October 21, 1942, made effective as of April 28, 1942, was taken in the light of the above-mentioned directive and without restricting its effect. Furthermore, the congressional action taken February 25, 1944, and made effective for the fiscal years ending after June 30, 1943, substantially incorporated into the statute the administrative practice shown in the Joint Departmental Statement of March 31, 1943. It thus became an express congressional definition of the factors appropriate for consideration in determining excessive profits, whereas before it was an administrative interpretation of 'excessive profits' to the same effect. (c) The statutory term 'excessive profits,' in its context, was a sufficient expression of legislative policy and standards to render it constitutional.-The fact that this term later was further defined both by administrative action and by statutory amendment indicates the prob- [334 U.S. 742, 784] able desirability of such added definition, but it does not demonstrate that such further definition was a constitutional necessity essential to the validity of the original exercise by Congress of its war powers in initiating a new solution of an unprecedented problem. The fact that the congressional definition confirmed the administrative practice which already was in effect under the original statutory language tends to show that a statutory definition was not necessary in order to give effect to the congressional intent. In 1942 the imposition of excess profits taxes was a procedure already familiar to Congress, both as an emergency procedure to raise funds for extraordinary wartime expenditures, and as one to meet the needs of peace. The recapture of excess income as applied by Congress to the railroads had been upheld by this Court in 1924. Dayton-Goose Creek R. Co. v. United States, 263 U.S. 456, 33 A.L.R. 472. The opinions of this Court in Yakus v. United States, 321 U.S. 414 , 64 S. Ct. 660; Schechter Poultry Corp. v. United States, 295 U.S. 495, 529 -542, 842, 848, 97 A.L.R. 947; and Panama Refining Co. v. Ryan, 293 U.S. 388, 413 -433, 245, 253, are not in conflict with our present position. The policy and purpose of Congress in choosing the renegotiation of profits as an alternative to cost-plus contracts, to flat percentage limitations of profits, and to 100% excess profits taxes was an attempt to determine a fair return on war contracts, under conditions where actual experience alone could disclose what was fair and when the primary national need was for the immediate production of unprecedented quantities of new products. The action of Congress was an expression of its well- considered judgment as to the degree of administrative authority which it was necessary to grant in order to effectuate its policy. This action of Congress came within the scope of its discretion as described by Chief Justice Hughes in Panama Refining Co. v. Ryan, supra, 293 U.S. at page 421, 55 S.Ct. at page 248: [334 U.S. 742, 785] 'Undoubtedly legislation must often be adapted to complex conditions involving a host of details with which the national Legislature cannot deal directly. The Constitution has never been regarded as denying to the Congress the necessary resources of flexibility and practicality, which will enable it to perform its function in laying down policies and establishing standards, while leaving to selected instrumentalities the making of subordinate rules within prescribed limits and the determination of facts to which the policy as declared by the Legislature is to apply. Without capacity to give authorizations of that sort we should have the anomaly of a legislative power which in many circumstances calling for its exertion would be but a futility.' It is not necessary that Congress supply administrative officials with a specific formula for their guidance in a field where flexibility and the adaptation of the congressional policy to infinitely variable conditions constitute the essence of the program. 'If Congress shall lay down by legislative act an intelligible principle * * * such legislative action is not a forbidden delegation of legislative power.' Hampton Co. v. United States, 276 U.S. 394, 409 , 352.S tandards prescribed by Congress are to be read in the light of the conditions to which they are to be applied. 'They derive much meaningful content from the purpose of the Act, its factual background and the statutory context in which they appear.' American Power & Light Co. v. S.E. C., 329 U.S. 90, 104 , 141. The purpose of the Renegotiation Act and its factual background establish a sufficient meaning for 'excessive profits' as those words are used in practice. 37 The word 'excessive' appears twice in the [334 U.S. 742, 786] Eighth Amendment to the Constitution: 'Excessive bail shall not be required, nor excessive fines imposed, * * *.' In the Original Renegotiation Act, 403(d),38 there were expressly disallowed to the contractor in determining his profits 'compensation paid by a contractor to its officers or employees in excess of a reasonable amount, * * *' and 'any costs incurred by the contractor which are excessive and unreasonable.' 'Excessive profits are those in excess of reasonable profits.' Spaulding v. Douglas Aircraft Co., 9 Cir., 154 F.2d 419, 423. The following, somewhat comparable, legislative specifications are among those which have been held to state a sufficiently definite standard for administrative action: 'Just and reasonable' rates for sales of natural gas, Federal Power Comm'n v. Hope Gas Co., 320 U.S. 591 , 600, 601, 286, 287; 'public interest, convenience, or necessity' in establishing rules and regulations under the Federal Communications Act, 47 U.S.C.A. 151 et seq., National Broadcasting Co. v. United States, 319 U.S. 190 , 225, 226, 1013, 1014; prices yielding a 'fair return' or the 'fair value' of property, Sunshine Coal Co. v. Adkins, 310 U.S. 381 , 397, 398, 914; 'unfair methods of competition' distinct from offenses defined under the common law, Federal Trade Comm'n v. Keppel & Bro., 291 U.S. 304, 311 , 312, 314, 425, 426, 427; 'just and reasonable' rates for the services of commission men, Tagg Bros. & Morehead v. United States, 280 U.S. 420, 431 , 221; and 'fair and reasonable' rent for premises, with final determination in the courts, Levy Leasing Co. v. Siegel, 258 U.S. 242, 243 , 248, 250, 290, 291, 292. </s> 3. Methods Prescribed and Limitations Imposed on the Administration. The methods prescribed and the limitations imposed by Congress upon the contemplated administrative action [334 U.S. 742, 787] are helpful. The Act is confined to the duration of the war or to a short time thereafter. Renegotiation, from the beginning, has been confined to the elimination of excessive profits from contracts and subcontracts with certain governmental departments directly related to the conduct of the war. By subsequent amendments the scope of the Act was limited by further express exceptions and exemptions. The administrative officials to whom authority was granted were clearly specified and were all officials of high governmental responsibility. Each was required to act whenever he found excessive profits existed under the conditions defined. The provisions for a redetermination of excess profits by the Tex Court de novo are discussed later. They likewise imposed important limitations on the allowable recoveries. Accordingly, we hold that the delegation of authority here in issue, under the Renegotiation Act in its several forms, was a constitutional definition of administrative authority and not an unconstitutional delegation of legislative power. The Renegotiation of War Contracts Was Not a Taking of Private Property for Public Use. The recovery by the Government of excessive proi ts received or receivable upon war contracts is in the nature of the regulation of maximum prices under war contracts or the collection of excess profits taxes, rather than the requisitioning or condemnation of private property for public use. One of the primary purposes of the renegotiation plan for redetermining the allowable profit on contracts for the production of war goods by private persons was the avoidance of requisitioning or condemnation proceedings leading to governmental ownership and operation of the plants producing war materials. A refund to the Government of excessive earnings of railroad carriers under the recapture provisions of 15a of the [334 U.S. 742, 788] Transportation Act of 1920, 41 Stat. 488, 49 U.S.C.A. 15a, has been sustained by this Court. Dayton-Goose Creek R. Co. v. United States, 263 U.S. 456, 33 A.L.R. 472. The collection of renegotiated excessive profits on a war subcontract also is not in the nature of a penalty and is not a deprivation of a subcontractor of his property without due process of law in violation of the Fifth Amendment. The Renegotiation Act, Including Its Amendments, Has Been Properly Applied To Contracts Entered Into Before Its and Their Respective Enactments. The excessive profits claimed by the Government in these cases arose out of contracts between the respective petitioners and other private parties. None arose out of contracts made directly with the Government itself. All the contracts, however, related to subject matter within the meaning of the Renegotiation Act in its respective stages. The contracts all were of the type which came to be known, under the Act, as subcontracts. All, except four in the Lichter case, were entered into after the enactment of the Original Renegotiation Act, April 28, 1942, and on those four, the final payment had not been made by that date. We therefore do not have before us an issue as to the recovery of excessive profits on any contract made directly with the Government nor on any subcontract upon which final payment had been made before April 28, 1942, although relating to war goods made or services performed after the declaration of war, December 8, 1941. Congress limited the Renegotiation Act to future contracts and to contracts already existing but pursuant to which final payments had not been made prior to the date of enactment of the original Act. These included contracts made directly with the Government and also subcontracts such as those here involved. [334 U.S. 742, 789] We uphold the right of the Government to recover excessive profits on each of the contracts before us. This right exists as to such excessive profits whether they arose from contracts made before or after the passage of the Act. A contract is equally a war contract in either event and, if uncompleted to the extent that the final payment has not yet been made, the recovery of excessive profits derived from it may be authorized as has been done here. While the Original Renegotiation Act may not have expressly defined some of the contracts before us as subcontracts, the Act of October 21, 1942, in its amendments effective as of April 28, 1942, did so. Accordingly, the contracts entered into between private parties in the Alexander case between April 28, 1942, and October 21, 1942, come within the scope of the Renegotiation Act. The Tax Court Remedy. Before the amendments incorporated in it on February 25, 1944, by the Revenue Act of 1943 (the so-called Second Renegotiation Act) the Original Renegotiation Act, as theretofore amended, did not provide expressly for a review or redetermination of the initial determination of the excess profits authorized to be made by the respective Secretaries. The 1944 amendments added not merely an express statement of factors to be taken into consideration in determining excessive profits ( 403(a)(4)(A),39 but also created a War Contracts Price Adjustment Board ( 403(d)(1)40 to make such determinations in the future. Also, it providd expressly for petitions to be filed with the Tax Court to secure redeterminations of the orders of such Board. 403(e)(1).41 It expressly [334 U.S. 742, 790] stated that 'A proceeding before the Tax Court to finally determine the amount, if any, of excessive profits shall not be treated as a proceeding to review the determination of the Board, but shall be treated as a proceeding de novo.' 403(e)(1). It provided also that 'In the absence of the filing of a petition with The Tax Court of the United States under the provisions of and within the time limit prescribed in subsection (e)(1), such order (of the Board) shall be final and conclusive and shall not be subject to review or redetermination by any court or other agency.' 403( c)(1).42 All of the determinations in the case before us were made after February 25, 1944, and those in the Pownall case were made on behalf of the Board. The above procedure under 403(e)(1) accordingly was open to the petitioners in the Pownall case but they did not file a petition with the Tax Court. In addition to the above procedures affecting future determinations of excessive profits to be made by the Board, the Second Renegotiation Act also made express provisions, in 403(e)(2),43 for a redetermination by the Tax Court of excessive profits determined to exist by the respective Secretaries. These provisions applied first to any determinations made by a Secretary prior to February 25, 1944, with respect to a fiscal year ending before July 1, 1943. In those instances a petition for redetermination by the Tax Court was permitted to be filed within 90 days after February 25, 1944. We have no such case before us. These provisions applied also to any determination made by a Secretary after February 25, 1944, with respect to a fiscal year ending before July 1, 1943. In that event, a petition for redetermination by the Tax Court was permitted to be filed within 90 days after the date of the [334 U.S. 742, 791] redetermination. We have such situations in the Lichter and Alexander cases. No petitions were filed with the Tax Court in any of the cases before us, and the time for doing so has expired. Accordingly, here, as in Aircraft & Diesel Corp. v. Hirsch, 331 U.S. 752, 771 , 1502, we do not have before us, and we do not express an opinion upon, the finality which would have attached to a redetermination by the Tax Court if such a redetermination had been sought and made. We have only the situations presented by the respective failures of the petitioners to resort to the Tax Court in the face of the express statutory provisions made for such administrative relief. As to the effect of the statute and of the course of action taken, we hold that the statute did afford procedural due process to the respective petitioners but that none of them made use of the procedure so provided for them. Consistent with the primary need for speed and definiteness in these matters, the original administrative determinations by the respective Secretaries or by the Board were intended primarily as renegotiations in the course of which the interested parties were to have an opportunity to reach an agreement with the Government or in connection with which the Government, in the absence of such an agreement, might announce its unilateral determination of the amount of excessive profit claimed by the United States. This initial proceeding was not required to be a formal proceeding producing a record for review by some other authority. In lieu of such a procedure for review, the Second Renegotiation Act provided an adequate opportunity for a redetermination of the excessive profits, if any, de novo by the Tax Court. 'The demands of due process do not require a hearing, at the initial stage or at any particular point or at more than one point in an administrative proceeding so log as the requi- [334 U.S. 742, 792] site hearing is held before the final order becomes effective.' Opp Cotton Mills v. Administrator, 312 U.S. 126 , 152, 153, 535, 536. We uphold the decisions below and the contentions of the Government to the effect that the statutory provision thus made for a petition to the Tax Court was not, in any case before us, an optional or alternative procedure. It provided the one and only procedure to secure a redetermination of the excessive profits which had been determined to exist by the orders of the respective Secretaries or of the Board in the cases before us. Failure of the respective petitioners to exhaust that procedure has left them with no right to present here issues such as those as to coverage and the amount of profits which might have been presented there. Accordingly, there is excluded from our consideration in this proceeding the contention in the Lichter case that the petitioners' subcontracts were exempt from renegotiation on the ground that they were subcontracts under prime contracts with a Department of the Government and had been awarded to them as the result of competitive bidding for the construction of buildings and facilities. There is excluded also, for example, the contention in the Pownall case that petitioners' contracts which were for amounts under $100,000 each were not subject to renegotiation. Likewise, in the Alexander case, there is excluded the petitioner's contention that it had not made excessive profits within the meaning of the statute and that its contracts for processing wool were not 'subcontracts' within the meaning of the Original Renegotiation Act. For these reasons, we uphold the constitutionality of the Renegotiation Act on its face as authority for the recovery of excessive profits as ordered in the three respective cases before us, and we hold that the respective petitioners do not have the right to present questions [334 U.S. 742, 793] as to the coverage of that Act, as to the amount of excessive profits adjudged to be due from them or as to other comparable issues which might have been presented by them to the Tax Court upon a timely petition to that court for a redetermination of excessive profits, if any. Accordingly, in each of the cases before us, the judgment of the Circuit Court of Appeals is affirmed. Affirmed. Mr. Justice MURPHY concurs in the result in these cases. Mr. Justice JACKSON concurs in the result in the Pownall case, but dissents in the Lichter and Alexander cases. Appendix. I. Excerpts from the so-called Original or First Renegotiation Act, 403, Sixth Supplemental National Defense Appropriation Act, 1942, approved April 28, 1942, c. 247, 56 Stat. 226, 245, 246. '(a) * * * For the purposes of subsections (d) and (e) of this section, the term 'contract' includes a subcontract and the term 'contractor' includes a subcontractor. </s> '(b) The Secretary of each Department is authorized and directed to insert in any contract for an amount in excess of $100,000 hereafter made by such Department (1) a provision for the renegotiation of the contract price at a period or periods when, in the judgment of the Secretary, the profits can be determined with reasonable certainty; (2) a provision for the retention by the United States or the repayment to the United States of (A) any amount of the contract price which is found as a result of such renegotiation to represent excessive </s> 56 Stat. 245. price equal to the amount of the reduction in the contract price of any subcontract [334 U.S. 742, 794] under such contract pursuant to the renegotiation of such subcontract as provided in clause (3) of this subsection; and (3) a provision requiring the contractor to insert in each subcontract for an amount in excess of $ 100,000 made by him under such contract (A) a provision for the renegotiation by such Secretary and the subcontractor of the contract price of the subcontract at a period or periods when, in the judgment of the Secretary, the profits cn be determined with reasonable certainty, (B) a provision for the retention by the United States or the repayment to the United States of any amount of the contract price of the subcontract which is found as a result of such renegotiation, to represent excessive profits, and (C) a provision for relieving the contractor from any liability to the subcontractor on account of any amount so retained by or repaid to the United States. '(c) The Secretary of each Department is authorized and directed, whenever in his opinion excessive profits have been realized, or are likely to be realized, from any contract with such Department or from any subcontract thereunder, (1) to require the contractor or subcontractor to renegotiate the contract price, (2) to withhold from the contractor or subcontractor any amount of the contract price which is found as a result of such renegotiation to represent excessive profits, and (3) in case any amount of the contract price found as a result of such renegotiation to represent excessive profits shall have been paid to the contractor or subcontractor, to recover such amount from such contractor or subcontractor. Such contractor of subcontractor shall be deemed to be indebted to the United States for any amount which such Secretary is authorized to recover from such contractor or subcontractor under this subsection, and such Secretary may bring actions in the appropriate courts of the United States to recover such amount on behalf of the United States. All amounts recovered under this subsection shall be covered into the Treasury as miscellaneous receipts. This subsection shall be applicable to all contracts and subcontracts hereafter made and to all contracts and subcontracts heretofore made, whether or not such contracts or subcontracts contain a renegotiation or recapture clause, provided that final payment pursuant to such contract or subcontract has not been made prior to the date of enactment of this Act. </s> '(d) In renegotiating a contract price or determining excessive profits for the purposes of this section, the Secretaries of the respective Departments shall not make any allowance for any salaries, bonuses, or other compensation paid by a contractor to its officers or employees in excess of a reasonable amount, nor shall they make [334 U.S. 742, 795] allowance for any excessive reserves set up by the contractor or for any costs incurred by the contractor which are excessive and unreasonable. For the purpose of ascertaining whether such unreasonable compensation has been or is being paid, or whether such excessive reserves have been or are being set up, or whether any excessive and unreasonable costs have been or are being incurred, each such Secretary shall have the same powers with respect to any such contractor that an agency designated by the President to exercise the powers conferred by title XIII of the Second War Powers Act, 1942, has with respect to any contractor to whom such title is applicable. * * * </s> '(e) In addition to the powers conferred by existing law, the Secretary of each Department shall have the right to demand of any contractor who holds contracts with respect to which the provisions of this section are applicable in an aggregate amount in excess of $100,000, statements of actual costs of production and such other financial statements, at such times and in such form and detail, as such Secretary may require. * * *' </s> 56 Stat. 245. II. Excerpts from Title VIII, Renegotiation of War Contracts, Revenue Act of 1942, approved October 21, 1942, c. 619, 56 Stat. 798, 982-985, 26 U.S. C.A.Internal Revenue Acts Beginning 1940, Revenue Act of 1942, 801, p. 376. Section 801 of the Revenue Act of 1942 amended the Section in several particulars, all effective as of April 28, 1942. Among the amendments were certain additions or changes contained in 403(a), 403(c) and 403(i) and reading as follows: 'Sec. 801. Renegotiation of War Contracts. </s> '(a) Subsections (a), (b), and (c) of section 403 of the Sixth Supplemental National e fense Appropriation Act (Public 528, 77th Cong., 2d Sess.), are amended to read as follows: </s> 'Sec. 403. (a) For the purposes of this section- </s> '(4) The term 'excessive profits' means any amount of a contract or subcontract price which is found as a result of renegotiation to represent excessive profits. </s> '(5) The term 'subcontract' means any purchase order or agreement to perform all or any part of the work, or to make or furnish any article, required for the performance of another contract or subcontract. The term 'article' includes any mate- [334 U.S. 742, 796] rial, part, assembly, machinery, equipment, or other personal property. </s> 'For the purposes of subsections (d) and (e) of this section, the term 'contract' includes a subcontract and the term 'contractor's includes a subcontractor. </s> '(c) (1) Whenever, in the opinion of the Secretary of a Department, the profits realized or likely to be realized from any contract with such Department, or from any subcontract thereunder whether or not made by the contractor, may be excessive, the Secretary is authorized and directed to require the contractor or subcontractor to renegotiate the contract price. When the contractor or subcontractor holds two or more contracts or subcontracts the Secretary in his discretion, may renegotiate to eliminate excessive profits on some or all of such contracts and subcontracts as a group without separately renegotiating the contract price of each contract or subcontract. </s> '(2) Upon renegotiation, the Secretary is authorized and directed to eliminate any excessive profits under such contract or subcontract (i) by reductions in the contract price of the contract or subcontract, or by other revision in its terms; or (ii) by withholding, from amounts otherwise due to the contractor or subcontractor, any amount of such excessive profits; or (iii) by directing a contractor to withhold for the account of the United States, from amounts otherwise due to the subcontractor, any amount of such excessive profits under the subcontract; or (iv) by recovery from the contractor or subcontractor, through repayment, credit or suit, of any amount of such excessive profits actually paid to him; or (v) by any combination of these methods, as the Secretary deems desirable. The Secretary may bring actions on behalf of the United States in the appropriate courts of the United States to recover from such contractor or subcontractor, any amount of such excessive profits actually paid to him and not withheld or eliminated by some other method under this subsection. The surety under a contract or subcontract shall not be liable for the repayment of any excessive profits thereon. All money recovered by way of repayment or suit under this subsection shall be covered into the Treasury as miscellaneous receipts. </s> '(3) In determining the excessiveness of profits realized or likely to be realized from any contract or subcontract, the Sec- [334 U.S. 742, 797] retary shall recognize the properly applicable exclusions and deductions of the character which the contractor or subcontractor is allowed under Chapter 1 and Chapter 2E of the Internal Revenue Code. In determining the amount of any excessive profits to be eliminated hereunder the Secretary shall allow the contractor or subcontractor credit for Federal income and excess profits taxes as provided in section 3806 of the Internal Revenue Code. </s> '(4) Upon renegotiation pursuant to this section, the Secretary may make such final or other agreements with a contractor or subcontractor for the elimination of excessive profits and for the discharge of any liability for excessive profits under this section, as the Secretary deems desirable. Such agreements may cover such past and future period of periods, may apply to such contract or contracts of the contractor or subcontractor, and may contain such terms and conditions, as the Secretary deems advisable. * * * </s> '(5) Any contractor or subcontractor who holds contracts or subcontracts, to which the provisions of this section are applical e, may file with the Secretaries of all the Departments concerned statements of actual costs of production and such other financial statements for any prior fiscal year or years of such contractor or subcontractor, in such form and detail, as the Secretaries shall prescribe by joint regulation. Within one year after the filing of such statements, or within such shorter period as may be prescribed by such joint regulation, the Secretary of a Department may give the contractor or subcontractor written notice, in form and manner to be prescribed in such joint regulation, that the Secretary is of the opinion that the profits realized from some or all of such contracts or subcontracts may be excessive, and fixing a date and place for an initial conference to be held within sixty days thereafter. If such notice is not given and renegotiation commenced by the Secretary within such sixty days the contractor or subcontractor shall not thereafter be required to renegotiate to eliminate excessive profits realized from any such contract or subcontract during such fiscal year or years and any liabilities of the contractor or subcontractor for excessive profits realized during such period shall be thereby discharged. </s> '(6) This subsection (c) shall be applicable to all contracts and subcontracts hereafter made and to all contracts and sub- [334 U.S. 742, 798] contracts heretofore made, whether or not such contracts or subcontracts contain a renegotiation or recapture clause, unless (i) final payment pursuant to such contract or subcontract was made prior to April 28, 1942. </s> '(c) (Sec. 801.) Section 403 of the Sixth Supplemental National Defense Appropriation Act (Public 528, 77th Cong., 2d Sess.), is amended by adding at the end thereof the following subsections: </s> '(i) * * * </s> '(2) The Secretary of a Department is authorized, in his discretion, to exempt from some or all of the provisions of this section- </s> '(i) any contract or subcontract to be performed outside of the territorial limits of the continental United States or in Alaska; </s> '(ii) any contracts or subcontracts under which, in the opinion of the Secretary, the profits can be determined with reasonable certainty when the contract price is established, such as certain classes of agreements for personal services, for the purchase of real property, perishable goods, or commodities the minimum price for the sale of which has been fixed by a public regulatory body, of leases and license agreements, and of agreements where the period of performance under such contract or subcontract will not be in excess of thirty days; and </s> '(iii) a portion of any contract or subcontract or performance thereunder during a specified period or periods, if in the opinion of the Secretary, the provisions of the contract are otherwise adequate to prevent excessive profits. </s> 'The Secretary may so exempt contracts and subcontracts both individually and by general classes or types.' </s> 56 Stat. 982. III. Excerpts from the so-called Second Renegotiation Act, Title VII, Renegotiation of War Contracts, passed notwithstanding the objec- [334 U.S. 742, 799] tions of the President, February 25, 1944, c. 63, 58 Stat. 21, 78-92, 50 U. S.C. (Supp. V, 1946) 1191, 50 U.S.C.A.Appendix, 1191, also 26 U.S.C.A. Internal Revenue Acts Beginning 1940, Revenue Act of 1943, 701, p. 491. While 403 of the Sixth Supplemental National Defense Appropriation Act, 1942, as expanded by 701(b) of the Revenue Act 1943, is too long for reproduction here, the following excerpts from it are especially relevant: 403(a)(4)(A); 403(c)(1); 403(d)(1); 403(d)(4); 403(e)( 1); 403(e)(2); 403(l); see also, 701(d) of the Revenue Act of 1943: Sec. 701. Renegotiation of War Contracts. (b) Renegotiation of War Contracts.-Section 403, as amended, of the Sixth Supplemental National Defense Appropriation Act, 1942, is amended to read as follows: 'Sec. 403. (a) For the purposes of this section- </s> '(4) (A) The term 'excessive profits' means the pot ion of the profits derived from contracts with the Departments and subcontracts which is determined in accordance with this section to be excessive. In determining excessive profits there shall be taken into consideration the following factors: </s> '(i) efficiency of contractor, with particular regard to attainment of quantity and quality production, reduction of costs and economy in the use of materials, facilities, and manpower; </s> '(ii) reasonableness of costs and profits, with particular regard to volume of production, normal pre-war earnings, and comparison of war and peacetime products; </s> '(iii) amount and source of public and private capital employed and net worth; </s> '(iv) extent of risk assumed, including the risk incident to reasonable pricing policies; </s> '(v) nature and extent of contribution to the war effort, including inventive and developmental contribution and cooperation with the Government and other contractors in supplying technical assistance; </s> '(vi) character of business, including complexity of manufacturing technique, character and extent of subcontracting, and rate of turn-over; </s> '(vii) such other factors the consideration of which the public interest and fair and equitable dealing may require, which factors [334 U.S. 742, 800] shall be published in the regulations of the Board from time to time as adopted. </s> '(c) (1) Whenever, in the opinion of the Board, the amounts received or accrued under contracts with the Departments and subcontracts may reflect excessive profits, the Board shall give to the contractor or subcontractor, as the case may be, reasonable notice of the time and place of a conference to be held with respect thereto. The mailing of such notice by registered mail to the contractor or subcontractor shall constitute the commencement of the renegotiation proceeding. At the conference, which may be adjourned from time to time, the Board shall endeavor to make a final or other agreement with the contractor or subcontractor with respect to the elimination of excessive profits received or accrued, and with respect to such other matters relating thereto as the Board deems advisable. Any such agreement, if made, may, with the consent of the contractor or subcontractor, also include provisions with respect to the elimination of excessive profits likely to be received or accrued. If the Board does not make an agreement with respect to the elimination of excessive profits received or accrued, it shall issue and enter an order determining the amount, if any, of such excessive profits, and forthwith give notice thereof by registered mail to the contractor or subcontractor. In the absence of the filing of a petition with The Tax Court of the United States under the provisions of and within the time limit prescribed in subsection (e)(1), such order shall be final and conclusive and shall not be subject to review or redetermination by any court or other agency. The Board shall exercise its powers with respect to the aggregate of the amounts received or accrued during the fiscal year (or such other period as may be fixed by mutual agreement) by a contractor or subcontractor under contracts with the Departments and subcontracts, and not separately with respect to amounts received or accrued under separate contracts with the Departments or subcontracts, except that the Board may exercise such powers separately with respect to amounts received or accrued by the contractor or subcontractor under any one or more separate contracts with the Departments or subcontracts at the request of the contractor or subcontractor. Whenever the Board makes a determination with respect to the amount of excessive profits, whether such determination is made by order or is embodied in an agreement with the contractor of subcontractor, it shall, at the request of the contractor or subcontractor, as the case may be, prepare and furnish such contractor or subcontractor with a statement of such deter- [334 U.S. 742, 801] mination, of the facts used as a basis therefor, and of its reasons for such determination. Such statement shall not be used in The Tax Court of the United States as proof of the facts or conclusions stated therein. </s> '(d) (1) There is hereby created a War Contracts Price Adjustment Board (in this section called the 'Board'), which shall consist of six members. </s> '(4) The Board may delegate in whole or in part any power, function, or duty to the Secretary of a Department, and any power, function, or duty so delegated may be delegated in whole or in part by the Secretary to such officers or agencies of the United States as he may designate, and he may authorize successive redelegations of such powers, functions, and duties. </s> '(e) (1) Any contractor or subcontractor aggrieved by an order of the Board determining the amount of excessive profits received or accrued by such contractor or subcontractor may, within ninety days (not counting Sunday or a legal holiday in the District of Columbia as the last day) after the mailing of the notice of such order under subsection (c)(1), file a petition with The Tax Court of the United States for a redetermination thereof. Upon such filing such court shall have exclusive jurisdiction, by order, to finally determine the amount, if any, of such excessive profits received or accrued by the contractor or subcontractor, and such determination shall not be reviewed or redetermined by any court or agency. The court may determine as the amount of excessive profits an amount either less than, equal to, or greater than that determined by the Board. A proceeding before the Tax Court to finally determine the amount, if any, of excessive profits shall not be treated as a proceeding to review the determination of the Board, but shall be treated as a proceeding de novo. * * * </s> '(2) Any contractor or subcontractor * * * aggrieved by a determination of the Secretary made prior to the date of the enactment of the Revenue Act of 1943, with respect to a fiscal year ending before July 1, 1943, as to the existence of excessive profits, which is not embodied in an agreement with the contractor or subcontractor, may, within ninety days (not counting Sunday or a legal holiday in the District of Columbia as the last day) after the date of the enactment of the Revenue Act of 1943, file a petition with The Tax Court [334 U.S. 742, 802] of the United States for a redetermination thereof, and any such contractor or subcontractor aggrieved by a determination of the Secretary made on or after the date of the enactment of the Revenue Act of 1943, with respect to any such fiscal year, as to the existence of excessive profits, which is not embodied in an agreement with the contractor or subcontractor, may, within ninety days (not counting Sunday or a legal holiday in the District of Columbia as the last day) after the date of such determination, file a petition with The Tax Court of the United States for a redetermination thereof. Upon such filing such court shall have the same jurisdiction, powers, and duties, and the proceeding shall be subject to the same provisions, as in the case of a petition filed with the court under paragraph (1), except that the amendments made to this section by the Revenue Act of 1943 which are not made applicable as of April 28, 1942, or to fiscal years ending before July 1, 1943, shall not apply. </s> '(l) This section may be cited as the 'Renegotiation Act'.' </s> '(d) (SEC. 701.) Effective Date.-The amendments made by subsection (b) shall be effective only with respect to the fiscal years ending after June 30, 1943, except that (1) the amendments inserting subsections (a)(4)(C), ( a)(4)(D), (i) (1)(C), (i)(1)(D), (i)(1)(F), (i)(3), and (l) in section 403 of the Sixth Supplemental National Defense Appropriation Act, 1942, shall be effective as if such amendments and subsections had been a part of section 403 of such Act on the date of its enactment, and (2) the amendments adding subsection (d) and (e) (2) to section 403 of such Act shall be effective from the date of the enactment of this Act.' 58 Stat. 78. </s> Mr. Justice DOUGLA dissenting in part. The business involved in the Lichter case relates to profits realized during the fiscal year ending December 31, 1942. As to the amounts owed under these contracts, petitioners are entitled to a hearing in the District Court. For Congress did not require that class of contracts to be taken to the Tax Court. I think a close reading of the statutes, contained in Appendix III to the Court's opinion, will bear me out. [334 U.S. 742, 803] Section 403(e)(1) relates to orders of the Board and provides that they may be reviewed by the Tax Court. And 403(c)(1) provides that in the absence of the filing of such a petition with the Tax Court, the orders of the Board 'shall be final and conclusive.' But we are concerned here not with orders of the Board but with an order of the Secretary. Section 403(e)(2) provides that those orders, too, may be taken to the Tax Court. But 403(e)(2) by its terms makes inapplicable those provisions of the 1943 amendment which are not made applicable as of April 28, 1942, or to the fiscal years ending before July 1, 1943. Thus, 403(c)(6) limits subsection (c) 'to all contracts and subcontracts, to the extent of amounts received or accrued thereunder in any fiscal year ending after June 30, 1943, whether such contracts or subcontracts were made on, prior to, or after the date of the enactment of the Revenue Act of 1943.' Hence it is clear that the provision of 403(c)( 1) which makes the orders of the Board final and conclusive in absence of the filing of a petition with the Tax Court is not applicable here. Orders of the Secretary, at least as respects 1942 business, are therefore treated differently than orders of the Board. I conclude that the purpose was to leave contracts and contractors who fell in that category with the right of access to the courts which they had enjoyed prior to the Revenue Act of 1943. In those cases jurisdiction of the Tax Court may be invoked at the option of the petitioners. Macauley v. Waterman S.S. Corp., 327 U.S. 540 , is not opposed to this conclusion. For that case involved an order of the Board. Wade v. Stimson, 331 U.S. 793 , involved an order of the Secretary and related to 1942 business. But the question in issue here was not raised there, as it is not in Alexander Wool Combing Co. v. United States, decided this day. Footnotes </s> [Footnote 1 The Renegotiation Act, including its amendments, is here treated as consisting of: I. Section 403, Sixth Supplemental National Defense Appropriation Act, 1942, approved April 28, 1942, c. 247, 56 Stat. 226, 245, 246. Sometimes this is called the Original or First Renegotiation Act. For relevant excerpts from its text see Appendix I, infra. II. Title VIII, Renegotiation of War Contracts, Revenue Act of 1942, approved October 21, 1942, c. 619, 56 Stat. 798, 982Ä985, 26 U.S.C.A. Internal Revenue Acts Beginning 1940, Revenue Act of 1942, 801, p. 376. For relevant excerpts from its text see Appendix II, infra. III. Section 1, Military Appropriation Act, 1944, approved July 1, 1943, c. 185, 57 Stat. 347, 348. IV. An Act to prevent the payment of excessive fees or compensation in connection with the negotiation of war contracts, approved July 14, 1943, c. 239, 57 Stat. 564, 565. V. Title VII, Renegotiation of War Contracts, and Title VIII, Repricing of War Contracts, Revenue Act of 1943, passed notwithstanding the objections of the President, February 25, 1944, c. 63, 58 Stat. 21, 78Ä 93, 50 U.S.C. (Supp. V, 1946) 1191, 1192, 50 U.S.C.A.Appendix, 1191, 1192; also 26 U.S.C.A. Internal Revenue Acts Beginning 1940, Revenue Act of 1943, 701 and 801, pp. 491 and 508. For relevant excerpts from its text see Appendix III, infra. Sometimes this is called the Second Renegotiation Act. Section 701(b), of the foregoing Chapter 63, added to 403 of the Sixth Sup lemental National Defense Appropriation Act, 1942, a final subsection as follows: '(l) This section may be cited as the 'Renegotiation Act." 58 Stat. 90. Section 701(d) also provided that this subsection (l) of 403, and certain others, 'shall be effective as if such amendments and subsections had been a part of section 403 of such Act of the date of its enactment.' 58 Stat. 92. VI. An Act to extend through December 31, 1945, the termination date under the Renegotiation Act, approved June 30, 1945, c. 210, 59 Stat. 294, 295, 50 U.S.C. (Supp. V, 1946) 1191, 50 U.S.C.A.Appendix, 1191. </s> [Footnote 2 In addition to the opinions of the Circuit Courts of Appeals and District Courts cited in the text, see Ring Construction Corp. v. Secretary of War, 8 T.C. 1070; Cohen v. Secretary of War, 7 T.C. 1002; Stein Bros. Mfg. Co. v. Secretary of War, 7 T.C. 863. For discussions of the Renegotiation Act by this Court, stopping short of passing upon its constitutionality, see Aircraft & Diesel Corp. v. Hirsch, 331 U.S. 752 ; and Macauley v. Waterman S.S. Corp., 327 U.S. 540 . </s> [Footnote 3 Among the many other provisions implementing the Congress and the President with powers to meet the vare d demands of war, the following obviously command attention: 'We the People of the United States, in Order to form a more perfect Union, * * * provide for the common defence, * * * and secure the Blessings of Liberty to ourselves and our Posterity, do ordain and establish this Constitution for the United States of America.' U.S.Const. Preamble. 'The Congress shall have Power To lay and collect Taxes, Duties, Imposts and Excises, to pay the Debts and provide for the common Defence and general Welfare of the United States; </s> 'To declare War, </s> 'To provide and maintain a Navy; </s> 'To make all Laws which shall be necessary and proper for carrying into Execution the foregoing Powers, * * *.' Id. Art. I, 8. </s> 'The President shall be Commander in Chief of the Army and Navy of the United States, * * *.' Id. Art. II, 2, Cl. 1. </s> Madison said in The Federalist, Number XLI,ÄGeneral View of the Powers Conferred by the Constitution: 'Security against foreign danger is one of the primitive objects of civil society. It is an avowed and essential object of the American Union. The powers requisite for attaining it must be effectually confided to the federal councils.' Hamilton said in The Federalist, Number XXIII,ÄThe Necessity of a Government as Energetic as the One Proposed to the Preservation of the Union: 'The circumstances that endanger the safety of nations are infinite, and for this reason no constitutional shackles can wisely be imposed on the power to which the care of it is committed. This power ought to be co- extensive with all the possible combinations of such circumstances; and ought to be under the direction of the same councils which are appointed to preside over the common defence.' </s> ---------- [Footnote 4 'The Constitution grants to Congress power 'to raise and support Armies', 'to provide and maintain a Navy', and to make all laws necessary and proper to carry these powers into execution. Under this authority Congress can draft men for battle service. Selective Draft Law Cases, 245 U.S. 366 , L.R.A.1918C, 361, Ann.Cas.1918B, 856. Its power to draft business organizations to support the fighting men who risk their lives can be no less.' United States v. Bethlehem Steel Corp., 315 U.S. 289, 305 , 589. In writing of the power of Congress to pass a Conscription Act, President Lincoln said, with characteristic clearness: 'Whether a power can be implied when it is not expressed has often been the subject of controversy; but this is the first case in which the degree of effrontery has been ventured upon of denying a power which is plainly and distinctly written down in the Constitution. The Constitution declares that 'The Congress shall have Power * * * to raise and support Armies, but no Appropriation of Money to that Use shall be for a longer Term than two Years.' The whole scope of the conscription act is 'to raise and support armies.' There is nothing else in it. * * * </s> '* * * Do you admit that the power is given to raise and support armies, and yet insist that by this act Congress has not exercised the power in a constitutional mode?Ähas not done the thing in the right way? Who is to judge of this? The Constitution gives Congress the power, but it does not prescribe the mode, or expressly declare who shall prescribe it. In such case Congress must prescribe the mode, or relinquish the power. There is no alternative. * * * The power is given fully, completely, unconditionally. It is not a power to raise armies if State authorities consent; nor if the men to compose the armies are entirely willing; but it is a power to raise and support armies given to Congress by the Constitution, without an 'if." 9 Nivolay and Hay, Works of Abraham Lincoln 75Ä77 (1894). </s> The foregoing quotation is from an opinion by President Lincoln, which was not actually issued or published by him but which was quoted to the above extent by Honorable Charles Evans Hughes, of New York, in his address on 'War Powers Under the Constitution' before the American Bar Association, September 5, 11 7, 42 A.B.A.Rep. 232, 234Ä235. The draft was put in force both by the Union and by the Confederacy during the Civil War and its validity was sustained by the courts in both North and South. 'The power of coercing the citizen to render military service, is indeed a transcendent power, in the hands of any government; but so far from being inconsistent with liberty, it is essential to its preservation.' Burroughs v. Peyton, 16 Grat. 470, 473, 57 Va. 470, 473. See cases cited in 42 A.B.A.Rep. 234 n. 1, and see Selective Draft Law Cases, 245 U.S. 366 , L.R.A.1918C, 361, Ann.Cas.1918B, 856; Jacobson v. Massachusetts, 197 U.S. 11, 29 , 362, 3 Ann.Cas. 765; In re Grimley, 137 U.S. 147, 153 , 55. ---------- 5. 'Our own objectives are clear: The objective of smashing the militarism imposed by war lords upon their enslaved peoples; the objective of liberating the subjugated nations; the objective of establishing and securing freedom of speech, freedom of religion, freedom from want, and freedom from fear everywhere in the world. 'We shall not stop short of these objectives; nor shall we be satisfied merely to gain them and call it a day. I know that I speak for the American peopleÄand I have good reason to believe I speak also for all the other peoples who fight with usÄwhen I say that this time we are determined not only to win the war, but also to maintain the security of the peace which will follow. </s> 'But modern methods of warfare make it a task, not only of shooting and fighting, but an even more urgent one of working and producing. </s> 'Victory requires the actual weapons of war and the means of transporting them to a dozen points of combat. </s> 'It will not be sufficient for us and the other united nations to produce a slightly superior supply of munitions to that of Germany, Japan, Italy, and the stolen industries in the countries which they have overrun. </s> 'The superiority of the united nations in munitions and ships must be overwhelmingÄso overwhelming that the Axis nations can never hope to catch up with it. In order to attain this overwhelming </s> superiority the United States must build planes and tanks and guns and ships to the utmost limit of our national capacity. We have the ability and capacity to produce arms not only for our own forces but also for the armies, navies, and air forces fighting on our side. 'And our overwhelming superiority of armament must be adequate to put weapons of war at the proper time into the hands of those men in the conquered nations, who stand ready to seize the first opportunity to revolt against their German and Japanese oppressors, and against the traitors in their own ranks, known by the already infamous name of 'Quislings.' As we get guns to the patriots in those lands, they too will fire shots heard 'round the world. </s> 'This production of ours in the United States must be raised far above its present levels, even though it will mean the dislocation of the lives and occupations of millions of our own people. We must raise our sights all along the production line. Let no man say it cannot be done. It must be doneÄand we have undertaken to do it. </s> 'I have just sent a letter of directive to the appropriate departments and agencies of our Government, ordering that immediate steps be taken: </s> '1. To increase our production rate of airplanes so rapidly that in this year, 1942, we shall produce 60,000 planes, 10,000 more than the goal set a year and a half ago. This includes 45,000 combat planesÄbombers, dive-bombers, pursuit planes. The rate of increase will be continued, so that next year, 1943, we shall produce 125,000 airplanes, including 100, 000 combat planes. </s> '2. To increase our production rate of tanks so rapidly that in this year, 1942, we shall produce 45,000 tanks; and to continue that increase so that next year, 1943, we shall produce 75,000 tanks. </s> '3. To increase our production rate of antiaircraft guns so rapidly that in this year, 1942, we shall produce 20,000 of them; and to continue that increase so that next year, 1943, we shall produce 35,000 antiaircraft guns. </s> '4. To increase our production rate of merchant ships so rapidly that in this year, 1942, we shall build 8,000,000 dead-weight tons as compared with a 1941 production of 1,100,000. We shall continue that increase so that next year, 1943, we shall build 10,000,000 tons. </s> 'These figures and similar figures for a multitude of other imple- </s> ments of war will give the Japanese and Nazis a little idea of just what they accomplished in the attack on Pearl Harbor. 'Our task is hardÄour task is unprecedentedÄand the time is short. We must strain every existing armament-producing facility to the utmost. We must convert every available plant and tool to war production. That goes all the way from the greatest plants to the smallestÄfrom the huge automobile industry to the village machine shop. </s> 'Production for war is based on men and womenÄthe human hands and brains which collectively we call labor. Our workers stand ready to work long hours; to turn out more in a day's work; to keep the wheels turning and the fires burning 24 hours a day, and 7 days a week. They realize well that on the speed and efficiency of their work depend the lives of their sons and their brothers on the fighting fronts. </s> 'Production for war is based on metals and raw materialsÄsteel, copper, rubber, aluminum, zinc, tin. Greater and greater quantities of them will have to be diverted to war purposes. Civilian use of them will have to be cut further and still furtherÄand, in many cases, completely eliminated. </s> 'War costs money. So far, we have hardly even begun to pay for it. We have devoted only 15 percent of our national income to national defense. As will appear in my Budget Message tommorrow, our war program for the coming fiscal year will cost $56,000,000,000 or, in other words, more than one-half of the estimated annual national income. This means taxes and bonds and bonds and taxes. It means cutting luxuries and other nonessentials. In a word, it means an all-out war by individual effort and family effort in a united country. </s> 'Only this all-out scale of production will hasten the ultimate all- out victory. Speed will count. Lost ground can always be regainedÄlost time never. Speed will save lives; speed will save this Nation which is in peril; speed will save our freedom and civilizationÄand slowness has never been an American characteristic.' 88 Cong.Rec. 32, 33Ä34 (1942). </s> ---------- [Footnote 6 'Ever since the beginning of the last war there has been a constant effort to find an effective method of controlling war profits without impeding war production. The renegotiation law is the latest product of such efforts.T o obtain speed we have had to use contracting methods that would never have been tolerated in peacetime. We granted cost-plus-fixed-fee contracts where the specifications were not known or had to be subject to numerous changes or where there was no time to prepare detailed specifications. We also granted lump-sum contracts for many items which had never before been made in quantity and for which estimates of cost were mere guesses. This was particularly true of the billions of dollars of war contracts which were hastily 'shoveled' out early in January 1942. 'Is the renegotiation law a necessary and desirable method of counteracting the wasteful effects of such necessary practices in early wartime procurement? Is it being administered in such a way as to give effect to the statutory intent? What changes, if any, are needed? </s> 'As to the necessity and desirability of the renegotiation law: </s> '(1) Because of the wartime need for rapid procurement of materials of war, new materials with which there has been no previous manufacturing experience and other articles previously manufactured only in relatively small quantities, some procedure for subsequent price adjustment is necessary and desirable if excessive war profits and costs are to be avoided. </s> '(2) Taxes alone will not do the job because (a) higher corporate tax rates are likely to encourage higher costs and discourage economical production; (b) no scheme of taxation has been devised which is sufficiently flexible to provide an incentive for efficient low-cost production; (c) a profit percentage which would fairly reward one war contractor with one type of financial structure would bankrupt a second contractor with a different financial set-up, and would provide inordinately excessive profits for a third contractor with a still different financial problem. </s> '(3) War contractors in most cases can protect themselves against loss by escalator clauses and other contract provisions for contingencies. The people can obtain protection in many cases only through some procedure such as renegotiation. </s> '(4) Experience has shown 'cost-plus' contracts to be worse than worthless in the effort to prevent excessive costs. They strongly tend to increase costs instead of the reversed. </s> 'The administration of the renegotiation law during the first 10 months of its existence has been characterized by two significant accomplishments: </s> '(1) The assembly in Government of an unusual group of able, conscientious, and patriotic lawyers, accountants, and businessmen as administrators of renegotiation; </s> '(2) The gradual education of war contractors as to the reasons for and importance of their adopting a policy of tailoring their own profits to levels which, in their own special situations, are fair both to them and to the Government. On the other hand, the administration of the renegotiation law and the law itself are properly subject to certain constructive criticisms: '(1) Substantial variations in administrative policy and attitude still exist among the four departments charged with responsibility for renegotiation, although this condition has been noticeably improved in recent weeks. The existence of such a condition has created wholly unnecessary confusion, uncertainty, and misunderstanding among contractors. </s> '(2) Results of Navy renegotiations to date justify an inference that in its early proceedings the Navy Price Adjustment Board may have been too strongly influenced by a desire to achieve the same kind of mathematical exactness which results from a cost-plus-a-percentage-of-cost contract, a result which is inconsistent with the flexibility which was the basic purpose of the renegotiation law. </s> '(3) Army administration has been rendered unnecessarily cumbersome by use of military channels in the handling of an essentially business and financial enterprise. </s> '(4) The principles and results of renegotiation have been shrouded with entirely too much secrecy not only as to the public but as to the renegotiators themselves, causing many war contractors to be i stracted by wholly unwarranted but nevertheless natural fears of the unknown. </s> '(5) In some cases the cost audits incident to renegotiation and taxation have been unnecessarily duplicatory. </s> '(6) It is impossible to recover every last dollar of excessive war profits without unnecessarily interfering with war production, and overzealous administration of the vast powers delegated by this law could be seriously detrimental to war procurement.' S.Rep.No.10, Part 5, 78th Cong., 1st Sess. 1Ä3 (1943). </s> ---------- [Footnote 7 '5. The necessary result of this combination of circumstances is that the war procuring agencies cannot use normal methods of procurement. The pressing need for speed requires the abandonment of drawn-out negotiation and the careful surveys of all relevant factors which sound purchasing would otherwise require. Competition necessarily wanes and no longer offers an adequate guide to the prices which should be paid. Above all, the forecasting of costs of production becomes, in large measure, a matter of informed guessing rather than of real cost analysis. This is true in the case of new products, new plants, and new producers; it is likewise true, though perhaps in lesser degree, wherever the quantities to be manufactured are sharply increased over pre-war amounts. Accordingly, advance prices quoted in good faith by manufacturers in a large number of cases have little relation to costs actually experienced in the course of production. Furthermore, many manufacturers feel unable to quote firm prices without including reserves to cover many contingencies the occurrence of which might skyrocket their costs, and so overturn all their estimates. '6. These were the conditions of wartime procurement, after December 7, 1941, and the War Department had to force its procurement activities into their mold. Efforts were made, of course, to develop contractual devices which would minimize the paramount difficulty in estimating production costs. The cost-plus-fixed-fee contract was used where unavoidable, but this form has the disadvantage of removing financial incentives to efficiency and of imposing a heavy burden of auditing upon the Government and the contractor. Escalator clauses, permitting prices to be adjusted according to fluctuations in indices of labor and material costs, were also used but proved unworkable. Letters of intent, under which manufacture was commenced prior to the negotiation of a formal contract, helped to speed production, but could not, of course, solve the ultimate problem of decreasing costs and preventing excessive profits. </s> '7. Shortly after the declarations of war, both the legislative and the executive branches of the Government realized that excessive wartime profits were certain to accrue unless counter measures were taken. The evil effect of such wartime excessive profit on the morale of the fighting forces and the civilian population, as well as the unnecessary financial burden upon the Government, could not be ignored. The example of the last war was still fresh. Many war contractors realized the dangers and inequities resulting from such excessive profit, and some of them made refunds of excessive profits or voluntarily reduced their prices. In the spring of 1942, the War Department developed cost analysis units to check, so far as practicable, on production costs, and set up a price adjustment board to negotiate with contractors for voluntary price reductions and refunds of past payments. Tentative policies as to what profits were </s> excessive were established and meetings with contractors had. At the same time, there came into use contract clauses providing for the renegotiation or redetermination of contract prices after an initial period of production had laid a basis for the proper estimation of costs. We hoped that these means would keep incentives to efficiency alive and at the same time would tend to eliminate undue profits such as were then coming to light. '8. The Congress apparently felt, however, that these contractual measures, resting as they did upon the voluntary cooperatio of a relatively small number of war contractors, did not provide enough certainty that excessive profits would be eliminated. The Vinson-Trammel Act, limiting profits on aircraft and ship construction, had been repealed in 1940, but an effort was made to revive it. In March, 1942, the War Department and the War Production Board opposed such legislation on the ground that a flat percentage profit limitation would impede production and would be unfair to many contractors and too generous to others. After the Case amendment imposing such a flat percentage limitation on profits from war contracts had been adopted by the House of Representatives late in March, 1942, the armed services and the War Production Board offered a substitute proposal giving statutory authority to the process of voluntary renegotiation which had been developing. Congress adopted the principle of renegotiation with which the armed services were in accord (rather than the principle of a flat percentage limitation of profits), and it also endowed the procuring agencies with power to determine excessive profits when no bilateral agreement could be reached with the contractor. I believe that this addition by the Congress of the power of unilateral action was a wise and a necessary one, and that without it renegotiation would not have accomplished anything like the results that have been achieved. </s> '12. * * * Some conception of the vast scope of the procurement activity of the armed services after the attack on Pearl Harbor can be gained from the fact that the total expenditures of the War and Navy Departments for the one fiscal year ending June 30, 1942 ($22,905,000,000) considerably exceeded the total military and naval expenditures of the Government from 1789 through the end of World War I.' Affidavit of Robert P. Patterson, Under Secretary of War, sworn to August 3, 1945. </s> [Footnote 8 See note 1, supra. </s> [Footnote 9 McKinley v. United States, 249 U.S. 397 ( regulations of local activities near federal military stations); Northern Pacific R. Co. v. North Dakota, 250 U.S. 135 ( seizure and operation of railroads); Hamilton v. Kentucky Distilleries and W. Co., 251 U.S. 146 , (local liquor traffic); Central Union Trust Co. v. Garvan, 254 U.S. 554 (seizure of enemy property); Hirabayashi v. United States, 320 U.S. 81 (curfew regulations); Yakus v. United States, 321 U.S. 414 (Emergency Price Control Act, 50 U.S.C.A.Appendix, 901 et seq.); Bowles v. Willingham, 321 U.S. 503 , 64 S. Ct. 641 (rent control); and Korematsu v. United States, 323 U.S. 214 (exclusion of civilians from west coast military area). In Hirabayashi v. United States, supra, this Court said, 320 U.S. page 93, 63 S.Ct. page 1382. 'The war power of the national government is 'the power to wage war successfully.' See Charles Evans Hughes, War Powers Under the Constitution, 42 A.B.A.Rep. 232, 238. It extends to every matter and activity so related to war as substantially to affect its conduct and progress. The power is not restricted to the winning of victories in the field and the repulse of enemy forces. * * * Since the Constitution commits to the Executive and to Congress the exercise of the war power in all the vicissitudes and conditions of warfare, it has necessarily given them wide scope for the exercise of judgment and discretion in determining the nature and extent of the threatened injury or danger and in the selection of the means for resisting it. * * * Where, as they did here, the conditions call for the exercise of judgment andd iscretion and for the choice of means by those branches of the Government on which the Constitution has placed the responsibility of war-making, it is not for any court to sit in review of the wisdom of their action or substitute its judgment for theirs.' </s> [Footnote 10 '20. At the beginning of the limited emergency in 1939, the only applicable statutory limits on profits from the sale of military or naval supplies were contained in the Vinson-Trammel Act of March 27, 1934, as amended (34 U.S.C.A. 494 et seq.) (relating to naval vessels) and the Merchant Marine Act of 1936, as amended (46 U.S.C.A. 1101 et seq.) ( relating to construction of merchant ships). The Act of April 3, 1939 (10 U.S.C.A. 311, 312), extended percentage profit limitation to cover Army aircraft contracts. The percentage of profit allowed to contractors was lowered to approximately 8% by the Act of June 28, 1940 (50 U.S.C.A. Appendix, 1152), but the Second Supplemental National Defense Appropriation Act, 1941, enacted September 9, 1940, provided that as to aircraft the old limitation of 12% was to prevail. '21. * * * Accordingly, the Second Revenue Act of 1940 (54 Stat. 974), containing the excess profits tax, suspended the profit limitation statutes applicable to Army and Navy contracts entered into after December 31, 1939, or uncompleted on that date by contractors and subcontractors subject to the new excess profits tax. Thereafter, until the passage of the Sixth Supplemental National Defense Appropriation Act of 1942, the only statutory provisions concerning war or defense contracts were those of the excess profits tax.' Affidavit of Robert P. Patterson, Under Secretary of War, sworn to August 3, 1945. </s> And see Hensel and McClung, Profit Limitation Controls Prior to the Present War, 10 Law & Contemp.Prob. 187 (1943Ä1944). </s> [Footnote 11 The following significant congressional hearings were publicly held: Hearings before the Senate Committee on Finance on 403 of Pub.L.No. 528, 77th Cong., 2d Sess. (September 22 and 23, 1942); Hearings before a Subcommittee of the Senate Committee on Finance on 403 of Pub.L.No.528, 77th Cong., 2d Sess. (September 29 and 30, 1942); Hearings before the Subcommittee of the House Committee on Appropriations on Mil.Est.App.Bill for 1944, 78th Cong., 1st Sess. 483Ä518, 571Ä580 (June 10, 1943); Hearings before the Subcommittee of the Senate Committee on Appropriations on H.R.2906 (Mil.Est.App.Bill for 1944), 78th Cong., 1st Sess. 22, 30Ä33, 125Ä138, 150Ä151 (1943); Hearings before the House Committee on Naval Affairs, pursuant to H.R. Res.30, Vol. 2, 78th Cong., 1st Sess. (June 10Ä30, 1943); Hearings before the House Committee on Ways and Means on H.R.2324, 2698 and 3015 (Renegotiation of War Contracts), 78th Cong., 1st Sess. ( September 9Ä23, 1943); Hearings before the Senate Committee on Finance on H.R.3687 (Revenue Act of 1943), 78th Cong., 1st Sess. 49, 388Ä392, 402Ä424, 443Ä452, 465, 469, 598Ä601, 620Ä629, 669Ä684, 690Ä696, 925Ä926, 987Ä1111, 1121Ä1132 ( November 29ÄDecember 15, 1943); Hearings before the House Committee on Ways and Means on H.R.2628 ( extension of termination date of Renegotiation Act), 79th Cong., 1st Sess. ( April 12Ä16, 1945). In addition, private hearings and interviews appear to have been had by Congressional Committees. The following major reports on the operation of the Renegotiation Act were issued by Congressional Committees: H.R.Rep.No.733, 78th Cong., 1st Sess. (October 7, 1943). Report of the Committee on Naval Affairs, pursuant to H.R.Res.30 (Renegotiation of War Contracts); Sen.Rep.No.10, Part 5, 78th Cong., 1st Sess. (March 30, 1943). Additional Report of the Special Senate Committee Investigating the National Defense Program (Renegotiation of War Contracts); Sen.Rep.No.10, Part 16, 78th Cong., 2d Sess. 40Ä64, 192Ä199 (March 4, 1944). Additional Report of the Special Senate Committee Investigating the National Defense Program (Third Annual Report); H.R.Rep.No.871, 78th Cong., 1st Sess. 75Ä90 (November 18, 1943), on H. R.3687 (Revenue Bill of 1943); Sen.Rep.No.627, 78th Cong., 1st Sess. 98Ä119 (December 22, 1943), on H.R.3687 (Revenue Bill of 1943); H.R.Rep.No. 1079, 78th Cong., 2d Sess. 34Ä39, 76Ä88 (February 4, 1944 ), on H.R.3687 (Conference Report on Revenue Act of 1943). See also: Renegotiation of War ContractsÄLaw, Dea tes and Other Legislative MaterialsÄCompiled for the use of the House Committee on Ways and Means, 78th Cong., 1st Sess. (1943); Data on Renegotiation of Contracts, Senate Committee on Finance ( December 9, 1943). </s> [Footnote 12 In its brief filed jointly in the present cases the Government has submitted the following statement as to the results of renegotiation: '11. The results of renegotiation: We are advised by the War Contracts Price Adjustment Board that as of June 30, 1947, 118,101 contractors had been assigned for renegotiation with respect to 1942 through 1946 fiscal years, and contracts aggregating over $190,000,000,000 ( excluding contractors eliminated because of exemptions or non-coverage) were subjected to renegotiation. Of the total assignments, 115,535 (or 97. 8%) were completed as of June 30, 1947. Out of the 115,535 completed assignments, 85,037 (or 73.6%) resulted in cancellations or clearances indicating that no excessive profits had been made or that the contractor was found to be exempt from renegotiation; 28,889 (or 25%) resulted in bilateral refund agreements between the Government and the contractor; 1, 609 (or 1.4%) resulted in unilateral determinations by the Departments or the War Contracts Price Adjustment Board. Of the 30,498 assignments involving determinations of excessive profits, 1,609 (or 5.28%) were unilateral determinations and 28,889 (or 94.72%) were bilateral. </s> 'Also as of June 30, 1947, the gross recoveries through renegotiation amounted to some $10,434,637,000, and the estimated net recovery (after deduction of the federal tax credit allowed contractors on renegotiation refunds) amounted to $3,130,391,000. Of the total gross recoveries of $10, 434,637,000, some $895,493,000 (or 8.58%) were involved in unilateral determinations and the rest were recovered by voluntary agreement.' </s> [Footnote 13 See note 1, supra. </s> [Footnote 14 For relevant excerpts from its text, see Appendix I, infra. [Footnote 15 For relevant excerpts from its text, see Appendix II, infra. [Footnote 16 For relevant excerpts from its text, see Appendix III, infra. [Footnote 17 See 403(l) in note I, supra. [Footnote 18 In the House of Representatives, the Case Amendment, providing in effect a limitation of 6% on war profits was adopted without debate. 88 Cong.Rec. 3139Ä3140 (1942). Before the Senate Subcommittee on Appropriations strong objection was made to this provision by the representatives of the Government and its omission was recommended by the Senate Committee on Appropriations. After ample consideration it was omitted in the Act as passed. 88 Cong.Rec. 3378Ä3405; 3582Ä3599; 3647Ä3662; 3666 (1942), and see H.R.Rep.No.2030, 77th Cong., 2d Sess. 8Ä10 (1942). [Footnote 19 Hearings before the Subcommittee of the Senate Committee on Finance on Pub.L.No.528, 77th Cong., 2d Sess. 16Ä28 (September 29, 1942). </s> [Footnote 20 See Appendix III, infra. </s> [Footnote 21 See Appendix III, infra. </s> 1. The Statutory Language. [Footnote 22 See Appendix I, infra. </s> [Footnote 23 See Appendix I, infra. [Footnote 24 See Appendix I, infra. </s> [Footnote 25 See Appendix II, infra. [Footnote 26 Published as part of the material submitted by Under Secretary of War Robert P. Patterson at the Hearings on the Renegotiating of Contracts before a Subcommittee of the Senate Committee on Finance on 403 of Pub.L. No. 528, 77th Cong., 2d Sess. 28, 34Ä43 (September 29, 1942). [Footnote 27 See Appendix II, infra. [Footnote 28 See Appendix II, infra. </s> [Footnote 29 See Appendix II, infra. [Footnote 30 See Hearings before the House Committee on Naval Affairs, 78th Cong., 1st Sess., Vol. 2, pp. 469, et seq., 1025Ä1039, especially 1028Ä 1029 (1943). </s> 2. The Validity of the Delegation of Authority. </s> [Footnote 31 'The question remains: What may be deemed to be the force and effect in time of war of the restrictive provisions contained in the constitution with respect to the exercise of federal authority? It is manifest, at once, that the great organs of the National Government retain and perform their functions as the constitution prescribes. Senators and Representatives are qualified and chosen as provided in the constitution and the legislative power vested in the Congress must be exercised in the required manner. The President is still the constitutional Executive, elected in the manner provided and subject to the restraints imposed upon his office. The judicial power of the United States continues to be vested in one Supreme Court and such inferior courts as Congress has ordained. Again, apart from the provisions fixing the framework of the Government, there are limitations which by reason of their express terms or by necessary implication must be regarded as applicable as well in war as in peace. Thus one of the expressed objects of the power granted to Congress 'to lay and collect Taxes, Duties, Imposts, and Excises' is to 'provide for the common defense,' and it cannot be doubted that taxes laid for this purpose, that is, to support the army and navy and to provide the means for military operations, must be laid subject to the constitutional restrictions.' Address by Honorable Charles E. Hughes, of New York, on 'War Powers Under the Constitution,' September 5, 1917, 42 A.B.A.Rep. 232, 241Ä242. </s> [Footnote 32 Billings v. United States, 232 U.S. 261, 282 , 424. [Footnote 33 Brushaber v. Union Pacific R. Co., 240 U.S. 1, 24 , 244, L.R.A.1917D, 414, Ann.Cas.1917B, 713. </s> [Footnote 34 'We the People of the United States, in Order to form a more perfect Union, establish Justice, insure domestic Tranquility, provide for the common defence, promote the general Welfare, and secure the Blessings of Liberty to ourselves and our Posterity, do ordain and establish this Constitution for the United States of America.' (Italics supplied.) U.S. Const. Preamble. </s> [Footnote 35 See notes 19 and 26, supra. [Footnote 36 See note 30, supra. </s> [Footnote 37 Excessive means: 'Characterized by, or exhibiting, excess; as: a Exceeding what is usual or proper; overmuch. b Greater than the usual amount or degree; exceptional; very great.' Webster's New International Dictionary, 2d ed. (1938). </s> [Footnote 38 See Appendix I, infra. </s> [Footnote 39 See Appendix III, infra. [Footnote 40 See Appendix III, infra. [Footnote 41 See Appendix III, infra. </s> [Footnote 42 See Appendix III, infra. [Footnote 43 See Appendix III, infra.

United States Supreme Court COMMISSIONER v. ASPHALT PRODUCTS CO., INC.(1987) No. 86-1053 Argued: Decided: June 1, 1987 </s> Because Asphalt Products Co. (APC) kept its books, and prepared its 1974 federal income tax return, on a cash receipts and disbursement basis, its reported 1974 taxable income did not fully reflect that its 1974 year-end inventories and accounts receivable were substantially higher than in prior years. APC's 1974 return also claimed a deduction for the expense of driving two trucks to APC from their place of purchase, even though they detoured to pick up equipment bought by APC's shareholders in their individual capacities. After determining that APC was required to compute its 1974 income on an accrual basis and disallowing the truck transportation deduction as a personal expense of the shareholders, the Commissioner of Internal Revenue, pursuant to 26 U.S.C. 6653(a)(1), added to the resulting deficiency a penalty in the amount of 5% of the full alleged underpayment, contending that the use of the wrong accounting method and the deduction of the truck transportation expense constituted negligence. Although concluding that APC's use of cash-basis accounting was nonnegligent, the Tax Court agreed that APC had negligently deducted the truck transportation expense, and therefore added to APC's deficiency - almost all of which was due to the change in accounting methods - a negligence penalty computed by reference to the full amount of the deficiency. Affirming the finding that the truck transportation deduction was negligent, the Court of Appeals nevertheless reversed the imposition of the negligence penalty on the full amount of the deficiency, concluding that the penalty "should be applied only to that portion of the deficiency attributable to the disallowed deduction." </s> Held: </s> Section 6653(a)(1)'s plain language - whereby, if "any part of any underpayment" is due to negligence, the Commissioner shall add to the tax a penalty of "5 percent of the underpayment" - clearly establishes that the penalty is imposed on the entire amount of "the underpayment," not just on the "part of [the] underpayment" attributable to negligence. This conclusion is supported by the Government's plausible interest in [482 U.S. 117, 118] deterring negligent tax preparation and by the statute's explicit limitation of other penalties to the amount of a negligent or fraudulent underpayment. </s> Certiorari denied in No. 86-1054. Certiorari granted in No. 86-1053; 796 F.2d 843, reversed. </s> [Footnote * Together with No. 86-1054, Asphalt Products Co., Inc. v. Commissioner of Internal Revenue, also on petition for writ of certiorari to the same court. </s> PER CURIAM. </s> Asphalt Products Co. (APC) manufactures emulsified asphalt, a paving material containing oil refining residues, principally for sale to Tennessee county governments for use in highway construction. For reasons related to the rise in oil prices attending the 1973 Arab oil embargo, APC's 1974 year-end inventories and accounts receivable were substantially higher than in prior years. Because APC kept its books, and prepared its 1974 federal tax return, on a cash receipts and disbursements basis, its reported 1974 taxable income did not fully reflect these changes. APC's 1974 return also claimed a deduction of $1,103.04 for the expense of transporting two trucks from their place of purchase in Seattle to Tennessee. The trucks were driven to Tennessee by way of California, where they picked up two trailer-mounted waste water treatment plants bought by APC's shareholders in their individual capacities. </s> The Commissioner of Internal Revenue determined that, because of the increases in APC's inventories and accounts receivable, the company's traditional cash-basis bookkeeping did not "clearly reflect income," 26 U.S.C. 446(b), for the 1974 tax year, and APC was therefore required to compute its 1974 income on an accrual basis. The Commissioner also disallowed the deduction for the expense of transporting the trucks and trailers, on the ground that it was a personal expense of the shareholders. After several other adjustments, the Commissioner recomputed APC's taxes to show a deficiency of $154,332.16. </s> The Commissioner further contended that APC's use of the wrong accounting method and its deduction of the truck transportation expenses constituted negligence, and it added [482 U.S. 117, 119] to the deficiency a penalty under 26 U.S.C. 6653(a)(1), which then provided: "If any part of any underpayment . . . is due to negligence or intentional disregard of rules or regulations (but without intent to defraud), there shall be added to the tax an amount equal to 5 percent of the underpayment." (Section 6653 was amended in minor respects by the Tax Reform Act of 1986, Pub. L. 99-514, 1503, 100 Stat. 2742; unless otherwise indicated, all further references are to the pre-1986 statute.) The penalty totaled $7,716.61 - 5% of the full alleged underpayment of $154,332.16. </s> In the Tax Court, APC stipulated that the truck transportation expenses were not properly deductible, unsuccessfully contested the requirement that it use accrual accounting, and successfully contested certain other determinations, resulting in a recalculated deficiency of $133,248.69 - almost all of which was due to the change in accounting methods. The Tax Court concluded that APC's use of cash-basis accounting was nonnegligent, but affirmed the Commissioner's finding that APC had negligently deducted the truck transportation expenses. It thus added to APC's tax a negligence penalty of $6,943.37, computed as before by reference to the full amount of the deficiency (adjusted for carryback credits, see 26 U.S.C. 6211, 6653(c)(1)). </s> The Court of Appeals for the Sixth Circuit affirmed, over a dissent, the Tax Court's determination that APC was required to use accrual accounting, and unanimously (albeit with little enthusiasm) affirmed the finding that the deduction for truck transportation expenses was negligent. 796 F.2d 843 (1986). APC has petitioned for certiorari on those two issues in No. 86-1054, and we deny that petition. Accordingly, for purposes of this opinion we accept, without approving, the Commissioner's finding of negligence. The Court of Appeals reversed the Tax Court's imposition of the negligence penalty on the full amount of the deficiency, concluding that the penalty "should be applied only to that portion of the deficiency attributable to the disallowed deduction." [482 U.S. 117, 120] Id., at 850. The Commissioner has petitioned for certiorari on that issue in No. 86-1053. Because this holding is in apparent conflict with Abrams v. United States, 449 F.2d 662 (CA2 1971), and is in obvious conflict with the plain language of the statute, we grant certiorari in No. 86-1053 and reverse. </s> Section 6653(a)(1) could not be clearer. If "any part of any underpayment" is due to negligence, the Commissioner shall add to the tax a penalty of "5 percent of the underpayment." It is impossible further to explain the statute without merely repeating its language - the penalty is imposed on "the underpayment," not on the "part of [the] underpayment" attributable to negligence. By contrast (if contrast is thought necessary), the very next paragraph of the statute, 6653(a)(2) (added in 1981, see Pub. L. 97-34, 722(b)(1), 95 Stat. 342), limits the 50% penalty on interest due on negligent underpayments to "the portion of the underpayment . . . which is attributable to the [taxpayer's] negligence." The section imposing interest penalties on fraudulent underpayments contains the same proviso, 6653(b)(2)(A), as does (after the 1986 Tax Reform Act) the provision for direct penalties on fraudulent underpayments. See 1503(b)(1)(A), 100 Stat. 2742 ("If any part of any underpayment . . . is due to fraud, there shall be added to the tax . . . 75 percent of the portion of the underpayment which is attributable to fraud"). As the Court of Appeals for the Second Circuit held in Abrams v. United States: "It is evident that it was intended that the five percent was to be assessed not just against that segment of the deficiency due to negligence but against the entire amount. The language is clear and leads to no other interpretation." 449 F.2d, at 664. </s> The taxpayers in Abrams argued "that a literal application of the statute could lead to absurd results where a comparatively insignificant item of income is negligently omitted," ibid., and the court in Abrams expressly reserved judgment on that situation. Ibid. ("That case is not before us on this [482 U.S. 117, 121] appeal and we therefore express no opinion whatever as to its proper disposition if it should ever arise"). The Court of Appeals in this litigation relied on that reservation, and on the absence of any "egregious attempts [by APC] to avoid the payment of taxes," 796 F.2d, at 849, to distinguish Abrams, concluding that the Commissioner's construction of the statute lets "the tail wag the dog." 796 F.2d, at 850; ibid. (Nelson, J., concurring in part and dissenting in part) ("Where the taxpayer is subject to a penalty only because of the negligent omission of a comparatively insignificant item of income, and the Commissioner also asserts that there is a large underpayment not claimed to be due to negligence, I agree with the court that it would be absurd to let the Commissioner calculate the negligence penalty by applying the statutory percentage to the sum of the negligent and non-negligent underpayments"). This was error. Judicial perception that a particular result would be unreasonable may enter into the construction of ambiguous provisions, but cannot justify disregard of what Congress has plainly and intentionally provided. Given the Government's plausible interest in deterring negligent tax preparation and given the statute's explicit limitation of other penalties to the amount of the negligent or fraudulent underpayment, no conclusion can be drawn from the provision here at issue except that Congress desired to impose a modest penalty (5%) upon underpayments any part of which was attributable to negligence of the taxpayer. It is not our assigned role to alter that disposition. </s> The decision of the Court of Appeals limiting the amount of the negligence penalty is </s> Reversed. </s> JUSTICE MARSHALL, concurring in part and dissenting in part. </s> Once again the Court decides a case summarily without benefit of full briefing on the merits of the question decided. As I noted recently, Montana v. Hall, 481 U.S. 400, 405 -406 (1987) (dissenting from summary disposition), this Court's [482 U.S. 117, 122] Rules governing the filing of petitions for certiorari instruct the parties to address whether plenary consideration of the case would be appropriate, and do not encourage detailed discussions of the merits. In this case, adhering to the admonition in this Court's Rule 22.2 that a response be "as short as possible," respondent filed a nine-page brief in opposition to the petition for certiorari, of which only four pages dealt with the issue of the proper construction of 26 U.S.C. 6653(a) (1). It is, in my view, unfair to decide a case such as this without first permitting the litigants to brief in full the merits of the issues decided. </s> The wisdom of summary disposition of this case is particularly doubtful. The legislative history of the Tax Reform Act of 1986, not mentioned by the Court, indicates that Congress considered carefully the scheme for imposing negligence penalties, see H. R. Conf. Rep. No. 99-841, pt. 2, pp. 779-782 (1986), and expressly disapproved the decision of the Court of Appeals in this case. Id., at 782, n. 3. Because Congress has definitively stated that the decision below is not to be followed in cases arising under the 1986 Act, this case, if left undisturbed, would have negligible precedential value. Moreover, courts considering the issue even with regard to tax years before 1987, while not bound by the current Congress' view of the intent of a previous Congress, would probably pay some heed to the congressional view of the proper reading of 6653(a)(1). * </s> Under the circumstances it appears the reason for summarily reversing the judgment of the Court of Appeals in this case is simply that the majority perceives it to be wrong. But this Court routinely denies petitions for certiorari seeking review of decisions that, on the face of the petitions or the [482 U.S. 117, 123] petitions and responses, appear to be wrong. I can discern no intelligible principle distinguishing from that large number of cases those the Court chooses to decide without first giving the parties the opportunity to brief the merits of the case in full, and giving itself the opportunity to ensure that its initial impression is borne out by more thoughtful consideration. That our jurisdiction is discretionary should not lead us to be arbitrary in its exercise. </s> I would not decide this case without first giving the parties the opportunity to file briefs on the merits. Accordingly, I dissent from the Court's summary disposition in No. 86-1053. Because I too would deny the petition for certiorari in No. 86-1054, I concur in that part of the Court's per curiam opinion. </s> [Footnote * Indeed, petitioner relies on this legislative history to support his contention that the decision of the Court of Appeals in this case was erroneous, Pet. for Cert. 6-8, and suggests that the Court vacate and remand the decision below for further consideration in light of the Conference Report. Id., at 8, n. 4. </s> JUSTICE BLACKMUN, concurring in part and dissenting in part. </s> I agree with the Court in its denial of the petition for certiorari in No. 86-1054. I dissent from its summary reversal of the judgment of the Sixth Circuit on the negligence penalty issue. I do not agree that the correct result is so obvious and the Court of Appeals so clearly in error that summary reversal is warranted. I hope the Court's action is not due to an innate reluctance to review a federal income tax case. After all, United States Courts of Appeals have reached conflicting conclusions on the issue, and income tax law often has its special vagaries. I would grant certiorari in No. 86-1053 and give that case plenary consideration. </s> [482 U.S. 117, 124]